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Appeal No. LXVI of 1949. Appeal from the High Court of judicature, Bombay, in a reference under section 66 of the Indian Income tax Act, 1022. K.M. Munshi (N. P. Nathvani, with him), for the appel lant. ' M.C. Setalvad, Attorney General for India (H. J. Umrigar, with him), for the respondent. 1950. May 26. The judgment of the Court was delivered by MEHR CHAND MAHAJAN J. This is an appeal against a judgment of the High Court of Judicature at Bombay in an income tax matter and it raises the question whether munici pal property tax and urban immoveable property tax payable under the relevant Bombay Acts are allowable deductions under section 9 (1) (iv) of the Indian Income tax Act. The assessee company is an investment company deriving its income from properties in the city of Bombay. For the assessment year 1940 41 the net income of the assessee under the head "property" was computed by the Income tax Officer in the sum of Rs. 6,21,764 after deducting from gross rents certain payments. The company had paid during the relevant year Rs. 1,22,675 as municipal property tax and Rs. 32,760 as urban property tax. Deduction of these two sums was claimed under the provisions of section 9 the Act. Out of the first item a deduction in the sum of Rs. 48,572 was allowed on the ground that this item represented tenants ' burdens paid by the assessee, otherwise the claim was disal lowed. The, appeals of the assessee to the Appellate As sistant Commissioner and to the Income tax Appellate Tribu nal were unsuccessful. The Tribunal, however, agreed to refer two questions of law to the High Court of Judicature at Bombay, namely, (1) Whether the municipal taxes paid by the applicant company are an allowable deduction under 555 the provisions of section 9 (1) (iv) of the Indian Income tax Act; (2) Whether the urban immoveable property taxes paid by the applicant company are an allowable deduction under section 9 (1) (iv) or under section 9 (1) (v) of the Indian Income tax Act. A supplementary reference was made covering a third question which was not raised before us and it is not there fore necessary to refer to it. The High Court answered all the three questions in the negative and hence this appeal. The question for our determination is whether the munic ipal property tax and urban immoveable property tax can be deducted as an allowance under clause (iv) of sub section (1) of section 9 of the Act. The decision of the point depends firstly on the construction of the language employed in sub clause (iv) of sub section (1) of section 9 of the Act, and secondly, on a finding as to the true nature and character of the liability of the owner under the relevant Bombay Acts for the payment of these taxes. Section 9 along with the relevant clause runs thus: (1) The tax shall be payable by an assessee under the head ' income from property ' in respect of the bona fide annual value of property consisting of any buildings or lands appurtenant thereto of Which he is the owner, . . subject to the following allowances, namely : (iv) where the property is subject to a mortgage or other capital charge, the amount of any interest on such mortgage or charge; where the property is subject to an annual charge not being a capital charge, the. amount of such charge; where the property is subject to a ground rent, the amount of such ground rent; and, where the property has been acquired, constructed, repaired, renewed or recon structed with borrowed capital, the amount of any interest payable on such capital; . . . " It will be seen that clause (iv) consists of four sub clauses corresponding to the four deductions allowed 556 under the clause. Before the amending Act of 1939, clause (iv) contained only the first, third and fourth sub clauses. Under the first sub clause interest is deductible whether the amount borrowed on the security of the property was spent on the property or not. There is no question of any capital or other expenditure on the property. The expression "capital charge" in the sub clause cannot connote a charge on the capital, that is, the property assessed. That would be a redundancy as the opening words themselves clearly indicate that the charge is on the property. We are therefore of opinion that capital charge here could only mean a charge created for a capital sum, i.e., a charge to secure the discharge of a liability of a capital nature. In 1933 the Privy Council decided the case of Bijoy Singh. Dudhuria vs Commissioner of Income tax, Calcutta (1 ). It was not an assessment under section 9 but an assess ment on the general income of an assessee who was liable to pay maintenance for his step mother which had been charged on all his assets by a decree of Court. It was not a li ability voluntarily incurred by him but one cast on him by law. The Privy Council held that the amount paid by him in discharge of that liability formed no part of his real income and so should not be included in his assessment. Though the decision proceeded on the principle that the outgoings were not part of the assessee 's income at all, the framers of the amending Act of 1939 wanted, apparently, to extend the principle, so far as the assessment of property was concerned, even to cases where obligatory payments had to be made out of the assessee 's income from the property charged with such payments, and the second sub clause, namely, "where the property is subject to an annual charge not being a capital charge, the amount of such charge" was added. It is this sub clause which the appellant invokes in support of its claim to deduction of the municipal and urban, property taxes in the present case. In view of the opening words of the newly added sub clause, the expression "capital charge" also used therein cannot have reference to a charge on the property, and we think it must (1) I.L.R. 60 cal. 557 be understood in the same sense as in sub clause (1); that is to say, the first sub clause having provided for deduc tion of interest where a capital sum is charged on the property, this sub clause provides for a deduction of annual sums so charged, such sums not being capital sums, the limiting words being intended to exclude cases where capital raised on the security of the property is made repayable in instalments. In Commissioner of Income tax, Bombay vs Mahomedbhoy Rowji (1), a Bench of the Bombay High Court considered the meaning of these words. As regards "annual charge," Beau mont C.J. observed as follows : "The words, I think, would cover a charge to secure an annual liability." Kania J., as he then was, said as follows : "I do not see how a charge can be annual unless it means a charge in respect of a payment to be made annually." This construction of the words has been followed in the judgment under appeal. In Gappumal Kanhaiya Lal vs Commissioner of Income tax (2) (the connected appeal before us), the Bench of the Allahabad High Court agreed with the construction placed on these words in the Bombay case, i.e., the words "annual charge" mean a charge to secure an annual liability. It is therefore clear that there is no conflict of judicial deci sions as to the meaning of the phrase "annual charge" occur ring in section 3 (1) (iv) and the meaning given is the natural meaning of these words. As to the phrase "capital charge", Beaumont C.J. in the case above referred to took the view that the words mean a charge on capital. Kania J., however, took a different view and observed that he was not prepared to accept the sugges tion that a document which provides for a certain payment to be made monthly or annually and charged on immoveable property or the estate of an individual becomes a capital charge. In the Allahabad judgment under appeal these (1) I.L.R. (2) I.L.R. 1944 All. 558 words were considered as not meaning a charge on capital. It was said that if an annual charge means a charge to secure the discharge of an annual liability, then, capital charge means a charge to secure the discharge of a liability of a capital nature. We think this construction is a natu ral construction of the section and is right. The determination of the point whether the taxes in dispute fall within the ambit of the phrase "annual charge not being a capital charge" depends on the provisions of the statutes under which they are levied. Section 143 of the City of Bombay Municipal Act, 1888, authorises the levy of a general tax on all buildings and lands in the city. The primary responsibility to pay this property tax is on the lessor (vide section 146 of the Act). In order to assess the tax provision has been made for the determination of the annual rateable value of the building in section 154. Section 156 provides for the maintenance of an assessment book in which entries have to be made every official year of all buildings in the city, their rateable value, the names of persons primarily liable for payment of the property tax on such buildings and of the amount for which each building has been assessed. Section 167 lays down that the assess ment book need not be prepared every official year but public notices shall be given in accordance with sections 160 to 162 every year and the provisions o+ the said sec tions and of sections 163 and 167 shall be applicable each year. These sections lay down a procedure for hearing objections and complaints against entries in the assessment book. From these provisions it is clear ' that the liabil ity for the tax is determined at the beginning of each official year and the tax is an annual one. It recurs from year to year. Sections 143to 168 concern themselves with the imposition, liability and assessment of the tax for the year. The amount of the tax for the year and the liability for its payment having been determined, the Act then pre scribes for its collection in the chapter "The collection of taxes. " Section 197 provides that each of the property taxes shall be payable in 559 advance in half yearly instalments on each first day of April and each first day of October. The provision as to half yearly instalment necessarily connotes an annual li ability. In other words, it means that the annual liability can be discharged by half yearly payments. Procedure has also been prescribed for recovery of the instalments by presentment of a bill, a notice of demand and then distress, and sale. Finally section 212 provides as follows : "Property taxes due under this Act in respect of any building or land shall, subject to the prior payment of the land revenue, if any, due to the provincial ,Government thereupon, be a first charge . . upon the said build ing or land . " It creates a statutory charge on the building. Urban immove able property tax is leviable under section 22 of Part VI of the Bombay Finance Act, 1932,on the annual letting value of the property. The duty to collect the tax is laid on the municipality and it does so in the same manner as in the case of the municipal property tax. Section 24 (2) (b) is in terms similar to section 212 of the Bombay Municipal Act. It makes the land or the building security for the payment of this tax also. For the purposes of section 9 of the Indian Income tax Act both these taxes, namely, the munici pal property tax as well as the urban immoveable property tax are of the same character and stand on the same foot ing. Mr. Munshi, the learned counsel for the appellant con tended that both the taxes are assessed on the annual value of the land or the building and are annual taxes, although it may be that they are collected at intervals of six months for the sake of convenience, that the income tax itself is assessed on an annual basis, that in allowing deductions all payments made or all liabilities incurred during the previ ous year of assessment should be allowed and that the taxes in question fell clearly within the language of section 9 (1) (iv). The learned Attorney General, on the other hand, argued that although the taxes are assessed for the year the liability to pay them arises at the beginning 560 of each half year and unless a notice of demand is issued and a bill presented there is no liability to pay them and that till then no charge under section 212 of the Act could possibly arise and that the liability to pay being half yearly in advance, the charge is not an annual charge. It was also suggested that the taxes were a capital charge in the sense of the property being security for the payment. We are satisfied that the contentions raised by the learned Attorney General are not sound. It is apparent from the whole tenor of the two Bombay Acts that the taxes are in the nature of an annual levy on the property ' and are assessed on the annual value of the property each year. The annual liability can be discharged by half yearly instalments. The liability being an annual one and the property having been subjected to it, the provisions of clause (iv) of sub sec tion (1) of section 9 are immediately attracted. Great emphasis was laid on the word"due" used in section 212 of the Municipal Act and it was said that as the taxes do not become due under the Act unless the time for the payment arrives, no charge comes into existence till then and that the charge is not an annual charge. We do not think that this is a correct construction of section 212. The words "property taxes due under this Act" mean property taxes for which a person is liable under the Act. Taxes payable during the year have been made a charge on the property. The liability and the charge both co exist and are co exten sive. The provisions of the Act affording facilities for the discharge of the liability do not in any way affect their true nature and character. If the annual liability is not discharged in the manner laid down by section 197, can it be said that the property cannot be sold for recovery of the whole amount due for the year ? The answer to this query can only be in the affirmative, i.e., that the proper ty is liable to sale. In Commissioner of Income tax, Bombay vs Mahomedbhoy Rowji(1) Beaumont C.J., while rejecting the claim for the deduction of the taxes, placed reliance on (1) I.L.R. 561 section 9 (1) (v) which allows a deduction in respect of any sums paid on account of land revenue. It was observed that land revenue stands on the same footing as municipal taxes and that as the legislature made a special provision for deduction of sums payable in regard to land revenue but not in respect of sums paid on account of municipal taxes that circumstance indicated that the deduction was not allowable. For the same purpose reference was also made to the provi sions of section 10 which deal with business allowances and wherein deduction of any sum paid on account of land reve nue, local rates or municipal taxes has been allowed. In the concluding part of his judgment the learned Chief Jus tice said that it was not necessary for him to consider what the exact meaning of the words was and that it was suffi cient for him to say that it did not cover municipal taxes which are made a charge on the property under section 212 of the Bombay Municipal Act. Without determining the exact meaning of the words used by the statute it seems to us it was not possible to arrive at the conclusion that the taxes were not within the ambit of the clause. It is elementary that the primary duty of a Court is to give effect to the intention of the legislature as expressed in the words used by it and no outside consideration can be called in aid tO find that intention. Again reference to clause (v) of the section is not very helpful because land revenue is a charge of a paramount nature on all buildings and lands and that being so, a deduction in respect of the amount was mentioned in express terms. Municipal taxes, on the other hand, do not stand on the same footing as land revenue. The law as to them varies from province to province and they may not be necessarily a charge on property in all cases. The legis lature seems to have thought that so far as municipal taxes on property are concerned, if they fall within the ambit of clause (iv), deduction will be claimable in respect of them but not otherwise. The deductions allowed in section 10 under the head "Income from business" proceed on a different footing and a construction of section 9 with the aid of section 10 is apt to mislead. 562 Kania J. in the above case in arriving at his conclusion was influenced by the consideration that these taxes were of a variable character, i.e., liable to be increased or re duced under the various provisions of the Municipal Act and that the charge was in the nature of a contingent charge. With great respect, it may be pointed out that all charges in a way may be or are of a variable and contingent na ture. If no default is made, no charge is ever enforceable and whenever there is a charge, it can be increased or reduced during the year either by payment or by additional borrowing. In Moss Empires Ltd. vs Inland Revenue Commissioners (1) it was held by the House of Lords that the fact that certain payments were contingent and variable in amount did not affect their character of being annual payments and that the word, "annual" must be taken to have the quality of being recurrent or being capable of recurrence. In Cunard 's Trustees vs Inland Revenue Commissioners (2) it was held that the payments were capable of being recur rent and were therefore annual payments within the meaning of schedule D, case III, rule 1 (1), even though they were not necessarily recurrent year by year and the fact that they varied in amount was immaterial. The learned Attorney General in view of these decisions did not support the view expressed by Kania J. Reliance was placed on a decision of the High Court of Madras in Mamad Keyi vs Commissioner of Income tax, Madras(3), in which moneys paid as urban immoveable property tax under the Bombay Finance Act were disallowed as inadmis sible under section 9 (1) (iv) or 9 (1) (v) of the Indian Income tax Act. 'This decision merely followed the view expressed in Commissioner of income tax, Bombay vs Mahomedb hoy Rowji (4)and was not arrived at on any independent or fresh reasoning and is not of much assistance in the deci sion of the case. The Allahabad High Court (1) (2) [1948] 1 A.E.R. 150. (3) I.L.R. (4) I.L.R. 563 in Gappumal Kanhaiya Lal vs Commissioner of Incometax (1) (the connected appeal) took a correct view of this matter and the reasoning given therein has our approval. The result is that this appeal is allowed and the two questions which were referred to the High Court by the Income tax Tribunal and cited above are answered in the affirmative. The appellants will have their costs in the appeal. Appeal allowed.

IN-Abs

The charge created in respect of municipal property tax by section 212 of the City of Bombay Municipal Act, 1888, is an "annual charge not being a capital charge" within the mean ing of section 9 (1) (iv) of the Indian Income tax Act, 199.2, and the amount of such charge should therefore be deducted in computing the income from such property for the purposes of section 9 of the Indian Income tax Act. The charge in respect of urban immoveable property tax created by the Bombay Finance Act, 1939 is similar in character and the amount of such charge should also be deducted. The expression "capital charge" in s.9(1) (iv) means a charge created for a capital sum,that is to say, a charge created to. ' secure the discharge of a liability of a capi tal nature; and an "annual charge" means a charge to secure an annual liabili ty. 554

Civil Appeal No.94 of 1949. 107 834 Appeal from a judgment and decree of the High Court of Judi cature at Patna in Appeal from Appellate Decree No. 97 of 1946 (Mannohar Lall and Mukherji JJ.) dated 23rd Decem ber, 1947, confirming the judgment of the District Judge of Purulia in Appeal No. 159 of 1944. S.P. Sinha (P. K. Bose, with him) for the appel lant. N.C. Chatterjee and Panchanan Ghosh (Chandra Narayan Naik, with them) for the respondent. 1950. December 1. The Judgment of the Court was deliv ered by PATANJALI SASTRI J. This appeal arises out of a suit brought by the respondent in the court of the Subordinate Judge, Dhanbad, for recovery of arrears of royalty and cess from the appellant and another alleged to be due under a compromise decree passed on the 6th March, 1923, in a previ ous suit between the predecessors in interest of the par ties. The only plea which is material for the purpose of this appeal is that the compromise decree not having been registered was inadmissible in evidence. The courts below held that the document did not require registration and gave effect to its terms in decreeing the suit. The second defendant has preferred this appeal. The facts are not now in dispute and may be briefly stated. On 11th March, 1921, one Kumar Krishna Prasad Singh (hereinafter referred to as Kumar) granted a perma nent lease of the right to the underground coal in 5,800 bighas of land belonging to him to Shibsaran Singh and Sitaram Singh (hereinafter referred to as the Singhs) by a registered patta stipulating for a salami of Rs. 8,000 and royalty at the rate of 2a. per ton of coal raised subject to a minimum of Rs. 8,000 and for certain other cesses and interest. On 7th June, 1921, Kumar executed another perma nent patta leasing the right to the coal in 500 bighas out of the 5,800 bighas referred to above to one Prayngji Bal lavji Deoshi and his son Harakchand Deoshi (hereinafter referred to as the Deoshis). By this document. 835 the Deoshis agreed inter alia to pay royalty at the rate of 2a. per ton on all classes of coal raised subject to a minimum of Rs. 750 a year. The Singhs feeling themselves aggrieved by the latter transaction brought a title suit (No. 1291 of 1921) in the Court of the Subordinate Judge of Dhanbad for a declaration of their title and for possession of the 500 bighas leased to the Deoshis under the aforesaid patta of 7th June, 1921. To that suit Kumar was made a party as defendant No. 3, the Deoshis being defendants 1 and 2. The suit was however cornpromised on 6th March, 1923, by all the parties and a decree based on the compromise was also passed on the same day. The interest of the Singhs was brought to sale in 193S in execution of a decree obtained against them and was purchased by the plaintiff who insti tuted the presnt suit on 3rd October, 1942, claiming the royalty and cesses payable under the compromise decree for the period from Pous 1345 to Asadh 1349 B.S. from defendants 1 and 2 as the representatives of the Deoshis who entered into the compromise of March, 1923. In order to appreciate the contentions of the parties, it is necessary to set out the relevant terms of the compro mise decree which are as follows : "The plaintiffs (the Singhs) within two months from this date shall pay Rs. 8,000 as salami to defendant No. 3 (Kumar). Otherwise all the terms of the compromise Will stand cancelled and the plaintiffs shall not be competent to claim any right to or possession over the.land covered by the patta dated 11th March, 1921. The patta which defend ant No. 3 executed in favour of the plaintiffs in respect of 5,800 bighas of coal land in village Rahraband shall remain in force, and the plaintiffs will get a decree of declara tion of their right and title to the 500 bighas of coal land in dispute but defendants 1 and 2 (the Deoshis) shall hold possession as tenants. Besides the terms mentioned below, defendants 1 and 2 shall remain bound by all the remaining terms under which they took settlement of the 500 bighas of coal land from defendant No. 3 under 836 patta and Kabuliyat, and both the defendants 1 and 2 shall possess the same under the plaintiffs from generation to generation and all the terms of the said patta and Kabuliyat shall remain effective and in force between them. Both the defendants 1 and 2 shall remain bound to pay to the plain tiffs commission at the rate of 2a. per ton on all sorts of coal instead of 2a. a ton as stated before in the patta of 5,800 bighas of land settled with the plaintiffs. The plaintiffs shall pay to defendant No. 3 in future the mini mum royalty of Rs. 6,000 instead of Rs. 8,000 as stipulated in the original patta of 11 th March 1921 and commission at the rate of la. a ton in place of 2a. a ton as stipulat ed in the patta of March 21 . Unless the plaintiffs pay to the defendant No. 3 Rs. 8,000 within 2 months from this day they shall not be competent to take out execution of this decree, nor shall they be competent to take posses sion of the land in dispute. The defendants 1 and 2 within one month from the date of payment of Rs. 8,000 as aforesaid to defendant No. 3 shall execute a new Kabuliyat in favour of the plaintiff in respect of the modified terms stated above, i.e., on the condition to pay commission at the rate of 2a. per ton. In the new patta which defendant No. 3 will execute in favour of the plaintiffs he shall embody the condition that the annual minimum royalty will be Rs. 6,000 instead of Rs. 8,000 and commission will be at the rate of la. 9p. per ton in place of 2a. per ton as mentioned in the aforesaid patta. If the defendant No. 3 does not execute the parts on the aforesaid modified terms in favour 'of the plaintiffs within the time aforesaid and both the defendants 1 and 2 also do not execute a kabuliyat on the aforesaid modified terms, then this very rafanama shall be treated as the parts and kabuliyat, and the plaintiffs in accordance with the terms of the rafanama shall pay to defendant No. 3, Rs. 6,000 only as minimum royalty and commission at the rate of la. per ton with respect to 5,800 bighas and shall continue to realise commission at the rate of 2a. 6p. per ton from defendants 1 and 2 who shall remain bound to pay the same. " 837 The answer to the question whether this compromise decree requires registration depends on the legal effect of the changes in the status quo ante of the parties brought about by the document. A careful analysis reveals the following alterations : (1) In the lease to the Singhs, the rate of royalty or commission was reduced from 2a. per ton of coal raised to la. per ton and the minimum royalty was reduced from Rs. 8,000 to Rs. 6,000 while the area of coal land in their khas possession was reduced by 500 bighas. (2) In the lease to the Deoshis the rate of royalty or commission was enhanced from 2a. per ton to 2a. per ton and tiffs was made payable to the Singhs. The Singhs and the Deoshis were brought into a new legal relationship, the former accepting the latter as tenants holding the disputed 500 bighas under them in consideration of the latter agreeing to pay the enhanced royalty to the former. (4) The whole arrangement was made conditional on the Singhs paying Rs. 8,000 to Kumar within 2 months from the date of the compromise, it being expressly provided that the Singhs were not to be entitled to execute the decree or to take possession of the disputed area of 503 bighas which evidently had not till then passed into their possession. Now, sub section (1) of section 17 of the , enumerates five categories of documents of which regis tration is made compulsory which include" (d) leases of immoveable property from year to year, or for any term exceeding one year, or reserving a yearly rent;". Sub sec tion (2) however provided that "nothing in clauses (b) and (c) of sub section (1)applies to . (vi) any decree or order of court. " It may be mentioned in passing that this clause was amended with affect from the 1st April, 1930, by the , so as to exclude from the scope of the exception compromise decrees comprising immovable property other than that which is the subject matter of the suit. But 838 the amendment cannot affect the document here in question which came into existence in 1923. Before the amendment, the clause was held to cover even compromise decrees comprising immovable property which was not the subject matter of the suit: [Vide Hemanta Kumari Debi vs Midnapur Zamindari Co. ( ')]. That decision applies to the present case and obviates the objection that because the compromise in question covered also the remaining 5,300 bighas which were not the subject matter of the title suit of 1921, it was outside the scope of the exception in sub section (2), clause (vi). The only question, therefore, is whether the compromise decree is a "lease" [which expression includes "an agreement to lease" by the definition in section 2 (7)] within the meaning of el. (d) of sub section (1). It is obvious that if the compromise decree fails within clause (d) of sub section (1) it would not be protected under clause (vi) of sub section (2) which excepts only documents falling under the categories (b) and (c) of sub section (1). The High Court was of opinion that, on a proper construction of the terms of the compromise, it did not fall under clause (d). Mano har Lall J., who delivered the leading judgment, observed: "It was a tripartite agreement embodied in the decree of the court and was, therefore, exempt from registration. It will be oh.served also that so far as the defendants were con cerned, their possession of the 500 bighas was not inter fered with and they still remained in possession as the lessees, but instead of paying the royalty to the plaintiffs it was agreed between all the parties that the defendants would pay the royalty in future to Shibsaran and Sitcram. If the matter had stood there, the learned Advocate for the appellant could not have seriously contested the position, but he vehemently argued that when the agreement was not to pay the same amount of royalty or commission as previously agreed to but an altered amount of royalty and commission, the document should be held to fall within the mischief of section 17 (1)(d)of the (1) P.C. 839 . The answer to this contention is, as I have stated just now, to be found in the Full Bench decision of this court :" [see Charu Chandra Mitra 's case ()]. It was there held that a mere alteration of the rent reserved does not make the transaction a new lease so as to bring it within clause (d)of subsection (1). We are unable to share this view. It oversimplifies the compromise transaction which, in our opinion, involves much more than a mere alteration of the royalties stipulated for in the previous pattas executed by Kumar. Nor can we accept the suggestion of Mr. Chatterjee for the respondents theft the compromise operated as an assignment to the Singhs by Kumar of the latter 's reversion under the "lease granted to the Deoshis and all that the latter did was to acknowledge the Singhs as their landlords and attern to them. On tiffs view it was said that the transaction would not fall under clause (d), although it would fall under clause (b) but then would be saved by the exception in clause (vi) of sub section (2). The argument, however, overlooks that Kumar had leased the area of 5,800 bighas to the Singhs by his patta dated 11th March, 1921, and the compromise by providing that the Singhs should pay the reduced royalty of 1a. per ton in respect of the whole area preserved Kumar 's reversion intact. He could not therefore be deemed to have assigned any part of his inter est in 5,800 bighas as landlord to the Singhs who continue to hold the entire extent as tenants under him. What the compromise really did was. as stated already, to bring the Singhs and the Deoshis into a new legal relationship as underlessor and under lessee in respect of 500 bighas which were the subject matter of the title suit; in other words, its legal effect was to create a perpetual underlease be tween the Singhs and the Deoshis which would clearly fall under clause (d) but for the circumstance that it was to take effect only on condition float the Singhs paid Rs. 8,000 to Kumar within 2 months (1) 840 thereafter. As pointed out by the Judicial Committee in Hemanta Kumar 's case (1) "An agreement for a lease, which a lease is by the statute declared to include, must, in their Lordships ' opinion, be a document which effects an actual demise and operates as a lease . The phrase which in the context where it occurs and in the statute in which it is found, must in their opinion relate to some document which creates a present and immediate interest in the land. " The compromise decree expressly provides that unless the sum of Rs. 8,000 was paid within the stipulated time the Singhs were not to execute the decree or to take possession of the disputed property. Until the payment was made it was impossible to determine whether there would be any under lease or not. Such a contingent agreement is not within clause (d) and although it is covered by clause (b). is excepted by clause (vi) of sub section ( '2). We therefore agree with the conclusion of the High Court though on dif ferent grounds and dismiss the appeal with costs. Appeal dismisseel.

IN-Abs

An agreement for a lease, which a lease is by the Indian declared to include, must be a document which effects an actual demise and operates as a lease. It must create present and immediate interest in land. Where a litigation between two persons A and B who claimed to be tenants under C was settled by a compromise decree the effect of which was to create a perpetual underlease between A and B which was to take effect only on condition that A paid Rs. 8,000 to C within a fixed period: Held, that such a contingent agreement was not "a lease" within el. (a) of section 17 (t) of the Indian , and even though it was covered by cl. (b) of the said sec tion it was exempt from registration under el. (vi) of subs. (2) of section 17. Hemanta Kumari Debi vs Midnapur Zamindari Co. (I P.C.) relied on.

iminal Appeal No. 40 of 1951, 127 Appeal from the Judgment and Order dated the 1st June, 1951, of the High Court of Judicature in Assam (Thadani C.J. and Ram Labhaya J.,) in Criminal Reference No. I of 1951, arising out of Judgment and Order dated the 15th November, 1950, of the Court of the Additional District Magistrate, Lakhimpur, in Case No. 1126C of 1950. Jindra Lal for the appellant. Nuruddin Ahmed for the respondent. October 23. The Judgment of the Court was delivered by CHANDRASEKHARA AIYAR J. Rameshwar Bhartia, the appellant, is a shopkeeper in Assam. He was prosecuted for storing paddy without a licence in excess of the quantity permitted by the Assam Food Grains Control Order, 1947. He admitted storage and possession of 550 maunds of paddy, but pleaded that he did not know that any licence was necessary. The 'Additional District Magistrate recorded a plea of guilty, but imposed him a fine of Rs. 50 only, as he considered his ignorance of the provisions of the Food Grains Control Order to be genuine. The stock of paddy was left in the possession of the appellant by the Procurement Inspector under a Jimmanama or security bond executed in his favour. He was subsequently unable to produce it before the court, as the whole of it was taken away by a Congress M.L.A. for affording relief to those who suffered in the earthquake, and so, the appellant was ordered to procure a similar quantity of paddy after taking an appropriate licence, and to make over the same to the procurement department payment of the price. The District Magistrate, being moved to do so by the procurement department, referred the case to the High Court under section 438, Criminal Procedure Code, for enhancement of the sentence, as in his opinion the sentence was unduly lenient and the Jimmanama, which was admittedly broken, should have been forfeited. 128 The reference was accepted by the High Court, and the sent ence was enhanced to rigorous ' imprisonment for six months and a fine of Rs. 1,000. As regards the Jimmanama, the case was sent back to the trial court for taking action according to law under section 514, Criminal Procedure Code, for its forfeiture. The appellant applied to the High. Court for a certificate under article 134 (1) (c) of the Constitution that the case was a fit one for appeal to this Court. This application was granted. Out of the three points urged for the appellant, two were rejected, but the third one was accepted as a good ground, namely, that there was a contravention of the provisions of section 556, Criminal Procedure Code and that consequently the, trial before the Additional District Magistrate was void. One of the contentions urged before us was that Shri C.K. Bhuyan was not a "Director" at all and therefore there was no valid sanction under section 38 of the Order. A notifications dated 16th May) 1950, and published in the Assam Gazette of the 24th May, 1950, was produced before us to show that Sri C.K. Bhuyan was an Additional Deputy Commissioner and it was conceded by the appellant 's counsel before the High Court that if he was a Deputy Commissioner, he would be a Director under the Order, as all Deputy Commissioners in Assam were notified as Directors for the purposes of the Order. Mr. Jindra Lal sought to draw a distinction between a Deputy Commissioner and an Additional Deputy Commissioner in this respect, but there is no warrant for the same,, apart from the circumstance that it is a question of fact which has to be investigated afresh, and which we cannot allow to be raised now for the first time. The primary question to consider in this appeal is whether there has been any infringement of Section 556, Criminal Procedure Code, and a consequent want of jurisdiction in the court which tried the offence. The facts relevant to this question lie 129 within a narrow compass. The Procurement Inspector sent a report , Ist July,1950 about the nature of the offence ; he wrote out a short note the, subject, and requested that the accused might be prosecuted and the Assistant Director of Procurement, Dibru garh, might be authorised to dispose of the paddy immediately to avoid loss due to deterioration, Sri 0. K. Bhuyan,who was the then District Magistrate Lakhimpur, made the following order: "Prosecution sanctioned under section 7 (1) of ,the Essential Supplies (Temporary Powers) Act, 1946, for violation of sections 3 and 7 of the Assam Food Grains Oontrol Order, 1947. " The case happened to be tried by the same gentleman in his capacity as Addtional District Magistrate, and the accused was convicted as aforesaid. The argument for the appellant was that having sanctioned the prosecution, Sri C.K. Bhuyan became "personally interested" in the case within the meaning of section 556, and was therefore incompetent to try the same. It was contended that the trial was not only irregular but illegal. There is no question that "personal interest" within the meaning of the section is not limited to private interest, and that it may well include official interest also. But what is the extent of the interest which will attract the disability is a subject which different views are possible and have been taken. Section 556 itself indicates the difficulty. The Explanation to the section runs in these terms: "A Judge or Magistrate shall not be deemed a party, or personally interested, within the , meaning of this section, to or in any case by reason only that be is a Municipal Commissioner or otherwise concerned therein in a public capacity, or by reason only that he has viewed the place in which an offence, is alleged to have been committed, or any other place .in which any other transaction material to the case 'is alleged to have occurred, and made an inquiry III connection with the case. " 130 This shows that to be connected with a case in a public capacity is not by itself enough to render the person incompetent to try it. Even if he had made an enquiry in connection with this case, it would not matter. But look at the illustration: "A, as collector, upon consideration of information furnished to him, directs the prosecution of B for a breach of the excise laws. A is disqualified from trying this case as a Magistrate. " It is evident from the words of the illustration that if a prosecution is directed by a person in one capacity, he shall not try the case acting in another capacity as a Magistrate. The explanation and illustration lend some support to the view that there is a distinction between a passive interest and an active interest, and that it is only in the latter case that the disqualification arises or intervenes. Under sub section (3) (a) of section 2 of the Assam Food Grains Control Order "Director" means "the Director of Supply, Assam, and includes, for the purpose of any specific. provision of this Order, any other officer duly authorised in that behalf by him or by the Provincial Government by notification in the Official Gazette. " Section 38 provides: No prosecution in respect of an alleged contravention of any provision of this Order shall be instituted without the sanction of the Director. " A little confusion is likely to arise from the employment of the word " Director" in the Control Order and the word "directs" in the illustration to section 556 of the Code '. It has to be borne in mind that a sanction by the Director within the meaning of the Code does not necessarily mean "a direction given by him that the accused should be prosecuted. " In both cases of sanction and direction, an application of the mind is necessary, but there is this essential difference that in the one case there is a legal impediment to the prosecution if there be no sanction, and in the other case, there is a positive order that 131 the prosecution should be launched. For a sanction, all that is necessary for one to be satisfied about is the existence of a prima facie case. In the case of a, direction, a further element that the accused deserves to be prosecuted is involved. The question whether a Magistrate is personally interested or not has essentially to be decided the facts in each case. Pecuniary interest, however small, will be a disqualification but as regards other kinds of interest, there is no measure or standard except that it should be a substantial one, giving rise to a real bias, or a reasonable apprehension the part of the accused of such bias. , The maxim " Nemo debet esse judex in propria sua causa" applies only when the interest attributed is such as to render the case his own cause. The fulfllment of a technical requirement imposed by a statute may not, in many cases, amount to a mental satisfaction of the truth of the facts placed before the officer. Whether sanction should be granted or not may conceivably depend upon consideration extraneous to the merits of the case. But where a prosecution is directed, it means that the authority who gives the direction is satisfied in his own mind that the case must be initiated. Sanction is in the nature of a permission while a direction is in the nature of a command. Let us now examine some of the decisions the subject. For the appellant, strong reliance was placed the judgment of the Privy Council in Gokulchand Dwarkadas vs King(1), and it was argued the basis of some of the observations of the Judicial Committee that a sanction was an important and substantial matter and not a mere formality. The facts in that case were that while there was a sanction of the Government for a prosecution under the Cotton Cloth and Yarn Control, Order, there was nothing in the sanction itself, or in the shape of extraneous evidence, to show that the sanction was accorded after the relevant facts were placed before the sanctioning authority. To quote their Lordships ' own words; (1) (1948) 52 C.W.N.325. 132 "There is no evidence to show that the report of the Sub Inspector to the District Superintendent of Police, which was not put in evidence, was forwarded to the District Magistrate, nor is there any evidence is to the contents of the endorsement of the District Magistrate, referred to in the sanction, which endorsement also was not put in evidence. The prosecution was in a position either to produce or to account for the absence of the 'report made to the District Superintendent of Police and the endorsement of the District Magistrate referred to in the sanction, and to call any necessary oral evidence to supplement the documents and show what were the facts which the sanction was given. " It is in this connection that their Lordships em phasise that the sanction to prosecute is an important step constituting a condition precedent, and observe: "Looked at as a matter of substance it is plain that the Government cannot adequately discharge the obligation of deciding whether to give or withhold a sanction without a knowledge of the facts of the case. Nor, in their Lordships ' view, is a sanction given without reference to the facts constituting the offence a compliance with the actual terms of clause 23. " This, however, is no authority for the position that a sanction stands the same footing as a direction. It is true that the facts should be known to the sanctioning authority ; but it is not at all necessary that the authority should embark also an investigation of the facts, deep or perfunctory, before according the sanction. The decision lends no support to the view that wherever there is a sanction, the sanctioning authority is disabled under section 556 of the Code from trying the case initiated as a result of the sanction. the other hand, there is plenty of support for the opposite) view. In the very early case of The Government of Bengal vs HeeraLall Dass and Others(1), at a time when there (1) (1872) 17 Weekly Reporter, Criminal Rulings, 39. 133 was no such statutory provision as section 556 of the Code but, only the general rule of law that a man could not be judge in a case in which he had an interest, the facts were that a Sub Registrar, who was also an Assistant Magistrate, having come to know in his official capacity as a registering officer that an offence under the Registration Act had been committed, sanctioned a prosecution, and subsequently tried the case himself. A Full Bench consisting of Sir Richard Couch C. ' J. and five other learned Judges came to the conclusion, after an examination of some of the English cases, that the trial was not vitiated. The learned Chief Justice said: "In this case, I think, the Sub Registrar has not such an interest in the matter as disqualifies him from trying the case; and I may observe with reference to some of the arguments that have been used as to the Sub Registrar having made up his mind, and that the accused would have no chance of a fair trial, that the sanction of the superior officer, the Registrar, is required before the prosecution can be instituted, and certainly I do not consider that the prosecution will not be instituted unless the Sub Registrar has made up his mind as to the guilt of the party. It is his duty, when he comes to know that an offence has been committed, to cause a prosecution to be instituted, by which I understand that there is prima facie evidence of an offence having been committed, that there is that which renders it proper that there should be ail enquiry, and the Registrar accordingly gives his sanction to it ; and certainly, I cannot suppose that, because an officer in his position sanctions the institution of a prosecution, his mind is made up as to the guilt of the party and . that he is not willing to consider the evidence which may be produced before him when he comes to try the case. In this case, there appears to 'be no such interest as would prevent the case from going" before the Magistrate as the trying authority . 134 In Queen Empress vs Chenchi Reddi(1) it was pointed out that when there was only an authorisation and not a direction, there was no supervening disability ; and the case of Girish Chunder Ghose vs The QueenEmpress(2) was distinguished, the ground that there the Magistrate had taken a very active part in connection with the case as an executive officer. The Bombay High Court went even a step further in the case reported in Emperor vs Bavji(3), where the Magistrate who tried the case had earlier held a departmental enquiry and forwarded the papers to the Collector with his opinion that there was sufficient evidence to justify a criminal prosecution. As he did no more than express an opinion that there was evidence, which he, had neither taken nor sifted, which made a criminal prosecution desirable, it was held that the Magistrate was not disqualified from holding the trial, though, no doubt it would have been more expedient had the Collector sent the case for disposal to another of his subordinates. As stated already, the question whether the bar under section 556 comes into play depends upon the facts and circumstances of each particular case, the dividing line being a thin one somewhat but still sufficiently definite and tangible, namely, the removal of a legal impediment by the grant 'of sanction and the initiation of criminal proceedings as the result of a direction. In the present case before us, we have nothing more than a sanction, and consequently we are unable to hold that the trial has become vitiated by reason of the provisions of section 556, Criminal Procedure Code. The other point taken behalf of the appellant is a more substantial one. The security bond was taken from him not by the court but by the Procurement Inspector. It is true that it contained the undertaking that, the seized paddy would be produced before the court, but still it was a promise made to the particular official and not to the court. The High (1) Mad. 238. (3) (19O3) (2) Cal. 857. 135 Court was in error in thinking that section 514, Criminal Procedure Code, applied. Action could be taken only when the bond is taken by the court under the provisions of the Code such as section 91 for appearance, the several security sections or those relating to bail. Clause (1) of section 514 runs: "Whenever it is proved to the satisfaction of the, Court by which a bond under this Code has been taken, or of the Court of a Presidency Magistrate or Magistrate of the first class, or when the bond is for appearance before a Court, to the satisfaction of such Court, that such bond has been forfeited, the Court shall record the grounds of such proof, and may call upon any person bound by such bond to pay the penalty thereof, or to show cause why it should not be paid. " The language is perfectly clear; the power to forfeit and the imposition of the penalty provided for in the later parts of the section arise only if the preliminary conditions are satisfied. There was no argument addressed to us that the High Court in suggesting that action should be taken under section 514 for forfeiture of the bond acted in the exercise of its inherent powers under section 561 A. It did not purport to exercise any such power; and, moreover, there will then arise the question whether when the Code contains an express provision a particular subject, there could be any resort to inherent jurisdiction, under a general provision. We have got an additional circumstance in the appellant 's favour in this case that the seized paddy was taken away by a member of the Legislative Assembly for giving relief to those affected by the earthquake, and if that is true, as it seems to be from the letter written by the ' M.L.A. to the Additional District Magistrate the 1st November, 1950, it appears to us harsh, if not unjust, to ask him to produce the same paddy or a similar quantity of paddy. The order of the High Court sending back the case to the 136 Magistrate for taking action according to law under section 514 will, therefore, stand set aside. We generally do not interfere in the matter of sentence, but in this case we find that the Magistrate has held that the appellant 's plea that he was ignorant of the provisions of the Assam Food Grains Control Order, 1947, was a genuine one. Having regard to this circumstance and the fact that from a fine of Rs. 50 to 6 months ' rigorous imprisonment and a fine of Rs. 1,000 is a big jump, we think it is appropriate that the sentence of imprisonment imposed by the High Court should be set aside and we order accordingly. The fine of Rs. 1,000 will stand. Sentence reduced.

IN-Abs

The question whether a Magistrate is "personally interested" in a ease within the meaning of section 556, Criminal Procedure Code, has essentially to be decided the facts of each case. Where an officer as a District Magistrate exercising his powers under section 7(1) of the Essential Supplies (Temporary Powers) Act, 1946, sanctioned the prosecution of a person for violation of sections 3 and 7 of the Assam Food Grains Control Order, 1947, and the same officer as Additional District Magistrate tried and convicted the accused, and it was contended that as the officer had given sanction for prosecution he was "personally interested" in the case within the meaning of section 656, Criminal Procedure Code, and the trial and conviction were therefore illegal: Held, that bymerely giving sanction for prosecution he did not become personally interested" in the case and the trial and conviction were not illegal. In both cases of sanction and direction to prosecute, an application of the mind is necessary, but there is this essential difference that in the one case there is a legal impediment to the prosecution if there is no sanction and in the other case there is a positive order that the prosecution should be launched. For a sanction, all that is necessary for one to be satisfied about is the existence of a prima facie case. In the case of a direction, a further element that the accused deserves to be prosecuted is involved. Whether sanction should be granted or not may conceivably depend considerations extraneous to the merits of the case. But where a prosecution is directed, it means that the authority who gives the sanction is satisfied in his own mind that the case must be initiated. Sanction is in the nature of a permission, while direction is in the nature of a command. Gokulchand Dwarka Das vs The King , Government of Bengal vs Heera Lall Dass and Others (1872) 17 W. R. Cr. 39, Queen Empress vs Chenchi Reddi (1901) I.L.R. , Girish Chunder vs Queen Empress (1893) I.L.R. , and Emperor vs Ravji , referred to.

Appeal No. 388 of 1960. Appeal by special leave from the judgment and order dated February 3, 1959, of the Patna High Court in Election Appeal No. 10 of 1958. section P. Varma, for the appellant. L. K. Jha and D. Govardhan, for respondent No. 1. L. K. Jha and K. K. Sinha, for respondent No. 2. 1960. November 17. The Judgment of the Court was delivered by 471 GAJENDRAGADKAR, J. Is the appellant Ram Padarath Mahto disqualified for membership of the Bihar Legislature under section 7(d) of the Representation of the People Act, 1951 (hereafter called the Act)? That is the short question which arises for our decision in the present appeal by special leave. The appellant was one of the candidates for the Dalsinghsarai Constituency in the District of Darbhanga in Bihar for the State Legislature. The said Constituency is a Double Member Constituency; it was required to elect two members, one for the general and the other for the reserved seat for scheduled castes in the Bihar Legislative Assembly. It appears that the said Constituency called upon voters to elect members on January 19, 1957. January 29, 1957 was fixed as the last date for the filing of the nomination papers. The appellant filed his nomination paper on January 28, 1957, and on the next day seven other members filed their nomination papers. On February 1, 1957, the nomination paper filed by the appellant was rejected by the returning officer on two grounds; he held that the appellant being an Inspector of Co operative Societies was a Government servant at the material time and so was disqualified from standing for election. He also found that the appellant was a member of a joint and undivided Hindu family which carried on the business of Government as stockiest of grain under a contract between the Government of Bihar and a firm of the joint family known as Nebi Mahton Bishundayal Mahto. Thereafter the election was duly held, and Mr. Mishri Singh and Mr. Baleshwar Ram, respondents 1 and 2 were declared duly elected to the general and reserved seat respectively. The validity of this election was challenged by the appellant by his Election Petition No. 428 of 1957. To this petition he impleaded the two candidates declared to have been duly elected and five others who had contested in the election. Before the Election Tribunal the appellant urged that he was not in the employ of the Government of Bihar at the material time. He pointed out that he had resigned his job on January 13, 472 1957, and his resignation had been accepted on January 25, 1957, relieving him from his post as from the later date. He also contended that there was a partition in his family and that he had no share or interest in the contract in question. Alternatively it was argued that even if the appellant had an interest in the said contract it did not fall within the mischief of section 7(d) of the Act. These pleas were traversed by respondents 1 and 2 who contested the appellant 's election petition. The Election Tribunal found that the petitioner was not a Government servant on the day he filed his nomination paper, and so according to it the returning officer was wrong in rejecting his nomination paper on the ground that he was a Government servant at the material time. The Election Tribunal rejected the appellant 's case that there was a partition in the family, and held that at the relevant time the appellant continued to be a member of the joint Hindu family which had entered into the contract in question with the Government of Bihar. However, in its opinion, having regard to the nature of the said contract it was not possible to hold that the appellant was disqualified under section 7(d), and so it came to the conclusion that the returning officer was in error in rejecting the appellant 's nomination paper on this ground as well. In the result the Tribunal allowed the election petition, declared that the nomination paper had been improperly rejected, and that the election of the two contesting respondents was void. Against this decision the two contesting respondents filed two appeals in the High Court at Patna (Election Appeals Nos. 9 and 10 of 1958). The High Court has confirmed the finding of the Tribunal that the appellant was not a Government servant at the material time. It has also agreed with the conclusion of the Tribunal that at the relevant time the appellant was a member of the undivided Hindu family. On the construction of the contract, however, it differed from the view adopted by the Tribunal, and it has held that as a result of the said contract the appellant was disqualified under section 7(d) of the Act. This finding 473 inevitably led to the conclusion that the appellant 's nomination paper had been properly rejected. On that view the High Court did not think it necessary to consider whether the Tribunal was right in declaring void the election of not only respondent 1 but of respondent 2 as well. It is against this decision of the High Court that the appellant has come to this Court by special leave; and the only question which is raised on his behalf is that the High Court was in error in coming to the conclusion that he was disqualified under section 7(d). The decision of this question naturally depends primarily on the construction and effect of the contract in question. Section 7 of the Act provides for disqualification for membership of Parliament or of State Legislatures. Section 7(d), as it stood at the material time and with which we are concerned in the present appeal provides,, inter alia, that a person shall be disqualified for being chosen as, and for being, a member of the Legislative Assembly of a State, if whether by himself or by any person or body of persons in trust for him or for his benefit or on his account, he has any share or interest in a contract for the supply of goods to, or for the execution of any works or the performance of any services undertaken by, the appropriate Government. On the concurrent findings recorded by the High Court and the Tribunal it cannot now be disputed that the appellant has interest in the contract in question; so that the first part of section 7(d) is satisfied. The High Court has found that the contract attracts the last part of section 7(d) inasmuch as according to the High Court the Government of Bihar had undertaken to discharge the service of supplying grain to the residents of Bihar and the firm of the appellant 's family had entered into a contract for the performance of the said services. The last part of section 7(d) postulates that the appropriate Government has undertaken to perform certain specific services, and it is for the performance of such services that the contract had been entered into by a citi zen. In other words, if a citizen has entered into a contract with the appropriate Government for the 60 474 performance of the services undertaken by the said Government he attracts the application of section 7(d). This provision inevitably raises two questions: what are the services undertaken by the appropriate Government? Has the contract been entered into for the performance of the said services? At this stage it is necessary to consider the material terms of the contract. This contract was made on February 8, 1956, between the Governor of Bihar who is described as the first party and the firm which is described as the second party. The preamble to the contract shows that the first party had to stock and store foodgrains in Darbhanga District for sale in pursuance of the Grain Supply Scheme of the Government for which a proper custodian and bailee for reward was necessary. It also recites that the second party had applied to become such custodian and bailee of such stock of foodgrains as the first party shall deliver to the second party in one lump or from time to time on terms and in the manner expressly specified under the contract, or as may be necessarily implied. Clause 1 of the contract provides that the second party shall, at the direction of the first party, take over foodgrains from the railway wagons or from any place as directed by the first party; thereafter the second party had to cause the grains to be stored in his godown at Dalsinghsarai and had to redeliver the same to the first party after weighing either at the second party 's godown approved by the first party or at any other place as directed by the first party. The movement of the grain had to be done by the second party himself or by a transport contractor appointed by the first party. Clause 2 imposed on the second party the liability to maintain a register and keep accounts as prescribed thereunder. Under cl. 3 the second party undertook to keep such stocks and establishments as may be necessary at his own expense. Clause 4 imposed upon the second party the obligation to protect the stock of foodgrains or to make good the losses except as thereinafter provided: Clauses 5 to 8 are not material for our purpose. Clause 9 provides that the second party shall deposit the sum of 475 Rs. 5,000 in a Savings Bank account which has been pledged to the District Magistrate, Darbhanga, and comply with the other conditions specified in the clause. Clause 10 deals with the remuneration of the second party. It provides that the first party shall be liable to pay to the second party remuneration for the undertaking in this agreement at the rate of Re. 1 per( cent on the value of the stocks moved or taken over from his custody under the orders or directions of the first party or his agent calculated at the rate fixed by the Government from time to time for wholesale sales of grain. The clause adds that no remuneration shall be payable to the second party if the first party takes over the whole of the balance stock lying with the second party for reasons of the termination of the agreement. The rest of the clauses need not be recited. It would thus be seen that the agreement in terms is one of bailment. The State Government wanted to entrust the work of stocking and storing foodgrains to a custodian or bailee. In that behalf the appellant 's firm made an application and ultimately was appointed a bailee. There is no doubt that by this contract the firm has undertaken to do the work of stocking and storing foodgrains belonging to the State Government; and if it can be reasonably held that the service undertaken by the State Government in the present case was that of stocking the foodgrains the contract in question would obviously attract the provisions of section 7(d). Mr. Varma, however, contends that the service undertaken by the State Government is the sale of foodgrains under its Grain Supply Scheme; and he argues that unless the contract shows that it was for sale of the said goods it cannot attract the provisions of section 7(d). Unfortunately the scheme adopted by the State Government for the supply of grain has not been produced before the Election Tribunal, and so the precise nature and extent of the services undertaken by the State Government fall to be determined solely by reference to the contract in question. It is true that the contract relates to the stocking and storing of foodgrains which the State Government wanted to sell to the residents of Bihar; but can it be said 476 that stocking and storing of foodgrains was such an integral or essential part of the selling of goods that a contract for stocking and storing foodgrains should necessarily be regarded as a contract for their sale? In our opinion, it is difficult to accept the argument that stocking and storing of foodgrains is shown to be such an essential and integral part of the supply scheme adopted by the State Government. Theoretically speaking stocking and storing foodgrains cannot be said to be essential for the purpose of carrying out the scheme of sale of foodgrains, because it would conceivably be possible for the State Government to adopt a scheme whereby goods may be supplied without the State Government having to store them; and so the work of stocking and storing of foodgrains may in some cases be conceivably incidental to the scheme and not its essential part. It is significant that sale of goods under the contract was never to take place at the godown of the firm. It had always to take place at other selling, centers or shops; and thus, between the stocking and storing of goods and their sale there is an element of time lag. The only obligation that was imposed on the firm by this contract was to be a custodian or bailee of the goods, keep them in good order and deliver them after weighment as directed by the first party. It cannot be denied that the remuneration for the bailee has been fixed at the rate, of Re. 1 per cent on the value of the stocks moved or taken over from his custody; but that only shows the mode or method adopted by the con tract for determining the remuneration including rent of the godowns; it cannot possibly show the relationship of the contract with the sale of goods even indirectly. Can it be said that the contract entered into by the State Government for purchasing foodgrains from agriculturists who grow them or for transporting them after purchase to the godowns are contracts for the sale or supply of goods? Purchase of goods and their transport are no doubt preparatory to the carrying out of the scheme of selling them or supplying them, and yet it would be difficult to hold that contracts entered into by the State Government with the agriculturists or the transport agency is a contract for the 477 sale of goods. We have carefully considered the material terms of this contract, and on the record as it stands we are unable to accept the conclusion of the High Court that a contract of bailment which imposed on the bailee the obligation to stock and store the foodgrains in his godown can be said to be a contract for the purpose of the service of sale of grain which the State Government had undertaken within the meaning of section 7(d). It appears that before the High Court it was not disputed by the appellant that the service whose performance had been undertaken by the State Government consisted in the supply of grain to the people of the State of Bihar; and the High Court thought that from this concession it inevitably followed that the firm had a share and was interested in the contract for the performance of the service undertaken by the Government of Bihar. It seems to us that the concession made by the appellant does not inevitably or necessarily lead to the inference drawn by the High Court. If the service undertaken by the State Government is one of supplying grain how does it necessarily follow that a contract by which the bailee undertook to store the grain was a contract for the supply of grain? It may sound technical, but in dealing with a statutory provision which imposes a disqualification on a citizen it would be unreasonable to take merely a broad and general view and ignore the essential points of distinction on the ground that they are technical. The narrow question is: if the State Government undertook the work of supplying the grain, is the contract one for the supply of grain?; in our opinion, the answer to this question must be in the negative; that is why we think the High Court did not correctly appreciate the effect of the contract when it held that the said contract brought the appellant 's case within the mischief of section 7(d). In coming to its conclusion the High Court thought that its view was supported by a decision of this Court in N. Satyanathan vs K. Subramanyan (1). In that case the appellant who was a contractor had entered into an agreement with the Central Government (1) ; 478 whereby he had offered to contract with the Governor General for the provision of a motor vehicle service for the transit and conveyance of all postal articles for the period specified in the contract, and the Governor General had accepted the offer. As a consideration for the same the Government had agreed to pay to the contractor Rs. 200 per month during the subsistence of the agreement "as his remuneration for the service to be rendered by him". It appears that on this contract two questions were raised before this Court. First it was urged that it could not be said that the Central Government had undertaken any service within the meaning of section 7(d) of the Act when it made arrangements for the carriage of mailbags and postal articles through the contractor. This contention was rejected on the ground that though the Government was not bound in the discharge of its duties as a sovereign State to make provision for postal mail service, it had in fact undertaken to do so under the Indian Post Offices Act for the convenience of the public. "It cannot be gainsaid", observed Sinha, J., as he then was, "that the postal department is rendering a very useful service, and that the appellant has by his contract with the Government undertaken to render that kind of service on a specified route"; and he added, "the present case is a straightforward illustration of the kind of contract contemplated under section 7(d) of the Act". This straightforward illustration, in our opinion, clearly brings out the class and type of contracts which fall within section 7(d) of the Act. Government must undertake to render a specified service or specified services and the contract must be for the rendering of the said service or services. That was precisely what the contract in the case of N. Satyanathan (1) purported to do. It is difficult to see how this case can be said to support the conclusion of the High Court that the contract for stocking and storing of goods is a contract for rendering the service of supplying and selling the same to the residents of the place. In this connection Mr. Jha, for the respondents, has drawn our attention to a decision of the Madras High (1) ; 479 Court in V. V. Ramaswamy vs Election Tribunal, Tirunelveli (1). In that case the Court was concerned with four contracts by which the contracting party agreed "to hold the reserve grain stock belonging to the Government of Madras, safely store it, and dispose of it according to the directions of the Government". In other words, it was a contract not only for the stocking and storing of foodgrains but also of disposing of it, and that naturally meant that the contract was for service which the State Government had undertaken to perform. This decision cannot assist the respondents in the present appeal. In the result we hold that the High Court was not justified in reversing the finding of the Tribunal that the contract in question did not attract the provisions of section 7(d) of the Act. The appeal must, therefore, be allowed and the order passed by the High Court set aside. We cannot finally dispose of the matter, because one question still remains to be considered, and that is whether the conclusion that the appellant 's nomination paper had been improperly rejected would lead to the decision that the election of not only respondent 1 but also respondent 2 should be declared to be void. The Election Tribunal has declared the whole election to be void, and in their respective appeals filed before the High Court both the respondents have challenged the correctness of that finding. The High Court, however, thought that since in its opinion the nomination paper of the appellant had been properly rejected it was unnecessary to deal with the other point. The point will now have to be considered by the High Court. We would, therefore, set aside the order passed by the High Court and remand the pro ceedings to it in order that it may deal with the other question and dispose of the appeals expeditiously in accordance with law. In the circumstances of this case we direct that the parties should bear their own costs in this Court. Costs in the High Court will be costs in the appeal before it. Appeal allowed.

IN-Abs

The appellant was a member of a joint Hindu family which carried on the business of Government stockists of grain under a contract with the Government of Bihar. His nomination for election to the Bihar Legislative Assembly was rejected on the ground that he was disqualified under section 7(d) of the Representation of the People Act, 195T, as he had an interest in a contract for the performance of services undertaken by the Bihar Government. The appellant contended that the service undertaken by the Government was the sale of foodgrains under the Grain Supply Scheme and the contract was not for the sale of such foodgrains and did not attract the provisions of section 7(d). Held, that the contract was not one for the performance of any service undertaken by the Government and the appellant was not disqualified under section 7(d). A contract of bailment which imposed on the bailee the obligation to stock and store the foodgrains in his godowns was not a contract for the purpose of the service of sale of grain which the Government had undertaken. The Government had undertaken the work of supplying grain but the contract was not one for the supply of grain. N. Satyanathan vs K. Subramanyam, ; and V. V. Ramaswamy vs Election Tribunal, Tirunelveli, , distinguished.

Appeal No. 198 of 1954. Appeal from the judgment and order dated October 16, 1952, of the former Nagpur High Court in Misc. Petn.; No. 1231 of 1951. M. section K. Sastri, for the appellant. H. L. Khaskalam, B. K. B. Naidu and I. N. Shroff, for the respondent. 64 502 1960. November 18. The Judgment of the Court was delivered by IMAM, J. This is an appeal from the judgment of the Nagpur High Court dismissing the appellants petition under articles 226 and 227 of the Constitution of India. The High Court certified under article 132(1) of the Constitution that the case involved a substantial question of law as to the interpretation of the Constitution. Hence the present appeal. The appellant was the Ruler of the State of Baster. After the passing of the Indian Independence Act, 1947, the appellant executed an Instrument of Accession to the Dominion of India on August 14, 1947. Thereafter, he entered into an agreement with the Dominion of India popularly known as "The Stand Still Agreement". On December 15, 1947, he entered into an agreement with the Government of India whereby he ceded the State of Baster to the Government of India to be integrated with the Central Provinces and Berar (now the State of Madhya Pradesh) in such manner as the Government of India thought fit. Con sequently the Governments in India came to have exclusive and plenary authority, jurisdiction and powers over the Baster State with effect from January 1, 1948. The Legislature of the State of Madhya Pradesh passed the Madhya Pradesh Abolition of Proprietary Rights (Estates, Mahals, Alienated Lands) Act, 1950 (Madhya Pradesh Act 1 of 1951), hereinafter referred to as the Act, which received the assent of the President of India on January 22, 1951. The preamble of the Act stated that it was one to provide for the acquisition of the rights of proprietors in estates, mahals, alienated villages and alienated lands in Madhya Pradesh and to make provisions for other matters connected therewith. Under section 3 of the Act, vesting of proprietary rights in the State Government takes place on certain conditions,, mentioned in that section, being complied with. The definition of 'proprietor ' is stated in section 2 cl. (m) and it is "in relation to 503 (i) the Central Provinces, includes an inferior proprietor, a protected thekadar or other thekadar, or protected headman; (ii) the merged territories, means a maufidar including an ex Ruler of an Indian State merged with Madhya Pradesh, a Zamindar, Ilaquedar, Khorposhdar or Jagirdar within the meaning of wajib ul arz, or any sanad, deed or other instrument, and a gaontia or a thekadar of a village in respect of which by or under the provisions contained in the wajib ul arz applicable to such village the maufidar, the gaontia, or the thekadar, as the case may be, has a right to recover rent or revenue from persons holding land in such village;". The definition of 'mahal ' is stated in section 2(j) and it is "mahal", in relation to merged territories, means any area other than land in possession of a raiyat which has been separately assessed to land revenue, whether such land revenue be payable or has been released, compounded for or redeemed in whole or in part;". Before the High Court the appellant contended that he was still a Sovereign Ruler and absolute owner of the villages specified in Schedules A and B of his petition under articles 226 and 227 of the Constitution. He urged that his rights had been recognized and guaranteed under the agreements entered into by him with the Government of India. The provisions of the Act, therefore, did not apply to him. It was further contended that the provisions of the Act did not apply to a Ruler or to the private property of a Ruler which was not assessed to land revenue. He relied on article 6 of the Instrument of Accession and the first paragraph of article 3 of the Merger Agreement. The High Court held that if the petitioner 's rights under article 6 of the Instrument of Accession and article 3 of the Merger Agreement had been infringed it was clear from the provisions of article 363 of the Constitution that interference by the courts was barred in disputes arising out of these two instruments. The High Court was also of the opinion that article 362 of the Constitu tion was of no assistance to the appellant. 504 After referring to the definition of the word 'proprietor ' in the Act, the High Court was of the opinion that the word 'maufidar ' in section 2(m) of the Act had not been used in any narrow or technical sense. A 'maufidar ' was not only a person to whom a grant of maufi lands had been made but was also one who held land which was exempt from the payment of "rent or tax". It accordingly rejected the contention on behalf of the appellant that the word 'maufidar ' is necessarily confined to a grantee from the State or Ruler and therefore a Ruler could not conceivably be a maufidar. The High Court also rejected the contention on behalf of the appellant that as he was a "Ruler" within the meaning of that expression in article 366(22) of the Constitution he did not come within the expression 'ex Ruler ' as contained in the definition of the word 'proprietor ' in the Act. The expression 'Ruler ' as defined in article 366(22) of the Constitution applied only for interpreting the provisions of the Constitution. The expression 'ex Ruler ' given in the Act must therefore be given the ordinary dictionary meaning. According to Shorter Oxford English Dictionary, 'Ruler ' means "one who, or that which, exercises rule, especially of a supreme or sovereign kind. One who has control, management, or head ship within some limited sphere". The High Court accordingly took the view that although the appellant did exercise such a rule in the past he ceased to exercise it in his former Domain after the agreements of accession and merger had come into operation. Accordingly the appellant must be regarded as an ex Ruler and as he was also a maufidar he fell within the definition of the word 'proprietor ' in the Act. The question whether the villages mentioned in Schedules A and B of the petition under articles 226 and 227 of the Constitution fell in any of the categories, "Estates, Mahals, Alienated lands", was also considered by the High Court. In its opinion they did not fall within the category of Estates or Alienated lands but they did fall within the category of Mahals. According to the definition of 'Mahal ' in section 2(j) of the Act the same must be separately assessed to land 505 revenue. According to the appellant they had not been assessed to land revenue but this was denied on behalf of the State of Madhya Pradesh. The High Court was of the opinion that in these circumstances it was for the appellant to establish that the villages in question had never been assessed to land revenue but no evidence had been led to this effect. On the contrary, according to the High Court, it would appear from the documents on the record that the villages known as 'Bhandar villages ' had been assessed to land revenue. As the rest of the villages in Schedule A and the villages in Schedule B, upto the date of the High Court judgment, had not been recognized as the private property of the appellant by the Government of India as required by the second and third paragraphs of the Merger Agreement, the appellant could not assert his ownership over them. The High Court, accordingly, dismissed his petition under articles 226 and 227 of the Constitution. Two questions in the main were urged before us (1) whether the appellant is a proprietor within the meaning of that expression in the Act and (2) whether the villages in question came within the definition of the word 'mahal ' contained in the Act. On behalf of the appellant it had also been urged that the Act could not defeat the rights of the appellant guaranteed under article 3 of the Merger Agreement. It seems clear to us, however, that in view of the provisions of article 363(1) of the Constitution any dispute arising out of the Merger Agreement or the Instrument of Accession is beyond the competence of the courts to enquire into. The High Court rightly decided this point against the appellant. With reference to the first point we would first consider whether the appellant is an ex Ruler for the purposes of the Act. That he is so factually cannot be denied, since he ceded his State to the Government of India to be integrated with the Central Provinces and Berar (now the State of Madhya Pradesh) in such manner as the Government of India thought fit. He further ceded to the Government ' of India full and exclusive authority, jurisdiction and powers in relation 506 to the governance of his State when he agreed that the administration of that State would be transferred to the Government of India as from January 1, 1948. The question is whether his recognition for the purposes of the Constitution as Ruler by virtue of the provisions of article 366(22) of the Constitution of India continues his status as a Ruler for purposes other than the Constitution. article 366(22) states: " "Ruler" in relation to an Indian State means the Prince, Chief or other person by whom any such covenant or agreement as is referred to in clause (1) of article 291 was entered into and who for the time being is recognised by the President as the Ruler of the State, and includes any person who for the time being is recognised by the President as the successor of such Ruler". Article 291 refers to the privy purse payable to Rulers. It states: "Where under any covenant or agreement entered into by the Ruler of any Indian State before the commencement of this Constitution, the payment of any sums, free of tax, has been guaranteed or assured by the Government of the Dominion of India to any Ruler of such State as privy purse (a) such sums shall be charged on, and paid out of, the Consolidated Fund of India; and (b) the sums so paid to any Ruler shall be exempt from all taxes on income. " Article 291 refers to any covenant or agreement entered into by the Ruler of any Indian State before the commencement of the Constitution. The covenant or agreement referred to in this Article certainly includes the Instrument of Accession and the Merger Agreement. The effect of the Merger Agreement is clearly one by which factually a Ruler of an Indian State ceases to be a Ruler but for the purposes of the Constitution and for the purposes of the privy purse guaranteed, he is a Ruler as defined in article 366(22) of the Constitution. There is nothing in the provisions of article 366(22) which requires a court to recognise such a person as a Ruler for purposes outside the Constitution. In our opinion, the High Court rightly held that 507 the appellant was an ex Ruler and that article 366(22) of the Constitution did not make him a Ruler for the purposes of the Act. As the appellant was an 'ex Ruler ', he was within the class of persons who were by name specifically included in the definition of 'proprietor ' and therefore clearly within the scope of the Act. That the appellant was not only an ex Ruler but a maufidar appears to us to be clear. The ordinary dictionary meaning of maufi is "Released, exempted, exempt from the payment of rent or tax, rent free" and maufidar is "A holder of rent free land, a grantee". It was common ground in the High Court that the villages in question were exempt from the payment of rent or tax. In our opinion, the High Court rightly took the view that the expression 'maufidar ' was not necessarily confined to a grantee from a State or a Ruler of a State. A maufidar could be a person who was the holder of land which was exempted from the payment of rent or tax. In our opinion, the appellant certainly came within the expression 'maufidar ' besides being an ex Ruler ' of an Indian State merged with Madhya Pradesh. It is, however, contended on behalf of the appellant that the most important part of the definition was the concluding portion where it was stated that in the case of a maufidar he must be a person who by or under the provisions contained in the wajib ul arz applicable to his village, had the right to recover rent or revenue from persons holding land in such village. It was contended that even if the appellant was a maufidar, there was nothing to show that with reference to any village held by him it was entered in the wajib ul arz, that he had a right to recover rent or revenue from persons holding land in such village. In the petition under articles 226 and 227 of the Constitution, filed by the appellant in the High Court, it was nowhere asserted that even if he was regarded as a maufidar it was not entered in the wajib ul arz with respect to any of his maufi villages that he had a right to recover rent or revenue from persons holding land in such villages. From the judgment of the High 508 Court it would appear that no such argument was advanced before it. In the application for a certificate under article 132(1) of the Constitution we can find no mention of this. In the statement of the case filed in this Court also there is no mention of this fact. There is thus no material on the record to establish that the appellant as a maufidar had no right to recover rent or revenue from persons holding land in his villages. The burden was on the appellant to prove this fact which he never attempted to discharge. It is impossible therefore to accept this contention on behalf of the appellant raised for the first time before us in the course of the submissions made on behalf of the appellant. Regarding the second point arising out of the definition of 'Mahal ', the High Court definitely found that the petitioner had given no evidence to establish that the villages in question were not assessed to land revenue. On the contrary, at least with reference to the Bhandar villages documents on the record showed that these villages had been assessed to land revenue. Since it was a question of fact whether the villages had been assessed to land revenue, which was denied on behalf of the State of Madhya Pradesh, the High Court rightly held that the contention of the appellant in this respect could not be accepted. As for the other villages, in Schedules A and B of the petition of the appellant under articles 226 and 227 of the Constitution the High Court, in our opinion, rightly held that the petition was not maintainable as these villages had not yet been recognised by the Government of India as the private property of the appellant. In our opinion, the appeal accordingly fails and is dismissed with costs. Appeal dismissed.

IN-Abs

The appellant was the Ruler of the State of Baster which was later integrated with the State of Madhya Pradesh. He was recognised by the President as a Ruler under article 366(22) of the Constitution. The respondent resumed certain lands belonging to the appellant under the Madhya Pradesh Abolition of Proprietary Rights (Estates, Mahals, Alienated Lands) Act, 1950. The appellant contended that he was still a Ruler and not an ex Ruler and as such did not come within the definition of "proprietor" given in the Act. Held, that the appellant was an ex Ruler for the purposes of the Act and was within the class of persons who were by name included in the definition of 'proprietor ' and was within the scope of the Act. Factually the appellant was an ex Ruler. He was a Ruler for the purposes of the privy purse guaranteed to him. There was nothing in article 366(22) which required a court to treat such a person as a Ruler for purposes outside the Constitution. Further, the appellant was also a maufidar in respect of the lands acquired which were exempt from the payment of rent or tax. The expression "maufidar" was not necessarily confined to a grantee from a State or a Ruler of a State; he could be the holder of land which was exempted from payment of rent or tax.

Appeals Nos. 155 to 160 of 1956. Appeals from the judgments and orders of the Bombay High Court dated July 6, 1954, in Special Civil Applications Nos. 393, 395, 409 and 632 of 1954; July 19, 1954, in Special Civil Application No. 1205 of 1954; and July 30, 1954, in Special Civil Application No. 1309 of 1954. Purshottam Trikamdas, V. M. Limaye, E. Udayaratnam and section section Shukla, for the appellants. H. N. Sanyal, Additional Solicitor General of India, N. P. Nathwani, K. L. Hathi and R. H. Dhebar, for the respondents. 1960. October 3. The Judgment of the Court was delivered by WANCHOO J. These six appeals on a certificate granted by the Bombay High Court raise a common question as to the constitutionality of the Bombay Personal Inams Abolition Act, No. XLII of 1953, (hereinafter called the Act) and will be disposed of by this judgment. The appellants hold personal inams which are covered by Bombay Acts Nos. 11 and VII of 1863. The Act was attacked on a number of grounds in the High Court of which only two have 945 been urged before us, namely, (i) that the property which has been dealt with under the Act is not an estate and (ii) that no compensation has been provided in the Act for taking away the property of the appellants: The writ petitions were opposed by the State of Bombay and the main contention on its behalf was that the Act was protected under article 31 A of the Constitution. Before we deal with the two points raised before us, we should like briefly to refer to the rights which holders of personal inams had by virtue of Bombay Acts Nos. II and VII of 1863. Act No. 11 extended to certain parts of the Presidency of Bombay and dealt with holders of lands in those parts who were holding lands wholly or partially exempt from the payment of government land revenue. The Act provided for the cases of holders of such lands whose title to exemption had not till then been formally adjudicated. It laid down that if such holders of lands consented to submit to the terms and conditions prescribed in the Act in preference to being obliged to prove their title to the exemption enjoyed by them, the Provincial Government would be prepared to finally authorise and guarantee the continuance, in perpetuity, of the said land to the said holders, their heirs and assigns upon the said terms and subject to the said conditions. The main provision of the Act in this respect was that such holders of land would be entitled to keep their lands in perpetuity subject to payment of (i) a fixed annual payment as nazrana in commutation of all claims of the Crown in respect of succession and transfer which shall be calculated at the rate of one anna for each rupee of assessment and (ii) a quit rent equal to one fourth of the assessment. There were other provisions in the Act for those cases where the holders of such lands were not prepared to abide by the conditions of the Act and wanted their claims to be adjudicated; but we are not concerned with those provisions for present purposes. Thus the main right which the holders of lands got by Act 11 was that they held their lands on payment of one fourth of the assessment instead of full 946 assessment plus further one sixteenth of the assessment; thus they paid in all five annas in the rupee of the full assessment and retained eleven annas in the rupee for themselves. Act No. VII dealt with similar holders of lands in the remaining parts of the Presidency of Bombay, and made similar provisions with this difference that such holders of lands were to pay two annas for each rupee of the assessment as quit rent under section 6. Thus those who came under Act VII paid only two annas in the rupee of the assessment and retained fourteen annas in the rupee for themselves. We now turn to the provisions of the Act. By section 2(c) inamdar " is defined as a holder of personal inam and includes any person lawfully holding under or through him. Section 2(d) defines an " inam village or " inam land " while section 2(e) defines " personal inam Section 3 provides that the Act will not apply to certain inams including devasthan inams or inams held by religious or charitable institutions. The Explanation to the section lays down that by the term " inams held by religious or charitable institu tions " will be meant devasthan or dharmadaya inams granted or recognized by the ruling authority for the time being for a religious or charitable institution and entered as such in the alienation register kept under section 53 of the Bombay Land Revenue Code, 1879 (hereinafter called the Code), or in the records kept under the rules made under the . Thus so far as religious or charitable institutions were concerned those inams which they held from the very beginning as devasthan or dharmadaya inams and which were entered in the relevant records were out of the provisions of the Act. Section 4 extinguishes all personal inams and save as expressly provided by or under the provisions of the Act, all rights legally subsisting on the said date in respect of such personal inams were also extinguished subject to certain exceptions which are, however, not material now. Section 5 provides that all inam villages or inam lands are and shall be liable to the payment of land revenue in accordance with the provisions of the Code or the 947 rules made thereunder and the provisions of the Code and the rules relating to unalienated lands shall apply to such lands. It further provides that an inamdar in respect of the inam land in his actual possession or in possession of a person holding from him other than an inferior holder (subject to an exception which we shall mention just now) would be primarily liable to the State Government for the payment of land revenue due in respect of such land held by him and shall be entitled to all the rights and shall be liable to all obligations in respect of such land as an occupant under the Code or the rules made thereunder or any other law for the time being in force. Thus by section 5 the holder of a personal inam became for all practical purposes an occupant under the Code liable to pay full land revenue and the advantage that he had under Acts II and VII of 1863 of paying only a part of the land revenue and retaining the rest for himself was taken away. The exception which we have refer. red to above was where the inferior holder holding inam land paid an amount equal to the annual assess ment to the holder of the personal inam, such inferior holder would be liable to the State Government and would become an occupant of the land under the Code. Section 7 then vests certain lands like public roads, paths and lanes, the bridges, ditches, dikes and fences, the bed of the sea and harbours, creeks below high water mark and of rivers, streams, nallas, lakes, wells and tanks, and all canals, water courses, all standing and flowing water, all unbuilt village sites, all waste lands and all uncultivated lands (excluding lands used for building or other non agricultural purposes) in the State Government and extinguishes the rights of inamdar in them. Section 8 deals with right to trees and section 9 with right to mines and mineral products. Section 10 provides for compensation for extinguishment of rights under section 7 while section 11 gives a right of appeal from the order of the Collector under section 10. Sections 12 to 16 deal with procedural matters and section 17 provides for payment of compensation for extinction or modification of an inamdar 's right which may not be covered by section 10. Sub section (5) 948 of section 17 however says that " nothing in this section shall entitle any person to compensation on the ground that any inam village or inam land which was wholly or partially exempt from the payment of land revenue has been under the provisions of this Act made subject to the payment of full assessment in accordance with the provisions of the Code ". Section 17 A provides for the issue of bonds while section 18 provides for the application of the Bombay Tenancy and Agricultural Lands; Act, 1948, to any inam village or. inam land or the mutual rights and obligations of an inamdar and his tenants. Section 19 provides for making of rules and section 20 deals with repeals and amendments. It will be seen from this analysis of the Act that the main provisions are sections 4, 5 and 7. So far as section 7 is concerned, there is provision for compensation with respect to lands vested in the State by virtue of that section. But no compensation is provided for the rights extinguished by as. 4 and 5. As we have seen already the main right of an inamdar was to hold his lands on payment of land revenue which was less than the full assessment and it is this right which has been abolished by sections 4 and 5 and the inamdar will now have to pay the full assessment. No compensation has been provided for the loss which the inamdar suffers by having to pay the full assessment. This brings us to the first contention. On behalf of the appellants it is urged that what sections 4 and 5 extinguish is the right of the inamdar to appropriate to himself the difference between the full assessment and the quit rent, and this is not an estate within the meaning of Art, 3 1 A of the Constitution. The relevant provisions in article 31 A for present purposes aref these: " 31 A (1) Notwithstanding anything contained in article 13, no law providing for (a) the acquisition by the State of any estate or of any rights therein or the extinguishment or modification of any such rights, or (b). . . . (c). . . . 949 (d). . . . (e). . . . shall be deemed to be void on the ground that it is in consistent with or takes away or abridges any of the rights conferred by article 14, art 19 or article 31 ; Provided. . . (2) In this article (a) the expression ' estate ' shall, in relation to any local area, have the same meaning as that expression or its local equivalent has in the existing law relating to land tenures in force in that area, and shall also include any jagir, inam or muafi or other similar grant and in the States of Madras and Kerala any janmam right; (b) the expression 'rights ' in relation to an estate shall include any rights vesting in a proprietor, sub proprietor, under proprietor, tenure holder, raiyat, under raiyat or other intermediary and any rights or privileges in respect of land revenue ". It will be, clear from the definition of the word estate " in article 31 A(2)(a) that it specifically includes an " inam " within it. As such it would be in our opinion idle to contend that inams are not estates within the meaning of the expression " estate " for the purpose of article 31 A. The Act specifically deals with inams and would thus be obviously protected under article 31 A from any attack under article 14, article 19 or article 31. It is, however, urged that the right of the inamdar to appropriate to himself that part of full assessment which was left over after he had paid the quit rent to the Government is not a right in an estate. This contention also has no force. Inams being estates, the right of the inamdar to retain part of the full assessment over and above the quit rent payable to the Government arises because he holds the inam estate. The right therefore can be nothing more than a right in an estate. Besides the definition of the expression " rights " in article 31 A(2)(b) makes the position clear beyond all doubt, for it provides that the rights in relation to an estate would include any rights or privileges in respect of land revenue 121 950 Even if it were possible to say that the right of the inamdar to appropriate to himself the difference between the full assessment and the quit rent was not a right in an estate as such, it would become a right in an estate by virtue of this inclusive definition for the inamdar 's right could only be a right or privilege in respect of land revenue. Besides, it is clear that the right in question falls under section 3(5) of the Code and as such also it is an estate under Art.31 A. The contention of the appellants therefore that inams dealt with by the Act are not covered by the expression " estate " in article 31 A fails. Their further contention that their right to retain the difference between full assessment and quit rent is not a right in an estate also fails. The Act therefore when it extinguishes or modifies the rights of inamdars in the inam estates is clearly protected by article 31 A. The next contention is that the Act does not provide for compensation and is therefore ultra vires in view of article 31. We find, however, that the Act has provided for compensation under section 10 so far as that part of inam lands which are vested in the State by section 7 are concerned. Further section 17 provides for compensation in a possible case where anything has been left out by section 7 and the inamdar is entitled to compensation for it. It is true that by sub section (5) of section 17 no compensation is to be paid for the loss to the inamdar of what he used to get because of the difference between the quit rent and the full assessment. It is how ever clear that article 31 A saves the Act from any attack under article 31 which is the only Article providing for compensation. In this view of the matter the constitutionality of the Act cannot be assailed on the ground that it provides no compensation for extinction of certain rights. There is no force in these appeals and they are hereby dismissed with costs. One set only of hearing costs. Appeals dismissed.

IN-Abs

The appellants held personal inams which were governed by Bombay Acts Nos. II and VII of 1863 by virtue of which they held their lands on payment of land revenue which was less than the full assessment. After. coming into force of the Bombay Personal Inams Abolition Act, 1952, the appellants who were affected by it Challenged the validity of the Act on the grounds, inter alia, (i) that the property which had been dealt with under the Act was not an estate inasmuch as what sections 4 and 5 extinguished was the right of the inamdar to appropriate to himself the difference between the full assessment and 944 the quit rent and this was not an estate within the meaning of article 31 A of the Constitution of India, and (2) that no compensation bad been provided in the Act for taking away the property of the appellants. Held: (i) that the right of the inamdar to appropriate to himself the difference between the full assessment and the quit rent was a right in respect of land revenue and was therefore a right in an estate by virtue of the definition in article 31 A(2)(b). Such a right also fell under section 3(5) Of the Bombay Land Revenue Code, 1879, and as such it was an estate under article 31 A. Accordingly, the Act when it extinguished or modified the rights of inamdars in inam estates was protected by article 31 A. (2) that sub section (5) Of section 17 of the Act under which no compensation was to be paid for the loss to the inamdar of what he used to get because of the difference between the quit rent and the full assessment, was not invalid as article 31 A saved the Act from any attack under article 31 which was the only Article providing for compensation.

iminal Appeal No. 68 of 1958. Appeal by special leave from the judgment and order dated July 11, 1957, of the Allahabad High Court (Lucknow Bench), Lucknow, in Criminal Appeal No. 515 of 1955, arising out of the judgment and order dated October 31, 1955, of the Special Judge, Anti corruption, Lucknow, in Criminal Case No. 2/3/32/45 of 1953 55. Frank Anthony, Udai Pratap Singh and P. C. Agarwala, for the appellant. G. C. Mathur and O. P. Lal, for the respondent. December 15. The Judgment of the Court was delivered by GAJENDRAGADKAR J. This appeal by special leave Gajendragadkar j. has been filed by C. 1. Emden (hereinafter called the appellant) who has been convicted under section 161 of the Indian Penal Code and under section 5(2) of the Prevention of Corruption Act 2 of 1947 (hereinafter called the Act). The case against him was that he had accepted a bribe of Rs. 375 from Sarat Chandra Shukla on January 8, 1953. The appellant was a Loco Foreman at Alambagh Loco Shed, and Shukla had secured a contract at the same place for the removal of cinders 76 594 from ash pits and for loading coal. This contract had been given to Shukla in June 1952. The prosecution case was that the appellant demanded from Shukla Rs. 400 per month in order that Shukla may be allowed to carry out his contract peacefully without any harassment. Shukla was told by the appellant that he had been receiving a monthly payment from Ram Ratan who had held a similar contract before him and that it would be to his interest to agree to pay the bribe. Shukla, however, refused to accede to this request and that led to many hostile acts on the part of the appellant. On January 3, 1953, the appellant again asked Shukla to pay him the monthly bribe as already suggested; Shukla then requested him to reduce the demand on the ground that the contract given to him was for a much lesser amount than that which had been given to his predecessor Ram Ratan; the appellant thereupon agreed to accept Rs. 375. Shukla had no money at the time and so he asked for time to make the necessary arrangement. The agreement then was that Shukla would pay the money to the appellant on January 8, 1953. Meanwhile Shukla approached the Deputy Superintendent, of Police, Corruption Branch, and gave him information about the illegal demand made by the appellant. Shukla 's statement was then recorded before a magistrate and it was decided to lay a trap. Accordingly, a party consisting of Shukla, the magistrate, the Deputy Superintendent of Police and some other persons went to the Loco Yard. Shukla and Sada Shiv proceeded inside the Yard while the rest of the party stood at the gate. Shukla then met the appellant and informed him that he had brought the money; he was told that the appellant would go out to the Yard and accept the money. At about 3 p.m. the appellant went out to the Yard and, after making a round, came to the place which was comparatively secluded. He then asked Shukla to pay the money and Shukla gave him a bundle containing the marked currency notes of the value of Rs. 375. A signal was then made by Shukla and the raiding party immediately arrived on the scene. The magistrate disclosed his identity to the 595 appellant and asked him to produce the amount paid to him by Shukla. The appellant then took out the currency notes from his pocket and handed them over to the magistrate. It is on these facts that charges under section 161 of the Indian Penal Code and section 5(2) of the Act were framed against the appellant. The appellant denied the charge. He admitted that he had received Rs. 375 from Shukla but his case was that at his request Shukla had advanced the said amount to him by way of loan for meeting the expenses of the clothing of his children who were studying in school. The appellant alleged that since he had been in need of money he had requested Kishan Chand to arrange for a loan of Rs. 500; but knowing about his need Shukla offered to advance him the loan, and it was as such loan that Shukla paid him Rs. 375 and the appellant accepted the said amount. Both the prosecution and the defence led evidence to support their respective versions. The learned special judge who tried the case believed the evidence given by Shukla, held that it was sufficiently corroborated, and found that the defence story was improbable and untrue. The learned judge also held that on the evidence led before him the presumption under section 4 of the Act had to be raised and that the said presumption had not been rebutted by the evidence led by the defence. Accordingly, the learned judge convicted the appellant of both the offences charged and sentenced him to suffer one year 's rigorous imprisonment and to pay a fine of Rs. 500 under section 161 of the Code and two years ' rigorous imprisonment under section 5 of the Act. Both the sentences were ordered to run concurrently. The appellant challenged the correctness and propriety of this order by his appeal before the High Court of Allahabad. The High Court saw no reason to interfere with the order under appeal because it held that, on the facts of the case, a statutory presumption under section 4 had to be raised and that the said presumption had not been rebutted by the appellant. In other words the High Court did not consider the prosecution evidence apart from the presumption since 596 it placed its decision on the presumption and the failure of the defence to rebut it. In the result the conviction of the appellant was confirmed, the sentence passed against him under section 161 was maintained but the sentence under section 5(2) of the Act was reduced to one year. The sentences thus passed were ordered to run concurrently. It is against this order that the present appeal by special leave has been preferred by the appellant. This appeal has been placed before a Constitution Bench because one of the points which the appellant raises for our decision is that section 4(1) of the Act which requires a presumption to be raised against an accused person is unconstitutional and ultra vires as it violates the fundamental right guaranteed by article 14 of the Constitution. We would, therefore, first examine the merits of this point. The Act was passed in 1947 with the object of effectively preventing bribery and corruption. Section 4(1) provides that where in any trial of an offence punishable under section 161 or section 165 of the Indian Penal Code it is proved that an accused person has accepted or obtained, or has agreed to accept or attempted to obtain, for himself or for any other person, any gratification (other than legal remuneration) or any valuable thing from any person, it shall be presumed unless the contrary is proved that he accepted or obtained or agreed to accept or attempted to obtain, that gratification or that valuable thing, as the case may be, as a motive or reward such as is mentioned in the said section 161, or as the case may be, without consideration or for a consideration which he knows to be inadequate. Mr. Anthony, for the appellant, contends that this section offends against the fundamental requirement of equality before law or the equal protection of laws. It is difficult to appreciate this argument. The scope and effect of the fundamental right guaranteed by article 14 has been considered by this Court on several occasions; as a result of the decisions of this Court it is well estab. lished that article 14 does not forbid reasonable classific ation for the purposes of legislation; no doubt it forbids class legislation; but if it appears that the 597 impugned legislation is based on a reasonable classification founded on intelligible differentia and that the said differentia have a rational relation to the object Sought to be achieved by it, its validity cannot be successfully challenged under article 14 (Vide: Shri Ram Krishna Dalmia vs Shri Justice section R. Tendolkar (1). In the present case there can be no doubt that the basis adopted by the Legislature in classifying one class of public servants who are brought within the mischief of section 4(1) is a perfectly rational basis. It is based on an intelligible differentia and there can be no difficulty in distinguishing the class of persons covered by the impugned section from other classes of persons who are accused of committing other offences. Legislature presumably realised that experience in courts showed how difficult it is to bring home to the accused persons the charge of bribery; evidence which is and can be generally adduced in such cases in support of the charge is apt to be treated as tainted, and so it is not very easy to establish the charge of bribery beyond a reasonable doubt. Legislature felt that the evil of corruption amongst public servants posed a serious problem and bad to be effectively rooted out in the interest of clean and efficient administration. That is why the Legislature decided to enact section 4(1) with a view to require the raising of the statutory presumption as soon as the condition precedent prescribed by it in that behalf is satisfied. The object which the Legislature thus wanted to achieve is the eradication of corruption from amongst public servants, and between the said object and the intelligible differentia on which the classification is based there is a rational and direct relation. We have, therefore, no hesitation in holding that the challenge to the vires of section 4(1) on the ground that it violates article 14 of the Constitution must fail. Incidentally, we may refer ' to the decision of this Court in A. section Krishna vs The State of Madras (2) in which a similar challenge to the vires of a statutory presumption required to be raised under section 4(2) of the Madras Prohibition Act, 10 of 1937, has been repelled. (1) ; (2) ; 598 That takes us to the question of construing section 4(1). When does the statutory presumption fall to be raised, and what is the content of the said presumption? Mr. Anthony contends that the statutory presumpion cannot be raised merely on proof of the fact that the appellant had received Rs. 375 from Shukla; in order to justify the raising of the statutory presumption it must also be shown by the prosecution that the amount was paid and accepted as by way of bribe. This argument involves the construction of the words " any gratification other than, legal remuneration " used in section 4(1). It is also urged by Mr. Anthony that even if the statutory presumption is raised against the appellant, in deciding the question as to whether the contrary is proved within the meaning of section 4(1) it must be borne in mind that the onus of proof on the appellant is not as heavy as it is on the prosecution in a criminal trial. Let us first consider when the presumption can be raised under section 4(1). In dealing with this question it may be relevant to remember that the presumption is drawn in the light of the provisions of section 161 of the Indian Penal Code. In substance the said section provides inter alia that if a public servant accepts any gratification whatever other than legal remuneration as a motive or reward for doing or forbearing to do any official act, he is guilty of accepting illegal gratification. Section 4(1) requires the presumption to be raised whenever it is proved that an accused person has accepted " any illegal gratification (other than legal remuneration) or any valuable thing. " This clause does not include the receipt of trivial gratification or thing which is covered by the exception prescribed by sub section The argument is that in prescribing the condition precedent for raising a presumption the Legislature has advisedly used the word " gratification " and not money or gift or other consideration. In this connection reliance has been placed on the corresponding provision contained in section 2 of the English Prevention of Corruption Act, 1916 (6 Geo. 5, c. 64) which uses the words "any money, gift, or other consideration ". The use of the 599 word gratification emphasises that it is not the receipt of any money which justifies the raising of the presumption; something more than the mere receipt of money has to be proved. It must be proved that the money was received by way of bribe. This contention no doubt is supported by the decision of the Rajasthan High Court in The State vs Abhey Singh (1) as well as the decision of the Bombay High Court in the State vs Pandurang Laxman Parab (2). On the other hand Mr. Mathur, for the State, argues that the word " gratification " should be construed in its literal dictionary meaning and as such it means satisfaction of appetite or desire; that is to say the presumption can be raised whenever it is shown that the accused has received satisfaction either of his desire or appetite. No doubt it is conceded by now that in most of the cases it would be the payment of money which would cause gratification to the accused; but he contests the suggestion that the word " gratification " must be confined only to the payment of money coupled with the right that the money should have been paid by way of a bribe. This view has been accepted by the Bombay High Court in a subsequent decision in State vs Pundlik Bhikaji Ahire (3) and by the Allahabad High Court in Promod Chander Shekhar vs Rex (4). Paragraph 3 of section 161 of the Code provides that the word " gratification " is not restricted to pecuniary gratification or to gratifications estimable in money. Therefore " gratification " mentioned in section 4(1) cannot be confined only to payment of money. What the prosecution has to prove before asking the court to raise a presumption against an accused person is that the accused person has received a " gratification other than legal remuneration "; if it is shown, as in the present case it has been shown, that the accused received the stated amount and that the said amount was not legal remuneration then the condition prescribed by the section is satisfied. In the context of the remuneration legally payable to, and receivable by, a (1) A.I.R. (2) xi. (3) (4) I.L.R. 1950 All. 600 public servant, there is no difficulty in holding that where money is shown to have been paid to, and accepted by, such public servant and that the said money does not constitute his legal remuneration, the presumption has to be raised as required by the section. If the word " gratification " is construed to mean money paid by way of a bribe then it would be futile or superfluous to prescribe for the raising of the presumption. Technically it may no doubt be suggested that the object which the statutory presumption serves on this construction is that the court may then presume that the money was paid by way of a bribe as a motive or reward as required by section 161 of the Code. In our opinion this could not have been the intention of the Legislature in prescribing the statutory presumption under section 4(1). In the context we see no justification for not giving the word " gratification " its literal dictionary meaning. There is another consideration which supports this construction. The presumption has also to be raised when it is shown that the accused person has received any valuable thing. This clause has reference to the offence punishable under section 165 of the Code; and there. is no doubt that one of the essential ingredients of the said offence is that the valuable thing should have been received by the accused without consideration or for a consideration which he knows to be inadequate. It cannot be suggested that the relevant clause in section 4(1) which deals with the acceptance of any valuable thing should be interpreted to impose upon the prosecution an obligation to prove not only that the valuable thing has been received by the accused but that it has been received by him without consideration or for a consideration which he knows to be inadequate. The plain meaning of this clause undoubtedly requires the presumption to be raised whenever it is shown that the valuable thing has been received by the accused without anything more. If that is the true position in respect of the construction of this part of section 4(1) it would be unreasonable to hold that the word " gratification " in the same clause imports the necessity to prove not only the payment 601 of money but the incriminating character of the said payment. It is true that the Legislature might have used the word " money " or " consideration " as has been done by the relevant section of the English statute; but if the dictionary meaning of the word " gratification " fits in with the scheme of the section and leads to the same result as the meaning of the word " valuable thing " mentioned in the same clause, we see no justification for adding any clause to qualify the word " gratification"; the view for which the appellant contends in effect amounts to adding a qualifying clause to describe gratification. We would accordingly hold that in the present appeal the High Court was justified in raising the presumption against the appellant because it is admitted by him that he received Rs. 375 from Shukla and that the amount thus received by him was other than legal remuneration. What then is the content of the presumption which is raised against the appellant ? Mr. Anthony argues that in a criminal case the onus of proof which the accused is called upon to discharge can never be as heavy as that of the prosecution, and that the High Court should have accepted the explanation given by the appellant because it is a reasonably probable explanation. He contends that the test which can be legitimately applied in deciding whether or not the defence explanation should be accepted cannot be as rigorous as can be and must be applied in deciding the merits of the prosecution case. This question has been considered by courts in India and in England on several occasions. We may briefly indicate some of the relevant decisions on this point. In Otto George Gfeller vs The King(1) the Privy Council was dealing with the case where the prosecution had established that the accused were in possession of goods recently stolen and the point which arose for decision was how the explanation given by the accused about his possession of the said goods would or should be considered by the jury. In that connection Sir George Rankin observed that the appellant did not (1) A.I.R. 1943 P.C. 211. 77 602 have to prove his story, but if his story broke down the jury might convict. In other words, the jury might think that the explanation given was one which could not be reasonably true, attributing a reticence or an incuriosity or a guilelessness to him beyond anything that could fairly be supposed. The same view was taken in Rex vs Carr Briant (1) where it has been observed that in any case where either by statute or at common law some matter is presumed against an accused, " unless the contrary is proved the jury should be directed that it is for them to decide whether the contrary is proved, that the burden of proof required is less than that required at the bands of the prosecution in proving the case beyond a reasonable doubt, and that the burden may be discharged by evidence satisfying the jury of the probability of that which the accused is called upon to establish " (p. 612). In other words, the effect of these observations appears to be to relax to some extent the rigour of "the elementary proposition that in civil cases the preponderance of probability may constitute sufficient ground for a verdict " (p. 611),(Also vide: Regina vs Dunbar (2)). It is on the strength of these decisions that Mr. Anthony contends that in deciding whether the contrary has been proved or not under section 4(1) the High Court should not have applied the same test as has to be applied in dealing with the prosecution case. The High Court should have inquired not whether the explanation given by the appellant is wholly satisfactory but whether it is a reasonably possible explanation or not. On behalf of the State it is urged by Mr. Mathur that in construing the effect of the clause " unless the contrary is proved " we must necessarily refer to the definition of the word " proved " prescribed by section 3 of the Evidence Act. A fact is said to be proved when, after considering the matter before it, the Court either believes it to exist or considers its existence so probable that a prudent man ought under the circumstances of the particular case to act on the supposition that it exists. He has also relied on section 4 which provides that whenever it is directed that the (1) (2) at p. 11. 603 court shall presume a fact it shall record such fact as proved unless and until it is disproved. The argument is that there is not much room for relaxing the onus of proof where the accused is called upon to prove the contrary under section 4(1). We do not think it necessary to decide this point in the present appeal. We are prepared to assume in favour of the appellant that even if the explanation given by him is a reasonably probable one the presumption raised against him can be said to be rebutted. But is the explanation. given by him reasonably probable ? That is the question which must now be considered. What is his explanation ? He admits that he received Rs. 375 from Shukla but urges that Shukla gave him this amount as a loan in order to enable him to meet the expenses of the clothes for his school going children. In support of this the appellant gave evidence himself, and examined other witnesses, Kishan Chand and Ram Ratan being the principal ones amongst them. The High Court has examined this evidence and has disbelieved it. It has found that Kishan Chand is an interested witness and that the story deposed to by him is highly improbable. Apart from this conclusion reached by the High Court on appreciating oral evidence adduced in support of the defence plea, the High Court has also examined the probabilities in the case. It has found that at the material time the appellant was in possession of a bank balance of Rs. 1,600 and that his salary was about Rs. 600 per month. Besides his children for whose clothing he claims to have borrowed money had to go to school in March and there was no immediate pressure for preparing their clothes. The appellant sought to overcome this infirmity in his explanation by suggesting that he wanted to reserve his bank balance for the purpose of his daughter 's marriage which he was intending to perform in the near future. The High Court was not impressed by this story; and so it thought that the purpose for which the amount was alleged to have been borrowed could not be a true purpose. Besides the High Court has also considered whether it would have been probable that Shukla 604 should have advanced money to the appellant. Having regard to the relations between the appellant and Shukla it was held by the High Court that it was extremely unlikely that Shukla would have offered to advance any loan to the appellant. It is on a consideration of these facts that the High Court came to the conclusion that the explanation given by the accused was improbable and palpably unreasonable. It is true that in considering the explanation given by the appellant the High Court has incidentally referred to the statement made by him on January 8, 1953, before the magistrate, and Mr. Anthony has strongly objected to this part of the judgment. It is urged that the statement made by the appellant before the magistrate after the investigation into the offence had commenced is inadmissible. We are prepared to assume that this criticism is wellfounded and that the appellant 's statement in question should not have been taken into account in considering the probability of his explanation; but, in our opinion, the judgment of the High Court shows that not much importance was attached to this statement, and that the final conclusion of the High Court was substantially based on its appreciation of the oral evidence led by the defence and on considerations of probability to which we have already referred. Therefore, we are satisfied that the High Court was right in discarding the explanation given by the appellant as wholly unsatisfactory and unreasonable. That being so it is really not necessary in the present appeal to decide the question about the nature of the onus of proof cast upon the accused by section 4(1) after the statutory presumption is raised against him. In the result the appeal fails, the order of conviction and sentence passed against the appellant is confirmed and his bail bond cancelled. Appeal dismissed.

IN-Abs

The appellant, who was working as a Loco Foreman, was found to have accepted a sum of Rs. 375 from a Railway Contractor. The appellant 's explanation was that he had borrowed the amount as he was in need of money for meeting the expenses of the clothing of his children who were studying in school, The Special judge accepted the evidence of the contractor and held that the money had been taken as a bribe, that the defence story was improbable and untrue, that the presumption under section 4 Of the Prevention of Corruption Act had to be raised and that the presumption had not been rebutted by the appellant and accordingly convicted him under section 161 Indian Penal Code and section 5 Of the Prevention of Corruption Act, 1947. On appeal the High Court held that on the facts of the case the statutory presumption under section 4 had to be raised, that the explanation offered by the appellant was improbable and palpably unreasonable and that the presumption had not been rebutted, and upheld the conviction. The appellant contended (i) that section 4 was ultra vires as it contravened article 14 of the Constitution, (ii) that the presumption under section 4 could not be raised merely on proof of acceptance of money but it had further to be proved that the money was accepted as a bribe, (iii) and that even if the presumption arose it was rebutted when the appellant offered a reasonably probable explanation. Held, that section 4 of the Prevention of Corruption Act did not violate article 14 Of the Constitution. The classification of public servants who were brought within the mischief of section 4 was based on intelligible differentia which had a rational relation to the object of the Act, viz,, eradicating bribery and corruption amongst public servants. Ram Krishna Dalmia vs Shri justice section R. Tendolkar; , , followed. A. section Krishna vs The State of Madras, ; , referred to. The presumption under section 4 arose when it was shown that the accused had received the stated amount and that the said amount was not legal remuneration. The word " gratification ' 593 in section 4(1) was to be given its literal dictionary meaning of satisfaction of appetite or desire ; it could not be construed to mean money paid by way of a bribe. The High Court was justified in raising the presumption against the appellant as it was admitted that he had received the money from the contractor and the amount received was other than legal remuneration. State vs Pundlik Bhikaji Ahire, and Promod Chander Shekhar vs Rex, I.L.R. 1950 All. 382, approved. The State vs Abhey singh, A.I.R. 1957 Raj. 138 and State vs Pandurang Laxman Parab, , disapproved. Even if it be assumed that the presumption arising under section 4(1) could be rebutted by the accused giving an explanation which was a reasonably probable one the High Court was right in holding that the explanation given by the appellant was wholly unsatisfactory and unreasonable. Otto George Gfeller vs The King, A.I.R. 1943 P.C. 211 and Rex vs Cary Briant, (1943) I K.B. 607, referred to.

minal Appeal No. 124 of 1959. Appeal by special leave from the judgment and order dated June 19 and 20, 1959, of the former Bombay High Court in Criminal Appeal No. 411 of 1959 arising out of the judgment and order dated March 17, 1959, of the Presidency Magistrate XX Court, Mazagaon, Bombay in Case Nos. 1952 54/P of 1958. B. M. Mistri, Ravinder Narain, section N. Andley, J. B. Dadachanji, Rameshwar Nath and P. L. Vohra for the Appellants. Nur ud din Ahmed and R. H. Dhebar, for the Respondent. 1960. November 18. The Judgment of the Court was delivered by IMAM, J. The appellants were convicted under sections 65(b), 65(f) and 66(b) of the Bombay Prohibition Act of 1949, hereinafter referred to as the Act, by the Presidency Magistrate XX Court, Mazagaon, Bombay. The appellant No. 1 was sentenced to 9 months ' rigorous imprisonment and a fine of Rs. 1,000 under section 65(b). No separate sentence was imposed under the other sections. Appellant No. 2 was sentenced to 6 months ' rigorous imprisonment and fine of Rs. 500 under section 65(b). No separate sentence was imposed under the other sections. They appealed to the Bombay High Court against their convictions and sentence. The High Court set aside their convictions under sections 65(b) and 66(b) of the Act but maintained their conviction under section 65(f ) read with section 81 relying on the presumption against the appellants arising out of section 103 of the Act. The High Court accordingly directed that the sentence of imprisonment and fine imposed upon the appellants by the Presidency Magistrate under section 65(b) be regarded as the sentence of imprisonment and fine imposed on the appellants under section 65(f) read with section 81. 66 518 According to the case of the prosecution, there was a search on August 2,1958, of certain premises in the occupation of appellant No. 1 on the third floor of Dhun Mansion, Khetwadi 12th Lane. A complete working still was found there and both the appellants were working it. Appellant No. 2 was pumping air into the cylinder with a motor pump while appellant No. 1 was holding a rubber tube attached to the tank. An iron stand with a boiler on it was also found there. Below the boiler there was a stove which was burning. There was also a big jar near the still. According to the prosecution, this big jar contained illicit liquor. Another glass jar was used as a receiver which, according to the prosecution, also contained 20 drams of illicit liquor. The, boiler contained four gallons of wash. There were also 11 wooden barrels containing wash. In the drawing room of the premises a small glass jar containing 20 drams of illicit liquor, a bottle of 1 1/2 drams of illicit liquor and a pint bottle containing 3 drams of illicit liquor were also found. A _panchnama was drawn up concerning the recovery of these articles. It was the case of the prosecution that the appellants were manufacturing illicit liquor and were in possession of a still and other materials for the purpose of manufacturing intoxicant and were also in possession of illicit liquor. The Presidency Magistrate was satisfied that a working still and illicit liquor in the glass jars and the two bottles were found in the premises in question. The High Court also was of the opinion that a working still was found there but it thought that it would not be safe to rely upon the conflicting and unsatisfactory evidence in the case to hold that illicit liquor had been found in the premises in question, as it had not been satisfactorily proved that the bottles and the glass jars had been sealed in the presence of the panchas. The High Court was further of the opinion that there was no evidence on the record to show that the very bottles which were attached and the sample bottles in which was contained the wash were the bottles which were examined by the Chemical Examiner in respect 519 of which he made a report to the Magistrate. Accordingly, it was of the opinion that the convictions under sections 65(b) and 66(b) could not stand. On behalf of the appellants it was urged that no presumption under section 103 of the Act could arise as it had not been established, on the findings of the High Court, that the still was an apparatus for the manufacture of any intoxicant as is ordinarily used in the manufacture of any intoxicant. It was further argued that no questions were put to the accused, when they were examined under section 342 of the Code of Criminal Procedure, in this connection and therefore they had been denied the opportunity to rebut the presumption. The Presidency Magistrate had not used the provision,,; of section 103 against the appellants because he had found that in fact illicit liquor had been recovered from the premises and that the still was for manufacturing such intoxicant. If the Presidency Magistrate had at all intended to use the presumption under section 103 against the appellants, he was bound to have given them an opportunity to rebut it. If at the appellate stage the High Court was of the opinion that it had not been established that any illicit liquor had been recovered as a result of the search, then it ought not to have convicted the appellants on the presumption arising under section 103 without giving the appellants an opportunity to rebut the same. In this case the offence under section 65(f) would be the using, keeping or having in possession a still or apparatus for the purpose of manufacturing any intoxicant other than toddy. It was not established by the evidence that the still or apparatus recovered from the premises occupied by appellant No. 1 was one which is not ordinarily used for the manufacture of toddy. It was further urged on behalf of appellant No. 2 that he could not be convicted either for being in possession of the still or under section 65(f) read with section 81, that is to say, abetment of an offence under section 65(f) of the Act. This appellant was merely a servant of appellant No. 1. If any one was in possession of the still it was appellant No. 1. There was also no evidence to show that appellant No. 2 had abetted 520 appellant No. 1 in coming into possession of the still. Appellant No. 2 was merely using the pump, presumably under the orders of his master, and as he could not be said to be in possession of the still, no presumption against this appellant could arise under section 103 of the Act. We would deal with the case of appellant No. 2 first. There is no evidence that he in any way aided his master to come into possession of the still. It would be reasonable to suppose that when he was using the pump he was doing so on the orders of his master and he may not have been aware of what was being manufactured, whatever suspicion may arise from his conduct. It cannot also be said that he was in possession of the still. The still was in the possession of his master. He was merely an employee in the premises and cannot be said to be in physical possession of things belonging to his master unless they were left in his custody. It seems to us that whatever suspicion there may be against the appellant No. 2 it cannot be said that it has been established beyond reasonable doubt that he was in such possession of the still as would amount to an offence under section 65(f) of the Act. In the circumstances, no presumption could arise under section 103 against him that he was in posses sion of the still for which he could not account satis factorily. We would accordingly allow the appeal of appellant No. 2 and set aside his conviction and sentence. So far as the appellant No. 1 is concerned, there can be no question that he was found in possession of a still which, having regard to the nature of the still as disclosed by the evidence, is ordinarily used for the manufacture of an intoxicant such as liquor. Having regard to the description of the still, as found on the record, we are satisfied that the still in question is not ordinarily used for the manufacture of toddy. Indeed, it is doubtful that any still is required for the manufacture of toddy because toddy is either fermented or not. If the toddy is unfermented the need for a still is unnecessary. On the other hand, if the toddy is fermented, the process of fermentation is a natural 521 one and does not require the aid of any apparatus to ferment it. It was said, however, that by heating the toddy, a higher degree of fermentation takes place and it becomes more potent. We have, however, no evidence on the record as to this. Even if we assume that toddy, when heated, becomes highly fermented and therefore more potent, there is nothing to show that the heating process to achieve this required an elaborate still of the kind found in the premises of appellant No. 1. It was, however, pointed out that no questions were put to the appellant in order to give him an opportunity to rebut the presumption arising out of section 103 of the Act. It is, however, to be remembered that when the appellant was examined under section 342 of the Code of Criminal Procedure he had volunteered the statement that he did not know about the various contraband seized by the police. Since this was his attitude in the matter, it is difficult 'to understand what further questions could have been put to him to explain the possession of the still and the various other articles found in the premises occupied by him. It is not possible to say in this particular case that this appellant had been prejudiced by the failure of the Magistrate to put to him any specific questions about the still and the other articles found in the premises occupied by him. The presumption which arises under section 103 of the Act is that an offence under the Act is committed where a person is found in mere possession, without further evidence, of any still, utensil, implement or apparatus whatsoever for the manufacture of any intoxicant as are ordinarily used in the manufacture of such intoxicant until the contrary is proved. it is difficult to conceive that the appellant could have given any satisfactory evidence to establish that the still and other articles found in the premises occupied by him could ordinarily be used for the manufacture of toddy. We are accordingly satisfied that there was no prejudice caused to the appellant, in the circumstances of the present case, when the High Court relied upon the presumption arising under section 103 522 to uphold his conviction under section 65(f) of the Act. It was finally urged that the sentence should be reduced. In our opinion, the sentence imposed cannot be said to be unduly severe having regard to the provisions of the Act. Accordingly, the appeal of appellant No. 2 is allowed and his conviction and sentence are set aside but the appeal of appellant No. 1 is dismissed. Appeal disposed of accordingly.

IN-Abs

During the search of the premises of the appellant No. 1 a complete working still was found which was being worked by the appellant No. 1 and his servant, appellant No. 2. The presidency Magistrate was satisfied that a working still and 516 illicit liquor were found. The appellant No. 1 was examined under section 342 of the Code of Criminal Procedure, he volunteered the statement that he did not know anything of the contraband seized by the police ; so no specific question about the still and other articles recovered from his premises were put by the Presidency Magistrate who convicted the appellants under sections 65(b), 65(f) & 66(b) of the Bombay Prohibition Act, relying on the facts of the recovery of still and illicit liquor and did not use the provision of section 103 for presumption against the appellants. The appellants on appeal by special leave contended, (1) that no presumption under section 103 of the Act could arise ; and that he had been denied the opportunity to rebut the presumption under section 103 of the Act, as no questions were put to them when they were examined under section 342 of the Code of Criminal Procedure (3) that as the Magistrate had not used the provision of section 103 for presumption against the appellants, the High Court ought not to have convicted the appellants on the presumption arising under section 103 of the Act without giving them an opportunity to rebut the same. On behalf of appellant No. 2 it was further urged that he was merely a servant of appellant No. 1; if any one was in possession of the still it was appellant No. 1 and no presumption against him could arise under section 103 of the Act. Held, that when an accused is examined under section 342 of the Code of Criminal Procedure and volunteers statement denying all knowledge of articles recovered from his possession, no prejudice is caused to him if no further questions are put to explain the possession of articles found in the premises occupied by him. The presumption which arises under section 103 of the Bombay Prohibition Act is that an offence under the Act is committed when a person is found in mere possession, without further evidence, of any still, utensil, implement or apparatus whatsoever for the manufacture of such intoxicant until contrary is proved. Thus no prejudice was caused to the appellant No. 1 when the High Court relied upon the presumption arising under section 103 of the Act to uphold his conviction under section 65(f) of the Act. Held, further, that it cannot be said of merely an employee in the premises that he was in physical possession of the things belonging to his master unless they were left in his custody, Where an offence under section 65(f) of the Bombay Prohibition Act has not been established beyond reasonable doubt and the possession of still does not amount to an offence under the section no presumption could arise under section 103 of the Act against a person that he was in possession of the still for which he could not account satisfactorily. In the instant case the still being in the possession of the master and there being no evidence that the employee in any 517 way aided his master to come into possession of the still, it could not be said that the appellant No. 2 was in such possession of the still as would amount to an offence under section 65(f) of the Act.

Appeal No. 198 of 1954. Appeal from the judgment and order dated October 16, 1952, of the former Nagpur High Court in Misc. ; No. 1231 of 1951. M. section K. Sastri, for the appellant. H. L. Khaskalam, B. K. B. Naidu and I. N. Shroff, for the respondent. 64 502 1960. November 18. The Judgment of the Court was delivered by IMAM, J. This is an appeal from the judgment of the Nagpur High Court dismissing the appellants petition under articles 226 and 227 of the Constitution of India. The High Court certified under article 132(1) of the Constitution that the case involved a substantial question of law as to the interpretation of the Constitution. Hence the present appeal. The appellant was the Ruler of the State of Baster. After the passing of the Indian Independence Act, 1947, the appellant executed an Instrument of Accession to the Dominion of India on August 14, 1947. Thereafter, he entered into an agreement with the Dominion of India popularly known as "The Stand Still Agreement". On December 15, 1947, he entered into an agreement with the Government of India whereby he ceded the State of Baster to the Government of India to be integrated with the Central Provinces and Berar (now the State of Madhya Pradesh) in such manner as the Government of India thought fit. Con sequently the Governments in India came to have exclusive and plenary authority, jurisdiction and powers over the Baster State with effect from January 1, 1948. The Legislature of the State of Madhya Pradesh passed the Madhya Pradesh Abolition of Proprietary Rights (Estates, Mahals, Alienated Lands) Act, 1950 (Madhya Pradesh Act 1 of 1951), hereinafter referred to as the Act, which received the assent of the President of India on January 22, 1951. The preamble of the Act stated that it was one to provide for the acquisition of the rights of proprietors in estates, mahals, alienated villages and alienated lands in Madhya Pradesh and to make provisions for other matters connected therewith. Under section 3 of the Act, vesting of proprietary rights in the State Government takes place on certain conditions,, mentioned in that section, being complied with. The definition of 'proprietor ' is stated in section 2 cl. (m) and it is "in relation to 503 (i) the Central Provinces, includes an inferior proprietor, a protected thekadar or other thekadar, or protected headman; (ii) the merged territories, means a maufidar including an ex Ruler of an Indian State merged with Madhya Pradesh, a Zamindar, Ilaquedar, Khorposhdar or Jagirdar within the meaning of wajib ul arz, or any sanad, deed or other instrument, and a gaontia or a thekadar of a village in respect of which by or under the provisions contained in the wajib ul arz applicable to such village the maufidar, the gaontia, or the thekadar, as the case may be, has a right to recover rent or revenue from persons holding land in such village;". The definition of 'mahal ' is stated in section 2(j) and it is "mahal", in relation to merged territories, means any area other than land in possession of a raiyat which has been separately assessed to land revenue, whether such land revenue be payable or has been released, compounded for or redeemed in whole or in part;". Before the High Court the appellant contended that he was still a Sovereign Ruler and absolute owner of the villages specified in Schedules A and B of his petition under articles 226 and 227 of the Constitution. He urged that his rights had been recognized and guaranteed under the agreements entered into by him with the Government of India. The provisions of the Act, therefore, did not apply to him. It was further contended that the provisions of the Act did not apply to a Ruler or to the private property of a Ruler which was not assessed to land revenue. He relied on article 6 of the Instrument of Accession and the first paragraph of article 3 of the Merger Agreement. The High Court held that if the petitioner 's rights under article 6 of the Instrument of Accession and article 3 of the Merger Agreement had been infringed it was clear from the provisions of article 363 of the Constitution that interference by the courts was barred in disputes arising out of these two instruments. The High Court was also of the opinion that article 362 of the Constitu tion was of no assistance to the appellant. 504 After referring to the definition of the word 'proprietor ' in the Act, the High Court was of the opinion that the word 'maufidar ' in section 2(m) of the Act had not been used in any narrow or technical sense. A 'maufidar ' was not only a person to whom a grant of maufi lands had been made but was also one who held land which was exempt from the payment of "rent or tax". It accordingly rejected the contention on behalf of the appellant that the word 'maufidar ' is necessarily confined to a grantee from the State or Ruler and therefore a Ruler could not conceivably be a maufidar. The High Court also rejected the contention on behalf of the appellant that as he was a "Ruler" within the meaning of that expression in article 366(22) of the Constitution he did not come within the expression 'ex Ruler ' as contained in the definition of the word 'proprietor ' in the Act. The expression 'Ruler ' as defined in article 366(22) of the Constitution applied only for interpreting the provisions of the Constitution. The expression 'ex Ruler ' given in the Act must therefore be given the ordinary dictionary meaning. According to Shorter Oxford English Dictionary, 'Ruler ' means "one who, or that which, exercises rule, especially of a supreme or sovereign kind. One who has control, management, or head ship within some limited sphere". The High Court accordingly took the view that although the appellant did exercise such a rule in the past he ceased to exercise it in his former Domain after the agreements of accession and merger had come into operation. Accordingly the appellant must be regarded as an ex Ruler and as he was also a maufidar he fell within the definition of the word 'proprietor ' in the Act. The question whether the villages mentioned in Schedules A and B of the petition under articles 226 and 227 of the Constitution fell in any of the categories, "Estates, Mahals, Alienated lands", was also considered by the High Court. In its opinion they did not fall within the category of Estates or Alienated lands but they did fall within the category of Mahals. According to the definition of 'Mahal ' in section 2(j) of the Act the same must be separately assessed to land 505 revenue. According to the appellant they had not been assessed to land revenue but this was denied on behalf of the State of Madhya Pradesh. The High Court was of the opinion that in these circumstances it was for the appellant to establish that the villages in question had never been assessed to land revenue but no evidence had been led to this effect. On the contrary, according to the High Court, it would appear from the documents on the record that the villages known as 'Bhandar villages ' had been assessed to land revenue. As the rest of the villages in Schedule A and the villages in Schedule B, upto the date of the High Court judgment, had not been recognized as the private property of the appellant by the Government of India as required by the second and third paragraphs of the Merger Agreement, the appellant could not assert his ownership over them. The High Court, accordingly, dismissed his petition under articles 226 and 227 of the Constitution. Two questions in the main were urged before us (1) whether the appellant is a proprietor within the meaning of that expression in the Act and (2) whether the villages in question came within the definition of the word 'mahal ' contained in the Act. On behalf of the appellant it had also been urged that the Act could not defeat the rights of the appellant guaranteed under article 3 of the Merger Agreement. It seems clear to us, however, that in view of the provisions of article 363(1) of the Constitution any dispute arising out of the Merger Agreement or the Instrument of Accession is beyond the competence of the courts to enquire into. The High Court rightly decided this point against the appellant. With reference to the first point we would first consider whether the appellant is an ex Ruler for the purposes of the Act. That he is so factually cannot be denied, since he ceded his State to the Government of India to be integrated with the Central Provinces and Berar (now the State of Madhya Pradesh) in such manner as the Government of India thought fit. He further ceded to the Government ' of India full and exclusive authority, jurisdiction and powers in relation 506 to the governance of his State when he agreed that the administration of that State would be transferred to the Government of India as from January 1, 1948. The question is whether his recognition for the purposes of the Constitution as Ruler by virtue of the provisions of article 366(22) of the Constitution of India continues his status as a Ruler for purposes other than the Constitution. article 366(22) states: " "Ruler" in relation to an Indian State means the Prince, Chief or other person by whom any such covenant or agreement as is referred to in clause (1) of article 291 was entered into and who for the time being is recognised by the President as the Ruler of the State, and includes any person who for the time being is recognised by the President as the successor of such Ruler". Article 291 refers to the privy purse payable to Rulers. It states: "Where under any covenant or agreement entered into by the Ruler of any Indian State before the commencement of this Constitution, the payment of any sums, free of tax, has been guaranteed or assured by the Government of the Dominion of India to any Ruler of such State as privy purse (a) such sums shall be charged on, and paid out of, the Consolidated Fund of India; and (b) the sums so paid to any Ruler shall be exempt from all taxes on income. " Article 291 refers to any covenant or agreement entered into by the Ruler of any Indian State before the commencement of the Constitution. The covenant or agreement referred to in this Article certainly includes the Instrument of Accession and the Merger Agreement. The effect of the Merger Agreement is clearly one by which factually a Ruler of an Indian State ceases to be a Ruler but for the purposes of the Constitution and for the purposes of the privy purse guaranteed, he is a Ruler as defined in article 366(22) of the Constitution. There is nothing in the provisions of article 366(22) which requires a court to recognise such a person as a Ruler for purposes outside the Constitution. In our opinion, the High Court rightly held that 507 the appellant was an ex Ruler and that article 366(22) of the Constitution did not make him a Ruler for the purposes of the Act. As the appellant was an 'ex Ruler ', he was within the class of persons who were by name specifically included in the definition of 'proprietor ' and therefore clearly within the scope of the Act. That the appellant was not only an ex Ruler but a maufidar appears to us to be clear. The ordinary dictionary meaning of maufi is "Released, exempted, exempt from the payment of rent or tax, rent free" and maufidar is "A holder of rent free land, a grantee". It was common ground in the High Court that the villages in question were exempt from the payment of rent or tax. In our opinion, the High Court rightly took the view that the expression 'maufidar ' was not necessarily confined to a grantee from a State or a Ruler of a State. A maufidar could be a person who was the holder of land which was exempted from the payment of rent or tax. In our opinion, the appellant certainly came within the expression 'maufidar ' besides being an ex Ruler ' of an Indian State merged with Madhya Pradesh. It is, however, contended on behalf of the appellant that the most important part of the definition was the concluding portion where it was stated that in the case of a maufidar he must be a person who by or under the provisions contained in the wajib ul arz applicable to his village, had the right to recover rent or revenue from persons holding land in such village. It was contended that even if the appellant was a maufidar, there was nothing to show that with reference to any village held by him it was entered in the wajib ul arz, that he had a right to recover rent or revenue from persons holding land in such village. In the petition under articles 226 and 227 of the Constitution, filed by the appellant in the High Court, it was nowhere asserted that even if he was regarded as a maufidar it was not entered in the wajib ul arz with respect to any of his maufi villages that he had a right to recover rent or revenue from persons holding land in such villages. From the judgment of the High 508 Court it would appear that no such argument was advanced before it. In the application for a certificate under article 132(1) of the Constitution we can find no mention of this. In the statement of the case filed in this Court also there is no mention of this fact. There is thus no material on the record to establish that the appellant as a maufidar had no right to recover rent or revenue from persons holding land in his villages. The burden was on the appellant to prove this fact which he never attempted to discharge. It is impossible therefore to accept this contention on behalf of the appellant raised for the first time before us in the course of the submissions made on behalf of the appellant. Regarding the second point arising out of the definition of 'Mahal ', the High Court definitely found that the petitioner had given no evidence to establish that the villages in question were not assessed to land revenue. On the contrary, at least with reference to the Bhandar villages documents on the record showed that these villages had been assessed to land revenue. Since it was a question of fact whether the villages had been assessed to land revenue, which was denied on behalf of the State of Madhya Pradesh, the High Court rightly held that the contention of the appellant in this respect could not be accepted. As for the other villages, in Schedules A and B of the petition of the appellant under articles 226 and 227 of the Constitution the High Court, in our opinion, rightly held that the petition was not maintainable as these villages had not yet been recognised by the Government of India as the private property of the appellant. In our opinion, the appeal accordingly fails and is dismissed with costs. Appeal dismissed.

IN-Abs

The appellant was the Ruler of the State of Baster which was later integrated with the State of Madhya Pradesh. He was recognised by the President as a Ruler under article 366(22) of the Constitution. The respondent resumed certain lands belonging to the appellant under the Madhya Pradesh Abolition of Proprietary Rights (Estates, Mahals, Alienated Lands) Act, 1950. The appellant contended that he was still a Ruler and not an ex Ruler and as such did not come within the definition of "proprietor" given in the Act. Held, that the appellant was an ex Ruler for the purposes of the Act and was within the class of persons who were by name included in the definition of 'proprietor ' and was within the scope of the Act. Factually the appellant was an ex Ruler. He was a Ruler for the purposes of the privy purse guaranteed to him. There was nothing in article 366(22) which required a court to treat such a person as a Ruler for purposes outside the Constitution. Further, the appellant was also a maufidar in respect of the lands acquired which were exempt from the payment of rent or tax. The expression "maufidar" was not necessarily confined to a grantee from a State or a Ruler of a State; he could be the holder of land which was exempted from payment of rent or tax.

Appeal No. 285 of 1959. Appeal by Special Leave from the Judgment and Decree dated the 13th July, 1956, of the Patna High Court in M. J. C. No. 404 of 1954. M. C. Setalvad, Attorney General for India and section P. Varma, for the Appellants. A. V. Viswanatha Sastri, Suresh Aggarwala and D. P. Singh, for the Respondent. 1960. November 21. The Judgment of the Court was delivered by 524 SINHA, C.J. This appeal, by special leave, is directed against the judgment and order of the High Court of Patna dated July 13, 1956 disposing of a reference under section 25(1) of the Bihar Sales Tax Act, 1947, which hereinafter will be referred to as the Act, made by the Board of Revenue, Bihar. The facts of this case have never been in dispute and may shortly be stated as follows. The appellant is a Corporation incorporated under the Damodar Valley Corporation Act (XIV of 1948) and will hereinafter be referred to as the Corporation. It is a multipurpose Corporation, one of its objects being the construction of a number of dams in Bihar and Bengal with a view to controlling floods and utilising the stored water for purposes of generation of electricity. One of such dams is the Konar Dam in the district of Hazaribagh in Bihar. For the construction of the aforesaid Dam the Corporation entered into an agreement with Messrs Hind Construction Ltd. and Messrs Patel Engineering Co. Ltd. on May 24, 1950, and appointed them contractors for the aforesaid purpose. They will hereinafter be referred to as the Contractors. As a result of a change in the design of the Dam, it became necessary to enter into a supplementary agreement and on March 10, 1951, cl. 8 of Part II of the original agreement was amended and a fresh cl. 8 was substituted. Under the new cl. 8 of the agreement, as amended, the Corporation agreed to make available to the contractors such equipment as was necessary and suitable for the construction aforesaid. The Contractors are charged the actual price paid by the Corporation for the equipment and machinery thus made available, inclusive of freight and customs duty, if any, as also the cost of transport, but excluding sales tax. The equipment thus supplied by the Corporation to the Contractors was classified into two groups, Group A and Group B, as detailed in Schedule No. 2. The machinery in Group A was to be taken over from the Contractors by the Corporation, after the completion of the work at their "residual value" which was to be calculated in the manner set out in the agreement. The machinery in Group B was to become the 525 property of the Contractors after its full price had been paid by them. No more need be said about the machinery in Group B, because there is no dispute about that group, the Contractors having accepted the position that Group B machinery had been sold to them. The controversy now remaining between the parties relates to the machinery in Group A. On August 12, 1952, the Superintendent of Sales Tax, Hazaribagh, assessed the Corporation under section 13(5) of the Act for the period April, 1950 to March, 1952. It is not necessary to set out the details of the tax demand, because the amount is not in controversy. What was contended before the authorities below and in this Court was that the transaction in question did not amount to a "sale" within the meaning of the Act. The Superintendent rejected the contention raised on behalf of the Corporation that it was not liable to pay the tax in respect of the machinery sup plied to the Contractors. The Corporation went up in appeal to the Deputy Commissioner of Sales Tax against the said order of assessment. By his order dated May 5, 1953, the Deputy Commissioner rejected the contention of the appellant as to its liability under the Act, but made certain amendments in the assessment which are not material to the points in controversy before us. The Deputy Commissioner repelling the Corporation 's contentions based on the Act, held inter alia that the supply of equipment in Group A of the agreement aforesaid amounted to a sale and was not a hire ; that the condition in the agreement for the "taking over" of the equipment on conditions laid down in the agreement was in its essence a condition of repurchase and that the Corporation was a "dealer" within the meaning of the Act. The Corporation moved the Board of Revenue, Bihar, in its revisional jurisdiction under section 24 of the Act. The Board of Revenue by its resolution dated October 1, 1953, rejected the revisional application and upheld the order of the authorities below. Thereafter, the Corporation made an application to the Board of Revenue under section 25 of the Act for a reference to refer the following 67 526 questions to the High Court at Patna, namely, (a) whether the assessment under section 13(5) of the Act is maintainable, (b) whether, in the facts and circumstances of the case, it can be held that the property in the goods included in Schedule A did pass to the Contractors and the transaction amounted to a sale, and (c) whether the terms of the agreement amount to sale transactions with the Contractors and taking over by the Corporation amounts to repurchase. This application was made on December 22, 1953, but when the application for making a reference to the High Court came up for hearing before the Board of Revenue on May 20, 1954, and after the parties had been heard, counsel for the Corporation sought leave of the Board to withdraw questions (a) and (c) from the proposed reference and the Board passed the following order: "Leave is sought by the learned advocate for the petitioner to drop questions (a) and (c) from the reference. The leave is granted. There remains only question (b) for reference to the High Court. . " Thus only question (b) set out above was referred to the High Court for its decision. After hearing the parties, a Division Bench of the High Court, Ramaswami, C. J. and Raj Kishore Prasad, J., heard the reference and come to the conclusion by its judgment dated July 13, 1956, that the reference should be answered in the affirmative, namely, that the transaction in question amounted to a sale within the meaning of section 2(g) of the Act. Thereupon the Corporation made an application headed as under article 132(1) of the Constitution and prayed that the High Court "be pleased to grant leave to appeal to the Supreme Court of India and grant the necessary certificate that this case is otherwise a fit case for appeal to the Supreme Court. . " Apart from raising the ground of attack dealt with by the High Court on the reference as aforesaid, the Corporation at the time of the hearing of the applica tion appears to have raised other questions as would appear from the following extract from the judgment and order of the High Court dated January 31, 1957 : 527 "It was conceded by learned counsel for the petitioner that the case does not fulfill the requirements of Article 133(1) of the Constitution; but the argument is that leave may be granted under Article 132 of the Constitution as there is a substantial question of law with regard to the interpretation of the Constitution involved in this case. We are unable to accept this argument as correct. It is not possible for us to hold that there is any substantial question of law as to the interpretation of the Constitution involved in this case. The question at issue was purely a matter of construction of section 2(g) of the Bihar Sales Tax Act and that question was decided by this Court in favour of the State of Bihar and against the petitioner. It is argued now on behalf of the petitioner that the provisions of section 2(g) of the Bihar Sales Tax Act are ultra vires of the Constitution, but no such question was dealt with or decided by the High Court in the reference. We do not, therefore, consider that this case satisfies the requirements of article 132(1) of the Constitution and the petitioner is not entitled to grant of a certificate for leave to appeal to the Supreme Court under this Article. The application is accordingly dismissed. " Having failed to obtain the necessary certificate from the High Court, the Corporation moved this Court and obtained special leave to appeal under article 136 of the Constitution. The leave was granted on March 31, 1958. Though the scope of the decision of the High Court under section 25 of the Act on a reference made to it is limited, the Corporation has raised certain additional points of controversy, which did not form part of the decision of the High Court. Apart from the question whether the transaction in question amounted to a sale within the meaning of the Act, the statement of the case on behalf of the appellant raises the following additional grounds of attack, namely, (1) that the Corporation is not a dealer within the meaning of the Act, (2) that the proviso to section 2(g) of the Act is ultra vires the Bihar Legislature and (3) that the Act itself is ultra vires the Bihar Legislature by reason of the 528 legislation being beyond the scope of entry 48 in List II of Schedule 7 of the Government of India Act, 1935. Hence, a preliminary objection was raised on behalf of the respondent that the additional grounds of attack were not open to the Corporation in this Court. It is, therefore, necessary first to determine whether the additional grounds of attack set out above are open to the Corporation. In our opinion, those additional grounds are not open. They were never raised at any stage of the proceedings before the authorities below, or in the High Court. This Court is sitting in appeal over the decision of the High Court under section 25 of the Act. The High Court in coming to its conclusion was acting only in an advisory capacity. It is well settled that the High Court acting in its advisory capacity under the taxing statute cannot go beyond the questions referred to it, or on a reference called by it. The scope of the appeal to this Court, even by special leave, cannot be extended beyond the scope of the controversy that could have been legally raised before the High Court. It is manifest that the High Court could not have expressed its opinion on any matter other than the question actually before it as a result of the reference made by the Board of Revenue. The preliminary objection must, therefore, be allowed and the appeal limited to the question whether the transaction in question in this case amounted to a sale within the meaning of the Act. It is manifest that this controversy between the parties has to be resolved with reference to the terms of the contract itself. Clause 8 of the agreement as amended is a very complex one as will presently appear from the following extracts, being the relevant portions of that clause : "The Corporation may hire or make available such of its equipment as is suitable for construction for the use of the Contractor. The actual prices paid by the Corporation for the equipment thus made available, inclusive of freight, insurance and custom duties, if any, and the cost of its transport to site but excluding such tax as sales tax whether local, municipal, State or Central, shall be charged to the 529 Contractor and the equipment shall remain the property of the Corporation until the full prices thereof have been realised from the Contractor. Equipment lent for the Contractor 's use, if any, shall be charged to him on terms of hiring to be mutually agreed upon; such terms will cover interest on capital cost and the depreciation of the equipment. The Corporation will supply to the Contractor the machinery mentioned in Schedule No. 2, Group A and Group B below." Then follows a description seriatim of the many items of machinery in Group A with the number of such machinery and the approximate cost thereof. In this Group A, there are fourteen items of which it is only necessary to mention the first one, that is to say, four excavators with accessories approximately valued at Rs. 12,46,390; and No. 14, two excavators of another model, approximately costing Rs. 3,35,000. The total approximate cost of the machinery in Group A is estimated to be Rs. 42,63,305. Then follow the descriptions of machinery in Group B, the approximate cost of which is Rs. 21,84,148. Then follow certain conditions in respect of equipments included in Group A, in these words: "The Corporation will take over from the Contractor item 1 and 14 on the completion of the work at a residual value calculated on the basis of the actual number of hours worked assuming the total life to be 30,000 hours and assuming that the machinery will be properly looked after during the period of its operation. The remaining items of this group will be taken over by the Corporation at their residual value taking into account the actual number of hours worked and the standard life of such machinery for which Schedule F. as last relished, ? of the U. section Bureau of Industrial Revenue, on the probable useful life and depreciation rates allowable for Income Tax purpose (vide Engineering News Record dated March 17, 1949) will serve as a basis, provided that the machinery shall be properly looked after by the Contractor during the period of its operation. Provided further that such residual value of the machinery shall be assessed 530 jointly by representatives of the Corporation and of the Contractor and that in case of difference of opinion between the two parties the matter shall be settled through arbitration by a third party to be agreed to both by the Corporation and the Contractor. The items included in this group will be taken over by the Corporation from the Contractor either on the completion of the work or at an earlier date if the Contractor so wishes, provided that in the latter case the equipments will be taken over by the Corporation only when they are declared surplus at Konar and such declaration is duly certified by the Consulting Engineer, within a period of 15 days of such declaration being received by the Corporation. In respect of the machinery which shall have been delivered to the Contractor on or before the 31st of December 1950, their cost shall be recovered from the Contractor in eighteen equal instalments beginning with January 1951 and in respect of the remaining items included in this group of machinery, their cost will be recovered from the Contractor in eighteen equal instalments beginning with July 1951, provided that these remaining items shall have been delivered to the Contractor prior to the last specified date. Provided (a) that the total actual price for these equipments which has been provisionally estimated at Rs. 42,63,305 will be chargeable to the Contractor as per first para of clause 1 above. (b) that after approximately two thirds of total cost or an amount of Rs. 28,43,000 (Rupees twenty eight lakhs forty three thousand) approximately has been recovered from the Contractor on account of these equipments the Corporation will consider the date or dates when it could take over the equipments still under use by the Contractor, assess the, extent to which they have already been depreciated and thereby arrive at, their residual value; and (c) that the recovery or refund of the amount payable by or to the Contractor on account of these equipments will be decided only if the Corporation is fully satisfied that their residual life at the time of 531 their being finally handed over to the Corporation shall under no circumstances fall below one third of their respective standard life as agreed upon by the Corporation and the Contractor." Then follow terms and conditions in respect of Group 'B ' which are not relevant to our purpose. Thereafter, the following conditions appear: "In respect of equipments whether in Group A or B made available by the Corporation to the Contractor. The following conditions shall apply to all equipments, i.e., those included in Group A and B above and others, if any (a) The Contractor shall continuously maintain proper machine cards separately in respect of each item of equipment, clearly showing therein, day by day, the number of actual hours the machine has worked together with the dates and other relevant particulars. (b) The Contractor shall maintain all such equipments in good running condition and shall regularly and efficiently give service to all plant and machinery, as may be required by the Corporation 's Chief Engineer who shall have the right to inspect, either personally or through his authorised representatives all such plant and equipment and the machine cards maintained in respect thereof at mutually convenient hours. (c) No item of equipment made available by the Corporation on loan or hire shall at any time be removed from the work site under any circumstances until the full cost thereof has been recovered from the Contractor by the Corporation and thereafter only if in the opinion of the Consulting Engineer the removal of such item or items is not likely to impede the satisfactory prosecution of the work. Similarly no item of equipment or material belonging to the Contractor but towards the cost of which money has been advanced by the Corporation shall at any time be removed from the work site under any circumstances until the amount of money so advanced has been recovered from the Contractor by 532 the Corporation and thereafter if in the opinion of the Consulting Engineer the removal of such item or items is not likely to impede the satisfactory prosecution of the work. (d) The Corporation shall supply to the Contractor whatever spares have been procured or ordered for the equipment already supplied or to be supplied by the Corporation to the Contractor under the terms of this Agreement and that thereafter the replenishment of the stock of spares shall be entirely the responsibility of the Contractor who shall therefore take active steps in time to procure fresh spares so as to maintain a sufficient reserve. The spares to be supplied by the Corporation will be issued to the Contractor by the Executive Engineer, Konar as and when required by the Contractor against indent accompanied by a certificate that the spares previously issued to him have been actually used up on the machines for which they were intended. (e) Whenever spares are issued to the Contractor in accordance with this provision, their actual prices inclusive of freight, insurance and customs but excluding storage and handling charges shall be debited against him and recovered from his next fortnightly bill. (f) In order to enable the Contractor to take active steps for planning the procurement of additional spares in advance, the Corporation shall forthwith furnish to him a complete list of all the spares which it has procured or ordered for the equipment to be supplied to the Contractor. " The portions quoted above contain the relevant terms and conditions in respect of the transaction in question, so far as it is necessary to know them for the purpose of this case. It will be noticed that the Corporation made available to the Contractors different kinds of machinery and equipment detailed in Group A of the approximate value of Rs. 42,63,000 odd, for which the price paid by the Corporation inclusive of freight, insurance, customs duty etc. has to be charged to them. But the machinery and the equipment so 533 made available to the Contractors were to remain the property of the Corporation until the, full price thereof had been realised from the Contractors. It is also noteworthy that the agreement makes a distinction between the aforesaid part of the agreement and the equipment lent to the contractors in respect of which the contractors had to be charged in terms of hiring, including interest on capital cost and the depreciation of equipment. Thus clearly the agreement between the parties contemplated two kinds of dealings between them, namely (1) the supply of machinery and equipments by the Corporation to the Contractors and (2) loan on hire of other equipment on terms to be mutually agreed between them in respect of the machinery and equipment supplied by the Corporation to the Contractors. There is a further condition that the Corporation will take over from the contractors items 1 and 14, specifically referred to above, and the other items in Group A at their "residual value" calculated on the basis indicated in the paragraph following the description of the machinery and the equipments. But there is a condition added that the "taking over" is dependent upon the condition that the machinery will be properly looked after during the period of its operation. There is an additional condition to the taking over by the Corporation, namely, the work for which they were meant had been completed, or earlier, at the choice of the Contractors, provided that they are declared surplus for the purposes of the construction of the Konar Dam and so certified by the Consulting Engineer. Hence, it is not an unconditional agreement to take over the machinery and equipment as in Group B. The total approximate price of Rs. 42,63,305 is payable by the Contractors in 18 equal instalments. Out of the total cost thus made realisable from the Contractors two thirds, namely, Rs. 28,42,000 approximately, has to be realised in any case. After the two thirds amount aforesaid has been realised from the contractors on account of supply of the equipments by the Corporation, the Corporation had to consider the date or dates of the "taking over" of the equipment after assessing the extent to which it 534 had depreciated as a result of the working on the project in order to arrive at the "residual value" of the same. The refund of the one third of the price or such other sum as may be determined as the "residual value" would depend upon the further condition that the Corporation was fully satisfied that their "residual life" shall, under no circumstances, fall below one third of their respective standard life as agreed upon by the parties. It would, thus, appear that the "taking over" of such of the equipments as were available to be returned was not an unconditional term. The Corporation was bound to take them over only if it was satisfied that their "residual life" was not less than one third of the standard life fixed by the parties. It is clear from the terms and conditions quoted above that there was no right in the contractors to return any of the machinery and equipments at any time they liked, or found it convenient to do so. The conditions which apply to all equipments, whether in Group A or in Group B, are also relevant to determine the nature of the transaction. The contractors are required to "continuously maintain proper machine cards showing certain relevant particulars". It is their duty to maintain the equipments in good running condition and to regularly and effectively service them. No item of machinery and equipment could be removed by the contractors under any circumstances until the full cost thereof had been recovered from them and even then only if the removal of those items of machinery or equipment was not likely to impede the satisfactory progress of the work. Then follows the most important condition that the Contractors themselves shall have to replenish their stock of spare parts of the machinery made available to them by the Corporation. When spare parts are supplied to the Contractors by the Corporation, they shall be liable for the actual price of those parts inclusive of freight, insurance and customs duty. Those substantially are the terms of the contract between the parties and the sole question for determination in this appeal is whether, in respect of the machinery and equipments admittedly supplied by the Corporation to the Contractors, it was a mere 535 contract of hiring, as contended on behalf of the appellant Corporation, or a sale or a hire purchase, as contended on behalf of the respondent State. The law on the subject is not in doubt, but the difficulty arises in applying that law to the facts and circumstances of a particular case on a proper construction of the document evidencing the transaction between the parties. It is well settled that a mere contract of hiring, without more, is a species of the contract of bailment, which does not create a title in the bailee, but the law of hire purchase has undergone consider able development during the last half a century or more and has introduced a number of variations, thus leading to categories, and it becomes a question of some nicety as to which category a particular contract between the parties comes under. Ordinarily, a contract of hire purchase confers no title on the hirer, but a mere option to purchase on fulfillment of certain conditions. But a contract of hire purchase may also provide for the agreement to purchase the thing hired by deferred payments subject to the condition that title to the thing shall not pass until all the instalments have been paid. There may be other variations of a contract of hire purchase depending upon the terms agreed between the parties. When rights in third parties have been created by acts of parties or by operation of law, the question, which does not arise here, may arise as to what exactly were the rights and obligations of the parties to the original contract. It is equally well settled that for the purpose of determining as to which category a particular contract comes under, the court will look at the substance of the agreement and not at the mere words describing the category. One of the tests to determine the question whether a particular agreement is a contract of mere hiring or whether it is a contract of purchase on a system of deferred payments 'of the purchase price is whether there is any binding obligation on the hirer to purchase the goods. Another useful test to determine such a controversy is whether there is a right reserved to the hirer to return the goods at any time during the subsistence of the contract. If there is such a right reserved, then 536 clearly there is no contract of sale, vide Helby vs Matthews and others (1). Applying these two tests to the transaction in the present case, it becomes clear that it was a case of sale of goods with a condition of repurchase on certain conditions depending upon the satisfaction of the Corporation as to whether the "residual life" of the machinery or the equipment was not less than one third of the standard life in accordance with the terms agreed between the parties. It is clear on those terms that there is no right reserved to the contractors to return the goods at any time that they found it convenient or necessary. On the other hand, they were bound to pay two thirds of the total approximate price fixed by the parties in equal instalments. The Contractors were not bound under the terms to return any of the machinery or the equipments, nor was the Corporation bound to take them back unconditionally. The term in the agreement regarding the "taking over" of the machinery or equipments by the Corporation on payment of the "residual value" is wholly inconsistent with a contract of mere hiring and is more consistent with the property in the goods having passed to the Contractors, subject to the payment of all the instalments of the purchase pride. Furthermore, the stipulation that the Contractors themselves will have to supply the spare parts, as and when needed, for replacements of the worn out parts is also consistent with the case of the respondent that title had passed to the contractors and that they were responsible for the upkeep of the machinery and equipments and for depreciation. If it were a mere contract of hiring, the owner of the goods would have continued to be liable for replacements of worn out parts and for depreciation. Applying those tests to the terms of the agreement between the parties, it is clear that the transaction was a sale on deferred payments with an option to repurchase and not a mere contract of hiring, as contended on behalf of the appellant. It must, therefore, be held that the judgment of the High Court is entirely correct and the appeal must be dismissed with costs. Appeal dismissed.

IN-Abs

The appellant Corporation was assessed to sales tax under section 13(5) of the Bihar Sales Tax Act, 1947, on the price of machinery and equipment, amounting approximately to Rs. 42,63,305, supplied to two contractor firms on the basis of an agreement which it entered into with them for the construction of a dam. The agreement provided, inter alia, that the price of the machinery and equipment supplied was to be paid by the contractors and until that was done they were to remain the property of the Corporation. It was further agreed that the Corporation would take them over after the completion of the work at their residual value, to be calculated in the manner set out in the agreement, provided that they were properly looked after during the period of operation; and if the contractors so chose earlier, if they were declared surplus and certified as such by the consulting Engineer. The price was to be paid in 18 equal instalments, two thirds of which was realisable in any case, and thereafter the Corporation was to consider the date or dates of taking them over after assessment of the depreciation in order to arrive at the residual value. The Corporation was not bound to take over if the residual life of the equipment fell below one third of the standard life as fixed by the parties. 523 The contractors were to replenish the stock of spare parts supplied to them at their own cost. The appellant 's case was that the transaction represented by the agreement was not a sale within the meaning of the Act. The Sales Tax authorities held against it and the only question that was ultimately referred to the High Court by the Board of Revenue under section 25 of the Act was whether the property in the equipment and machinery passed to the contractors and the transaction amounted to a sale. The High Court answered the question in the affirmative, holding that the transaction was a sale within the meaning of section 2(g) of the Act. The High Court having refused the necessary certificate, the appellant appealed by special leave granted by this court. Held, that the appeal must be confined to the question debated in the High Court. It is well settled that, while functioning in its advisory capacity under a taxing statute, the High Court cannot go beyond the question referred to it or on a reference called by it. That the appeal was by special leave could make no difference and the scope of the controversy could not be extended beyond what could be legally raised before the High Court. The two fold test to determine whether a particular agree ment is a contract of mere hiring or of purchase on deferred payments is (1) whether the hirer is under an obligation to purchase the goods and (2) whether he has the right to return the goods at any time during the subsistence of the contract. What has to be considered in each case is the substance of the agreement and not the words describing its category. Helby vs Matthews and others, , referred to. So judged, there could be no doubt that on the terms of the agreement between the parties the transaction in the instant case was clearly a sale on deferred payments with an option to repurchase and not a mere contract of hiring.

Appeal No. 353 of 1959. Appeal from the judgment and order dated April 22, 1958, of the Punjab High Court (Circuit Bench) at Delhi in Civil Writ No. 257 D of 1957. M. C. Setalvad, Attorney General of India, section N. Andley, J. B. Dadachanji Rameshwar Nath and P. L. Vohra, for the Appellant. G. section Pathak, R. L. Anand and Janardan Sharma, for the respondent No. 2. 591 1960. November 22. The Judgment of the Court was delivered by WANCHOO, J. This is an appeal on a certificate granted by the Punjab High Court. Sharda Singh (hereinafter called the respondent) was in the service of the appellant mills. On August 28, 1956, the respondent was transferred from the night shift to the day shift in accordance with para 9 of the Standing Orders governing the workmen in the appellant mills. At that time an industrial dispute was pending bet ween the appellant mills and their workmen. The transfer was to take effect from August 30, 1956; but the respondent failed to report for work in the day shift and was marked absent. On September 1, 1956, he submitted an application to the General Manager to the effect that he had reported for duty on August 30, at 10 30 p.m. and had worked during the whole night, but had not been marked present. He had again gone to the mills on the night of August 31, but was not allowed to work on the ground that he had been transferred to the day shift. He complained that he had been dealt with arbitrarily in order to harass him. Though he said that he had no objection to carrying out the orders, he requested the manager to intervene and save him from the high handed action taken against him, adding that the mills would be responsible for his wages for the days he was not allowed to work. On September 4, 1956, he made an application to the industrial tribunal, where the previous dispute was pending, under section 33 A of the , No. XIV of 1947, (hereinafter called the Act) and complained that he had been transferred without any rhyme or reason from one shift to another and that this amounted to alteration in the conditions of his service, which was prejudicial and detrimental to his interest. As this alteration was made against the provisions of section 33 of the Act, he prayed for necessary relief from the tribunal under section 33 A. On September 5, 1956, the General Manager replied to the letter of September 1, and told the respondent that his transfer from. one shift to the other had been ordered on 592 August 28, and he had been told to report for work in the day shift from August 30; but instead of obeying the order which was made in the normal course and report for work as directed he had deliberately disobeyed the order and reported for work on August 30 in the night shift. He was then ordered to leave and report for work in the day shift. He however did not even then report for work in the day shift and absented himself intentionally and thus disobeyed the order of transfer. The General Manager therefore called upon the respondent to show cause why disciplinary action should not be taken against him for wailfully refusing to obey the lawful orders of the departmental officers and he was asked to submit his explanation within 48 hours. The respondent submitted his explanation on September 7, 1956. Soon after it appears the appellant mills received notice of the application under section 33 A and they submitted a reply of it on October 5, 1956. Their case was that transfer from one shift to another was within the power of the management and could not be said to be an alteration in the terms and conditions of service to the prejudice of the workman and therefore the complaint under section 33 A was not maintainable. The appellant mills also pointed out that a domestic inquiry was being held into the subsequent conduct of the respondent and prayed that proceedings in the application under section 33 A should be stayed till the domestic inquiry was concluded. No action seems to have been taken on this complaint under section 33 A, for which the appellant mills might as they had prayed for stay However, the domestic inquiry continued and on February 25, be partly responsible of those proceedings. against the respondent 1957, the inquiry officer reported that t e charge of misconduct was proved. Thereupon the General Manager passed an order on March 5, 1957, that in view of the serious misconduct of the respondent and looking into his past records, he should be dismissed; but as an industrial dispute was pending then, the General Manager ordered that the permission of the industrial tribunal should be taken before the order of dismissal was 593 passed and an application should be made for seeking such permission under section 33 of the Act. In the meantime, a notification was issued on March 1, 1957, by which 10th March, 1957, was fixed for the coming into force of certain provisions of the Central Act, No. XXXVI of 1956, by which sections 33 and 33 A were amended. The amendment made a substantial change in section 33 and this change came into effect from March 10, 1957. The change was that the total ban on the employer against altering any condition of ser vice to the prejudice of workmen and against any action for misconduct was modified. The amended section provided that where an employer intended to take action in regard to any matter connected with the dispute or in regard to any misconduct connected with the dispute, he could only do so with the express permission in writing of the authority before which the dispute was pending; but where the matter in regard to which the employer wanted to take action in accordance with the Standing Orders applicable to a workman was not connected with the dispute or the misconduct for which action was proposed to be taken was not connected with the dispute, the employer could take such action as he thought proper, subject only to this that in case of discharge or dismissal one month 's wages should be paid and an application should be made to the tribunal before which the dispute was pending for approval of the action taken against the employee by the employer. In view of this change in the law, the appellant mills thought that as the misconduct of the respondent in the present case was not connected with the dispute then pending adjudication, they were entitled to dismiss him after paying him one month 's wages and applying for approval of the action taken by them. Consequently, no application was made to the tribunal for permission in accordance with the order of the General Manager of March 5, 1957, already referred to. Later, on April 2, 19579 an order of dismissal was passed by the General Manager after tendering one month 's wages to the respondent and an application was made to the authority concerned for approval of the action taken against the respondent. 594 Thereupon the respondent filed another application under section 33 A of the Act on April 9, 1957, in which he complained that the appellant mills had terminated his services without the express permission of the tribunal and that this was a contravention of the provisions of section 33 of the Act; he therefore prayed for necessary relief. On April 18, 1957, an interim order was passed by the tribunal on this application by which as a measure of interim relief, the appellant mills were ordered to permit the respondent to work with effect from April 19 and the respondent was directed to report for duty. It was also ordered that if the management failed to take the respondent back, the respondent would be paid his full wages with effect from April 19 after he had reported for duty. On May 6, 1957, however, the application dated April 9, 1957, was dismissed as defective and therefore the interim order of April 18 also came to an end. On the same day (namely, May 6, 1957), the respondent made another application under section 33 A in which he removed the defects and again complained that his dismissal on April 2, 1957, without the express previous permission of the tribunal was against section 33 and prayed for proper relief. It is this application which is pending at present and has not been disposed of, though more than three years have gone by. It is also not clear what has happened to the first application of September 4,1956, in which the respondent complained that his conditions of service had been altered to his prejudice by his transfer from one shift to another. Applications under section 33 and section 33 A of the Act should be disposed of quickly and it is a matter of regret that this matter is pending for over three years, though the appellant mills must also share the blame for this state of affairs ' However, the appellant mills gave a reply on May 14,1957, to the last application under section 33 A and objected that there was no breach of section 33 of the Act, their case being that the amended section 33 applied to the order of dismissal passed on April 2, 1957. Further, on the merits, the appellant mills ' case was that the dismissal was in the circumstances justified. 595 The matter came up before the tribunal on May 16, 1957. On this date, the tribunal again passed an interim order, which was to the effect that as a measure of interim relief, the respondent should be permitted to work from May 17 and the respondent was directed to report for duty. It was further ordered that in case the management failed to take him back, they would pay him his full wages with effect from the date he reported for duty. Thereupon the appellant mills filed a writ petition before the High Court. Their main contention before the High Court was two fold. In the first place it was urged that the tribunal had no jurisdiction to entertain an application under section 33 A of the Act in the circumstances of this case after the amended sections 33 and 33 A came into force from March 10, 1957. In the alternative it was contended that the tribunal had no jurisdiction to pass an interim order of reinstatement or in lieu thereof payment of full wages to the respondent even before considering the questions raised in the application under section 33 A on the merits. The High Court held on the first point that in view of section 30 of the Industrial Disputes (Amendment and Miscellaneous Provisions) Act, No. XXXVI of 1956, the present case would be governed by section 33 as it was before the amendment and therefore the tribunal would have jurisdiction to entertain the complaint dated May 6, 1957, under section 33 A of the Act. On the second point, the High Court held that the order of the tribunal granting interim relief was within its jurisdiction and was justified. In consequence, the writ petition was dismissed. Thereupon the appellant mills applied and was granted a certificate by the High Court to appeal to this Court; and that is how the matter has come up before us. The same two points which were raised in the High Court have been urged before us. We are of opinion that it is not necessary in the present case to decide the first point because we have come to the conclusion that the interim order of May 16, 1957, is manifestly erroneous in law and cannot be supported. Apart from the question whether the tribunal had jurisdiction 596 to pass an interim order like this without making an interim award, (a point which was considered and left open by this Court in The Management of Hotel Imperial vs Hotel Workers ' Union (1)), we are of opinion that where the tribunal is dealing with an application under section 33 A of the Act and the question before it is whether an order of dismissal is against the provisions of section 33 it would be wrong in law for the tribunal to grant reinstatement or full wages in case the employer did not take the workman back in its service as an interim measure. It is clear that in case of a complaint under section 33 A based on dismissal against the provisions of section 33, the final order which the tribunal can pass in case it is in favour of the workman, would be for reinstatement. That final order would be passed only if the employer fails to justify the dismissal before the tribunal, either by showing that proper domestic inquiry was held which established the misconduct or in case no domestic inquiry was held by producing evidence before the tribunal to justify the dismissal: See Punjab National Bank Ltd. vs All India Punjab National Bank Employees ' Federation (2), where it was held that in an inquiry under section 33 A, the employee would not succeed in obtaining an order of reinstatement merely by proving contravention of section 33 by the employer. After such contravention is proved it would still be open to the employer to justify the impugned dismissal on the merits. That is a part of the dispute which the tribunal has to consider because the complaint made by the employee is to be treated as an industrial dispute and all the relevant aspects of the said dispute fall to be considered under section 33 A. Therefore, when a tribunal is considering a complaint under section 33 A and it has finally to decide whether an employee should be reinstated or not, it is not open to the tribunal to order reinstatement as an interim relief, for that would be giving the workman the very relief which he could get only if on a trial of the complaint the employer failed to justify the order of dismissal. The interim relief ordered in this case was that the work (1) ; (2) ; 597 man should be permitted to work: in other words he was ordered to be reinstated; in the alternative it was ordered that if the management did not take him back they should pay him his full wages. We are of opinion that such an order cannot be passed in law as an interim relief, for that would amount to giving the, respondent at the outset the relief to which he would be entitled only if the employer failed in the proceedings under section 33 A. As was pointed out in Hotel Imperial 's case (1),ordinarily, interim relief should not be the whole relief that the workmen would get if they succeeded finally. The order therefore of the tribunal in this case allowing reinstatement as an interim relief or in lieu thereof payment of full wages is manifestly erroneous and must therefore be set aside. We therefore allow the appeal, set aside the order of the High Court as well as of the tribunal dated May 16, 1957, granting interim relief. Learned counsel for the respondent submitted to us that we should grant some interim relief in case we came to the conclusion that the order of the tribunal should be set aside. In the circumstances of this case we do not think that interim relief to the respondent is justified hereafter. As we have pointed above, applications under sections 33 and 33 A should be dealt with expeditiously. We trust that the applications dated September 4, 1956, which appears to have been overlooked and of May 6, 1957, will now be dealt with expeditiously and finally disposed of by the tribunal, as all applications under section 33 A should be. In the circumstances we pass no order as to costs. Appeal allowed.

IN-Abs

One Sharda Singh, respondent, who was an employee of the appellant mills was dismissed for disobeying the orders of the managing authority. He filed an application before the Industrial tribunal under section 33 A of the , contesting his dismissal on various grounds, whereupon the tribunal passed an order to the effect that as an interim measure the respondent be permitted to work in the appellant mills and if the management failed to take him back his full wages be paid from the date he reported for duty. The appellant mills then filed a Writ Petition before the High Court contesting the interim order of the Tribunal and the High Court held that the interim relief granted to the respondent was justified. On appeal by a certificate of the High Court, Held, that the interim order passed by the tribunal reinsta ting the respondent was erroneous. Such an interim relief could not be given by the Tribunal as it would amount to prejudging the respondents ' case and granting him the whole relief at the outset without deciding the legality of his dismissal after hearing the appellant employer. The Management, Hotel Imperial and Ors. vs Hotel Workers ' Union, ; , and Punjab National Bank vs All India Punjab National Bank Employees ' Federation, A.I.R. , referred to.

87 of 1959. Petition under article 32 of the Constitution of India for enforcement of Fundamental Rights. M. P. Amin, Dara P. Mehta, P. M. Amin; section N. Andley, J. B. Dadachanji, Rameshwar Nath and P. L. Vohra for the petitioners. A. V. Viswanatha Sastri, R. Ganapathy Iyer, P. Kesava Pillai and T. M. Sen, for the respondents. H. N. Sanyal, Additional Solicitor General of India, B. Sen and R. H. Dhebar, for the Intervener. 541 1960. November, 21. The, Judgment of P. B. Gajendragadkar, A. K. Sarkar, K. Subba Rao and J. R. Mudholkar, JJ., was delivered by P. B. Gajendragadkar J., K. N. Wanchoo, J., delivered a separate judgment. GAJENDRAGADKAR, J. This is a petition filed under article 32 of the Constitution in which the validity of the Orissa Mining Areas Development Fund Act,( , 1952 (XXVII of 1952), is challenged. The first petitioner is a public limited company which has its registered office at Bombay. A large majority of its shareholders are citizens of India; some of them are themselves companies incorporated under the Indian Companies Act. Petitioners Nos. 2 to 7 are the Directors of Petitioner No. 1, the second petitioner being the Chairman of its Board of Directors. These petitioners are all citizens of India. At all material times the first petitioner carried on and still carries on the business of producing and selling coal excavated from its collieries at Rampur in the State 'of Orissa. Two leases have been executed in its favour; the first was executed on October 17, 1941, by the Governor of Orissa whereby all that piece or parcel of land in the registration district of Sambalpur admeasuring about 3341.79 acres has been demised for a period of 30 years commencing from September 1, 1939, in consideration of the rent reserved thereby and subject to the covenants and conditions prescribed thereunder; and the second is a surface lease executed in its favour by Mr. Mohan Brijraj Singh Dee on April 19, 1951, in relation to a land admeasuring approximately 211.94 acres for a like period of 30 years commencing from February 4, 1939, in consideration of the rent and subject to the terms and conditions prescribed by it. Pursuant to section 5 of the Orissa Estates Abolition Act, 1951, all the right, title and interest of the Zamindar of Rampur in the lands demised to the first petitioner under the second lease vested in respondents, the State of Orissa. Since then the first petitioner has duly paid the rent reserved by the said lease to the appropriate authorities appointed by respondent 1, 69 542 and has observed and performed all the conditions and covenants of the said lease. In exercise of its rights under the said two leases the first petitioner entered upon the lands demised and has been carrying on the business of excavating and producing coal at its collieries at Rampur. In December, 1952, the Legislature of the State of Orissa passed the impugned Act; and it received the assent of the Governor of Orissa on December 10, 1952. It was, however, not reserved for the consideration of the President of India nor has it received his assent. In pursuance of the rule making power conferred on it by the impugned Act respondent 1 has purported to make rules called the Orissa Mining Areas Development Act Rules, 1955; these rules have been duly notified in the State Gazette on January 25, 1955. Subsequently, the Administrator, respondent 2, appointed under the impugned Act issued a notification on June 24, 1958, whereby the first petitioner 's Rampur colliery has been notified for the purpose of liability for the payment of cess under the impugned Act. The area of this colliery has been determined at 3341.79 acres. In its appeal filed under rule 3 before the Director of Mines the first petitioner objected to the issue of the said notification, inter alia, on the ground that the impugned Act and the rules framed under it were ultra vires and invalid; no action has, however, been taken on the said appeal presumably because the authority concerned could not enter tain or deal with the objections about the vires of the Act and the rules. Thereafter on March 26, 1959, the Assistant Administrative Officer, respondent 3, called upon the first petitioner to submit monthly returns for the assessment of the cess. The first petitioner then represented that it had filed an appeal setting forth its objections against the notification, and added that until the said appeal was disposed of no returns would be filed by it. In spite of this representation respondent 3, by his letter of May 6, 1959, called upon the 543 first petitioner to submit monthly returns in the prescribed form and issued the warning that failing compliance the first petitioner would be prosecuted under section 9 of the impugned Act. A similiar demand was made and a similar warning issued by respondent 3 by his letter dated June 6, 1959. It is under these circumstances that the present petition has been filed. The petitioners contend that the impugned Act and ' the rules made thereunder are ultra vires the powers of the Legislature of the State of Orissa, or in any event they are repugnant to the provisions of an existing law. According to the petition the cess levied under the impugned Act is not a fee but is in reality and in substance a levy in the nature of a duty of excise on the coal produced at the first petitioner 's Rampur colliery, and as such is beyond the legislative competence of the Orissa Legislature. Alternatively it is urged that even if the levy imposed by the impugned Act is a fee relatable to Entries 23 and 66 in List II of the Seventh Schedule, it would nevertheless be ultra vires having regard to the provisions of Entry 54 in List I read with Central Act LIII of 1948. The petitioners further allege that even if the said levy is held to be a fee it would be similarly ultra vires having regard to Entry 52 in List I read with Central Act LXV of 1951. According to the petitioners the impugned Act is really relatable to Entry 24 in List III, and since it is repugnant with Central Act XXXII of 1947 relatable to the same Entry and covering the same field the impugned Act is invalid to the extent of the said repugnancy under article 254. On these allegations the petitioners have applied for a writ of mandamus or a writ in the nature of the said writ or any other writ, order or direction prohibiting the respondents from enforcing any of the provisions of the impugned Act against the first petitioner; a similar writ or order is claimed against respondent 3 in respect of the letters addressed by him to the 1st petitioner on March 3, 1959 and June 6, 1959. This petition is resisted by respondent 1 on several grounds. It is urged on its behalf that the levy 544 imposed by the impugned Act is a fee relatable to Entries 23 and 66 in List II and its validity is not affected either by Entry 54 read with Act LIII of 1948 or by 'Entry 52 read with Act LXV of 1951. In the alternative it is contended that if the said levy is held to be a tax and not a fee, it would be a tax relatable to Entry 50 in List II, and as such the legislative competence of the State Legislature to impose the same cannot be successfully challenged. Respondent 1 disputes the petitioner 's contention that the impugned Act is relatable to Entry 24 in List III; and so, according to it, no question of repugnancy with the Central Act XXXII of 1947 arises. After this appeal was fully argued before us Mr. Amin suggested and Mr. Sastri did not object that we should hear the learned Attorney General on the question as to whether even if the levy imposed by the impugned Act is a fee relatable to Entries 23 and 66 in List II of the Seventh Schedule, it would nevertheless be ultra vires having regard to the provisions of Entry 54 in List I read with Central Act LIII of 1948. Accordingly we directed that a notice on this point should be served on the learned Attorney General and the case should be set down for hearing on that point again. For the learned Attorney General the learned Additional Solicitor General appeared before us in response to this notice and we have had the benefit of hearing his arguments on the point in question. The first question which falls for consideration is whether the levy imposed by the impugned Act amounts to a fee relatable to Entry 23 read with Entry 66 in List II. Before we deal with this question it is necessary to consider the difference between the concept of tax and that of a fee. The neat and terse definition of tax which has been given by Latham, C. J., in Matthews vs Chicory Marketing Board (1) is often cited as a classic on this subject. "A tax", said Latham, C. J., "is a compulsory exaction of money by public authority for public purposes enforceable by law, and is not payment for services rendered". In bringing out the essential features of a tax this defini (1) ; , 276. 545 tion also assists in distinguishing a tax from a fee. It is true that between a tax and a fee there is no generic difference. Both are compulsory exactions of money. by public authorities; but whereas a tax is imposed for public purposes and is not, and need not, be supported by any consideration of service rendered in return, a fee is levied essentially for services rendered and as such there is an element of quid pro quo between the person who pays the fee and the public authority which imposes it. If specific services are rendered to a specific area or to a specific class of persons or trade or business in any local area, and as a condition precedent for the said services or in return for them cess is levied against the said area or the said class of persons or trade or business the cess is distinguishable from a tax and is described as a fee. Tax recovered by public authority invariably goes into the consolidated fund which ultimately is utilised for all public purposes, whereas a cess levied by way of fee is not intended to be, and does not become, a part of the consolidated fund. It is earmarked and set apart for the purpose of services for which it is levied. There is, however, an element of compulsion in the imposition of both tax and fee. When the Legislature decides to render a specific service to any area or to any class of persons, it is not open to the said area or to the said class of persons to plead that they do not want the service and therefore they should be exempted from the payment of the cess. Though there is an element of quid pro quo between the tax payer and the public authority there is no option to the tax payer in the matter of receiving the service determined by public authority. In regard to fees there is, and must always be, co relation between the fee collected and the service intended to be rendered. Cases may arise where under the guise of levying a fee Legislature may attempt to impose a tax; and in the case of such a colourable exercise of legislative power courts would have to scrutinise the scheme of the levy very carefully and determine whether in fact there is a co relation between the service and the levy, or whether the levy is either not co related with service or is levied to such an 546 excessive extent as to be a presence of a fee and not a fee in reality. In other words, whether or not a particular cess levied by a statute amounts to a fee or tax would always be a question of fact to be determined in the circumstances of each case. The distinction between a tax and a fee is, however, important, and it is recognised by the Constitution. Several Entries in the Three Lists empower the appropriate Legislatures to levy taxes; but apart from the power to levy taxes thus conferred each List specifically refers to the power to levy fees in respect of any of the matters covered in the said List excluding of course the fees taken in any Court. The question about the distinction between a tax and a fee has been considered by this Court in three decisions in 1954. In The Commissioner, Hindu Religious Endowments, Madras vs Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt (1) the vires of the Madras Hindu Religious and Charitable Endowments Act, 1951 (Madras Act XIX of 195 1), came to be examined. Amongst the sections challenged was section 76(1). Under this section every religious institution had to pay to the Government annual contribution not exceeding 5% of its income for the services rendered to it by the said Government; and the argument was that the contribution thus exacted was not a fee but a tax and as such outside the competence of the State Legislature. In dealing with this argument Mukherjee, J., as he then was, cited the definition of tax given by Latham, C.J., in the case of Matthews (2), and has elaborately considered the distinction between a tax and a fee. The learned judge examined the scheme of the Act and observed that "the material fact which negatives the theory of fees in the present case is that the money raised by the levy of the contribution is not earmarked or specified for defraying the expense that the Government has to incur in performing the services. All the collections go to the consolidated fund of the State and all the expenses have to be met not out of those collections but out of the general revenues by a proper method of appropriation as is done in the (1) ; (2) ; 547 case of other Government expenses". The learned judge no doubt added that the said circumstance was not conclusive and pointed out that in fact there was a total absence of any co relation between the expenses incurred by the Government and the amount raised by contribution. That is why section 76(1) was struck down as ultra vires. The same point arose before this Court in respect of the Orissa Hindu Religious Endowments Act, 1939, as amended by amending Act 11 of 1952 in Mahant Sri Jagannath Ramanuj Das vs The, State of Orissa (1). Mukherjea, J., who again spoke for the Court, upheld the validity of section 49 which imposed the liability to pay the specified contribution on every Mutt or temple having an annual income exceeding Rs. 250 for services rendered by the State Government. The scheme of the impugned Act was examined and it was noticed that the collections made under it are not merged in the general public revenue and are not appropriated in the manner laid down for appropriation of expenses for other public purposes. They go to constitute a fund which is contemplated by section 50 of the Act, and this fund to which the Provincial Government contributes both by way of loan and grant is specifically set apart for the rendering of services involved in carrying out the provisions of the Act. The same view was taken by this Court in regard to section 58 of the Bombay Public Trust Act, 1950 (Act XXIX of 1950) which imposed a similar contribution for a similar purpose in Ratilal Panachand Gandhi vs The State of Bombay (2). It would thus be seen that the tests which have to be applied in determining the character of any impugned levy have been laid down by this Court in these three decisions; and it is in the light of these tests that we have to consider the merits of the rival contentions raised before us in the present petition. On behalf of the petitioners Mr. Amin has relied on three other decisions which may be briefly considered. In P. P. Kutti Keya vs The State of Madras (3), the Madras High Court was called upon to consider, inter (1) ; (2) [1954] S.C.R. 1055. (3) A.I.R. 1954 Mad. 621. 548 alia, the validity of section 11 of the Madras Commercial Crops Markets Act 20 of 1933 and Rules 28(1) and 28(3) framed thereunder. Section 11(1) levied a fee on the sales of commercial crops within the notified area and section 12 provided that the amounts collected by the Market Committee shall be constituted into a Market Fund which would be utilised for acquiring a site for the market, constructing a building, maintaining the market and meeting the expenses of the Market Committee. The argument that these provisions amounted to services rendered to the notified area and thus made the levy a fee and not a tax was not accepted by the Court. Venkatarama Aiyar, J., took the view that the funds raised from the merchants for a construction of a market in substance amounted to an exaction of a tax. Whether or not the construction of a market amounted to a service to the notified area it is unnecessary for us to consider. Besides, as we have already pointed out we have now three decisions of this Court which have authoritatively dealt with this matter, and it is in the light of the said decisions that the present question has to be considered. In Attorney General for British Columbia vs Esquimalt and Nanaimo Railway Co. (1), the Privy Council had to deal with the validity of forest protection impost levied by the relevant section of the Forest Act R. section B. C. 1936. The lands in question were statutorily exempted from taxation, and it was urged against the validity of the impost that the levy of the said impost was not a service charge but a tax; and since it contravened the exemption from taxation granted to the land it was invalid. This plea was upheld by the Privy Council. The Privy Council did consider two circumstances which were relevant; the first that the levy was on a defined class of interested individuals, and the second that the fund raised did not fall into the general mass of the proceeds of taxation but was applicable for a special and limited purpose. It was conceded that these considerations were relevant but the Privy Council thought that the weight to be attached to them should not be exagge (1) 540 rated. In appreciating the weight of the said relevant circumstances the Privy Council was impressed by the fact that the lands in question formed an important part of the national wealth of the Province and their proper administration, including in particular protection against fire, is a matter of high public concern ' as well as one of particular interest to individuals. In other words, the effect of the impugned provision was, that the expenses of what was the public service of the greatest importance for the Province as a whole had been divided between the general body of tax. payers and those individuals who had a special interest in having their property protected. It would thus appear that this decision proceeded on the basis that what was claimed to be a special service to the lands in question was in reality an item in public service itself, and so the element of quid pro quo was absent. It is true that when the Legislature levies a fee for rendering specific services to a specified area or to a specified class of persons or trade or business, in the last analysis such services may indirectly form part of services to the public in general. If the special service rendered is distinctly and primarily meant for the benefit of a specified class or area the fact that in benefiting the specified class or area the State as a whole may ultimately and indirectly be benefited would not detract from the character of the levy as a fee. Where, however, the specific service is indistinguishable from pub lic service, and in essence is directly a part of it, diffe rent considerations may arise. In such a case it is necessary to enquire what is the primary object of the levy and the essential purpose which it is intended to achieve. Its primary object and the essential purpose must be distinguished from its ultimate or incidental results or consequences. That is the true test in determining the character of the levy. In Parton. vs Milk Board (Victoria)(1), the validity of the levy imposed on dairymen and owners of milk depots by section 30 of the Milk Board Act of 1933 as amended by subsequent Acts of 1936 1939 was (1) ; 70 550 challenged, and it was held by Dixon, J., that the levy of the said contribution amounted to the imposition of a duty of excise. This decision was substantially based on the ground that the statutory board "performs no particular service for the dairyman or the owner of a milk depot for which his contribution may be considered as a fee or recompense" that is to say the element of quid pro quo was absent qua the persons on whom the levy had been imposed. Therefore none of the decisions on which Mr. Amin has relied can assist his case. Let us now examine the scheme of the impugned Act. As the preamble shows it has been passed because it was thought expedient to constitute mining areas and a Mining Areas Development Fund in the State of Orissa. It consists of 11 sections. Section 3 of the Act provides for the constitution of a mining area whenever it appears to the State Government that it is necessary and expedient to provide amenities like communications, water supply and electricity for the better development of any area in the State of Orissa wherein any mine is situated, or to provide for the welfare of the residents or to workers in any such areas within which persons employed in a mine or a group of mines reside or work. Under this section the State Government has to define the limits of the area. and is given the power to include within such area any local area contiguous to the same or to exclude from such area any local area comprised therein; that is the effect of section 3(1). Section 3(2) empowers the owner or a lessee of a mine or his duly constituted representative in the said area to file objections in respect of any notification issued under section 3(1) within the period specified, and the State Government is required to take the said objection into consideration. After considering objections received the State Government is authorised to issue a notification constituting a mining area under section 3(3). Section 4 deals with the imposition and collection of cess. The rate of the levy authorised shall not exceed 5 per centum of the valuation of the minerals at the pit 's mouth. Section 5 provides for the constitution of the Orissa Mining Areas Development 551 Fund. This fund vests in the State Government and has to be administered by such officer or officers as may be appointed by the State Government in that, behalf Section 5(2) requires that there shall be paid to the credit of the said fund the proceeds of the cess recovered under section 4 for each mining area during the quarter after deducting expenses, if any, for collection and recovery. Section 5(3) contemplates that to the credit of the said fund shall be placed all collections of cess under section 5(2) as well as amounts from State Government and the local authorities and public subscriptions specifically given for any of the purposes of the fund. Section 5(4) deals with the topic of the appli cation of the said fund. The fund has to be utilised to meet expenditure incurred in connection with such measures which in the opinion of the State Government are necessary or expedient for providing amenities like communications, water supply and electricity, for the better development of the mining areas, and to meet the welfare of the labour and other persons residing or working in the mining areas. Section 5(5) lays down that without prejudice to the generality of the foregoing provisions the fund may be utilised to defray any of the purposes specified in cls. (a) to (e). Under section 5(6) the State Government is given the power to decide whether any particular expenditure is or is not debitable to the fund and their decision is made final; and section 5(7) imposes on the State Government an obligation to publish annually in the gazette a report of the activities financed from the fund together with an estimate of receipts and expenditure of the fund and a statement of account. Section 6 prescribes the mode of constituting an advisory committee. It has to consist of such number of members and chosen in such manner as may be prescribed, provided however that each committee shall include representatives of mine owners and workmen employed in mining industry. The names of the members of the committee are required to be published in the gazette. Section 7 deals with the appointment and functions of the statutory authorities to carry out the purpose of the Act, while section 8 confers on the State Government power to 552 make rules. Section 9 prescribes penalties and provides for prosecutions; and section 10 gives protection to the specified authorities or officers in respect of anything done or intended to be done by them in good faith in pursuance of the Act or any rules or order made thereunder. Section 11, which is the last section confers on the State Government the power to do anything which may appear to them to be necessary for 'the purpose of removing difficulties in giving effect to the provisions of the Act. The scheme of the Act thus clearly shows that it has been passed for the purpose of the development of mining areas in the State. The basis for the operation of the Act is the constitution of a mining area, and it is in regard to mining areas thus constituted that the provisions of the Act come into play. It is not difficult to appreciate the intention of the State Legislature evidenced by this Act. Orissa is an underdeveloped State in the Union of India though it has a lot of mineral wealth of great potential value. Un fortunately its mineral wealth is located generally in areas sparsely populated with bad communications. Inevitably the exploitation of the minerals is handicapped by lack of communications, and the difficulty experienced in keeping the labour force sufficiently healthy and in congenial surroundings. The mineral development of the State, therefore, requires that provision should be made for improving the communications by constructing good roads and by providing means of transport such as tramways; supply of water and electricity would also help. It would also be necessary to provide for amenities of sanitation and education to the labour force in order to attract workmen to the area. Before the Act was passed it appears that the mine owners tried to put up small length roads and tramways for their own individual purpose, but that obviously could not be as effective as roads constructed by the State and tramway service provided by it. It is on a consideration of these factors that the State Legislature decided to take an active part in unsystematic development of its mineral areas which would help the mine owners in moving their 553 minerals quickly through the shortest route and would attract labour to assist the excavation of the minerals. Thus there can be no doubt that the primary and the principal object of the Act is to develop ' the mineral areas in the State and to assist more efficient and extended exploitation of its mineral wealth. The constitution of the advisory committee as prescribed by section 4 emphasises the fact that the policy of the Act would be to carry out with the assistance of the mine owners and their workmen. Thus after a mining area is notified an advisory committee is constituted in respect of it, and the task of carrying out the objects of the Act is left to the care of the said advisory committee subject to the provisions of the Act. Even before an area is notified the mine owners are allowed an opportunity to put forward their objections. These features of the Act are also relevant in determining the question as to whether the Act is intended to render service to the specified area and to the class of persons who are subjected to the levy of the cess. Section 5 shows that the cess levied does not become a part of the consolidated fund and is not subject to an appropriation in that behalf; it goes into the special fund earmarked for carrying out the purpose of the Act, and thus its existence establishes a correlation between the cess and the purpose for which it is levied. It was probably felt that some additions should be made to the special fund, and so section 5(3) contemplates that grants from the State Government and local authorities and public subscriptions may be collected for enriching the said fund. Every year a report of the activities financed by the fund has to be published together with an estimate of receipt and expenditure and a statement of accounts. It would thus be clear that the administration of the fund would be subject to public scrutiny and persons who are called upon to pay the levy would have an opportunity to see whether the cess collected from them has been properly utilised for the purposes for which it is intended to be used. It is not alleged by the petitioners 554 that the levy imposed is unduly or unreasonably excessive so as to make the imposition a colourable exercise of legislative power. Indeed the fact that the accounts have to be published from year to year affords an indication to the contrary. Thus the scheme of the Act shows that the cess is levied against the class of persons owning mines in the notified area and it is levied to enable the State Government to render specific services to the said class by developing the notified mineral area. There is an element of quid pro quo in the scheme, the cess collected is constituted into a specific fund and it has not become a part of the consolidated fund, its application is regulated by a statute and is confined to its purposes, and there is a definite co relation between the impost and the purpose of the Act which is to render service to the notified area. These features of the Act impress upon the levy the character of a fee as distinct from a tax. It is, however, urged that the cess levied by section 4(2) is in substance and reality a duty of excise. As we have already noticed section 4(2) provides that the rate of such levy shall not exceed 5 per centum of the valuation of the minerals at the pit 's mouth; in other words it is the value of the minerals produced which is the basis for calculating the cess payable by mine owners, and that precisely is the nature in which duty of excise is levied under Entry 84 in List I. The said Entry empowers Parliament to impose duties of excise, inter alia, on goods manufactured or produced in India. When minerals are produced from mines and a duty of excise is intended to be imposed on them it would be normally imposed at the pit 's mouth, and that is precisely what the impugned Act purports to do. It is also contended that the rate prescribed by section 4(2) indicates that it operates not as a mere fee but as a duty of excise. This argument must be carefully examined before the character of the cess is finally determined. It is not disputed that under Entry 23 in List II read with Entry 66 in the said List the State Legislature can levy a fee in respect of mines and mineral development. Entry 23 reads thus: "Regu lation of Mines and mineral development subject to 555 the provisions of List I with respect to regulation and development under the control of the Union". We will deal with the condition imposed by the latter part of this Entry later. For the present it is enough to state that regulation of mines and mineral development is within the competence of the State Legislature. Entry 66 provides that fees in respect of any of the matters in the said List can be imposed by the State Legislature subject of course to the exception of fees taken in any Court. The argument is that though the State Legislature is competent to levy a fee in respect of mines and mineral development, if the statute passed by a State Legislature in substance and in effect imposes a duty of excise it is travelling outside its jurisdiction and is trespassing on the legislative powers of Parliament. This argument is based on two considerations. The first relates to the form in which the levy is imposed, and the second relates to the extent of the levy authorised. The extent of the levy authorised would always depend upon the nature of the services intended to be rendered and the financial obligations incurred thereby. If the services intended to be rendered to the notified mineral areas require that a fairly large cess should be collected and co relation can be definitely established between the proposed services and the impost levied, then it would be unreasonable to suggest that because the rate of the levy is high it is not a fee but a duty of excise. In the present case, if the development of the mining areas involves con siderable expenditure which necessitates the levy of the prescribed rate it only means that the services being rendered to the mining areas are very valuable and the rate payer in substance is compensating the State for the services rendered by it to him. It is significant that the petitioners do not seriously suggest that the services intended to be rendered are a cloak and not genuine, or that the taxes levied have no relation to the said services, or that they are unreasonable and excessive. Therefore, in our opinion, the extent of the rate allowed to be imposed by section 4(2) cannot by itself alter the character of the levy from a 556 fee into that of a duty of excise. If the co relation between the levy and the services was not genuine or real, or if the levy was disproportionately higher than the requirements of the services intended to be rendered it would have been another matter. Then as to the form in which the impost is levied, it is difficult to appreciate how the method adopted by the Legislature in recovering the impost can alter its character. The character of the levy must be determined in the light of the tests to which we have already referred. The method in which the fee is recovered is a matter of convenience, and by itself it cannot fix upon the levy the character of the duty of excise. This question has often been considered in the past, and it has always been held that though the method in which an impost is levied may be relevant in determining its character its significance and effect cannot be exaggerated. In Balla Ram vs The Province of East Punjab (1) the Federal Court had to consider the character of the tax levied by section 3 of the Punjab Urban Immoveable Property 'tax Act XVII of 1940. Section 3 provided as follows: "There shall be charged, levied and paid an annual to tax on buildings and lands situated in the rating areas shown in the schedule to this Act at such rate not exceeding twenty per centum of the annual value of such buildings and lands as the Provincial Government may by notification in official gazette direct in respect of each such rating area". The argument urged before the Federal Court was that the tax imposed by the said section was in reality a tax on income within the meaning of Item 54 in List I of the Seventh Schedule to the Constitution Act of 1935, and as such it was not covered by Item 42 in List II of the said Schedule. This argument was rejected on the ground that the tax levied by the Act was in pith and substance a tax on lands and buildings covered by Item 42. It would be noticed that the basis of the tax was the annual value of the building which is the basis used in the Indian Income tax Act for determining income from property; and so, the attack against the section was based on (1) 557 the ground that it had adopted the same basis for leaving the impost as the Income tax Act and the said basis determined its character whatever may be the appearance in which the impost was purported to be levied. In repelling this argument Fazl Ali, J. observed that the crucial question to be answered was whether merely because the Income tax Act has adopted the annual value as the standard for determining the income it must necessarily follow that if the same standard is employed as a measure for any other tax that tax becomes a tax on income. The learned judge then proceeded to add that if the answer to this question is to be given in the affirmative then certain taxes which cannot possibly be described as income tax must be held to be so. In other words, the effect of this decision is that the adoption of the standard used in Income tax Act for getting at the income by any other act for levying the tax authorised by it would not be enough to convert the said. tax into an income tax. During the course of this judgment Fazl Ali, J. also noticed with approval a similar view taken by the Bombay High Court in Sir Byramjee Jeejeebhoy vs The Province of Bombay (1). This decision has been expressly approved by the Privy Council in Governor General in Council vs Province of Madras (2). Consistently with the decision of the Federal Court their Lordships expressed the opinion that "a duty of excise is primarily a duty levied on a manufacturer or producer in respect of the commodity manufactured or produced. It is a tax on goods and not on sales or the proceeds of the sale of goods. The two taxes, the one levied on the manufacturer in respect of his goods and the other on the vendor in respect of his sales may in one sense overlap, but in law there is no overlapping; the taxes are separate and distinct imposts. If in, fact they overlap that may be because the taxing authority imposing a duty of excise finds it convenient to impose that duty at the moment when the excisable article (1) I.L.R. (2) (1945) L.R. 72 I.A. 91. 71 558 leaves the factory or workshop for the first time on the occasion of its sale". In that case the question was whether the tax authorised by the Madras General Sales Tax Act, 1939, was a tax on the sale of goods or was a duty of excise, and the Privy Council held it was the former and not the latter. Therefore, in our opinion, the mere fact that the levy imposed by the impugned Act has adopted the method of determining the rate of the levy by reference to the minerals produced by the mines would not by itself make the levy a duty of excise. The method thus adopted may be relevant in considering the character of the impost but its effect must be weighed along with and in the light of the other relevant circumstances. In this connection it is always necessary to bear in mind that where an impugned statute passed by a State Legislature is relatable to an Entry in List II it is not permissible to challenge its vires only on the ground that the method adopted by it for the recovery of the impost can be and is generally adopted in levying a duty of excise. Thus considered the conclusion is inevitable that the cess levied by the impugned Act is neither a tax nor a duty of excise but is a fee. The next question which arises is, even if the cess is a fee and as such may be relatable to Entries 23 and 66 in List II its validity is still open to challenge because the legislative competence of the State Legislature under Entry 23 is subject to the provisions of List I with respect to regulation and development under the control of the Union; and that takes us to Entry 54 in List I. This Entry reads thus: "Regulation of mines and mineral development to the extent to which such regulation and development under the control of the Union is declared by Parliament by law to be expedient in the public interest". The effect of reading the two Entries together is clear. The jurisdiction of the State Legislature under Entry 23 is subject to the limitation imposed by the latter part of the said Entry. If Parliament by its law has declared that regulation and development of mines should in public interest be under the control of the Union, to 559 the extent of such declaration the jurisdiction of the State Legislature is excluded. In other words, if a Central Act has been passed which contains a declaration by Parliament as required by Entry 54, and if the said declaration covers the field occupied by the impugned Act the impugned Act would be ultra vires, not because of any repugnance between the two statutes but because the State Legislature had no jurisdiction to pass the law. The limitation imposed by the latter part of Entry 23 is a limitation on the legislative competence of (,he State Legislature itself. This position is not in dispute. It is urged by Mr. Amin that the field covered by the impugned Act has already been covered by the Mines and Minerals (Regulation and Development) Act, 1948, (LIII of 1948) and he contends that in view of the declaration made by section 2 of this Act the impugned Act is ultra vires. This Central Act was passed to provide for the regulation of mines and oil fields and for the development of minerals. It may be stated at this stage that by Act LXVII of 1957 which has been subsequently passed by Parliament, Act LIII of 1948 has now been limited only to oil fields. We are, however, concerned with the operation of the said Act in 1952, and at that time it applied to mines as well as oil fields. Section 2 of the Act contains a declaration as to the expediency and control by the Central Government. It reads thus: "It is hereby declared that it is expedient in the public interest that the Central Government should take under its control the regulation of mines and oil fields and the development of minerals to the extent hereinafter provided". It is common ground that at the relevant time this Act applied to coal mines. Section 4 of the Act provides that no mining lease shall be granted after the commencement of this Act otherwise than in accordance with the rules made under this Act. Section 5 empowers the Central Government to make rules by notification for regulating the grant of mining leases or for prohibiting the grant of such leases in respect of any mineral or in any area. Sections 4 and 5 thus 560 purport to prescribe necessary conditions in accordance with which mining leases have to be executed. This part of the Act has no relevance to our present purpose. Section 6 of the Act, however, empowers the Central Government to make rules by notification in the official gazette for the conservation and development of minerals. Section 6(2) lays down several matters in respect of which rules can be framed by the Central Government. This power is, however, without prejudice to the generality of powers conferred on the Central Government by section 6(1). Amongst the matters covered by section 6(2) is the levy and collection of royalties, fees or taxes in respect of minerals mined, quarried, excavated or collected. It is true that no rules have in fact been framed by the Central Government in regard to the levy and collection of any fees; but, in our opinion, that would not make any difference. If it is held that this Act contains the declaration referred to in Entry 23 there would be no difficulty in holding that the declaration covers the field of conservation and development of minerals, and the said field is indistinguishable from the field covered by the impugned Act. What Entry 23 provides is that the legislative competence of the State Legislature is subject to the provisions of List I with respect to regulation and development under the control of the Union, and Entry 54 in List I requires a declaration by Parliament by law that regulation and development of mines should be under the control of the Union in public interest. Therefore, if a Central Act has been passed for the purpose of providing for the conservation and development of minerals, and if it contains the requisite declaration, then it would not be competent to the State Legislature to pass an Act in respect of the subject matter covered by the said declaration. In order that the declaration should be effective it is not necessary that rules should be made or enforced; all that this required is a declaration by Parliament that it is expedient in the public interest to take the regulation and development of mines under the control of the Union. In such a case the test must be whether the legislative declaration covers the field 561 or not. Judged by this test there can be no doubt that the field covered by the impugned Act is covered by the Central Act LIII of 1948. It still remains to consider whether section 2 of the said Act amounts in law to a declaration by Parliament as required by article 54. When the said Act was passed in 1948 the legislative powers of the Central and the Provincial Legislatures were governed by the relevant Entries in the Seventh Schedule to the Constitution Act of 1935. Entry 36 in List I corresponds to the present Entry 54 in List I. It reads thus: "Regulation of Mines and Oil Fields and mineral development to the extent to which such regulation and development under Dominion control is declared by Dominion law to be expedient in public interest". It would be notic ed that the declaration required by Entry 36 is a declaration by Dominion law. Reverting then to section 2 of the said Act it is clear that the declaration contained in the said section is put in the passive voice; but in the context there would be no difficulty in holding that the said declaration by necessary implication has been made by Dominion law. It is a declaration contained in a section passed by the Dominion Legislature ' and so it is obvious that it is a declaration by a Dominion law; but the question is: Can this declaration by a Dominion law be regarded constitutionally as declaration by Parliament which is required by Entry 54 in List I. It has been urged before us by the learned Additional Solicitor General and Mr. Amin that in dealing with this question we should bear in mind two general considerations. The Central Act has been continued under article 372(1) of the Constitution as an existing law, and the effect of the said constitutional provision must be that the continuance of the existing law would be as effective and to the same extent after the Constitution came into force as before. It is urged that after the said Act was passed and before the Con stitution came into force no Provincial Legislature could have validly made a law in respect of the field covered by the said Act, and it would be commonsense to assume that the effect of the continuance of the 562 said law under article 372(1) cannot be any different. In other words, if no Provincial Legislature could have trespassed on the field covered by the said Act before the Constitution, the position would and must be the same even after the Constitution came into force. It is also contended that for the purpose of bringing the provision of existing laws into accord with the provisions of the Constitution the President was given power to make by order appropriate adaptations and modifications of such laws, and the object of making such adaptations obviously was to make the continuance of the existing laws fully effective. It is in the light of these two general considerations, so the. argument runs, must the point in question be considered. The relevant clause in the Adaptation of Laws Order, 1950, on which reliance has been placed in support of this argument is el. 16 in the Supplementary Part of the said Order. This clause provides that subject to the provisions of this Order any reference by whatever form of words in any existing law to any authority competent at the date of the passing of that law to exercise any powers or authorities, or to discharge any functions, in any part of India shall, where a corresponding new authority has been constituted by or under the Constitution, have effect until duly repealed or amended as if it were a reference to that new authority. The petitioners contend that as a result of this clause the declaration made by the Dominion Legislature in section 2 of the Central Act must now be held to be the declaration made by Parliament. Is this contention justified on a fair and reasonable construction of the clause? That is the crux of the problem. In considering this question it would be relevant to recall the scheme of the Adaptation of Laws Order, 1950. It consists of Three Parts. Part 1 deals with the adaptation of Central Laws and indicates the adaptation made therein; Part 11 deals with the adaptation of Provincial Laws and follows the same pattern; and Part III is a Supplementary Part which contains provisions in the nature of supplementary provisions. A perusal of the clauses contained in Part 563 I would show that though some adaptation was made in Act LIII of 1948 it was not thought necessary to make an adaptation in section 2 of the said Act whereby the declaration implied in the said section has been expressly adapted into a declaration by Parliament. Now, the effect of el. 16 in substance is to equate an authority competent at the date of the passing of the existing law to exercise any powers or authorities, or to discharge any functions with a corresponding new authority which has been constituted by or under the Constitution. Reference to the authority in the con. text would suggest cases like reference to the Governor General eo nomine, or Central Government which respectively would be equated with the President or the Union Government. Prima facie the reference to authority would not include reference to a Legislature; in this connection it may be relevant to point out that article 372(1) refers to a competent Legislature as distinguished from other competent authorities. That is the first difficulty in holding that el. 16 refers to the Dominion Legislature and purports to equate it with the Parliament. It is clear that for the application of this clause it is necessary that a reference should have been made to the authority by some words whatever may be their form. In other words it is only where the existing law refers expressly to some authority that this clause can be invoked. It is difficult to construe the first part of this clause to include authorities to which no reference is made by any words in terms, but to which such reference may be implied; and quite clearly the Dominion Legislature is not expressly referred to in section 2. In construing the present clause we think it would be straining the language of the clause to hold that an authority to which no reference is made by words in any part of the existing law could claim the benefit of this clause. Besides, there is no doubt that when the clause refers to any authority competent to exercise any powers or authorities, or to discharge any functions, it refers to the powers, authorities or functions attributable to the existing law itself; that is to say, authorities 564 which are competent to exercise powers or to discharge functions under the existing laws are intended to be equated with corresponding new authorities. It is impossible to hold that the Dominion Legislature is an authority which was competent to exercise any power or to discharge any function under the existing law. Competence to exercise power to discharge functions to which the clause refers must inevitably be related to the existing law and not to the Constitution Act of 1935 which would be necessary if Dominion Legislature was to be included as an authority under this clause. The Constitution Act of 1935 had been repealed by the Constitution and it was not, and could not obviously be, the object of the Adaptation of Laws Order to make any adaptation in regard to the said Act. Therefore, the competence of the Dominion Legislature which flowed from the relevant provisions of the Constitution Act of 1935 is wholly outside this clause. We have carefully considered the arguments urged before us by the learned Additional Solicitor General and Mr. Amin but we are unable to hold that cl. 16 can be pressed into service for the purpose of supporting the conclusion that the declaration by the Dominion Legislature implied in section 2 of Act LIII of 1948 can, by virtue of cl. 16, be held to be a declaration by Parliament within the meaning of the relevant Entries in the Constitution. If that be the true position then the alternative challenge to the vires of the Act based on el. 16 of the Adaptation of Laws Order must fail. There is another possible argument which may prima facie lead to the same conclusion. Let us assume that the result of reading article 372 and cl. 16 of the Adaptation of Laws Order is that under section 2 of Act LIII of 1948 there is a declaration by Parliament as suggested by the petitioners and the learned Additional Solicitor General. Would that meet the requirements of Entry 54 in List I of the Seventh Schedule? It is difficult to answer this question in the affirmative because the relevant provisions of the Constitution are prospective and the declaration by Parliament specified by Entry 54 must be declaration made by 565 Parliament subsequent to the date when the Constitution came into force. Unless a declaration is made by Parliament after the Constitution came into force it will not satisfy the requirements of Entry 54, and that inevitably would mean that the impugned Act is validly enacted under Entry 23 in List II of the Seventh Schedule. If that be the true position then it would follow that even on the assumption that el. 16 of the Adaptation of Laws Order and article 372 can be construed as suggested by the petitioners the impugned Act would be valid. Faced with this difficulty, both the learned Additional Solicitor General and Mr. Amin argued that cl. 21 of the said Order may be of some assistance. Clause 21 reads thus: "Any Court, Tribunal, or authority required or empowered to enforce any law in force in the territory of India immediately before the appointed day shall, notwithstanding that this Order makes no provision or insufficient provision for the adaptation of the law for the purpose of bringing it into accord with the provisions of the Constitution, construe the law with all such adaptations as are necessary for the said purpose". Assuming that this clause is valid we do not see how it is relevant in the present case. All that this clause purports to do is to empower the Court to construe the law with such adaptations as may be necessary for the purpose of bringing it in accord with the provisions of the Constitution. There is no occasion to make any adaptation in construing Act LIII of 1948 for bringing it into accord with the provisions of the Constitution at all. The said Act has been continued under article 372(1) and there is no constitutional defect in the said Act for the avoidance of which any adaptation is necessary. In fact what the petitioners seek to do is to read in section 2 of the said Act the declaration by Parliament required by Entry 54 so as to make the impugned Act ultra vires. Quite clearly cl. 21 cannot be pressed into service for such a purpose. Therefore, we reach this position that the field covered by Act LIII of 1948 is substantially the same as the field covered by the 72 566 impugned Act but the declaration made by section 2 of the said Act does not constitutionally amount to the requisite declaration by Parliament, and so the limitation imposed by Entry 54 does not come into operation in the present case. Act LIII of 1948 continues in operation under article 372; with this modification that so far as the State of Orissa is concerned it is the impugned Act that governs and not the Central Act. Article 372(1) in fact provides for the continuance of the existing law until it is altered, repealed or amended by a competent Legislature or other competent authority. In the absence of the requisite parliamentary declaration the legislative competence of the Orissa Legislature under Entry 23 read with Entry 66 is not impaired, and so the said Legislature is competent either to repeal, alter or amend the existing law which is the Central Act LIII of 1948; in effect, after the impugned Act was passed, so far as Orissa is concerned the Central Act must be deemed to be repealed. This position is fully consistent with the provisions of article 372. The result is that the material words used in cls. 16 and 21 being unambiguous and explicit, it is difficult to give effect to the two general considerations on which reliance has been placed by the petitioners. Incidentally the present case discloses that in regard to the requisite parliamentary declaration prescribed by Entry 54 in List I in its application to the pre Constitution Acts under corresponding Entry 36 in List I of the Constitution Act of 1935, there is a lacuna which has not been covered by any clauses of the Adaptation of Laws Order; that, however, is a matter for Parliament to consider. There is one more point which is yet to be considered. Mr. Amin contends that Entry 23 in List II is subject to the provisions in List I with respect to regulation and development under the control of the Union, and according to him Entry 52 in List I is one of such provisions. In this connection he relies on the said Entry which deals with industries the control of which by the Union is declared by Parliament by law to be expedient in the public interest, and Industries (Development and Regulation) Act, 1951 (LXV 567 of 1951). This Act has been passed to provide for the development and regulation of certain industries one of which undoubtedly is coal mining industry. Section 2 of this Act declares that it is expedient in the public interest that the Union should take under its control the industries specified in the First Schedule. This declaration is a declaration made by Parliament, and if the provisions of the Act read with the said declaration covered the same field as is covered by the impugned Act, it would undoubtedly affect the vires of the impugned Act; but in dealing with this question it is important to bear in mind the doctrine of pith and substance. We have already noticed that in pith and substance the impugned Act is concerned with the development of the mining areas notified under it. The Central Act, on the other hand, deals more directly with the control of all industries including of course the industry of coal. Chapter II of this Act provides for the constitution of the Central Advisory Council and Development Councils, chapter III deals with the regulation of scheduled industries, chapter IIIA provides for the direct management or control of industrial undertakings by Central Government in certain cases, and chapter IIIB is concerned with the topic of control of supply, distribution, price, etc, of certain articles. The last chapter deals with miscellaneous incidental matters. The functions of the Development Councils constituted under this Act prescribed by section 6(4) bring out the real purpose and object of the Act. It is to increase the efficiency or productivity in the scheduled industry or group of scheduled industries, to improve or develop the service that such industry or group of industries renders or could render to the community, or to enable such industry or group of industries to render such service more economically. Section 9 authorises the imposition of cess on scheduled industries in certain cases. Section 9(4) provides that the Central Government may hand over the proceeds of the cess to the Development Council there specified and that the Development Council shall utilise the said proceeds to achieve the objects mentioned in cls. (a) to (d). These 568 objects include the promotion of scientific and industrial research, of improvements in design and quality, and the provision for the training of technicians and labour in such industry or group of industries. It would thus be seen that the object of the Act is to regulate the scheduled industries with a view to improvement and development of the service that they may render to the society, and thus assist the solution of the larger problem of national economy. It is difficult to hold that the field covered by the declaration made by section 2 of this Act, considered in the light of its several provisions, is the same as the field covered by the impugned Act. That being so, it cannot be said that as a result of Entry 52 read with Act LXV of 1951 the vires of the impugned Act can be successfully challenged. Our conclusion, therefore, is that the impugned Act is relatable to Entries 23 and 66 in List II of the Seventh Schedule, and its validity is not impaired or affected by Entries 52 and 54 in List I read with Act LXV of 1951 and Act LIII of 1948 respectively. In view of this conclusion it is unnecessary to consider whether the impugned Act can be justified under Entry 50 in List II, or whether it is relatable to Entry 24 in List III and as such suffexs from the vice of repugnancy with the Central Act XXXII of 1947. The result is the petition fails and is dismissed with costs. WANCHOO, J. I have read the judgment just delivered by my learned brother Gajendragadkar J. and regret that I have not been able to persuade myself that the cess levied in this case on all extracted minerals from any mine in any mining area at a rate not exceeding five per centum of the value of the minerals at the pit 's mouth by the Orissa State Legislature under section 4 of the Orissa Mining Areas Development Fund Act, No. XXVII of 1952, (hereinafter called the Act) is a fee properly so called and not a duty of ex cise. The facts are all set out in the judgment just delivered and I need not repeat them. The scheme of the Act, as appears from section 3 thereof is to give power to the State Government, whenever it 569 thinks it necessary and expedient to provide amenities, like communications, water supply and electricity for the better development of any area in the State where , in any mine is situated or to provide for the welfare of residents or workers in any such area within. which persons employed in a mine or a group of mines reside or work, to constitute such an area to be a mining area for the purposes of the Act, to define the limits of the area, to include within such area any local area contiguous to the same and defined in the notification and to exclude from such area any local area comprised therein and defined in the notification. A notification under section 3 is made, after hearing objections from owners or lessees of mines. After such an area is con stituted under section 3, a cess is imposed under section 4 on all extracted minerals from any mine in any such area at the rate not exceeding five per centum of the value of the minerals at the pit 's mouth. The cess so collected is credited to a fund called the Orissa Mining Area Development Fund created under section 5 of the Act, besides other amounts with which we are not concerned in this case. The Fund is to be applied to meet expenditure incurred in connection with such measures, which in the opinion of the State Government, are necessary or expedient for providing amenities like communications, water supply and electricity, for the better development of mining areas and to meet the welfare of labour and other persons residing or working in the mining areas. Then come other provisions for working out the above provisions including section 8, which gives power to the State Government to frame rules to carry. into effect the purposes of the Act. The Rules were framed under the Act in January, 1955. The constitutional competence of the Orissa State Legislature to levy the cess under the Act is attacked on two main grounds. In the first place, it is urged that the cess is in pith and substance a duty of excise under item 84 of List I of the Seventh Schedule and therefore the levy of such a cess is beyond the competence of the Orissa State Legislature. In the second place, it is urged that even if the cess is a fee, in view 570 of the two Acts of the Central Legislature and Parliament, namely, The Mines and Minerals (Regulation and Development) Act, No. LIII of 1948 and The Industries (Development and Regulation) Act, No. LXV of 1951, the Orissa Legislature was not competent to pass the Act. The petition has been opposed on behalf of the State of Orissa and the main contentions urged on its behalf are that the cess is a fee properly so called and not a duty of excise and therefore the Orissa State Legislature was competent to levy it and the two Central Acts do not affect that competence. In the alternative it has been urged that even if the cess is a tax the State Legislature was competent to levy it under item 50 of List If of the Seventh Schedule. The first question therefore that falls for consideration is whether the cess in this ' ease is a tax or a fee. Difference between a tax properly so called and a fee properly so called came up for consideration before this Court in three cases in 1954 and was considered at length. In the first of them, namely, The Commissioner, Hindu Religious Endowments, Madras vs Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt it was pointed out that "though levying of fees is only a particular form of the exercise of the taxing power of the State, our Constitution has placed fees under a separate category for purposes of legislation and at the end of each one of the three legislative lists, it has given a power to the particular legislature to legislate on the imposition of fees in respect to every one of the items dealt with in the list itself". It was also pointed that "the essence of a tax is compulsion, that is to say, it is imposed under statutory power without the taxpayer 's consent and the payment is enforced by law. The second characteristic of a tax is that it is an imposition made for public purpose without reference to any special benefit to be conferred on the payer of the tax. This is expressed by saying that the levy of tax is for the purposes of general revenue, which when (1) ; 571 collected forms part of the public revenues of the State. As the object of a tax is not to confer any special benefit upon any particular individual, there is, as it is said, no element of quid pro quo between the tax payer and the public authority. Another feature of taxation is that as it is a part of the common burden, quantum of imposition upon the tax payer depends generally upon his capacity to pay. " As to fees, it was pointed out that "a 'fee ' is generally defined to be a charge for a special service rendered to individuals by some governmental agency. The amount of fee levied is supposed to be based on the expenses incurred by the Government in rendering the service, though in many cases the costs are arbitrarily assessed. Ordinarily, the fees are uniform and no account is taken of the varying abilities of different recipients to pay. " Finally, it was pointed out that "the distinction between a tax and a fee lies primarily in the fact that a tax is levied as a part of a common burden, while a fee is a payment for a special benefit or privilege. . . Public interest seems to be at the basis of all impositions, but in a fee it is some special benefit which the individual receives. " The consequence of these principles was that "if, as we hold, a fee is regarded as a sort of return or consideration for services rendered, it is absolutely necessary that the levy of fees should, on the face of the legislative provision be co related to the expenses incurred by Government in rendering the services. . . If the money thus paid is set apart and appropriated specifically for the performance of such work and is not merged in the public revenues for the benefit of the general public, it could be counted as fees and not a tax." Having laid down these principles, that case then considered the vires of section 76 of the Madras Hindu Religious and Charitable Endowments Act, No. XIX of 1951, and it was pointed out that the material fact which negatived the theory of fees in that case was that the money raised by levy of the contribution was not ear marked or specified for defraying the expenses 572 that the Government had to incur in performing the services. All the collections went to the consolidated fund of the State and all the expenses had to be met not out of those collections but out of the general revenues by a proper method of appropriation as was done in the case of other government expenses. That in itself might not be conclusive, but in, that case there was total absence of any co relation between the expenses incurred by the Government and the amount raised by contribution under the provision of section 76 and in those circumstances the theory of return or counter payment or quid pro quo could not have any possible application to that case. Consequently, the contribution levied under section 76 was held to be a tax and not a fee. In the second case of Mahant Sri Jagannath Ramanuj Das vs The State of Orissa (1), a similar imposition by the Orissa Legislature came up for consideration. After referring to the earlier case, it was pointed out that "two elements are thus. essential in order that a payment may be regarded as a fee. In the first place, it must be levied in consideration of certain services which the individuals accepted either willingly or unwillingly. But this by itself is not enough to make the imposition a fee, if the payments demanded for rendering of such services are not set apart or specifically appropriated for that purpose but are merged in the general revenue of the State to be spent for general public purposes." The Orissa imposition was held to be a fee because the collections made were not merged in the general public revenue and were meant for the purpose of meeting the expenses of the Commissioner and his office which was the machinery set up for due administration of the affairs of the religious institution. They went to constitute a fund which was contemplated by section 50 of the Orissa Act and this fund was specifically set apart for rendering services involved in carrying out the provisions of the Act. The third case, namely, Ratilal Panachand Gandhi (1) ; 573 vs The State of Bombay (1) came from Bombay. 58 of the Bombay Act, No. XXIX of 1950, provided for an imposition in proportion to the gross annual income of the trust. This imposition was levied for the purpose of due administration of the trust property and for defraying the expenses incurred in connection with the same. After referring to the two earlier cases, the Court went on to say that "taxis a common burden and the only return which the taxpayer gets is participation in the common benefits of the State. Fees, on the other hand, are payments primarily in the public interest, but for some special service rendered or some special work done for the benefit of those from whom the payments are demanded. Thus in fees there is always an element of quid pro quo which is absent in a tax. . But in order that the collections made by the Government can rank as fees, there must be co relation between the levy imposed and the expenses incurred by the State for the purpose of rendering such services. " It was then pointed out that the contributions, which were collected under section 58, were to be credited in the Public Trusts Administration Fund as constituted under section 57. This fund was to be applied exclusively for the payment of charges for expenses incidental to the regulation of public trusts and for carrying into effect the provisions of the Act. The imposition therefore was in that case held to be a fee. These decisions clearly bring out the difference between a tax and a fee and generally speaking there is always an element of quid pro quo in a fee and the amount raised through a fee is co related to the expenses necessary for rendering the services which are the basis of quid pro quo. Further, the amount collected as a fee does not go to augment the general revenues of the State and many a time a special fund is created in which fees are credited though this is not absolutely necessary. But as I read these deci sions, they cannot be held to lay down that 'What is in pith and substance a tax can become a fee merely (1) [1954] S.C.R. 1055. 574 because a fund is created in which collections are credited and some services may be rendered to the persons from whom collections are made. If that were so, it will be possible to convert many taxes not otherwise leviable into fees by the device of creating a special fund and attaching some service to be rendered through that fund to the persons from whom collections are made. I am therefore of opinion that one must first look at the pith and substance of the levy, and if in its pith and substance it is not essentially different from a tax it cannot be converted into a fee by creating a special fund in which the collections are credited and attaching some services to be rendered through that fund. Let me then look at the pith and substance of the cess, which has been imposed in this case. The cess consists of a levy not exceeding five per centum of the value of the minerals at the pit 's mouth on all extracted minerals. Prima facie such a levy is nothing more nor less than a duty of excise. Item 84 of List I gives power to levy duties of excise exclusively to the Union and is in these terms : "Duties of excise on tobacco and other goods manufactured or produced in India except (a) alcoholic liquors for human consumption; (b) opium, Indian hemp and other narcotic drugs and narcotics, but including medicinal and toilet preparations containing alcohol or any substance included in sub paragraph (b) of this entry. " This item gives power to Parliament to impose duties of excise on all goods manufactured. or produced in India with certain exceptions mentioned therein. Taking this particular case, coal is produced from the mine and would clearly be covered by the words " other goods produced in India" and a duty of excise can be levied on it. What then exactly is meant by a duty of excise? Reference in this connection may be made to Governor General in Council vs Province of Madras (1). In that case the point arose whether the sales tax imposed by the Madras Legislature was a duty of excise. The Privy Council pointed out that (1) (1945) L.R. 72 I.A. 91. 575 "in a Federal constitution in which there is a division of legislative powers between Central and Provincial legislatures, it appears to be inevitable that controversy should arise whether one or other legislature is not exceeding its own, and encroaching on the other 's, constitutional legislative power, and in such a controversy it is a principle, which their Lordships do not hesitate to apply in the present case, that it is not the name of the tax but its real nature, its 'pith and substance ' as it has sometimes been said which must determine into what category it falls. " The Privy Council went on to consider what a duty of excise was and said that "it is primarily a duty levied on a manufacturer or producer in respect of the commodity manufactured or produced. It is a tax on goods not on sales or the proceeds of sale of goods. Though sometimes a duty of excise may be imposed on first sales, a duty of excise and a tax on the sale of goods were separate and distinct imposts and in law do not overlap." The Privy Council approved of the decisions of the Federal Court in re The Central Provinces and Berar Sales of Motor Spirit and Lubricants Taxation Act, 1938 (1) and The Province of Madras vs Messrs. Boddu Paidanna and Sons (2). It seems to have been urged that because in some cases a duty of excise may be levied on the occasion of the first sale and a sales tax may also be levied on the same occasion, there is really no difference between the two. It is however clear that a duty of excise is primarily a tax on goods manufactured or produced; it is not a tax on the sale of goods, though the taxing authority may as a matter of concession to the producer not charge the tax immediately the goods are produced and may postpone it, to make it easy for the producer to pay the tax, till the first sale is made by him; nevertheless the charge is still on the goods and is therefore a duty of excise. On the other hand, a sales tax can only be levied when a sale is made and there is nothing to prevent its levy on the first sale. The two concepts (1) (2) (1948) F.C.R. go. 576 are however different and, as the Privy Council pointed out, a sales tax and a duty of excise are separate and distinct imposts and in law do not overlap. The pith and substance of a duty of excise is that it is primarily a duty levied on a manufacturer or producer in respect of the commodity manufactured or produced. Let me therefore see what the Orissa Legislature has done in the present case. It has levied a cess at a rate not exceeding five per centum on the value of minerals at the pit 's mouth on all extracted minerals. All the extracted minerals are nothing other than goods produced and the cess is levied on the goods produced at a rate not exceeding five per centum of the value at the pit 's mouth. The cess therefore in the present case cannot be anything other than a duty of excise. The pith and substance of the cess in this case falls fairly and squarely within entry 84 of List I and is therefore a duty of excise, which cannot be levied by the Orissa State Legislature. I may in this connection refer to the cesses levied by the Central Legislature and Parliament by Act XXXII of 1947 and by the Act No. LXV of of Act XXXII of 1947 lays down that there shall be levied and collected as a cess for the purposes of that Act a duty of excise on all coal and coke dispatched from collieries at such rate not less than four annas and not more than eight annas per ton as may from time to time be fixed by the Central Government by notification in the Official Gazette. This is obviously a tax on the goods produced, the basis of the tax being so much per ton. Again sec. 9 of Act LXV of 1951 lays down that there may be levied and collected as a cess for the purposes of that Act on all goods manufactured or produced in any such scheduled industry as may be specified in this behalf by the Central Government by notified order a duty of excise at a rate not exceeding two annas per centum of the value of the goods. This again is clearly a tax on goods produced or manufactured and is in the nature of a duty of excise, the basis of the tax being so much of the value of the goods. If these two taxes are duties of excise, 577 I fail to see any difference in pith and substance between these two taxes and the cess levied under the Act. It is however urged that the method employed in the Act for realising the cess is only a method of quantification of the fee and merely because of this quantification, the pith and substance of the impost does not change from a fee to a duty of excise. Reference in this connection was made to three cases of quantification. In Sir Byramjee Jeejeebhoy vs The Province of Bombay (1), a question arose with respect to a tax imposed on urban immovable property, whether it was a tax on lands and buildings. The challenge to the tax was on the ground that it was tax on income or capital value within items 54 and 55 of List I of the Seventh Schedule of the Government of India Act and could not therefore be imposed by the Bombay Legislature. It was held that the tax was a tax on lands and buildings within the meaning of item 42 of List II of the same Schedule and that the basis of the tax, which was the annual value, would not convert it into a tax on income or capital value. The High Court considered the pith and substance of the said Act and came to the conclusion that every tax on annual value was not necessarily a tax on income and it was held that the mode of assessment of a tax did not determine its character and one has to look to the essential character of the tax to decide whether it was a tax on income or on lands and buildings. Looking to the pith and substance of the tax it was held in that case that it was a tax on lands and buildings. That decision was in the circumstances of that case right because the intention of the legislature was not to tax the income of any one; the essential character of the tax in that case was to tax the lands and buildings and the annual value of the lands and buildings was only taken as a mode of levying the tax. In the present case, however, the very mode of the levy of the cess is nothing other than the levy of a duty of excise and therefore the principle of quantification for purposes of a fee cannot be extended to (1) I.L.R. 578 such an extent as to convert what is in pith and substance a tax into a fee on that basis. The next case to which reference was made is Municipal Corporation, Ahmedabad vs Patel Gordhandas Hargovandas (1). In that case the Ahmedabad Bo. rough Municipality had levied a rate on open lands and the basis of the levy was one per centum of the capital value of the land. It was urged that this amounted to a capital levy within entry 54 of List I; but the court repelled that contention and held that the levy was in pith and substance a tax on lands, which came within entry 42 of List II of the Seventh Schedule to the Government of India Act. A distinction was made between a tax on land which is levied on the basis of its capital value and a tax which is on capital treating it as an asset itself. This decision also, if I may say so with respect, is correct, for the basic idea was to tax lands and some method had to be found for doing so and the method evolved, though it might look like a capital levy, was in pith and substance not so. But the theory of quantification which is the basis of these two cases cannot be stretched so far as to turn levies which are in pith and substance taxes into fees, by the process of attaching certain services and creating a fund. The third case is Ralla Ram vs The Province of East Punjab (2). That was a case of a tax on lands and buildings and annual value was the basis on which the tax was levied. The Federal Court rightly pointed out that the pith and substance of the levy had to be seen and on that view it was not income tax but a tax on lands and buildings and the method adopted was merely a method of quantification. The Federal Court also pointed out that "where there is an apparent conflict between an Act of the Federal Legislature and an Act of the Provincial Legislature, we must try to ascertain the pith and substance or the true nature and character of the conflicting provisions and that before an Act is declared ultra vires, there should be an attempt to reconcile the two conflicting jurisdictions, and, only if such a reconciliation should prove (1) I.L.R. (2) 579 impossible, the impugned Act should be declared invalid. " It may also be pointed out that in all these three cases, one source of income of an individual or one item out of the total capital of an individual was the basis of calculation while income tax or capital levy is generally on the total income or the total capital of a person. That aspect must have gone into the decision that the method employed was merely a mode for imposing a tax on lands and buildings. In the present case, however, I see no difference between the method of imposing a duty of excise and the method employed in the Act for imposing a cess a matter which will be clear from the cesses imposed under the two Central Acts already referred to (No. XXXII of 1947 and No. LXV of 1951). It is not as if there could be no method of imposing a fee properly so called in this case except the one employed. Two methods readily suggest themselves. A lump sum annual fee could be levied on each mine even on a graded scale depending on the size of the mine as evidenced by its share capital. Or a similar graded fee could be levied on each mine depending on its size determined by the number of men employed therein. Where therefore the result of quantification is to bring a particular impost entirely within the ambit of a tax it would not be right to say that such an impost is still a fee, because certain services have to be rendered and a fund has been created in which collections of the impost are credited. If this were permissible many taxes not otherwise leviable would be converted into fees by the simple device of creating a special fund and attaching certain services to be rendered from the amount in that fund. That would in my opinion be a colourable exercise of the power of legislation, as explained in K. C. Gajapati Narayan Deo vs The State of Orissa (1). Let me illustrate how taxes can be turned into fees on the so called basis of quantification with the help of the device of creating a fund and attaching certain services to be rendered out of monies in the fund. Take the case of income tax under item 82 of List I of the Seventh Schedule, which is exclusively reserved (1) ; 580 for the Union. Suppose that some State Legislature wants to impose a tax on income other than agricultural income in the garb of fees. All that it has to do is then to create a special fund out of the amounts collected and to attach rendering of certain services to the fund. All that would be necessary would be to define the services to be rendered so widely that the amount required for the purpose would be practically limitless. In that case there would be no difficulty in levying any amount of tax on income, for the amount collected would always be insufficient for the large number of services to be rendered. What has to be done is to find out a number of items in Lists II and III of the Seventh Schedule in respect of which fees can be levied by the State Legislature. These fees can be levied on a total basis for a large number of services under various entries of Lists II and III. A fund can be created, say, for rendering services of various kinds to residents of one district. In order to meet the expenses of tendering such services, suppose, the legislature imposes a tax on every one in the district at 10 per centum of the net total income (other than agricultural income); the amount so collected is put in a separate fund and ear marked for such special services to be rendered to the residents of that district. Can it be said that such a levy is a fee justified under various entries of Lists II and III, and not a tax on income, on the ground that this is merely a mode of quantification? As an instance, take, item 6 of List II, "Public health and sanitation, hospitals and dispensaries"; item 9, "Relief of the disabled and unemployable"; item II, Education; item 12, Libraries, museums and similar institutions"; item 13, communications, that is to say, roads, bridges and other means of communications; item 17, "Water, that is to say, water supplies, irrigation and canals, drainage and embankments, water storage and water power"; and item ', 25, "Gas and gas works"; item 23 of List III, "Social security and social insurance, employment and unemployment"; item 24, "Welfare of labour including conditions of work, provident funds, employers ' liability workmen 's compensation, invalidity and old age 581 pensions and maternity benefits"; item 25, "Vocational and technical training of labour"; and item 38, "Electricity". Assume that a fund is created for rendering, these services to the residents of a district. The State Legislature is entitled to impose fees for rendering these services to the residents of the district; the costs of these services would obviously be limitless and in order to meet these costs, the State legislature levies a consolidated fee for all these purposes at 10 per centum of the total net income on the residents of the district (excluding his agricultural income) as a measure of quantification of the fee. Can it be said in the circumstances that such a levy would not be Income tax, simply because a fund is created to be used in the district where collections are made and these services have to be rendered out of the fund so created to the residents of that district and to no others? The answer can only be one, viz., that the nature of the impost is to be seen in its pith and substance; and if in pith and substance it is income tax within item 82 of List I of the Seventh Schedule it will still remain income tax in spite of the creation of a fund and the attaching of certain services to the monies in that fund to be rendered in a particular area. Such an impost can never be justified as a consolidated fee on the ground that it is merely a method of quantification. Compare what has been done in this case. Sec. 3 of the Act which refers to the services to be rendered mentions communications, that is,, roads, bridges and other means of communication (barring those given in List I), water supply and electricity, for the better development of the area. These three items themselves would mean expenditure of such large amounts that anything could be charged as a fee to meet the costs, particularly in an undeveloped State like Orissa. Further, the section goes on to mention provision for the welfare of residents or workers in any such area, which would include such things as social security and social insurance, provident funds, employer 's liability, workmen 's compensation, invalidity and old age pensions and maternity benefits and may be even employment and unemployment. Again large funds would 74 582 be required for these purposes. Therefore, the services enumerated in section 3 being so large and requiring such large sums, any amount can be levied as a fee and in the name of quantification any tax, even though it may be in List I, can be imposed; and that is exactly what has been done, namely, what is really a duty of excise has been imposed as a fee for these purposes which fall under items 13 and 17 of List II and 23, 24 and 38 of List III. There can be no doubt in the circumstances that the levy of a cess as a fee in this case is a colourable piece of legislation. I do not say that the Orissa State Legislature did this deliberately. The motive of the legislature in such cases is irrelevant and it is the effect of the legislation that has to be seen. Looking at that, the cess in this case is in pith and substance nothing other than a duty of excise under item 84 of List I and therefore the State legislature was incompetent to levy it as a fee. The next contention on behalf of the State of Orissa is that if the cess is not justified as a fee, it is a tax under item 50 of List II of the Seventh Schedule. Item 50 provides for taxes on mineral rights subject to any limitations imposed by Parliament by law relating to mineral development. This raises a question as to what are taxes on mineral rights. Obviously, taxes on mineral rights must be different from taxes on goods produced in the nature of duties of excise. If taxes on mineral rights also include taxes on minerals produced, there would be no difference between taxes on mineral rights and duties of excise under item 84 of List I. A comparison of Lists I and II of the Seventh Schedule shows that the same tax is not put in both the Lists. Therefore, taxes on mineral rights must be different from duties of excise which are taxes on minerals produced. The difference can be understood if one sees that before minerals are extracted and become liable to duties of excise somebody has got to work the mines. The usual method of working them is for the owner of the mine to grant mining leases to those who have got the capital to work the mines. There should 583 therefore be no difficulty in holding that taxes on mineral rights are taxes on the right to extract minerals and not taxes on the minerals actually extracted. Thus tax on mineral rights would be confined, for example, to taxes on leases of mineral rights and on premium or royalty for that. Taxes on such premium and royalty would be taxes on mineral rights while taxes on the minerals actually extracted would be duties of excise. It is said that, there may be cases where the owner himself extracts minerals and does not give any right of extraction to somebody else and that in such cases in the absence of mining leases or sub leases there would be no way of levying tax on mineral right, ,. It is enough to say that these cases also, rare though they are, present no difficulty. Take the case of taxes on annual value of buildings. Where there is a lease of the building, the annual value is determined by the lease money; but there are many cases where owners themselves live in buildings. In such cases also taxes on buildings are levied on the annual value worked out according to certain rules. There would be no difficulty where an owner himself works the mine to value the mineral rights on the same principles on which leases of mineral rights are made and then to tax the royalty which, for example, the owner might have got if instead of working the mine himself he had leased it out to somebody else. There can be no doubt therefore that taxes on mineral rights are taxes of this nature and not taxes on minerals actually produced. Therefore the present case is not a tax on mineral rights; it is a tax on the minerals actually produced and can be no different in pith and substance from a tax on goods produced which comes under Item 84 of List I, as duty of excise. The present levy therefore under section 4 of the Act cannot be justified as a tax on mineral rights. In the view I have taken, it is not necessary to consider the other point, raised on behalf of the petitioners, namely, that even if it is a fee, in view of the two Central Acts (mentioned earlier) the, Orissa Legislature was not competent to pass the Act. I would 584 therefore allow the petition, and declare that the Orissa Mining Areas Development Fund Act, 1952, is beyond the constitutional competence of the Orissa Legislature to pass it. The whole Act must be struck down because there will be very little left in the Act if section 4 falls as it must. The legislature would never have passed the Act without section 4. By COURT. In accordance with the majority Judgment of the Court, the Writ Petition is dismissed with costs.

IN-Abs

The petitioners challenged the constitutional validity of the Orissa Mining Areas Development Fund Act, 1952, which by section 3 empowered the State Government to constitute mining areas for the purpose of providing them with certain amenities after hearing objections from the lessees, by section 4 to impose and collect a cess not exceeding 5% of the valuation of the minerals at the pit 's mouth and by section 5 created a fund to which the cess was to be credited. The petitioners ' case, inter alia, was that the impugned Act and the rules made thereunder were ultra vires the powers of the State Legislature, the cess levied thereunder was not a fee but a duty of excise on coal within Entry 84 of List I of the Seventh Schedule to the Constitution and repugnant to Coal Mines Labour Welfare Fund Act, 1947 (Act XXXII of 1947), and, alternatively, even supposing it was a fee relatable to Entries 23 and 66 of List II, it was hit by Entry 54 of List I read with the Mines and Minerals (Regulation and Development) Act 1948 (Act LIII of 1948), or by Entry 52 of List I read with the Industries (Development and Regulation) Act, 1951 (Act LXV of 1951). It was urged on behalf of the State, inter alia, that the cess was a fee and not a duty of excise and the competence of the State Legislature to levy it was not affected by the Central Acts. Held (per Gajendragadkar, Sarkar, Subba Rao and Mudholkar, JJ.), that the cess imposed by the Act was a fee relatable to Entries 23 and 66 of List II of the Seventh Schedule to the Constitution and the Constitutional validity of the impugned Act was beyond question. Although there can be no generic difference between a tax and a fee since both are compulsory exactions of money by public authorities, there is this distinction between them that whereas a tax is imposed for public purposes and requires no consideration to support it, a fee is levied essentially for services rendered and there must be an element of quid pro quo between the person 538 who pays it and the public authority that imposes it. While a tax invariably goes into the consolidated fund, a fee is earmarked for the specified services in a fund created for the purpose. Whether a cess is one or the other would naturally depend on the facts of each case. If in the guise of a fee, the Legislature imposes a tax, it is for the Court on a scrutiny of the scheme of the levy, to determine its real character. The distinction is recognised by the Constitution which while empowering the appropriate Legislatures to levy taxes under the Entries in the three lists refers to their power to levy fees in respect of any such matters, except the fees taken in court, and tests have been laid down by this Court for determining the character of an impugned levy. Matthews vs Chicory Marketing Board, ; , The Commissioner, Hindu Religious Endowments, Madras vs Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt, ; , Mahant Sri Jagannath Ramanuj Das & Any. vs The State of Orissa, ; , and Ratilal Panachand Gandhi vs The State of Bombay, [1954] S.C.R. 1055, referred to. P. P. Kutti Keva & Ors. vs The State of Madras, A.I.R. , Attorney General for British Columbia vs Esquimalt and Nanaimo Railway Co., and Parton & Any. vs Mils Board (Victoria), (1949) 80 C.L.R. 229, considered and held inapplicable. In determining whether a levy is a fee the true test must be whether its primary and essential purpose is to render specific services to a specified area or class, it being of no consequence that the State may ultimately and indirectly be benefited by it. So judged, the scheme of the impugned Act leaves no manner of doubt that the levy authorised by it is a fee and not a tax. The amount of the levy must depend on the extent of the services sought to be rendered and if they are proportionate, it would be unreasonable to say that since the impost is high it must be a duty of excise. The rate specified by section 4(2) of the Act, therefore, cannot by itself alter the character of the levy and constitute a trespass by the State Legislature on the legislative powers of the Parliament under Entry 84 of the List I. Nor can the method prescribed by the Legislature for re covering the levy by itself alter its character. The method is a matter of convenience and, though relevant, has to be tested in the light of other relevant circumstances. It is not permissible to challenge the vires of a statute relatable to an Entry in List II solely on the ground that the method adopted for the recovery of the impost can and generally is adopted in levying a duty of excise. Ralla Ram vs The Province of East Punjab, , Byramjee Jeejeebhoy vs The Province of Bombay & Anr. I.L.R. 539 and Governor General in Council vs Province of Madras, (1945) 'L.R. 72 I.A. 91, considered. The limitation imposed by the latter part of Entry 23 of List II is a limitation on the legislative competence of the State ' Legislature itself and the test whether a statute passed by the State Legislature thereunder was ultra vires would be whether the requisite declaration under Entry 54, List I, has been made by Parliament by law covering the same field or not; it is not necessary in order to make the declaration effective that rules should also be made and enforced. Although by operation of article 372 of the Constitution Act LIII of 1948 was an existing Act substantially covering the same field as covered by the impugned Act, there was no adaptation of section 2 of that Act whereby a declaration implied by it could be said to have been adapted to a declaration by Parliament. Clause 16 of the Adaptation of Laws Order, 1950, properly construed, cannot be held to refer to the Dominion Legislature and equate it with the Parliament. It can be resorted to only where the existing law expressly refers to some authority that can be equated with the corresponding new authorities. Since the Dominion Legislature was not so referred to, its competence under the Constitution Act of 1935, repealed by the Constitution of India, was clearly outside the clause. Nor can Cl. 21 of the order be of any help to the petitioners. Consequently, in the absence of the requisite Parliamentary declaration, the competence of the Orissa State Legislature under Entry 23 read with Entry 66 of the List II was not impaired and the impugned Act must be deemed to have repeal ed the Central Act, so far as that State was concerned. This case incidentally discloses that in regard to the requisite Parliamentary declaration prescribed by Entry 54 in List I in its application to the pre constitution Acts under corresponding Entry 36 in List I of the Constitution Act of 1935, there is a lacuna which has not been covered by any clauses of the Adaptation of Laws Order, 1950. Nor was the impugned Act ultra vires the State Legislature by operation of Entry 52 of List I read with section 2 of the Industries (Development and Regulation) Act, 1951 (LXV of 1951). That Act, in pith and substance, deals more directly with the control of certain specified industries including the coal industry, while the impugned Act is concerned with the development of the mining areas notified under it. The field covered by the two Acts was not, therefore, the same. per Wanchoo, J. In order to determine whether a levy is a tax or a fee, what has to be considered is the pith and sub stance of the levy. Where the levy in pith and substance is not essentially different from a tax, it cannot be converted into a fee by crediting it to a special fund and attaching certain services to it. 540 The Commissioner, Hindu Religious Endowments, Madras, vs Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt, ; , Mahant Sri Jaannath Ramanuj Das vs The State of Orissa, ; and Ratilal Panachand Gandhi vs The State of Bombay, [1954] S.C.R. 1055, discussed. A duty of excise in pith and substance is primarily a duty levied on a manufacturer or producer in respect of the commodity manufactured or produced. It is different and distinct from a sales tax and in law they do not overlap. Governor General in Council vs Province of Madras, 72 I.A. 91, referred to. What the impugned Act did was to provide for the levying of the cess on the goods produced at a rate not exceeding five per centum of the value at the pit 's mouth. The cess was, therefore, in pith and substance a duty of excise falling within Entry 84 of List I, which the State legislature could not levy. It was not correct to say that the method employed by the impugned Act for realising the cess was a mere method of quantification and did not affect its character which was that of a fee. In the present case the very mode of the levy of the cess is nothing other than the levy of a duty of excise, and, therefore, the principle of quantification for purposes of a fee could not be so extended as to convert what was in pith and substance a tax into a fee. Sri Byramjee Jeejeebhoy vs The Province of Bombay, I.L.R. , Municipal Corporation, Ahmedabad vs Patel Gor dhandas Hargovandas, I.L.R. and Ralla Ram vs The Province of East Punjab, , considered. K. C. Gajapati Narayan Deo vs The State of Orissa, ; , referred to. The cess levied under section 4 of the Act could not be justified as a tax on mineral rights under Entry 50 of List II of the Seventh Schedule and the impugned Act was in effect a colourable piece of legislation.

Appeal No. 364 of 1957. Appeal from the judgment and order dated February 22, 1956, of the former Bombay High Court in I.T.R. No. 31/1955. N. A. Palkhivala and I. N. Shroff, for the Appellants. A. N. Kripal and D. Gupta, for the Respondent. 1960. November 22. The Judgment of the Court was delivered by SHAH, J. This is an appeal by seven appellants with leave granted by the High Court of Judicature at Bombay certifying that it involves a question of importance. The appellants held 570 out of a total issue of 800 shares of the Navjivan Mills Ltd., Kalol, a public limited company hereinafter referred to as the Mills. Between the years 1943 47, the Mills purchased 5,000 shares of the Bank of India Ltd. At an extraordinary general meeting of the shareholders of the Bank of India held on May 6, 1948, a resolution was passed increasing the share capital of the Bank and for that purpose offering new shares to the existing shareholders in the proportion of one new share for every three shares held by the shareholders. The face value of the new shares was to be Rs. 50, but the shares were issued at a premium of Rs. 50. The shareholders had to pay Rs. 100 for each new share. The Mills as the holder of 5,000 shares became entitled to receive 1,6662 shares of the Bank of India at the rate of Rs. 100 per share. The Bank of India communicated its resolution by letter dated May 25, 1948 and enclosed therewith three forms, form A for acceptance, form 586 B for renunciation and 'form C which may compendiously be called a form for allotment to nominees. On receiving the circular letter, the Directors of the Mills passed the following resolution: "Resolved that the company having a holding of 5,000 ordinary shares in the capital of the Bank of India Ltd. having now received an intimation from the said Bank that this company is entitled to get 1,6662 more ordinary shares on payment of Rs. 50 as capital and Rs. 50 as premium per each share and it is considered proper to invest in the said issue of the said Bank the funds of this company to the extent of 66 shares only and to distribute the right of this company to the remaining 1,600 shares of the said issue amongst the shareholders of this company in the proportion of the shares held by them in this company. IT IS HEREBY RESOLVED that the funds of this company may be invested in the 66 shares out of 1,666 shares offered by 'the Bank of India Ltd., and the right to the remaining 1,600 shares is hereby distributed among 800 shares of this company in the proportion of right to two shares of the Bank per one ordinary share held in this company. The Managing Agents may take steps to intimate the shareholders to exercise the right if they like to do so. " Accordingly, the Mills exercised the right to take over only 66 shares out of the shares offered and resolved that the right to the remaining 1,600 shares be distributed amongst its 800 share holders. The seven appellants as holders of 570 shares of the Mills became entitled to 1,140 shares of the Bank of India. The appellants agreed to the allotment of these shares and ultimately transferred them to a private company Jesinghbai Investment Co. ' Ltd. The assessment of the seven appellants and of other shareholders of the Mills was reopened under section 34(1)(a) of the Indian Income Tax Act by the Income Tax Officer on the footing that, the release by the Mills of the shares of the Bank of India amounted to a distribution of "dividend" and the value of the right released in favour of the shareholders though taxable 587 under section 12 of the Act, had escaped tax. The order of the Income Tax Officer reassessing the income of the seven appellants was confirmed in appeal by the Appellate Assistant Commissioner and by the Appellate Tribunal. At the instance of the appellants, the i following question was submitted by the Tribunal to the High Court at Bombay under section 66(1) of the Income Tax Act: "Whether on the facts and circumstances of the case the distribution of the right to apply for the shares of the Bank of India by Navjivan Mills Ltd. in favour of the assessees amounted to a distribution of "dividend" within the meaning of section 2(6A) of the Indian Income Tax Act. " The High Court reframed the question as follows: "Whether on the facts and circumstances of the case, the distribution of the right to apply for the shares of the Bank of India by Navjivan Mills Ltd., in favour of the assessees amounted to a distribution of "dividend"?" and answered it in the affirmative. The High Court observed that the definition of "dividend" in section 2(6A) was an inclusive and not an exhaustive definition, and even if the distribution of the right to the shares of the Bank of India could not be regarded as dividend within the extended meaning of that expression in section 2(6A), it was still dividend within the ordinary meaning of that expression and was taxable as income in the hands of the appellants. Counsel for the appellants contended that the High Court was not justified, having regard to the form of the question which expressly related to the distribution of the right to the Bank of India shares being dividend within the meaning of the definition in section 2(6A) of the Income Tax Act, in enlarging the scope of the question and in answering it in the light of its ordinary meaning. There is no substance in this contention. "Dividend" is defined in section 2(6A) as inclusive of various items and exclusive of certain others which it is not necessary to set out for the purpose of this appeal. "Dividend" in its ordinary meaning is a 588 distributive share of the profits or income of a company given to its shareholders. When the Legislature by section 2(6A) sought to define the expression "dividend" it added to the normal meaning of the expression several other categories of receipts which may not otherwise be included therein. By the definition in section 2(6A), "dividend" means dividend as normally understood and includes in its connotation several other receipts set out in the definition. The Tribunal had referred the question whether the distribution of the right to apply for the Bank of India shares amounted to distribution of dividend within the meaning of section 2(6A) and in answering that question, the High Court had to take into account both the normal and the extended meaning of that expression. In the question framed by the Tribunal, there is nothing to indicate that the High Court was called upon to advise on the question whether the receipts by the appellants amounted to dividend only within the extended definition of that expression in section 2(6A). It was also urged that in nominating its shareholders to exercise the option to purchase the new issue of the Bank of India, the Mills did not distribute any dividend. The Mills were, it is true, not obliged to accept the offer made by the Bank of India, however advantageous it might have been to the Mills to accept the offer: it was open to the Mills to renounce the offer. The Mills had three options, (1) to accept the shares, (2) to decline to accept the shares, or (3) to surrender them in favour of its nominee. It is undisputed that when the shares were offered by the Bank of India to its shareholders, the right to apply for the shares had a market value of Rs. 100 per share. The face value of the new share was Rs. 50 but the shareholders had to pay a premium of Rs. 50, thus making a total payment of Rs. 100 for acquiring the new share. The new shares were quoted in the market at more than Rs. 200: and the difference between the amount payable for acquiring the shares under the right offered by the Bank of India and the market quotation of the shares was indisputably the value of the right. The Mills could not be compelled to obtain 589 this benefit if it did not desire to do so: it could accept the shares or decline to accept those shares or exercise the option of surrendering them in favour of its nominees. This last option could be exercised by nominating the persons who were to take over the shares and that is what the Mills did. The Mills requested the Bank of India to allot the shares to its nominees, and the request for allotment to its nominees amounted to transfer of the right. By its resolution, the Mills in truth transferred a right of the value of Rs. 200 for each share held by its shareholders. This was manifestly not distribution of the capital of the Mills. It was open to the Mills to sell the right to the shares of the Bank of India in the market, and to distribute the proceeds among the shareholders. Such a distribution would undoubtedly have been distribution of dividend. If instead of selling the right in the market and then distributing the proceeds, the Mills directly transferred the right, the benefit in the hands of the shareholders was still dividend. Dividend need not be distributed in money; it may be distributed by delivery of property or right having monetary value. The resolution, it is true, did not purport to distribute the right amongst the shareholders as dividend. It did not also take the form of a resolution for distribution of dividend; it took the form of distribution of a right which had a monetary value. But by the form of the resolution sanctioning the distribution, the true character of the resolution could not be altered. We are therefore of the view that the High Court was right in holding that the distribution of the right to apply for and obtain two shares of the Bank of India (at half their market value) for each share held by the shareholders of the Mills amounted to distribution of dividend. The appeal fails and is dismissed with costs. Appeal dismissed.

IN-Abs

The appellants were shareholders of a company known as Navjivan Mills Ltd. which held a large number of shares of the Bank of India. The Bank with the object of increasing their share capital offered some more shares to the Mills for a price including premium which was about half the market value. The Mills purchased a small number of the shares so offered with their own funds and distributed their right to acquire the remaining shares to their shareholders in the proportion of two shares of the Bank for one share held by them. The assessment of the appellant was reopened by the Income Tax Officer under section 34(1)(a) of the Income tax Act on the footing that the release of the right to the shares of the Bank of India amounted to distribution of dividend. Appeals against the order of the Income Tax Officer having failed, the High Court at the instance of the appellants framed the following question: "Whether on the facts and circumstances of the case, the distribution of the right to apply for the shares of the Bank of India by Navjivan Mills Ltd. in favour of the assessees amounted to a distribution of "dividend"? 585 The High Court answered the question in the affirmative. On appeal with a certificate of the High Court, Held, that the view taken by the High Court was correct. The distribution to the shareholders of the Mills of the right to obtain two shares of the Bank of India for each share held by them at half the market value amounted to distribution of "dividend" which was liable to be taxed.

iminal Appeal No. 80 of 1963. Appeals by special leave from the judgment and order dated March 26, 1963, of the Punjab High Court in Criminal Mis. No. 186 of 1963. Criminal Appeals Nos. 86 to 93 of 1963. Appeal by special leave from the judgment and order dated February 21, 1963 of the Punjab High Court in Criminal Misc. No. 155, 102, 108, 105, 104, 101 and 107 of 1963 and judgment and order dated February 1963 of the same High Court in Criminal Misc. No. 99 of 1963. Criminal Appeals Nos. 109 to 111 of 1963. Appeals from the judgment and order dated May 31, 1963 of the Maharashtra High Court in Criminal Applications Nos. 217, 218 and 114 of 1963. Criminal Appeals Nos. 114 to 126 of 1963. Appeals from the judgment and order dated May 31, 1963 of the Maharashtra High Court in Criminal Applications Nos. 271, 265, 270, 267, 219, 220, 269, 264, 263, 266 and 273 of 1963. Criminal Appeal No. 65 of 1963. Appeal by special leave from the judgment and order dated April 3, 1963, of the Maharashtra High Court (Nagpur Bench) in Criminal Application No. 11 of 1963. M. C. Setalvad, N. C. Chatterjee, A. V. Viswanatha Sastri, section Mohan Kumaramangalam, C. B. Agarwala, Sarjoo Prasad, D. R. Prem, A. section R. Chari, section G. Patwardhan, W. section Barlingay, Etharajalu Naidu, Veda Vyas, Raghubir Singh, K. T . Sule, Asif Ansari, Hardayal Hardy, Bawa Shiv Charan Singh, section N. Mukherjee, Durgabhai Deshmukh, M. section K. Sastri, G. B. Rai, Ganpat Rai, D. N. Mukherjee, A. N. Sinha, Udayaratnam, K. V. Raghnatha Reddy, Janardhan Sharma, K. R. Choudhury, B. P. Maheshwari, I. B. Goyal, I. K. Nag, Y. Kumar, Hardev Singh,, M. I. Khowaja, section section Shukla, K. K. lain, Bishambar Lal Khanna, section Murthi, P. K. Chakravarti, P. K. Chatterjee, A. George Pudussary, Girish Chandra Mathur, Udai Pratap 804 Singh,Yogeshwar Prasad,M. R. Krishna Pillai, B. D.Sharma, K. P. Gupta, T. section Venkataraman, M. Veerappa,T.R.Ramachandra, R. C. Prasad, Santosh Chatterjee,N.N. Keshwani, K. Jayaram, R. Ganapathy Iyer, Thyagarajan, R. Vasudeva Pillai, R. V. section Mani, section C. Majumdar, Shaukat Hussain, K. Baldev Mehta, Mohan Behari Lal, Sadhu Singh, V. G. Row, section N. Kakkar, section K. Kapur, Parthasarathy, Shanti Swarup Bhatnagar, K. L. Mehta, Satish Mehta, Brij Kishore Prasad, Ali Ahmad, V. A. Syeid Muhammad, Narayanarayan Gooptu, Tapesh Roy, Madhan Bhaittia, Ajit Singh Banis and Brij Raj Kishore, J. B. Dada chanji O. C. Mathur, Ravinder Narain, D. P. Singh, M. K. Ramamurthi, R. K. Garg, and section C. Agarwal, for the appellant (in Cr. A. No. 80 of 1963). C. K. Daphtary, Attorney General, L. K. Kaushal, Deputy Advocate General, Punjab, D. D. Chaudhuri, R. N. Sachthey and R. H. Dhebar, for the respondent (in Cr. A. No. 80 of 1963). A. section R. Chari, D. P. Singh, M. K. Ramamurthi, R. K. Garg and section C. Agarwal for the appellant (in Cr. A. No. 86 of 1963). Hardev Singh and Y. Kumar, for the appellants (in Cr. A. Nos. 87 to 93 of 1963). L. D. Kaushal, Deputy Advocate General, Punjab, D.D.Chaudhri, R. N. Sachthey and R. H. Dhebar, for the respondent (in Cr. A. Nos. 86 to 93 of 1963). A. section R. Chari, 0. P. Malhotra, B. Parthasarathy, J. B. Dadachanji, 0. C. Mathur and Ravinder Narain, for the appellant (in Cr. A. No. 65 of 1963). N. C. Chatterjee, and Janardan Sharma, for the appellant (in Cr. A. No. 109 of 1963). K. T. Sule, Jitendra Sharma and Janardan Sharma, for the appellants (in Cr. A. Nos. 111 and 114 to 126 of 1963) and for the Detenue Interveners Nos. 12, 14, 16, 18 and 37). C. K. Daphtary, Attorney General, N. section Bindra, B. R. G. K. Achar, R. N. Sachthey and R. H. Dhebar, for the respondents (in Cr. A. No. 65, 109 to 111 and 114 to 126/1963). C. K. Daphtary, Attorney General, H. N. Sanyal, Solicitor General, section V. Gupte, Additional Solicitor General, R.N.Sachthey and R. H. Dhebar, for intervener No. 1 Naunit Lal, for intervener No. 1. B. Sen and P. K. Bose, for intervener No. 3. section P. Varma, for intervener No. 4. M. Adhikari, Advocate General, Madhya Pradesh and I.N.Shroff, for intervener No. 5. A. Ranganadham Chetty and A. F. Rangam, for intervener No. 6. G. C. Kasliwal, Advocate General, Rajasthan, R. H.Dhebar, R. N. Sachthey, for intervener No. 7. C. P. Lal, for intervener No. 8. N. C. Chatterjee, Narayan Gooptu, Tapesh Roy, D. P.Singh, M. K. Ramamurthi, R. K. Garg and section C. Agarwal, for intervener No. 69. A. section R. Chari, Narayan Gooptu, Tapesh Roy, D. P. Singh, M. K. Ramamurthi, R. K. Garg and section C. Agarwal, for intervener No. 70. A. section Peerbhoy A. Desai, M. Rajagopalan and K. R. Choudhari, for interveners Nos. 79 and 80. September 2, 1963. The judgment of P. B. Gajendragadkar, A. K. Sarkar, K. N. Wanchoo, M. Hidayatullah,B. Gajendragadkar, J. K. Subba Rao, J. delivered a dissenting Opinion. GAJENDRAGADKAR, J. This group of 26 criminal appeals has been placed for hearing and disposal before a special Constitutional Bench, because the appeals constituting the group raise two common important questions of Constitutional law. Nine of these appeals have been preferred against the decisions of the Punjab High Court, whereas seventeen have been preferred against the decisions of the Bombay High Court. All the appellants are detenues who have been detained respectively by the Punjab and the Maharashtra State Governments under Rule 30(1)(b) of the Defence of India Rules (hereinafter called the Rules) made by the Central Government in exercise of the powers conferred on it by section 3 of the Defence of India Ordinance, 1962 (No. 4 of 1962) (hereinafter called the Ordinance). They applied to the Punjab and the Bombay High Courts respectively under section 491 (1) (b) of the Code of Criminal Procedure and alleged that they had been improperly and illegally detained. Their contention was that section 3(2)(15)(1) and section 40 of the Defence 806 of India Act, 1962 (No. 51 of 1962) (hereinafter called 'the Act ') and Rule 36(1)(b) under which they have been detained are constitutionally invalid, because they contravene their fundamental rights under Articles 14, 21 and 22(4), (5) & (7) of the Constitution, and so, they claimed that an order should be passed in their favour directing the respective State Governments to set them at liberty. These petitions have been dismissed on the ground that the Presidential Order which has been issued under article 359 of the Constitution creates a bar which precludes them from moving the High Court under section 491 (1) (b) Cr. That is how the decisions of the two High Courts under appeal raise two common questions of considerable importance. The first question is : what is the true scope and effect of the Presidential Order which has been issued under article 359 (1) ? The answer to this question would depend upon a fair and reasonable construction of article 359(1) itself. The second question is : does the bar created by the Presidential Order issued under article 359(1) operate in respect of applications made by detenues under section 491 (1) (b) of the Code? The answer to this question would depend upon the determination of the true character of the proceedings which the detenues have taken under section 491(1)(b), considered in the light of the effect of the Presidential Order issued under article 359(1). Both the Punjab and the Bombay High Courts have held against the appellants. Meanwhile, when similar petitions were made before the Allahabad High Court in Criminal Cases Nos. 1618, 1759 and 1872 of 1963 Sher Singh Negi vs District Magistrate, Kanpur & Anr., the said High Court took a contrary view and directed the release of the detenues who had moved it under section 491 (1) (b) of the Code. It is because the questions raised are important and the answers given by the different High Courts have disclosed a sharp difference of opinion that a Special Bench has been constituted to deal with these appeals. If the two principal questions are answered in favour of the detenues, a third question would arise and that relates to the validity of the impugned sections of the Act and the relevant statutory Rules. On the 8th September, 1962, the Chinese aggressively attacked the northern border of India and that constituted a threat to the security of India. That is why on 807 the 26th October, 1962, the President issued a Proclamation under article 352 of the Constitution. This Proclamation declared, that a grave emergency existed whereby the security of India was threatened by external aggression. On the same day, the Ordinance was promulgated by the President. This Ordinance was amended by Ordinance No. 6 of 1962 promulgated on November 3, 1962. On this day, the President issued the Order under article 359(1), suspending the rights of citizens to move any Court for the enforcement of the rights conferred by articles 21 and 22 of the Constitution for the period during which the proclamation of emergency issued on October 26, 1962 would be in force. On November 6, 1962, the rules framed by the Central Government were published. Then followed an amendment of the Presidential Order on November 11 1962. By this amendment, for the words and figures "article 21" the words and figures "articles 14 and 21" were substituted. On December, 6, 1962, Rule 30 as originally framed was amended and Rule 30 A added. Last came the Act on December 12 1962. Section 48(1) of the Act has provided for the repeal of the Ordinances Nos. 4 and 6 of 1962. Section 48(2) provides that notwithstanding such repeal, any rules made, anything done or any action taken under the aforesaid two Ordinances shall be deemed to have been made, done or taken under this Act as if this Act had commenced on October 26, 1962. That is how the Rules made under the Ordinance continued to be the Rules under the Act, and it is under Rule 30(1) (b) that the appellants have been detained. Before dealing with the points which have been raised for our decision in the present appeals, it is necessary to indicate briefly at the outset the general argument which has been urged before us by Mr. Setalvad on behalf of the appellants, and the learned Attorney General on the other side. article 359(1.) which falls to be construed, occurs in Part XVIII of the Constitution which makes emergency provisions. Whenever the security of India or any part of the territory of India is threatened whether by war or by external aggression or internal disturbance, the President may, under article 352, by proclamation, make a declaration to ,hat effect. Articles 353 to 360 which occur in this Part thus constitute emergency provisions. The learned 808 Attorney General contends that in construing an emergency provision like article 359(1), we must bear in mind the fact that the said Article is intended to deal with a situation which has posed a threat to the security of India, and so, fundamental rights guaranteed by Part III which are un doubtedly of vital importance to the democratic way of life guaranteed by the Constitution have to be regulated during an emergency, because the very security of the nation is exposed to serious jeopardy. The security of the nation on such a solemn occasion must have precedence over the liberty of the individual citizens, and so, it is urged that if article 359 is capable of two constructions, one in favour of the fundamental rights of the citizens, and the other in favour of the grant of power to the President to control those rights, the Court should lean in favour of the grant rather than in favour of the individual citizen 's fundamental rights. In support of this argument, the learned Attorney General has relied on two decisions of the House of Lords. In The King (At the Prosecution of Arthur Zadig) vs Halliday,(1) Lord Finlay L. C. who was called upon to construe Regulation 14B of the Defence of the Realm (Consolidation) Regulations Act, 1914, noticed the argument that if the Legislature had intended to interfere with personal liberty, it would have provided, as on previous occasions of national danger, for suspension of the rights of the subject as to a writ of habeas corpus, and rejected it with the observations that the Legislature bad selected another war of achieving the same purposes, probably milder as well as more effectual than those adopted on the occasion of previous wars. He added that the suggested rule as to construing penal statutes and the provision as to trial of British subjects by jury made by the Defence of the Realm Act, 1915, have no relevance in dealing with an executive measure by way of preventing a public danger. The majority decision of the House of Lords in Liversidge vs Sir John Anderson (2 ) has also been relied upon by the learned Attorney General. In that case, the House or Lords had to consider the true scope and effect of Regulation 18B of the Defence (General) Regulations, 1939. (1) ; , 270. (2) ; 809 Viscount Maugham in I rejecting the argument of the detenu that the liberty of the subject was involved and that the legislation dealing with the liberty of the subject must be construed, if possible, in favour of the subject and against the Crown, quoted with approval the language of Lord Finlay, L. C., in the case of Rex vs Halliday(1). Lord Macmillan who took the same view observed that it is right so to interpret emergency legislation as to promote rather than to defeat its efficacy for the defence of the realm. That is in accordance with a general rule applicable to the interpretation of all statutes or statutory regulations in peace time as well as in war time. Lord Wright and Lord Romer adopted the same approach. The Attorney General relies on the fact that this approach has also been adopted by Gwyer, C. J., in Keshav Talpade vs The King Emperor(2). In making his contention in regard to the proper approach. which the Court should adopt in construing article 359, the learned Attorney General no doubt contended that the question about the approach would arise only if two constructions are reasonably possible. According to him, article 359 was capable of only one construction and that is the construction which the High Courts of Punjab and Bombay have accepted. On the other hand, Mr. Setalvad has argued that article 359 is not an emergency legislation properly so called and on the merits, he has strongly resisted the suggestion made by the learned Attorney General that if two reasonable constructions are possible, we should adopt that which is in favour of the grant of power to the President and not in favour of the citizens fundamental rights. He has relied on the minority speech of Lord Atkin in the case of Liversidge(3) and has argued that the view taken by Lord Atkin should be preferred to the majority view which the House of Lords adopted in that case. "In this country", observed Lord Atkin, "amid the clash of arms, the laws are not silent. They maybe changed, but they speak the same language in war as in peace. It has always been one of the pillars of freedom, one of the principles of liberty for which on recent authority we are now fighting, that the judges are no respecters of persons and stand between (1) ; , 270. (3) ; (2) , 63. 52 2 section C. lndia/64 810 the subject and any attempted encroachments on his liberty by the executive, alert to see that any coercive action is justified in law. In this case, I have listened to arguments which might have been addressed acceptably to the Court of King 's Bench in the time of Charles I." Realising that he was in a minority, Lord Atkin added that he protested, even if he did it alone, against a strained construction put on words with the effect of giving ail uncontrolled power of imprisonment to the Minister. In this connection, Mr. Setalvad referred to two subsequent decisions of the Privy Council in which the view taken by Lord Atkin has been accepted, vide Nakkuda Ali vs M. F. De section layaratne(1), and King Emperor vs Vimalabai Deshpande(2). In the former case, Lord Radcliffe observed that indeed, it would be a very unfortunate thing if the decision of Liversidge 's case came to be regarded as laying down any general rule as to the construction of such phrases when they appear in statutory enactments, and he added that the said decision is an authority for the proposition that the words "if A. B. has reasonable cause to believe" are capable of meaning "if A. B. honestly thinks that he has reasonable cause to believe" and that in the context and attendant circumstances of Defence Regulation 18B they did in fact mean just that. In distinguishing the said decision, Lord Radcliffe made the somewhat significant comment that the elaborate consideration which the majority of the House gave to the context and circumstances before adopting that construction itself shows that there is no general principle that such words are to be so understood. Mr. Setalvad has also invited our attention to the fact that the majority decision of the House of Lords in Liversidge(3) has not received the approval from jurists, (vide Maxwell on Interpretation of Statutes p. 276, footnote 54, Craies on Statue Law p. 309, and Friedmann, Law in a Changing Society p. 37.) Like the Attorney General, Mr. Setalvad also urged that the stage to choose between two rival constructions would not arise in the present appeals because, according to him, the construction for which he contended was the only reasonable construction of article 359. (1) , 76. (2) 73 I.A. 144. (3) ; 811 In our opinion, it is unnecessary to decide the merits of the rival contentions urged before us in regard to the rule of construction and the approach which the Court should adopt in construing article 359. It is common ground that the question of approach would become relevant and material only if we are satisfied that article 359 is reasonably capable of two alternative constructions. As we will presently point out, after hearing counsel on both sides, we have reached the conclusion that article 359 is reasonably ,capable of only one construction and that is the construction which has been put on it by the Punjab and Bombay High Courts. That is why we are relieved of the task of dealing with the merits of the controversy between the parties on this point. Let us then revert to the question of construing article 359. In doing so, it may be relevant and somewhat useful to compare and contrast the provisions of Articles 358 and 359. Indeed, both Mr. Setalvad and the learned Attorney General contended that article 359 should be interpreted in the light of the background supplied by the comparative examination of the respective provisions contained in articles 358 and 359 (1) & (2). The said two Articles read as under : "358. While a Proclamation of Emergency is in operation, nothing in article 19 shall restrict the power of the State as defined in Part III to make any law or to take any executive action which the State would but for the provisions contained in that Part be competent to make or to take, but any law so made shall, to the extent of the competency, cease to have effect as soon as the Proclamation ceases to operate, except as respects things done or omitted to be done before the law so ceases to have effect 359 (1) Where a Proclamation of Emergency is in operation, the President may by order declare that the right to move any Court for the enforcement of such of the rights conferred by Part III as may be mentioned in the order and all proceedings pending in any court for the enforcement of the rights so mentioned shall remain suspended for the period during which the Proclamation is in force or for such shorter period a may be specified in the order. 812 (2)Any order made as aforsesaid may extend to the whole or any part of the territory of India. " It would be noticed that as soon as a Proclamation of Emergency has been issued under article 352 and so long as it lasts, article 19 is suspended and the power of the legis latures as well as the executive is to that extent made wider. The suspension of article 19 during the pendency of the Proclamation of emergency removes the fetters created on the legislative and executive powers by article 19 and if the legislatures make laws or the executive commits acts which are inconsistent with the rights guaranteed by article 19, their validity is not open to challenge either during the 'continuance of the emergency or even thereafter. As soon as the Proclamation ceases to operate, the legislative enactments passed and the executive actions taken during the course of the said emergency shall be inoperative to the extent to which they conflict with the rights guaranteed under article 19 because as soon as the emergency is lifted, article 19 which was suspended during the emergency is automatically revived and begins to operate. Article 358, however, makes it clear that things done or omitted to be done during the emergency cannot be challenged even after the emergency is over In other words, the suspension of article 19 is complete during the period in question and legislative and executive action which contravenes article 19 cannot be questioned even after the emergency is over. Article 359, on the other hand, does not purport expressly to suspend any of the fundamental rights. It authorises the President to issue an order declaring that the right to move any court for enforcement of such of the rights in Part III as may be mentioned in the order and all proceedings pending in any court for the enforcement of the rights so mentioned shall remain suspended for the period during which the Proclamation is in force or for such shorter period as may be specified in the order. What the Presidential Order purports to do by virtue of the power conferred on 'the President by article 359(1) is to bar the remedy of the citizens to move any court for the enforcement of the specified rights. The rights are not expressly suspended, but the citizen is deprived of his right to move any court for their enforcement. That is one important 813 distinction between the provisions of article 358 and article 359(1). Before proceeding further, we may at this stage, in parenthesis, observe that there has been some argument before us on the question as to whether the fundamental rights specified in the Presidential Order issued under article 359 are even theoretically alive during the period specified in the said Order. The learned Attorney General has contended that the suspension of the citizens ' right to move any court for the enforcement of the said rights, in law, amounts to the suspension of the said rights themselves for the said period. We do not propose ,to decide this question in the present appeals. We will assume in favour of the appellants that the said rights arc, in theory, alive and it is on that assumption that we 'will deal with the other points raised in the present appeals. The other distinction lies in the fact that the suspension of article 19 for which article 358 provides continues so long as the Proclamation of Emergency is in operation, whereas the suspension of the right to move any court which the Presidential Order under article 359(1) brings about can last either for the period of the Proclamation or for a shorter period if so specified by the Order. It would be noticed that the Presidential Order cannot widen the authority of the legislatures or the executive; it merely suspends the rights to move any court to obtain a relief on the ground that the rights conferred by Part III have been contravened if the said rights are specified in the Order. The inevitable consequence of this position is that as soon as the Order ceases to be operative, the infringement of the rights made either by the legislative enactment or by executive action can perhaps be challenged by, a citizen in a court of law and the same may have to be tried on the merits on the basis that the rights alleged to have been infringed were in operation even during the pendency of the Presidential Order. If at the expiration .of the Presidential Order, Parliament passes any legislation to protect executive action taken during the pendency, of the Presidential Order and afford indemnity to the executive in that behalf, the validity and the effect of such legislative action may have to be carefully scrutinised. 814 Since the object of article 359(1) is to suspend the rights of the citizens to move any court, the consequence of the Presidential Order may be that any proceeding which may be pending at the date of the Order remains suspended during the time that the Order is in operation and may be revived when the said Order ceases to be operative; and fresh proceedings cannot be taken by a citizen after the Order has been issued, because the Order takes away the right to move any court and during the operation of the Order, the said right cannot be exercised by instituting a fresh proceeding contrary to the Order. If a fresh proceeding failing within the mischief of article 359(1) and the Presidential Order issued under it is instituted after the Order has been issued, it will have to be dismissed as being incompetent. In other words, article 359(1) and the Presidential Order issued under it may constitute a sort of moratorium or a blanket ban against the institution or continuance of any legal action subject to two important conditions. The first condition relates to the character of the legal action and requires that the said action must seek to obtain a relief on the ground that the claimant 's fundamental rights specified in the Presidential Order have been contravened, and the second condition relates to the period during which this ban is to operate. The ban operates either for the period of the Proclamation or for such shorter period as may be specified in the Order. There is yet another distinction between the provisions of article 358 and article 359(1). The suspension of Art '. 19 for which, provision is made under article 358 applies to the whole of the country, and so, covers all legislatures and also States. On the other hand, the Order issued under article 359(1) may extend to the whole of India or may be confined to any part of the territory of India. These, broadly stated, are the points of distinction between article 358 and article 359(1), What then is the true scope and effect of, article 359(1).? Mr. Setalvad contends that the right to move any court for the enforcement of such of the rights conferred by Part III as may be mentioned in the Order should be construed to mean the right to move the Supreme Court which has been guaranteed by article 32(1). He suggests that as one reads the relevant clause in article 359(1), one seems 815 to hear the echo of the right which has been constitu tionally guaranteed by article 32(1). His argument, therefore, is that the only right of which a citizen can be deprived under article 359(1) is the right to, move the Supreme Court, and so, his case is that even in regard to fundamental rights specified in the Presidential Order, a citizen is entitled to ask for reliefs from the High Court under article 226 because the right to move the High Court flowing from article 226 does not fall within the mischief of article 359(1). This argument attempts to interpret the words "the right to move for the enforcement of the specified rights" in isolation and without; taking into account the other words which indicate that the right to move which is specified in the said Article is the right to move "any courts$. In plain language, the words "any court" cannot mean only the Supreme Court they would necessarily take in all courts of competent jurisdiction. If the intention of the Constitution makers was to confine the operation of article 359(1) to the right to move only the Supreme Court, nothing could have been easier than to say so expressly instead of using the wider words "the right to move any court. ') To meet this difficulty,Mr. Setalvad attempted to invoke the assistance of article 32(3). article 32(3) provides that without prejudice to the: powers conferred on the Supreme Court by clauses (1) and ' (2), Parliament may by law empower any other court, to exercise within the local limits of its jurisdiction all or any of the powers exercisable by the Supreme Court under clause (2). The argument is that the Constitution contemplates that there may be some other courts in the country on which the powers exercisable by the Supreme Court under article 32(2) may be conferred, and so, the words "any court" may have been intended to take within their purview the Supreme Court and such other courts oil whom the Supreme Courts powers under article 32(2) may have been conferred. This argument is fallacious. The scheme of article 32 clearly indicates that the right to move this Court which itself is a guaranteed fundamental right,, cannot be claimed in respect of courts falling under article 32(3). article 32(3) merely provides for the conferment of this Court 's 816 powers under article 32(2) on the courts specified in clause (3). The right guaranteed by article 32(1) cannot be claimed in respect of the said other courts. Therefore, oh a plain construction of the relevant clauses of article 32, it is impossible to accept the argument that courts under article 32(3) must be regarded as having the same status as the Supreme Court and as such the right to move them must also be held to constitute a fundamental right of the citizen in respect of such courts. Besides, it would be irrational to suggest that whereas the Constitution did not confer on the citizens a guaranteed fundamental right to move the High Court under article 226, it thought of conferring such a guaranteed fundamental right in regard to courts on which the Supreme ' Court 's powers under article 32(2) would be conferred by article 32(3). Therefore, the attempt to suggest that 'the use of the words "any Court" used in article 359(1) is justified because they take in the Supreme Court and some other courts, fails and the conclusion inevitably follows that the words "any court" must be given their plain grammatical meaning and must be construed to mean any court of competent jurisdiction. In other words the words "any court" include the Supreme Court and the High Courts before which the specified rights can be enforced by the citizens. In this connection, it was attempted to be argued that the power of the High Court to issue the writs or orders specified in article 226(1) is a discretionary power and as such, no citizen can claim to have a right to move the High Court in that behalf, and '. so, it was suggested that the proceedings contemplated by article 226(1) are outside the purview of article 359(1). In our opinion, this argument is not well founded. It is true that in issuing writs or orders under article 226(1), the High Courts have discretion to decide whether a writ or, %,order should be issued as claimed by the petitioner; but the discretion conferred on the High Courts in that behalf has to be judicially exer cised, and having regard to the scheme of article 226(1), it cannot be said that a citizen. has no right to move the High Court for invoking its jurisdiction under article 226(1); article 226(1) confers wide powers on the High Courts to issue the specified writs, or other appropriate orders or directions; having regard to the nature of the said powers, 817 and the object intended to be achieved by their conferment there can be little doubt that in dealing with applications made before them the High Courts have to exercise their discretion in a judicial manner and in accordance with principles which are well settled in that behalf. The High Courts cannot capriciously or unreasonably refuse to en tertain the said applications and to deal with them on the merits on the sole ground that the exercise of their juris diction under article 226(1) is discretionary. Therefore, it is idle to suggest that the proceedings taken by citizens under article 226(1) are outside the purview of article 359(1). We must accordingly hold that the right to move any court under article 359(1) refers to the right to move any court of competent jurisdiction. The next question to consider is, what is the nature of the proceedings which are barred by the Presidential Order issued under article 359(1) ? They are proceedings taken by citizens for the enforcement of such of the rights conferred by Part III as may be mentioned in the order. If a citizen moves any court to obtain a relief on the ground that his fundamental rights specified in the Order have been contravened, that proceeding is barred. In determining the question as to whether a particular proceeding falls within the mischief of the Presidential Order or not, what has to be examined is not so much the form which the proceeding has taken, or the words in which the relief is claimed, as the substance of the matter and consider whether before granting the relief claimed by the citizen, it would be necessary for the Court to enquire into the question whether any of his specified fundamental rights have been contravened. If any relief cannot be granted to the citizen without determining the question of the alleged infringement of the said specified 'fundamental rights, that is a proceeding which falls under article 359(1) and would, therefore, be hit by the Presidential Order issued under the said Article. The sweep ,of article 359(1) and the Presidential Order issued under it is thus wide enough to include all claims made by citizens in any court of competent jurisdiction when it is shown that the said claims cannot be effectively adjudicated upon without examining the question as to whether the citizen is in substance, seeking to enforce any of the 818 said specified fundamental rights. We have already seen that the operation of article 359(1) and the Presidential Order issued under it is limited to the period during which the proclamation of emergency is in force, or for such shorter period as may be specified in the Order. That being so, we feel no difficulty in holding that proceedings taken by a citizen either under article 32(1) or under article 226(1) are hit by article 359(1) and the Presidential Order issued under it. In this connection it would be legitimate to add that the contention of the appellants which seeks to confine the operation of article 359(1) only to the right to move the Supreme Court, would make the said provision almost meaningless. There would be no point in preventing the citizen from moving this Court, while leaving it open to him to move the High Courts for the same relief and then to come to this Court in appeal, if necessary. That takes us to the question as to whether proceedings taken by a citizen under section 491(1)(b) are affected by article 359(1) and the Presidential Order issued under it. Section 491 (1) (b), inter alia, provides that any High Court may, whenever it thinks fit, direct that a person illegally or improperly detained in public custody be set at liberty. It has been strenuously urged before us that the proceedings for obtaining directions of the nature of habeas corpus which are taken under section 491 (1) (b) are outside article 359(1), and so, the Presidential Order cannot create a bar against a citizen asking the High Court to issue a writ in the nature of habeas corpus under the said provision. It is necessary to examine this argument very carefully. It is well known that after section 491 was enacted in the Code of Criminal Procedure in the present form in 1923, the right to obtain a direction in the nature of a habeas corpus became a statutory right in India. After 1923, it was not open to any party to ask for a writ of habeas corpus as a matter of common law. This question was elaborately considered by Rankin, C. J., in Girindra Nath Banerjee vs Birendra Nath Pal(1), where the learned C.J. considered the history of the development of the law on this point and came to the conclusion that the relief of a writ in the nature of a habeas corpus could be claimed (1) I.L.R. 819 after 1923 solely under Cr. P. C. The same view was taken by a full Bench of the Madras High Court in District Magistrate, Trivandrum vs K. C. Mammen Mappillal(1), where the said High Court held that it had no power to issue a writ of habeas corpus as known to the English Common Law. Its powers are confined in that respect to those conferred by section 491 of the Code of Criminal Procedure which gives authority to issue directions of the nature of habeas corpus. When this point was raised before the Privy Council in Matthen vs District Magistrate of Trivandrum (2), their Lordships observed that the reasoning of Rankin C.J. in the case of Girindra Nath Banerjee(3) was so clear and convincing that they were content to adopt it, as also to state that they were in entire agreement with the views expressed by him. The same view was expressed by the Privy Council in King Emperor vs Sibnath Banerji(4). Basing himself on these decisions, Mr. Setalvad contends that the statutory right to obtain relief under section 491 (1) (b) is a right which is separate and distinct from the Constitutional right guaranteed by the relevant Articles of the Constitution, and so, article 359(1) cannot be said to apply to the proceedings under section 491 (1) (b). In support of the same contention, Mr. Setalvad has also pressed into service the provisions of article 372 by which the existing laws are continued and he has invited our attention to the provisions of article 225 and 375 to show that the jurisdiction conferred on the High Courts by section 491 Cr. P. C. continues unless it is expressly taken away by a competent piece of legislation. In this connection, reliance has also been placed on the fact that in the past whenever the operation of section 491 was intended to be suspended, the legislature made a specific provision in that behalf and as an illustration, reference is made to section 10 of the Restriction and Detention Ordinance, 1944 (No, III of 1944). Section 10 specifically refers to section 491 of the Code and provides that no Court shall have power to make any order under the said section in respect of any order made under or having, effect under the Ordinance, or in respect of any person the subject of such an order. It is urged that the Presidential Order is con (1) I.L.R. 66 I.A. 222. (3) I.L.R. :54 Cal, 727.(4) 72 I.A. 241. 820 fined only to proceedings taken for enforcement of consti tutional rights and if it was intended that the proceedings under section 491(1)(b) should also be prohibited, it was essen tial that the said provision should, in terms, have been suspended by a competent piece of legislation. Mr. Setalvad has also emphasised the fact that the approach in dealing with a proceeding under section 491(1)(b) is different from the approach which the courts adopt in dealing with proceedings under article 226 or article 32. In invoking the Jurisdiction of the High Courts under article 226(1), or that of the Supreme Court under article 32(1), the Courts always enquire whether the party concerned is aggrieved by the order against which complaint is made. Under section 491(1)(b), however, the court can take action suo motu and that brings out the difference in the character of the two respective categories of proceedings. That, broadly stated, is the manner in which Mr. Setalvad has raised his contention that proceedings under section 491 (1) (b) are outside the purview of the Presidential Order and do not fall within the mischief of article 359(1). There is no doubt that the right to ask for a writ in the nature of habeas corpus which could once have been treated as a matter of Common Law has become a statutory right after 1923, and as we have already seen after section 491 was introduced in the Cr. P. C., it was not open to any citizen in India to claim the writ of habeas corpus on grounds recognised by Common Law apart from the provisions of section 491(1)(b) itself. It has, however, been suggested by the learned Attorney General that just as the common law right to obtain a writ of habeas corpus became a statutory right in 1923, a part of the said statutory .tight has now become a part of the fundamental rights guaranteed by the Constitution, and so, after the Constitution came into force, whenever a detenu claims to be released from illegal or improper ' detention, his claim can, in some cases, be sustained on the ground that illegal or improper detention affects his fundamental rights guaranteed by articles 19, or 21 or 23 as the case may be. If that be so, it would not be easy to accede to the argument that the said part of the statutory right recognised by section 491(1)(b) retains its distinctive and independent character even after 821 the Constitution came into force to such an extent that it cannot be said to form part of the fundamental rights guaranteed by the Constitution. It is true that there are two remedies open to a party whose right of personal freedom has been infringed; he may move the Court for a writ under article 226(1) or article 32(1) of the Constitution, or he may take a proceeding under s.491(1)(b) of the Code. But it seems to us that despite the fact that either of the two remedies can be adopted by a citizen who has been detained improperly or illegally, the right which he claims is the same if the remedy sought for is based on the ground that there has been a breach of his fundamental rights; and that is a right guaranteed to the citizen by the Constitution, and so, whatever is the form of the remedy adopted by the detenu, the right which he is seeking to enforce is the same. It is no doubt urged that under section 491 (1) (b) a stranger can apply for the release of a detenu improperly or illegally detained, or the Court itself can act suo motu. This argument is based on the provision that the High Court may, whenever it thinks fit, issue the appropriate direction. The learned Attorney General contended that the clause "whenever it thinks fit" postulates that some application or petition has been filed before the Court and on perusing the application or petition it appears to the Court fit to take the appropriate action. In other words, his argument is that the Court cannot take suo motu action under section 491(1)(b). He has also urged that a third person may apply, but he must show that he has been duly authorised to act on behalf of the detenu or he must at least purport to act on his behalf. We do not think it necessary to express any opinion on this part of the controversy between the parties. We are prepared to assume that the court can, in a proper case, exercise its power under section 491(1)(b) suo motu, but that, in our opinion, does not affect the decision of the question with which we are concerned. If article 359(1) and the Presidential Order issued under it govern the proceedings taken under section 491 (1) (b), the fact that the court can act suo motu will not make any difference to the legal position for the simple reason that if a party is precluded from claiming his release on the ground set out by him in his petition, the 822 Court cannot, purporting to act suo motu, pass any order inconsistent with the provisions of article 359(1) and the Presidential Order issued under it. Similarly, if the pro ceedings under section 491(1)(b) are hit by article 359(1) and the Presidential Order, the arguments based on the provisions of article 372 as well as articles 225 and 375 have no validity. The obvious and the necessary implication of the suspension of the right of the citizen to move any Court for enforcing his specified fundamental right. , is to suspend the Jurisdiction of the Court pro tanto in that behalf. Let us take a concrete case which will clearly bring. out the character of the proceedings taken by the detenues in the present cases. An application is made on behalf of the detenu that he is illegally or improperly detained. The State in its return pleads that the detention is neither illegal nor improper because it has been effected under rule 30(1) (b), and in support of this return reliance is placed on the provisions of section 3(2)(15)(i) of the Act. On receiving this return, it is urged on behalf of the detenu that the provisions of section 3(2)(15)(i) as well as Rule 30(1)(b) are invalid because they contravene the fundamental rights guaranteed to the citizens under articles 14, 21 and 22 and so, the sole issue which falls to be determined between the parties relates to the validity of the relevant statutory provisions and Rules. If the impugned provisions in the Act and the Rules are ultra Vires the detention is illegal and improper, but if, on the other hand, the said provisions are valid, the detention is legal and proper. In deciding this point, the Court will naturally have to take into account the provisions of section 45(1) of the Act. Section 45(1) provides that no order made in exercise of any power conferred by or under this Act shall be called in question in any Court; and the reply of the detenu inevitably would be that notwithstanding this provision, the validity of the impugned legislation must be tested. This clearly brings out the true nature and character of the dispute which is raised before the Court by the detenu in asking for the issue of a writ of habeas corpus in the present proceedings. The question which thus arises for our decision is, can it be said that the proceedings taken under section 491 (1) (b) are 823 of such a distinctly separate character that they cannot fall under article 359(1) ? Under section 491 as it stood before the date of the Constitution, it would have been open to the detenu to contend that the law under which he was detained was invalid, because it was passed by a legislature without legislative competence. The validity of the law might also have been challenged on the ground that the operative provision in the law suffered from the vice of excessive.delegation. The detenu might also have urged that in detaining him the mandatory provisions under the Act had not been complied with. But before the Constitution was adopted, it would not have been open to the detenu to claim that the impugned law was invalid because it contravened his fundamental rights guranteed by the relevant Articles of the Constitution. The right to challenge the validity of a statute on the ground that it contravenes the fundamental rights of the citizens has accrued to the citizens of this country only after and as a result of the provisions of the Constitution itself, and SO, there can be no doubt that when in the present proceedings the detenues seek to challenge the validity of the impugned statutory provision and the Rule, they are invoking their fundamental rights under the Constitution. If section 491. is treated as standing by itself and apart from the provisions of the Constitution, the plea raised by the detenues cannot be entertained in the proceedings taken under that section ; it is only when the proceedings taken under the said section are dealt with not only in the light of section 491 and of the rights which were available to the citizens before 1950, but when they are considered also in the light of the fundamental rights guaranteed by the Constitution that the relevant plea can be raised. In other words, it is clear that the content of the detenu 's right to challenge the legality of his detention which was available to him under section 491(1)(b) prior to the Constitution, has been enlarged by the fundamental rights guaranteed to the citizens by the Constitution, and so, whenever a detenu relies upon his fundamental rights even in support of his petition made under section 491(1)(b) he is really enforcing the said rights and in that sense, the proceedings inevitably partake of the character of proceedings taken by the detenu for enforcing these rights; that is why the argument that article 359(1) 824 and the Presidential Order issued under it do not apply to the proceedings under section 491(1)(b) cannot be sustained. The prohibition contained in the said Article and the Presidential Order will apply as much to proceedings under section 491(1)(b) as to those under article 226(1) & article 32(1). In this connection, it is hardly necessary to emphasise that in deciding the present question, we must take into account the substance of the matter and not attach undue or exaggerated importance to the form of the proceedings. If the form which the proceedings take is held to be decisive in the matter, it would lead to this irrational position that an application containing the requisite averments in support of a plea for the release of the detenu, would be thrown out by the High Court if in form it purports to be made under article 226, whereas it would be entertained and may indeed succeed if it purports to be made under section 491(1)(b). Indeed, this argument seems to suggest that when the Constitution makers drafted article 359, they intended that whenever an emergency arises and a Presidential Order is issued under article 359(1) in regard to the fundamental rights guaranteed by articles 21 and 22, it would be necessary to pass another piece of legislation providing for an appropriate change or repeal of a part of the provision of section 491(1)(b), Cr. P. C.; and since the legislature has through oversight omitted to pass the necessary Act in that behalf, proceedings under section 491(1)(b) must be allowed to be continued free from the bar created by the Presidential Order. In our opinion, this position is wholly untenable. Whether or not the proceedings taken under section 491(1)(b) fall within the purview of the Presidential Order, must depend upon the construction of article 359(1) and the Order, and in dealing with this point, we must look at the substance of the matter and not its form. Before giving relief to the detenu who alleges that he has been illegally and impropely detained, is the High Court required to consider the validity of the operative provisions of the impugned Act on the ground that they infringe the specified fundamental rights? If yes, the bar created by article 359(1) and the Presidential Order must inevitably step in even though the proceedings in form may have been taken under section 49t(1)(b) of the Code. In our opinion, therefore, once it is shown that the proceedings under 825 s.491(1)(b) cannot make a substantial progress unless the validity of the impugned law is examined on the ground of the contravention of the specified fundamental rights, it must follow that the bar created by the Presidential Order operates against them as much as it operates against proceedings taken under article 226(1) or article 32(1). Thus, the true legal position, in substance, is that the clause "the right to move any court" used in article 359(1) and the Presidential Order takes in all legal actions intended to be filed, or filed, in which the specified rights are sought to be enforced, and it covers all relevant categories of Jurisdictions of competent courts under which the said actions would otherwise normally have been entertained and tried. At this stage, we may conveniently refer to the recent decision of this Court in Sree Mohan Chowdhury vs The Chief Commissioner, Union Territory of Tripura(1), wherein this Court rejected the detenu 's petition on the ground that it was barred by the Presidential Order and it refused to entertain the argument that the Ordinance and the Act and the Rules framed thereunder were void for the reason that they contravened articles 14, 21 & 22, with the observation that the challenge made by the petitioner in that behalf really amounted to "arguing in the circle". If the Presidential Order precludes a citizen from moving the Court for the enforcement of the specified fundamental rights, it would not be open to the citizen to urge that the Act is void for the reason that it offends against the said fundamental rights. It is in order to prevent the citizen from making such a claim that the Presidential Order has been issued, and so, during the period of its operation, the challenge to the validity of the Act cannot be entertained. Incidentally, it may be observed that a petition for a writ of habeas corpus made by Mohan Chowdhury which was rejected by this Court on the ground that it was barred under the Presidential Order would, on the view for which the appellants contend, be competent if it is presented before the appropriate High Court under section 491(1)(b) of the Code; and that incidentally illustrates how exaggerated importance to the form of the petition would lead to extremely anomalous and irrational consequences. Therefore, our conclusion is that the proceedings (1) [1964] 3 S.C.R.412. 53 2 SC India/64 826 taken on behalf of the appellants before the respective High Courts challenging their detention on the ground that the impugned Act and the Rules arc void because they contravene articles 14, 21 and 22, arc incompetent for the reason that the fundamental rights which are alleged to have been contravened are specified in the Presidential Order and all citizens ire precluded from moving any Court for the enforcement of the said specified rights. The next question to consider is the validity of tile Presidential Order itself which was issued on the 3rd November, 1962. This is how the Order reads: "G.S.R. 1464. In exercise of the powers conferred by clause (1) of article 359 of the Constitution, the President hereby declares that the right of any person to move any court for the enforcement of the rights conferred by article 21 and article 22 of the Constitution shall remain suspends for the period during which the Proclamation of Emergency issued under clause (1) of article 352 thereof on ,lie 26th October, 1962 is in force, if such person has been delivered of any such rights under the Defence of India Ordanance, 1962 (4 of 1.962) or any rule or order made thereunder. " We have already stated that this Order was subsequently modified on the 11th November, 1962, by the addition of article 14. The first argument which has been urged against the validity of this Order is that it is inconsistent with the provisions of article 359(1). It is argued that the Order which the President is authorised to issue under this Article must be an Order of general application; in fact, the Order purports to be confined to persons who have been deprived of any of the specified rights under the Defence of India Ordinance, 1962, or any Rule or Order made thereunder. In other words, there is no doubt that this Order does not apply to persons who have been detained under the provisions of the earlier No. 4 of 1950, and so, in limiting the application of the Order to persons who have been detained under the Ordinance, the President has acted outside the powers conferred on him by article 359(1). In our opinion, this argument cannot be sustained. The power conferred on the President is wide enough to enable him to make an Order applicable to all parts of the country and to all 827 citizens and in respect of any of the rights conferred by Part 111. This wide power obviously includes the power to issue a limited order. What the Order purports to do is to provide that all persons wherever they reside who have been detained under the Ordinance or the Act, will be precluded from moving any court for the enforcement of the rights specified in the Order. It is not easy to see how this Order can be said to contravene or be otherwise inconsistent with the powers conferred on the President by article 359(1). It is then argued that the said Order is invalid because it seeks to give effect to the Ordinance which is void. It will be recalled that Ordinance No. 4 of 1962 was promul gated on the 26th October, 1962, whereas the Order was issued under article 359(1) on the 3rd November, 1962. The argument is that during the period between the 26th October and the 3rd November the validity of the said Ordinance could have been challenged on the ground that it contravened articles 14, 21 and 22, and so, the said Ordinance can be held to have been a still born piece of legislation and yet detentions effected under such a void law are sought to be protected by the Presidential Order by depriving the the detenues of their right to move any court to challenge the validity of the orders of detention passed against them. In our opinion, this argument is wholly misconceived. We have already stated that for the purpose 'of these appeals, we are prepared to assume that despite the issue of the Order under article 359(1), the fundamental rights guaranteed by articles 14, 21 and 22 are not suspended; what is suspended is the enforcement of the said rights during the prescribed period, and so, what is said about the invalidity of the Ordinance during the period between 26th October and 3rd November is true even after the Order was issued on the 3rd November. If the detenues are justified in contending that the Ordinance and the Act which took its place contravened the fundamental rights guaranteed by articles 14, 21 and 22, the said Ordinance and the Act would be and would continue to be invalid; but the effect of the Presidential Order is that their invalidity cannot be tested during the prescribed period. Therefore, the argument that since the Ordinance or the Act is invalid, the Presidential Order cannot preclude a citizen from test 828 ing its validity, must be rejected. The same argument is put in another form. It is urged that we have merely to examine the Ordinance and Act to be satisfied that articles 14, 21 and 22 (4), (5) and (7) have been contravened and it is suggested that if these infirmities in the Ordinance and the Act are glaring, it would not be open to the President to issue an Order pre venting the detenues from challenging the validity of the said statutory provisions. That, in substance, is what is described by this Court in Mohan Choudhury 's case(1) as arguing in the circle". Therefore, we are satisfied that the challenge to the validity of the Presidential Order is not well founded. It still remains to consider what are the pleas which are now open to the citizens to take in challenging the legality or the propriety of their detentions either under section 491(1)(b) of the Code, or article 226(1) of the Constitution. We have already seen that the right to move any court which is suspended by article 359(1) and the Presidential Order issued under it is the right for the enforcement of such of the rights conferred by Part III as may be mentioned in the Order. If in challenging the validity of his detention order, the detenu is pleading any right outside the rights specified in the Order, his right to move any court in that behalf is not suspended, because it is outside article 359(1) and consequently outside the Presidential Order itself. Let us take a case where a detenu has been detained in violation of the mandatory provisions of the Act. In such a case, it may be open to the detenu to contend that his detention is illegal for the reason that the mandatory provisions of the Act have been contravened. Such a plea is outside article 359(1) and the right of the detenu to move for his release on such a ground cannot be affected by the Presidential Order. Take also a case where the detenu moves the Court for a writ of habeas corpus on the ground that his detention has been ordered malafide. It is hardly necessary to emphasise that the exercise of a power malafide is wholly outside the scope of the Act conferring the power and can always be successfully challenged. It is true that a mere allegation that the detention is malafide would not be (1) ; 829 enough; the detenu will have to prove the malafides. But if the malafides are alleged, the detenu cannot be precluded from substantiating his plea on the ground of the bar created by article 359(1) and the Presidential Order. That is another kind of plea which is outside the purview of article 359(1). Section 491(1) deals with the power of the High Court to issue directions in the nature of the habeas corpus, and it covers six categories of cases in which such a direction ,can be issued. It is only in regard to that class of cases falling under section 491(1)(b) where the legality of the deten tion is challenged on grounds which fall under article 359(1) and Presidential Order that the bar would operate. In all other cases falling under section 491(1) the bar would be inap plicable and proceedings taken on behalf of the detenu will have to be tried in accordance with law. We ought to add that these categories of pleas have been mentioned by us by way of illustration, and so, they should not be read as exhausting all the pleas which do not fall within the purview of the Presidential Order. There is yet another ground on which the validity of the detention may be open to challenge. If a detenu contends that the operative provision of the law under which he is detained suffers from the vice of excessive delegation and is, therefore, invalid, the plea thus raised by the detenu cannot at the threshold be said to be barred by the Presi dential Order. In terms, it is not a plea which is relatable to the fundamental rights specified in the said Order. It is a plea which is independent of the said rights and its validity must be examined. Mr. Chatterjee has urged before us that section 3(2) (15) (i) as well as section 40 of the Act are invalid, because they confer oil the rule making authoritypower which is often described as excessive delegation. It is,therefore, necessary to consider this point. The Actwhich took the place of the Ordinance was passed, because it was thought necessary to provide for special measures to ensure the public safety and interest, the defence of India and civil defence and for the trial of certain offences and for matters connected therewith. Section 3(2)(15)(i) whose validity is challenged purports to confer on the Central Government power to make Rules. Section 3(1) reads thus : 830 "The Central Government may, by notification in the Official Gazette, make such rules as appear to it necessary or expedient for securing the defence of India and civil defence, the public safety, the maintenance of public order or the efficient conduct of military operations, or for maintaining supplies and services essential to the life of the community." Section 3(2) provides that without prejudice to the gene rality of the powers conferred by sub section (1) the rules may provide for, and may empower any authority to make orders providing for, all or any of the following matters; then follow clauses (1) to (57), including several subclauses which provide for the matters that may be covered by the Rules. Amongst them is cl. (15)(i) which reads as under: "Notwithstanding anything in any other law for the time being in force, the rules to be made may provide for the apprehension and detention in custody of any person whom the authority empowered by the rules to apprehend or detain (the authority empowered to detain not being lower in rank than that of a District Magistrate) suspects, on grounds appearing to that authority to be reasonable, of being of hostile origin or of having acted, acting, being about to act or being likely to act in a manncr prejudicial to the defence of India and civil defence, the security of the State, the public safety or interest, the maintenance of public order, India 's relations with foreign States, the maintenance of peaceful conditions in any part or area of India or the efficient conduct of military operations, or with respect to whom that authority is satisfied that his apprehension and detention are necessary for the purpose of preventing him from acting in any such prejudicial manner. " The argument is that in conferring power on the Central Government to make rules, the legislature has abdicated its essentially legislative function in favour of the Central Government. In our opinion, this argument is wholly un tenable. Right up from the time when this Court dealt with Special References in 1951, In re The etc.(1) the question about the limits within which (1) ; 831 the legislature can legitimately confer powers on its dele gate has been examined on several occasions and it has been consistently held that what the legislature is prohibited from doing is to delegate its essentially legislative func tion and power. If it appears from the relevant provisions of the impugned statute that powers which have been delegated include powers which can legitimately be regarded as essentially legislative powers, then the legislation is bad and it introduces a serious infirmity in the Act itself. On the other hand, if the legislature lays down its legislative policy in clear and unambiguous terms and leaves it to the delegate to execute that policy by means of making appropriate rules, then such delegation is not impermissible. In Harishanker Bagla vs The State of Madhya Pradesh(1) where the validity of section 3 of the Essential Supplies (Temporary Powers) Act, 1946, was challenged, this Court in upholding the validity of the impugned statute held that the preamble and the body of the relevant sections of the said Act sufficiently formulate the legislative policy and observed that the ambit and the character of the Act is such that the details of that policy can only be worked out by delegating that power to a subordinate authority within the framework of that policy. The same view has been expressed in Bhatnagars and Co., Ltd., vs The Union of India( ). In the present cases, one has merely to read section 3(1) and the detailed provisions contained in the several clauses of section 3(2) to be satisfied that the attack against the validity of the said section on the ground of excessive delegation is patently unsustainable. Not only is the legislative policy broadly indicated in the preamble to the Act, but the relevant provisions of the impugned section itself give such detailed and specific guidance to the rule making authority that it would be idle to contend that the Act has delegated essentially legislative function to the rule making authority. In our opinion, therefore, the contention that section 3(2)(15)(i) of the Act suffers from the vice of excessive delegation must be rejected. What we have said about this section applies with equal force to section 40. If the impugned sections of the Act are valid, it follows that Rule 30(1)(b) which is challenged by the appellants must be (1) (2) ; 832 held to be valid since it is consistent with the operative provisions of the Act and in making it, the Central Gov ernment has acted within its delegated authority. This conclusion is, of course, confined to the challenge of the appellants based on the ground that the impugned provisions and the Rule suffer from the vice of excessive delegation. If we had held that the impugned provision in the Act suffered from the vice of excessive delegation, it would have become necessary to consider what the effect of that conclusion would have been on the merits of the controversy between the parties in the present proceedings. If we had reached the conclusion that the impugned sections were invalid because they conferred power on the rule making authority which suffers from the vice of excessive delegation, the question would have arisen whether in challenging the validity of the Order of detention passed against him the detenu is enforcing his fundamental right under article 21 of the Constitution. article 21 is one of the articles specified in the Presidential Order and if at any stage of the proceedings, the detenu seeks to enforce his right under the said Article, that would be barred. It may be urged that if the detenues had been able to show that the impugned provisions of the Act were invalid because they suffered from the infirmity of excessive delegation, the next step which they would have been entitled to take was to urge that their detention under such an Act is void under article 21, because the law referred to in that Article must be a valid law; and that would raise the question as to whether this latter plea falls within the ambit of article 359(1) and the Presidential Order issued under it. We do not propose to express any opinion on this question in these appeals. Since we have held that the Act does not suffer from the vice of excessive delegation as alleged, it is unnecessary to pursue the enquiry as to whether if the challenge had been upheld, the detenu would have been precluded from urging the said invalidity in support of his plea that his detention was illegal. We must now turn to some other arguments which were urged before us at the hearing of these appeals. Mr. Sule contends that part of the Act containing the im 833 pugned sections was a colourable piece of legislation. His argument was that since the No. 4 of 1950 was already on the statute book, it was hardly necessary for the Legislature to have passed the impugned Act, and he urges that since the sole object of the Legislature in passing the impugned Act was to deprive the citizens of their fundamental rights under articles 21 and 22, it should be deemed to be a colourable piece of legislation. The legislative competence of the Parliament to pass this Act is not disputed. Entry No. 9 in List I in the Seventh Schedule confers on the Parliament jurisdiction to make laws in regard to the preventive detention for reasons connected with defence, foreign affairs, or the security of India as well as in regard to persons subjected to such detention. If the Legislature thought that having regard to the grave threat to the security of India posed by the Chinese aggression, it was necessary to pass the impugned Act notwithstanding the fact that another Act had already been passed in that behalf, it would be difficult to hold that the Legislature had acted malafide and that the Act must, therefore, be struck down as a colourable exercise of legislative power. It is hardly necessary to emphasise that a plea that an Act passed by a legislature competent to pass it is a colourable piece of legislation, cannot succeed on such flimsy grounds. Whether or not it was wise that this part of the Act should have been passed, is a matter which is wholly irrelevant in dealing with the plea that the Act is a colourable piece of legislation. In this connection, we may refer to another aspect of the same argument which has been pressed before us. Before doing so, however, let us briefly indicate the effect of the relevant Articles. Article 14 guarantees equality before law. Article 21 provides, inter alia, that no person shall be deprived of his personal liberty, except according to procedure established by law, and article 22(4), (5) (6) & (7) lay down Constitutional safeguards for the protection of the citizen whose personal liberty may be affected by an order of detention passed against him. Article 22(4) requires that an Advisory Board should be constituted and that cases of detenues should be referred to the Advisory Board for its opinion as provided therein. Article 22(5) 834 imposes an obligation on the detaining authority to commu nicate to the detenu grounds on which the order of detention has been passed against him with a view to afford him the earliest opportunity of making a representation against the order. Article 22(6) provides that in giving notice to the detenu under article 22(5), facts need not be disclosed which the detaining authority considers to be against public interest to disclose, and article 22(7) prescribes certain conditions which have to be satisfied by any law which the Parliament may pass empowering the detention of citizens. It is thus clear that the Constitution empowers the Parliament to make a law providing for the detention of citizens, but this power has to be exercised subject to the mandatory conditions specified in article 22(4), (5) & (7). It is common ground that the of 1950 complies with these requirements inasmuch as it has enacted sections 7 to 13 in that behalf. It is also clear that these Constitutional safeguards have not been provided for by the impugned Act. The argument is that even if the Parliament thought that during the period of emergency, citizens reasonably suspected to be engaged in prejudicial activities should be detained without affording them the benefit of the Con stitutional safeguards guaranteed by article 22(4), (5) & (7), the Parliament need not have enacted the Act and might well have left the executive to take action under the of 1950, and since Parliament has chosen to pass the Act under challenge and has disregarded the Constitutional provisions of Articles 14 and 22, the exercise of legislative power by Parliament must, in the context, be held to be a colourable exercise of legislative power. This argument seems to assume that if the Parliament had expected the executive to detain citizens under the of 1950 without giving them the benefit of the Constitutional safeguards prescribed by article 22, their cases could have been covered if a Presidential Order had been issued under article 359(1) in respect of such detentions. The question is: is this assumption well founded? Assuming that the Presidential Order had suspended the citizens ' right to move any court for enforcing their fundamental rights under articles 14, 21 and 22 and had made 835 the said Order applicable to persons detained under the of 1950, could that Order have effectively prevented the detenues from contending that their detention was illegal and void? In such a case, if the detenu was detained under the of 1950 and he challenged the validity of his detention on the ground that the relevant provisions of the said Act had not been complied with, would his challenge be covered by article 359(1) and the Presidential Order issued under it? In other words, can it be said that in making the said challenge, he was enforcing his fundamental rights specified in the Presidential Order? If it is held that he was challenging the validity of his detention because the mandatory provisions of the Act had not been complied with, his challenge may be outside article 359(1) and the Presidential Order. If, on the other hand, it is held that, in substance, the challenge is to enforce his aforesaid fundamental rights, though he makes the challenge by reference to the relevant statutory provisions of the Act themselves that would have brought Ills challenge within the prohibition of the Presidential Order. Normally, as we have already held, a challenge against the validity of the detention on the ground that the statutory provisions of the Act under which the detention is ordered have not been complied with, would fall outside article 359(1) and the Presidential Order, but the complication in the hypothetical case under discussion arises because unlike other provisions of the Act, the mandatory provisions in question essentially represent the fundamental rights guaranteed by article 22 and it is open to argument that the challenge in question sub stantially seeks to enforce the said fundamental rights. In the context of the alternative argument with which we arc dealing at this stage, it is unnecessary for us to decide whether the challengein question would have attracted the provisions ofArt. 359(1) and the Order or not. We are referringto this matter only for the purpose of showing thatthe Parliament may have thought that the executive would not be able to detain citizens reasonably suspected of prejudicial activities by taking recourse to the of 1950, and that may be the genesis of the impugned Act. If that 836 be so, it would not be permissible to suggest that in passing the Act, Parliament was acting malafide. It is quite true that if the Act has contravened the citizens ' fundamental rights under articles 14 and 22, it would be void and the detentions effected under the relevant provisions of the said Act would be equally inoperative; but it must be remembered that it is precisely in this set of circumstances that article 359(1) and the Presidential Order issued under it step in and preclude the citizen from enforcing his fundamental rights in any court. The said Article as well as the Presidential Order issued under it indicate that there may be cases in which the specified fundamental rights of citizens have been contravened by executive action and the impugned executive action may be invalid on that account. That is precisely why the said Article and the Presidential Order impose a ban against the investigation of the merits of the challenge during the period prescribed by the Order. Therefore, the alternative argument urged in support of the plea that the impugned provisions of the Act amount to a colourable piece of legislation fails. Mr. Parulekar who argued his own case before us with remarkable ability, contended that a detenu cannot be prevented from disputing the validity of the Ordinance, Act and the Rules under the Presidential Order if he did not ask for any consequential relief. His argument was that the prayer made in his petition under section 491(1)(b) consists of two parts; the first prayer is to declare that the impugned Act and the Order are invalid, and the second prayer is that his detention should be held to be illegal and his release should accordingly be ordered. The first prayer, says Mr. Parulekar, cannot fall within the mischief of the Order because he is not enforcing any of his rights when he asks merely for a declaration that the law is invalid, and he suggested that even if we take the view that he is precluded from challenging the validity of his detention by virtue of the said Order, we should not preclude him from challenging the validity of the law merely with a view to obtain a declaration in that behalf. In our opinion, this argument cannot be accepted. What section 359(1) purports to do is to empower the President to make an Order by which the right of the detenue to move the Court 437 to challenge the validity of his detention on the ground that any of his fundamental rights specified in the Order have been contravened, is suspended, and so, it would be unreasonable to suggest that what the detenu cannot do in order to secure his release, he should be allowed to do merely for the purpose of obtaining an academic declaration. A proceeding taken under section 491(1)(b) like a petition filed under article 226(1) or article 32(1) is intended to obtain relief, and the relief in such cases means the order for the release of the detenu. If the detenu is prohibited from asking for an order of release on the ground that the challenge to the validity of his order of detention cannot be made during the pendency of the Presidential Order, we do not see how it would be open to the same detenu to claim a mere declaration either under s.491, Cr. P.C. or article 226(1) or article 32(1) of the Constitution. We do not think that it was open to the High Court to consider the validity of the impugned Act without relation to the prayer made by the detenu in his petition. The proceedings commenced by the detenu by means of his petition under section 491(1)(b) constitute one proceeding and if the sole relief which the detenu seeks to obtain cannot be claimed by him by virtue of the Presidential Order, it would be unreasonable to hold that he can claim a different relief, VI Z., a mere declaration; such a relief is clearly outside the purview of the proceedings under section 491(1)(b) and articles 226(1) and 32(1). During the course of the hearing of these appeals, it has been strenuously pressed before us by Mr. Setalvad that the emergency created by the Chinese act of aggression may last long and in consequence, the citizens would be precluded from enforcing their fundamental rights specified in the Presidential Order during the period that the Order is in operation. That, however, has no material bearing on the points with which we are concerned. How long the Proclamation of Emergency should continue and what restrictions should be imposed on the fundamental rights of citizens during the pendency of the emergency, are matters which must inevitably be left to the executive because the executive knows the requirements of the situation and the effect of compulsive factors which operate during periods of grave crisis, such as our country is facing 838 today. As Lord Wright observed in the case of Liver sidge(1), "the safeguard of British liberty is in the good sense of the people and in the system of representative and responsible government which has been evolved. If extra ordinary powers are here given, they are given because the emergency is extraordinary and are limited to the period of the, emergency. " The other aspect of Mr. Setalvad 's argument was that during Operation the Presidential Order, the executive may abuse. Its powers and the citizens would have no remedy. This argument is essentially political and its impact on the constitutional question with which we are concerned is at best indirect. Even so, it may be permissible to observe that in a democratic State, the effective safeguard against abuse of executive powers whether in peace or in emergency, is ultimately to be found in the existence of enlightened, vigilant and vocal public opinion. The appellants have also relied upon the made by Lord Atkin in the case of Eshuqbavi Elecko vs Officer Administering the Government of Nigeria (2). "In accordance with British jurisprudence," said Lord Atkin, "no member of the executive can interfere with the liberty or property of a British subject except on the condition that he can support the legality of his action before a Court of Justice. And it is the tradition of British Justice that Judges should not shrink from deciding such issues in the face of the executive. " These noble sentiments so eloquently expressed by Lord Atkin as well as his classic minority speech in the case of Liversidge evoke a spontaneous response in the minds of all of us who have taken the oath to administer law in accordance with our Constitution and to uphold the fundamental rights of citizens guaranteed by the Constitution. This Court is fully conscious of the solemn duty imposed on it by article 32 which constitutes it the Custodian and Guardian of the citizens ' fundamental rights. But we must remember that the democratic faith in the inviolable character of individual liberty and freedom and the majesty of law which sustains it must ultimately be governed by the Constitution itself. The Constitution is the law of laws the paramount (1) ; (2) 839 and supreme law of the country. It has itself enshrined the fundamental rights of the citizens in the relevant Articles of Part III and it is no doubt the duty of this Court as the Custodian of those rights to see that they are not contravened contrary to the provisions of the Constitution. But the Constitution itself has made certain emergency provisions in Chapter XVIII with a view to en ,Able the na tion to meet grave emergencies like the present, and so, in dealing with the question about the citizen 's right to chal lenge the validity of his detention, we will have to give effect to the plain words of article 359(1) and the Presidential Order issued under it. As we have already indicated, the only reasonable construction which can be placed upon article 359)(1) is to hold that the citizen 's right to take any legal proceeding for the enforcement of his fun damental rights which have been specified in the Presi dential Order is suspended during the prescribed period. It is, in our opinion, plain that the right specified in article 35)(1) includes the relevant right, whether it is statutory, Constitutional or Constitutionally guaranteed, and the words "any court" refer to all courts of competent jurisdiction and naturally include the Supreme Court and the High Courts. If that be so, it would be singularly inappropriate for this Court to entertain an argument which seeks to circumvent this provision by suggesting that the right of the detenu to challenge the legality of his detention under section 491(1)(b) does not fall within the scope of the said Article. The said argument concentrates attention on the mere form of the petition and ignores the substance of the matter altogether. In the context, we think, such a sophisticated approach which leans solely on unrealistic and artificial subtlety is out of place and is illogical, unreasonable and unsound. We must, therefore, hold that the Punjab and the Bombay High Courts were right in coming to the conclusion that the detenues before them were not entitled to contend that the impugned Act and the statutory Rule under which they were deained were void for the reason that they contravened articles 14, 21 and 22(4), (5) & (7). Before we part with these appeals, we ought to mention one more point. At the commencement of the hearing of these appeals when Mr. Setalvad began to argue about 840 the validity of the impugned provisions of the Act and the Rules, the learned Attorney General raised a preliminary contention that logically, the appellants should satisfy this Court that it was open to them to move the High Courts on the grounds set out by them before the validity of the said grounds is examined. He suggested that, logically, the first point to consider would be whether the detenues can challenge the validity of the impugned Act on the ground that they arc illegally detained. If they succeed in showing that the applications made by them under section 491(1)(b) are competent and do not fall within the purview of article 359(1) and the Presidential Order, then the stage would be reached to examine the merits of their complaint that the said statutory provisions are invalid. If, however, they fail on the first point, the second Point would not fall to be considered. We then took the view that since a large number of appeals were placed for hearing before us and they raised important issues of Constitutional Law, it would be better to allow Mr. Setalvad to argue the case in the manner he thought best, and so, Mr. Setalvad addressed us on the validity of the Act in the first instance and then dealt with the question about the competence of the applications made under section 491 (1) (b) of the Code. In the main, the same method was adopted by the learned Advocates who followed Mr. Setalvad on the appellants ' side. Naturally, when the learned Attorney General made his reply, he also had to address us on both the points. It appeared that as regards the validity of the impugned provisions of the Act and the Rules he was not in a position to challenge the contention of the appellants that the Act contravened articles 14, 21 and 22(4), (5) & (7). Even so, he strongly pressed before us his original contention that we would not reach the stage of expressing our opinion on the validity of the Act if we were to uphold the preliminary objection that the applications made by the detenues were incompetent. In our opinion, the learned Attorney General is right when he contends that we should not and cannot pronounce any opinion on the validity of the impugned Act if we come to the conclusion that the bar created by the Presidential Order operates against the detenues in the present cases. In fact, that is the course which this Court 841 adopted in dealing with Mohan Choudhury 's case(1), and we are satisfied that that is the only course which this Court can logically and with propriety adopt. In the result, we hold that the Punjab and the Bombay High Court are right in coming to the conclusion that the applications made by the detenues for their release under section 491 (1) (b), Cr. P. C. are incompetent in so far as they seek to challenge the validity of their detentions on the ground that the Act and the Rule under which they are detained suffer from the vice that they contravene the fundamental rights guaranteed by articles 14, 21 and 22(4), (5) and (7). Since these appeals were placed before the Special Bench for the decision of the common questions of law raised by them, we do not propose to examine the other contentions which each one of the appellants seeks to raise in his appeal. Therefore, we direct that all the appeals included in the present group should now be set down before a Constitution Bench and each one of them should be dealt with in accordance with law. SUBBA RAO J. I have had the advantage of reading the judgment of my learned brother, Gajendragadkar J. I regret my inability to agree with him wholly. I agree with his conclusion in regard to the applicability of article 359 of the Constitution to a right to move a court both under article 32(1) and article 226 thereof, but not with his conclusion in regard to the exercise of power by the High Court under s.491 of the Code of Criminal Procedure. These appeals raise questions of great importance touching apparently conflicting, but really harmonious, concepts of individual liberty and security of the State, for the former cannot exist without the latter. My only Justification for a separate treatment of the subject even on questions on which ,here is general agreement is my conviction that on important questions I should express my thoughts in my own way. Broadly, two questions are posed for the consideration of this Court, namely (i) whether section 3(2) (15) (i) of the Defence of India Act, 1962 (51 of 1962), hereinafter called the Act, and r. 30(1)(b) of the Rules made in exercise of the power conferred under the Act are constitutionally void; and (ii) whether the Order made by the President in exercise of the power conferred on 'him under article 359(1) of the Constitution would be a (1) ; 54 2 section C. India/64 842 bar against the maintainability.of any action in any court to question the validity of the detention order made under the Act. I shall deal with the two questions in the said order. Before dealing with the first question it would be conveni ent to quote the impugned provisions of the Act. Section 3. ( 1) The. Central Government may by notification in the Official Gazette, make such rules as appear to it necessary or expedient for securing the defence of India and civil defence, the public safety, the maintenance of public order or the efficient conduct of military operations, or for maintaining supplies and services essential to the life of the community. (2)Without prejudice to the generality of the powers conferred by sub section (1), the rules may provide for, and may empower any authority to make orders providing for, all or any of the following matters, namely. (15)notwithstanding anything in any other law for the time being in force, (i) the apprehension and detention in custody of any person whom the authority empowered by the rules to apprehend or detain (the authority empowered to detain not being lower in rank than that of a District Magistrate) suspects, on grounds appearing to that authority to be reasonable, of being of hostile origin or of having acted, acting, being about to act or being likely to act in a manner prejudical to the defence of India and civil defence, the security of the State, the public safety or interest, the maintenance of public order, India 's relations with foreign States, the maintenance of peaceful conditions in any part or area of India or the efficient conduct of military operations, or with respect to whom that authority is satisfied that his apprehension and detention are necessary for the purpose of preventing him from acting in any such prejudicial manner, * * * * Rule 30. (1) The Central Government or the State Government, if it is satisfied with respect to any particular person that with a view to preventing him from 843 acting in any manner prejudicial to the defence of India and civil defence, the public safety, the maintenance of public order, India 's relations with foreign powers, the maintenance of peaceful conditions in any part of India, the efficient conduct of military operations or the maintenance of supplies and services essential to the life of the community, it is necessary so to do, may, make an order * * * * (b)directing that he be detained. Rule30A. (2) Every detention order shall be reviewedin accordance with the provisions hereinafter contained. (3)A detention order made by the Central Government Or the State Government or the Administrator shall be reviewed by the Central Government or the State Government or the Administrator, as the case may be. (4)A detention order made by an officer (who shall in no case be lower in rank than that of a District Magistrate) empowered by the State Government or the Administrator shall be reviewed : (a) in the case of an order made by an officer empowered by the State Government, by a reviewing authority consisting of any such two officers from among the following officers of that Government, that is to say, the Chief Secretary, a mem ber of the Board of Revenue, a Financial Commissioner and a Commissioner of a Division, as may be specified by that Government by notification in the Official Gazette ; (b) in the case of an order made by an officer empowered by the Administrator, by the Administrator himself. Under the said provisions the Central Government or the State Government or an officer on whom the power to detain is delegated can direct the detention of any person if the detaining authority is satisfied that his detention is necessary for one or other of the reasons mentioned in r. 30. No grounds of detention need be served upon the detenu; no opportunity need be given to him to make representations or establish his innocence. The period of detention can be indefinite. The Central Government or the 844 State Government or the Administrator of a Union Territory, as the case may be, is authorised to review the order of detention made by them. So too, a detention order made by an officer empowered by the State Government in that behalf can be reviewed by one or other of the officers mentioned in r. 30A (4) It is contended that the said provisions infringe article 22(4) and (5) of the Constitution and, therefore, void. This Court in Deepchand vs The State of Uttar Pradesh(1) laid down the effect of a law made in infringement of fundamental rights; and observed : "The result of the aforesaid discussion may be summarized in the following propositions; (i) whether the Constitution affirmatively confers powers on the legislature to make laws subject wise or negatively prohibits it from infringing any fundamental right, they represent only, two aspects of want of legislative power; (ii) the Constitution in express terms makes the power of a legislature to make laws in regard to the entries in the Lists of the Seventh Schedule subject to the other provisions of the Constituion and thereby circumscribes or reduces the said power by the limitations laid down in Part III of the Constitution; (iii) it follows from the premises that a law made in derogation or in excess of that power would be ab initio void wholly or to the extent of the contravention, as the case may be;. . . . " This view was accepted by a later decision of this Court in Mahandra Lal vs State of U.P.(2). It is, therefore, manifest that if the Act and the rules framed thereunder infringed the provisions of article 22(4) and (5) of the Constitution, they would be ab initio void they would be stillborn law and any detention made thereunder would be an illegal detention. Articles 21 and 22 enshrine fundamental rights relating to personal liberty,. Clauses (4) to (6) of article 22 specifically deal with preventive detention. This Court has held in A. K . Gopalan vs State of Madras(3) that the word '.,law" in article 21 means State made law or enacted law and that article 22 lays down only the minimum procedural conditions which such a (1) [1959] Supp. 2 S.C.R. 8, 40. (2 ) ; (3) ; 845 a statutory law cannot infringe in the matter of pre ventive detention. The minimum conditions arc as follows: (1) Parliament may make a law prescribing the maximum period for which any person may be detained; (2) he shall not be detained for a period more than 3 months unless an Advisory Board constituted for that purpose reports before the expiry of three months that there is sufficient cause for detention ; and (3) the authority making the order shall communicate to such person the grounds on which the order has been made and afford him the earliest opportunity of making representations against the order. At the same time cl. (7) enables Parliament to make a law prescribing the circumstances under which and the class or classes of cases in which a person may be detained for a period longer than three months without obtaining the opinion of the Advisory Board. Clause (6) of article 22 enables an authority not to disclose facts to the detenu which it considers to be against the public interest to disclose. While cls. (4) to (6) of article 22 provide for the minimum safeguards for a dctenu in the matter of preventive detention, cl. (7) removes them enabling Parliament to make a law for preventive detention ignoring practically the said safeguards. The only outstanding safeguard, therefore, is that Parliament can only make a law in derogation of the said safeguards by defining the circumstances under which and the class or classes of cases in which a person may be so detained. Parliament did not make such a law. Neither the Act nor the rules made thereunder satisfy the conditions laid down in that clause. The Act and the rules do not provide for the maximum period of detention, for the communication to the detenu of the grounds of detention, for affording him an opportunity of making representations against his detention, or for an Advisory Board consisting of persons with the requisite qualifications. The power to review given to the detaining authority cannot conceivably satisfy the condition of an Advisory Board provided for under cl. (4)(a) of article 22. It is, therefore, a clear case of Parliament making a law in direct infringment of the relevant provisions of article 22 of the Constitution, and therefore the law so made is void under the said Article., 846 In this context a relevant aspect of the argument advanced by the learned Attorney General may be noticed. He contends that, on a true construction of article 359(1) of the Constitution, if the requisite order is made by the President, a law can be made in infringement of article 22 of the Constitution. Under article 359, the President may by order declare that the right to move any court for the enforcement of such of the rights conferred by Part III as may be mentioned in the order shall remain suspended for the period during which a Proclamation of Emergency is in force or for such shorter period as may be specified in the order. It is contended that when remedy is suspended in respect of infringement of article 22, the right thereunder also falls with it. It is said that right and remedy are reciprocal; and if there cannot be a right without a remedy, there cannot also be a remedy without a right. In "Salmond on jurisprudence", 11th Edn., the following interesting passage is found, at p. 531, under the heading "Ubi jus Ibi Remedium"; "Whenever there is a right, there should also be an action for its enforcement. That is to say, the substantive law should determine the scope of the law of procedure, and not vice versa. Legal procedure should be sufficiently elastic and comprehensive to afford the requisite means for the protection of all rights which the substantive law sees fit to recognize. In early systems this is far from being the case. We there find remedies and forms of action determining rights than rights determining remedies. The maxim of primitive law is rather, Ubi remedium ibi jus. " I understand this passage to mean that a right pertains to the substantive law and the remedy, to procedural law; that where a right is provided by a statute a remedy, though not expressly provided for, may necessarily be implied. But the converse, though obtained in primitive law, cannot be invoked in modern times. To put it in other words, the suspension of a remedy cannot abrogate the right itself. Indeed, a comparative study of articles 358 and 359 of the Constitution indicates that it could not have been the intention of the makers of the Constitution, for article 358 expressly suspends the right whereas article 359 suspends the remedy. If the contention of the learned Attorney 847 General be accepted, both have the same effect: if that was the intention of the makers of the Constitution, they would not have expressed themselves in different ways in the two articles. Where they intended to suspend the right, they expressly said so, and where they intended only to suspend the remedy, they stated so. We cannot, therefore, accept this contention. At this stage I may also notice the argument of the learned Attorney General that article 359, by enabling the President to suspend the right to move for the enforcement of the fundamental rights mentioned therein, impliedly permitted Parliament to make laws in violation of those fundamental rights in respect whereof the right to move the court is suspended. I cannot appreciate this argument. It is one thing to suggest that in view of the amplitude of the phraseology used in article 359, the right to move for the enforcement of fundamental rights infringed by a void law, even deliberately made by Parliament, is suspended but it is a different thing to visualize a situation when the Constitution permitted Parliament under the shelter of executive fiat to make void laws. Indeed, a comparison of article 358 and article 359 I shall deal with them in detail later on indicates the contrary. I cannot for a moment attribute to the august body, the Parliament, the intention to make solemnly void laws. It may have made the present impugned Act bona fide thinking that it is sanctioned by the provisions of the Constitution. Whatever it may be, the result is, we have now a void Act on the statute book and under that Act the appellants before us have been detained illegally. To use the felicitous language of Lord Atkin, in this country "amid the clash of arms, the laws are not silent; they may be chanced, but they speak the same language in war as in peace". The tendency to ignore the rule of law is contagious, and, if our Parliament, which unwittingly made a void law, not only allows it to remain on the statute book, but also permits it to be administered by the executive, the contagion may spread to the people, and the habit of lawlessness, like other habits, dies hard. Though it is not my province, I venture to suggest, if I may, that the Act can be amended in conformity with our Constitution without it losing its effectiveness. This leads us to the question whether the appellants, 948 who are illegally detained, can move this Court under article 32 of the Constitution or the High Court under article 226 thereof or under section 491 of the Code of Criminal Procedure, hereinafter called the Code. It would be convenient at this stage to read the relevant provisions of the Constitution. Article 32.(1) The right to move the Supreme Court by appropriate proceedings for the enforcement of the rights conferred by this Part is guaranteed. * * * * (3)Without prejudice to the powers conferred on the Supreme Court by clauses (1) and (2), Parliament may by law empower any other Court to exercise within the local limits of its jurisdiction all or any of the powers exercisable by the Supreme Court under clause (2). (4)The right guaranteed by this article shall not be suspended except as otherwise provided for by this Constitution. Article. 226 (1) Notwithstanding anything in article 32, every High Court shall have power, throughout the territories in relation to which it exercises jurisdiction, to issue to any person or authority, including in appropriate cases any Government, within those territories directions, orders or writs, including writs in the nature of habeas corpus, mandamus, prohibition, ' quo warranto and certiorari, or any of them, for the enforcement of any of the rights conferred by Part III and for any other purpose. (2)The power conferred on a High Court by clause (1) shall not be in derogation of the power conferred on the Supreme Court by clause (2) of article 32. Article 358. While a Proclamation of Emergency is in operation nothing in article 19 shall restrict the power of the State as defined in Part III to make any law or to take any executive action which the State would but for the provisions contained in the Part be competent to make or to take, but any law so made shall, to the extent of the incompetency, cease to have effect as soon as the Proclamation ceases to operate, 849 except as respects things done or omitted to be done before the law so ceases to have effect. Article 359 (1) Where a Proclamation of Emergency is in operation, the President may by order declare that the right to move any court for the enforcement of such of the rights conferred by Part III as may be mentioned in the order and all proceedings pending in any court for the enforcement of the rights so mentioned shall remain suspended for the period during which the Proclamation is in force or for such shorter period as may be specified in the order. Article 33 confers power on Parliament to modify the rights conferred by Part III in their application to Armed Forces or the Forces charged with the maintenance of public order; article 34 enables Parliament to impose restrictions an the rights conferred by Part III while martial law is in force in any area. The contention of learned counsel for the appellants on the construction of the said provisions may be classified under the following heads: (1) article 358 permits the State to make laws only in infringement of article 19 of the Constitution, and article 359 suspends only the right to move the enforcement of the fundamental rights specified in the President 's Order and, therefore, article 359 cannot be so construed as to enlarge the legislative power of Parliament beyond the limits sanctioned by article 358 and, therefore, it should be confined only to executive infringements of the said rights. (2) Article 359 does not permit the executive to commit fraud on the Constitution by doing indirectly what Parliament cannot do directly under article 358 and article 13(2) of the Constitution. (3) For invoking article 359 two conditions must be complied with, namely, (i) the party shall have a right to move any court, and (ii) only for the enforcement of the rights conferred by Part III. Such a right to move for such a relief is expressly conferred by the Constitution under article 32. Therefore, the President 's order under article 359 would only suspend the right to move under article 32 and not for approaching the Court under article 226 of the Constitution. In any view, those words are inappropriate to a pre existing statutory right under section 491 of the Code. 850 To appreciate the contentions from a correct perspective it is necessary at the outset to notice the nature of the fundamental rights enshrined in the Constitution and the remedy or remedies provided for their enforcement. It would be pedantic to go into the question whether fundamental rights provided for under our Constitution are natural rights or primordial rights : whatever their origin might have been and from whatever source they might have been extracted, they are enshrined in our Constitution in Part III and described as fundamental rights. The constitution declared under article 13(2) that the State shall not make any law taking away or abridging the said rights and any law made in contravention of this clause shall be void to the extent of the contravention. After declaring such a law void, it proceeds to provide for the mode of enforcement of the said rights. Article 32(1) makes the right to move the Supreme Court by appropriate proceedings for the enforcement of the said rights a guaranteed right. Appropriate proceedings are described in cl. (2) thereof, that is to say, a person can move the said Court for directions, orders, or writs in the nature described thereunder for the enforcement of any of the said rights. The right to move, therefore, is regulated by the procedure prescribed thereunder. Article 226, though it does not find a place in Part III of the Constitution, confers a power on every High Court throughout the territories in relation to which it exercises jurisdiction to issue such directions, orders, or writs in the nature described thereunder for the enforcement of any of the rights conferred by Part III. There is a material difference between article 32 and article 226 of the Constitution, namely, while in article 32 the right to move the court is guaranteed, under article 226 no such guarantee is given. But a fair construction of the provisions of article 226 indicates that the right to move, though not guaranteed, is necessarily implied therein. As I have pointed out, under article 32 the right to move the Court is given a practical content by the provision indicating the different modes open to the person who has the said right to approach the Supreme Court. Article 226 employs the same procedure for approaching the High Court and that procedure must necessarily be for the exercise of the right to move that 851 court. When a power is conferred upon the High Court and a procedure is prescribed for a party to approach that court, it is reasonable to imply that the person has a right to move that court in the manner prescribed thereunder. The only difference between article 32 and article 226 is that the Supreme Court cannot say, if it is moved in the manner prescribed, that it will not decide on merits, but the High Court, in exercise of its jurisdiction can do so. The decision on merits is left to its discretion, though the exercise of that discretion is regulated by convention and precedent. Further, article 32(3) also enables Parliament to make a law empowering any other court to exercise within the local limits of itsjurisdiction all or any of the powers exercisable by theSupreme Court under cl. (2) thereof. One thing to benoticed is that Parliament can only empower any othercourt to exercise any of the powers exercisable under cl.(2) ; it cannot confer the guaranteed right mentioned in cl. (1) on any person to move that court. That is to say, the court or courts to which such powers are given would be in the same position as the High Court in respect of the enforcement of the fundamental rights. To put it shortly, no person will have a guaranteed right to move any such other court for the enforcement of fundamental rights. A discretionary jurisdiction similar to that of the High Court can only be conferred on them. For the same reason given in the case of the High Court, an aggrieved party will also have a right to move those courts in the manner prescribed. This analysis leads us to the following position Under the Constitution every person has a right to move, for the enforcement of a fundamental right, the Supreme Court, the High Courts or any other court or courts constituted by Parliament by law in the manner prescribed i.e., by one or other of the procedural writs or directions or orders described thereunder. With this background let me have a close look at the provisions of article 359. The expressions used in article 359 are clear and unambiguous. Three expressions stand out in bold relief, namely, (i) "right to move", (ii) "any Court", and (iii) "for the enforcement of such of the rights conferred by Part III". "Any Court" implies more 852 than one court, but it cannot obviously be any court in India, for it must be a court where a person has a right to move for the enforcement of the fundamental rights. It can, therefore, be only the Supreme Court, High Court or the courts or courts constituted by Parliament under article 32(3). If the contention of learned counsel for the appellants be accepted, the expression "court" should be confined to the Supreme Court. But the Article does .not say either Supreme Court or that the right to move is the guaranteed one under article 32(1). The next question is, what do the words "right to move" mean? The right to move is qualified by the expression "for the enforcement of such of the rights conferred by Part 111". Therefore, the right to move must be a right to move the Supreme Court or the High Court in the manner prescribed by article 32(2) or article 226(1) of the Constitution for the enforcement of the fundamental rights. The words in the second limb of the Article viz., that "all proceeding.s pending in any court for the enforcement of the rights so mentioned shall remain suspended" only relate to the proceedings instituted in exercise of the said right : they do not throw any light on the scope of the "right to move '. This construction gives full meaning to every expression used in the Article. if so construed, it can only mean that the temporary bar that can be imposed by an order of the President is not confined only to the guaranteed right of a person to move the Supreme Court for the enforcement of his fundamental rights, but also extends to the right of a person to move the High Court or the Court or Courts constituted by Parliament for the enforcement of such of the fundamental rights as mentioned in the order. I would, therefore, hold that the President 's order under article 359 suspending the right to move any court in respect of specified fundamental rights includes not only the right to move under article 32 but also that under article 226. The more difficult question is whether article 359 can be so construed as to empower the President to suspend all actions which a person may take under a statute or common law, if he seeks thereby to protect his liberty against unlawful encroachment by State or its officers. To put it in other words, can a person, who is illegally 853 detained under a void law, approach the High Court under section 491 of the Code or file a suit in a civil court for damages for illegal confinement or take any other legal proceedings open to him? Learned Attorney General contends that "any court" in article 359 means any court in India and that the expression "enforcement of fundamental rights" implies any relief asked for by a party if the granting of such relief involves directly or indirectly a decision on the question whether any of the fundamental rights specified in the President 's order has been infringed. This argument, if I may say so, completely ignores the scheme of the Constitution. Under the Constitution, a person may have three kinds of rights, namely, (i) fundamental rights, (ii) constitutional rights, and (iii) statutory or common law rights. Under article 32(1) a person has a fundamental right to move the Supreme Court for enforcement of his fundamental rights; under article 226, a person has a constitutional right to move the High Court for the enforcement of the said rights. Parliament, by law, in exercise of its powers conferred on it under article 245, may confer a right on a person to move any court for a relief wider in scope than that provided by article 32 or article 226 of the Constitution. Though Parliament may not have power, except in the cases specified to circumscribe the fundamental rights enshrined in Part III it can certainly make a law enlarging the content of the substantive and procedural rights of parties beyond those conferred by Part III. Under this category there may also be laws made by competent authority before the commencement of the Constitution, but continued under article 372, which do not any way infringe the fundamental rights created by the Constitution. Section 491 of the Code is one of the pre Constitution statutory provisions continued under article 372 of the Constitution. It does not in terms posit any right to move the High Court for the enforcement of fundamental rights. Therefore, the argument of the learned Attorney General involves considerable strain on the express language of article 359, for, he in effect asks us to equate the expression "a right to move for the enforcement of fundamental rights" with any relief asked for in any proceedings in any court, whether initiated at the instance of the party affected or not, 854 or whether started suo motu by the court, if it involves a decision on the question whether a particular law was void for the reason that it infringed the fundamental rights mentioned in the President 's order. In support of this contention he presses on us to hold that in days of stress and strain i.e., when there is a threat of war and conse quently an emergency is declared, a court has to adopt the principle of "strained construction" which will achieve the object behind article 359 of the Constitution and the order issued by the President. I shall briefly examine the decisions cited by him to ascertain whether any such novel doctrine of construction of statutes exists. Rex vs Halliday(1) is a decision of the House of Lords made in 1917 i.e., during the First World War. Regulation 14B of the Defence of the Realm (Consolidation) Regulation, 1914, empowered the Secretary of State to order the internment of any person of hostile origin or associations, where on the recommendation of a competent naval or military authority it appeared to him expedient for securing the public safety or the defence of the realm. This regulation was authorized by the Defence of the Realm Consolidation Act, 1914, section 1, sub section 1. The House of Lords, by a majority, held that the Act conferred upon , the King In Council power, during the continuance of the war, to issue regulations for securing the public safety and the defence of the realm and, there fore, the regulation was valid. It was urged there that no such restraint of personal liberty should be imposed except as a result of judicial enquiry. It was also contended that if the Legislature intended to interfere with personal liberty it should have provided for suspending the right of the subject as to the writ of heabeas corpus. The argument was negatived. Lord Atkin observed "The subject retains every right which those statutes confer upon him to have tested and determined in a Court of law, by means of a writ of Habeas Corpus,, addressed to the person in whose custody he may be, the legality of the order or warrant by virtue of which he is given into or kept in that custody. If the Legislature chooses to enact that he can be deprived of his liberty and incarcerated or (1) ; , 272. 855 interned for certain things for which he could not have been heretofore incarcerated or interned, that enactment and the orders made under it, if intra vires, do not infringe upon the Habeas Corpus Acts in any way whatever, to take away any rights conferred by Magna Charta, for the simple reason that the Act and these Orders become part of the law of the land. " This decision does not lay down any new rule of cons truction. Parliament is supreme in England. It its wisdom it did not take away the habeas corpus, but empowered the executive to issue regulations for public safety and defence of the nation. The regulation made did not exceed the power conferred by the Parliament. The House of Lords held that the detention was in accordance with law. Nor does the controversial decision in Liverside vs Sir John Anderson(1), which was the subject of servere criticism in later years, lay down any such new rule of construction. There, the Secretary of State, acting in good faith under reg. 18B of the Defence (General) Regulations, 1939, made an order in which he recited that he bad reasonable cause to believe a person to be of hostile associations and that by reason thereof it was necessary to exercise control over him and directed that that person be detained. The validity of the detention turned upon the construction of the express provisions of reg. 18B of the said Regulations. In that regulation the expression used was "reasonable cause to believe any person to be of hostile origin". The House of Lords, by a majority, held that the expression meant that "the Secretary of State thinks fit to be reasonable". There was a powerful dissent by Lord Atkin on the question of construction. With the correctness of the construction put upon by the majority on the said provision we are not concerned ; but none of the learned law Lords laid down in their speeches any new rule of construction peculiar to war conditions. Viscount Maugham observed : "My Lords, I think we should approach the construction of reg. 18B of the Defence (General) Regulations without any general presumption as to its (1) ; , 219, 251. 856 meaning except the universal presumption, applicable to Orders in Council and other like instruments, that, if there is a reasonable doubt as to the meaning of the words used, we should prefer a construction which will carry into effect the plain intention of those responsible for the Order in Council rather than one which will defeat that intention." Lord Atkin, in his dissenting judgment, protested against the strained construction put on words with the effect of giving an uncontrolled power of imprisonment to the minister. Then he proceeded to observe : "The words have only one meaning. They arc used with that meaning in statements of the common law and in statutes. They have never been used in the sense now imputed to them." These observations by the dissenting Lord may at the most indicate that the majority in fact put a strained cons truction on the express words used in the regulation; but they do not show that they have laid down any such rule of construction. This is made clear by Lord Macmillan when he stated: "In the first place, it is important to have in mind that the regulation in question is a war measure. This is not to say that the courts ought to adopt in wartime canons of construction different from those Which they follow in peace time. The fact that the nation is at war is no Justification for any relaxation of the vigilance of the courts in seeing that the law is duly observed,. especially in a matter so fundamental as the liberty of the subject matter the contrary. But in a time of emergency when the life of the whole nation is at stake it may well be that a regulation for the defence of the realm may quite properly have a meaning which because of its drastic invasion of the liberty of the subject the courts would be slow to attribute to a peace time measure. The purpose of the regulation is to ensure public safety, and it is right so to interpret emergency legislation as to promote rather than to defeat its efficacy for the defence of the realm. That is in accordance with a general rule applicable to the interpretation of 857 all statutes or statutory regulations in peace time as well as in war time. " These observations should be understood in the background of the earlier observation : "I do not agree that the critical phrase in the context in which I find it is susceptible only of one meaning, namely that for which the appellant contends. Were it so it would be strange that several learned judges should have found it to possess quite a different meaning." This judgment, therefore, is no authority for the position for which it is relied upon. The decision in substance says that the rule of construction of a statute is the same both in peace time and in war time and that when there is an ambiguity in the expressions used, the court may give such meaning to the words used which are capable of bearing that meaning as would promote rather than defeat the object of the legislation. Indeed, the Privy Council, in Nakkuda Ali vs Jayaratna(1), confined the interpretation put upon reg. 18B of the Defence (General) Regulations, 1939, by a majority of the House of Lords to the particular cricumstances of that case and they did not accept that construction when similar words were used in the Regulation 62 of the Defence (Control of Textiles) Regulations, 1945. I cannot, therefore, hold that the said decisions suggested a new rule of construction peculiar to war measures. The rules of construction are the same in war time as well as in peace time. The fundamental rule of construction is that the courts have to find out the expressed intention of the Legislature from the words of the enactment itself. Where the language is unambiguous, no more is necessary than to expound those words in their natural and ordinary sense. But where the words are ambiguous and reasonably capable of bearing two meanings, the court may be justified in adopting that meaning which would further the intention of the Legislature rather than that which would defeat it. In the present case we are not dealing with a war measure, but a constitutional provision which was designed to govern the affairs of our country for all times so (1) L.R. 1 55 2 S C India/64. 858 long the Constitution remains in force ; and it cannot certainly be strained to meet a passing phase in a country 's life. A strained construction put upon a statutory provison to meet a particular emergency may be rectified by a subsequent enactment. But such a construction put upon a constitutional provision might entail serious consequences. Even if Liversidge 's case(1) had laid down a new rule of construction, that construction cannot be invoked in the case of a constitutional provision. In Gibbons vs Ogden(2) the following rule of construction of a constitutional provision is stated : "That which the words declare is the meaning of an instrument ; and neither Courts nor legislatures have the right to add or to take away from that meaning. This is true of every instrument, but when we arc speaking of the most solemn and deliberate of all human writings those which ordain the fundamental law of states, the rule rises to a very high degree of significance. It must ' be very plain, nay absolutely certain, that the people did not intend what the language they have employed in its natural signifi cation, imports, before a Court will feel itself at liberty to depart from the plain reading of a constitutional pro vision. " No doubt a constitution should receive a fair, liberal and progressive construction so that the true objects of the instrument may be promoted ; but such a construction could not do violence to the natural meaning of the words used in particular provision of the Constitution. The relevant provisions of section 491 of the Code read (1) Any High Court may, whenever it thinks fit, direct (a) that a person within the limits of its appellate criminal jurisdiction be brought up before the Court to be dealt with according to law ; (b) that a person illegally or improperly detained in public or private custody within such limits be set at liberty * * * * Bearing in mind the said rules of construction, I ask myself the question whether the exercise of the power un (1) ; (2) ; 859 der section 491 of the. Code can be equated with a right to move the High Court to enforce such of the fundamental rights conferred by Part III of the Constitution as may be mentioned in the order of the President. It is necessary to ascertain the correct scope of the section to answer the question raised before us. The section is framed in wide terms and a discretionary power is conferred on the High Court to direct one or other of the things mentioned therein "whenever it thinks fit". Unlike article 32 and article 226, the exercise of the power is not channelled through well recognized procedural writs or orders. With the result the technicalities of such procedural writs do not govern or circumscribe the court 's discretion. A short history of this section reinforces the said view. Originally, the Supreme Courts in India purported to exercise the power to issue a writ of habeas corpus which the Kings ' Bench Division in England exercised. In 1861 Parliament passed Acts 24 25 Vict. 104 authorising the establishment of High Courts of judicature in India. The Letters Patents issued under that Act in 1865 were expressly made subject to the legislative powers of the Governor General in Council. The courts were given the same jurisdiction, power and authority which the Supreme Courts possessed but subject to the legislative power of the Governor General in Council. Pursuant to the power so conferred, the Governor General in Council passed successive Codes of Criminal Procedure in the years 1872, 1875, 1882;and,1898, and in 1923 by the Criminal Law (Amendment) Act, some of the provisions of the Code of 1898 were amended. The High Courts Act of 1861 authorized the Legislature, if it thought fit, to take away the powers which the High Courts exercised as successor to the Supreme Courts, and Acts of Legislatures passed in 1872 and subsequent years had taken away the power of the High Courts to issue prerogative writs ; and instead a statutory power precisely defined was conferred upon the High Courts. That statutory power underwent various changes and finally took the form of section 491 of the Code, as at present it stands. The attempt to resuscitate the prerogative writs was rejected by the Calcutta High Court in Girindra Nath Banerjee vs Birendra Nath Pal(1) and (1) Cal. 727. 860 by the Madras High Court in District Magistrate, Trivandrum vs Mammen Mappillai(1). The Privy Council in Matten vs District Magistrate, Trivandrum(2) approved the said decisions and held that the said Act. ,, have taken away the power of the High Courts to issue prerogative writs and thereafter the only power left in the High Court was that conferred by the statute. By reason of article 372 of the Constitution, the Code of Criminal Procedure, including section 491 thereof, continued to be in force until altered, repealed or amended by the competent Legislature or other competent authority. Article 225 of the Constitution expressly preserved the High Courts ' powers and jurisdiction, subject to other provisions thereof. Admittedly, Parliament has not made any law repealing section 491 of the Code. The statutory power conferred on the High Courts under that section is not inconsistent either article 32 or with article 226 or with any other Article in Part III or any other Chapter of the Constitution. So, it cannot be held that section 491 of the Code has been impliedly superseded by article 226 even to the extent it empowers the High Court to give relief to persons illegally detained by the State. Now what is the scope of that section? Though section 491 of the Code is remedial in form, it postulates the existence of the substantive right. In India, as in England, the rule of law was the accepted principle. No person can be deprived of his liberty except in the manner prescribed by the law of the land. If a person is illegally or improperly detained in violation of the law of the land, the High Court can direct his release "whenever it thinks fit" so to do. The section prima facie does not predicate a formal application ; nor does it insist that any particular person shall approach it. The phraseology used is wide enough for the exercise of the power suo motu by the High Court. Nor does the section introduce an antithesis between the exercise of jurisdiction on application and that exercised suo motu ; that is to say, even if an application was filed before the High Court and for one reason or other, no orders could be passed thereon, either because of procedural defect or because it was not pressed, (1) L.I.R. (2) L.R. (1939) 66 I.A. 222. 861 nothing prevents the High Court from acting suo motu ,on the basis of the information brought to its notice. It is said that various High Courts framed rules regulating the procedure of the respective High Courts, but that fact is not much relevance in the matter of construing the section. Shortly stated, the High Court is given an absolute discretion to direct a person, who has been illegally detained, to be released, whenever that fact is brought to its notice through whatever source it may be. This juris diction existed long before the Constitution was made and long before the fundamental rights were conferred upon the people under the Constitution. The rights, substantive as well as procedural, conferred under Part III and article 226 on the one hand and under section 491 of the Code on the other, are different. Under articles 32 and 226, an affected party can approach the Supreme Court or the High Court, as the case may be, only in the manner prescribed under article 32(2) or article 226 i.e., by way of writs and orders mentioned therein : he must ask the court for the enforcement of this fundamental right. The relief implies that he must establish that he has a fundamental right, that his fundamental right has been infringed by the State and, therefore, the Court should give the appropriate relief for the enforcement of that right. Both the right as well as the procedure are the creatures of the Constitution. Whereas section 491 of the Code assumes the existence of the "rule of law" and confers a power on the High Court to direct persons in illegal detention to be set at liberty. It is not bound by any technical procedures envisaged by the Constitution. If a person approaches the High Court alleging that he or some other person has been illegally detained, the Court calls upon the detaining authority to sustain the validity of the action. The onus of proof lies on the custodian to establish that the person is detained under a legal process ; but if it fails to establish that the person is detained under law, the said person may be released. It is true that the detaining authority will have to satisfy the court that the law under which the detention is made is a valid one. It may also be true that in scrutinizing the validity of that law the court has to go into the question whether the law offends any of the fundamental rights mentioned 862 in Part III of the Constitution. But that circumstance does not by any process of involved reasoning make the said proceeding one initiated in exercise of the right to move the High Court for the enforcement of the petitioner 's fundamental right. The distinction between the two lies in the fact that one is an enforcement of a petitioner 's fundamental right and the other, a decision on the unconstitutionality of a law because of its infringement of fundamental rights generally. Further, the right and the relief have a technical and specific significance given to them by the Constitution. They cannot be equated with the mode of approach to the High Court under section 491 of the Code or with the expression"whenever it thinks fit" confers an absolute discretionon the court to exercise its power thereunder or not todo so, having regard to the circumstances of each case. While the word "may" used in a statute was sometimes construed as imposing a duty on the authority concerned on whom a power is conferred to exercise the. same if the circumstances necessitated its exercise, the expression "whenever it thinks fit" does Rot warrant any such limitation on its absolute discretion. Though ordi narily a High Court may safely be relied upon to exercise its powers when the liberty of a citizen is illegally violated by any authority, the said unlimited discretion certainly enables it in extraordinary circumstances to refuse to come to his rescue. The absolute discretionary jurisdiction conferred under section 491 of the Code cannot be put on a par with the jurisdiction conferred under article 226 of the Constitution hedged in by constitutional limitations ' A brief reference to decided cases on the scope of section 491 of the Code will make my meaning clear. In Alam Khan vs The Crown(1), the Full Bench of the Lahore High Court has defined the scope of section 491 of the Code. Ram Lall, J., who spoke for the majority, stated, after quoting the relevant part of the section "The language of the section places no limit on the class of person or persons who can move a High Court with relation to a person in custody and if the (1) Lahore 274, 303. 863 High Court on hearing the petition thinks fit. to do so, may make an order that he be dealt with according to law. " In Ramji Lal vs The Crown(1), a Full Bench decision of the East Punjab High Court, Mahajan, J., as he then was, defined the wide scope of the section thus "Whatever may be the state of English law on the subject so far as section 491 of the Criminal Procedure Code is concerned it has been very widely worded and confers Jurisdiction on the Court to issue directions whenever it thinks fit. The Court may be moved by the prisoner or by some relation of his, or it may act suo motu if it acquires knowledge that a certain person has been illegally detained. The mode and manner in which the judge has to be satisfied cannot affect the Jurisdiction conferred on him under section 491 of the Criminal Procedure Code. " In King Emperor vs Vimlabai Deshpande(2), a police officer made an arrest of the respondents under sub rule I of r. 129 of the Defence of India Rules, 1939, which read : "Any police officer. . may arrest without warrant any person whom he reasonably suspects of having acted. . (a) in a manner prejudicial to the public safety or to the efficient prosecution of the war." ' The Judicial Committee held that the burden was upon the police officer to prove to the satisfaction of a court before whom the arrest was challenged that he had reasonable grounds of suspicion and that if he failed to discharge that burden, an order made by the Provincial Government under sub rule 4 of r. 129 for the temporary custody of the detenu was invalid. As the police officer failed to discharge the onus, the Privy Council held that the High Court was right in ordering the release of the person from custody under section 491 of the Code of Criminal Procedure. This shows that when a person is detained by a police officer, the burden of establishing that the detention is valid is on him. These authorities well establish that section 491 of the Code does not contemplate any right to move a court by any affected party, but the court can exercise the (1) I.L.R. (1949). II E.P. 28, 54. (2) (1946) L.R. 73 I.A. 144. 864 statutory power whenever it thinks fit, if the fact of illegal detention of a person is brought to its notice. The problem may be approached from a slightly different perspective. Three questions may be posed, namely, (1) has any person the right to move the High Court under section 491 of the Code to enforce his fundamental right? (2) would it be necessary for a person detained or any other on his behalf to allege that the detenu has a fundamental right and that it has been infringed by State action and seek a relief for enforcement of that right? (3) would it be obligatory on the Court to enforce the right if the said right had been established? All the questions must be answered in the negative. Under section 491 of the Code there is neither a right in the person detained to move the High Court for the enforcement of the fundamental right nor there is an obligation on the part of the High Court to give the said relief. It is only a discretionary jurisdiction conceived as a check on arbitrary action. There is another aspect of the question. Article 359 has nothing to do with statutory powers conferred by Parliament. Article 359 expressly deals with the constitutional right to move a court and the constitutional enforcement of that right. So far as ordinary laws are concerned, Parliament can always amend the law, having regard to the circumstances obtaining at a particular point of time ; for instance, Parliament could have amended section 491 of the Code by repealing that section altogether or by suitably amending it. Briefly stated, article 359 provides for the suspension of some constitutional rights in the manner prescribed thereunder. The statutory rights are left to be dealt with by the appropriate Legislature in exercise of the powers conferred on them. The argument that the intention of the makers of the Constitution in enacting article 359 would be defeated, if section 491 of the Code was salvaged, does not appeal to me. If Parliament had amended section 491 of the Code, which it should have done if it intended to do so, this alleged anomaly pointed outby the learned Attorney General could not have arisen. I would, therefore, hold that the expression "rightto move any Court for the enforcement of such of the rights conferred by Part III" could legitimately refer 865 only to the right to move under article 32 or article 226 of the Constitution for the said specific relief and could not be applied without doing violence to the language used to the exercise of the statutory power conferred on the High Courts under section 491 of the Code. If that be so, the expression "all proceedings pending in any Court for the enforcement of the rights" used in the second limb of article 359 must also necessarily refer to proceedings initiated in exercise of the right to move envisaged in the first limb of the article. I shall now proceed to consider some of the minor points raised at the Bar. Another argument advanced on behalf of the respondents may also be briefly noticed. It is said that while article 358 maintains the legislative incompetency to make laws in derogation of fundamental rights other than those enshrined in article 19, Art, 359 enables the President by an indirect process to enlarge the said legislative competency and, therefore, article 359 must be so read as to confine its scope only to executive acts. I cannot agree. Article 359 does not ex facie enlarge the legislative competency of Parliament or a State Legislature. It does not enable them to make laws during the period covered by the order of the President infringing the fundamental rights mentioned therein. It does not empower the Legislatures to make void laws ; it only enables the President to suspend the right to move the Court during the period indicated in his order. Once that period expires, the affected party can move the Court in the manner prescribed by the Constitution. Despite article 358 it may happen that void laws are made and executive actions are taken inadvertently or otherwise ; and article 359 is really intended to put off the enforcement of the rights of the people affected by those laws and actions till the expiry of the President 's order. The invalidity of the argument would be clear if it was borne in mind that article 358 also saved executive acts infringing article 19, but nonetheless article 359 gave protection against the exercise of the right to move any court in respect of such acts not saved by article 358. If the infringement of fundamental rights by executive action not saved by article 358 could not be a basis for the exercise of a right to move during the period of suspension, 866 by the same token, laws not saved by article 358 could not equally be the basis for such an action during the said. period. Be it as it may, the phraseology of article 359 is wide enough to comprehend laws made in violation of the specified fundamental rights. Another argument advanced is, while article 358 read with article 13(1) and (2), maintained the constitutional position that all laws infringing fundamental rights other than that enshrined in article 19 would be void during the emergency, the President by issuing the order he did, indirectly, in effect and substance, validated the laws infringing Arts.14, 21 and 22, and, therefore, the issuing of the said order must be held to be a fraud on hi s powers. This argument has no merits. It is based upon a misapprehension of the doctrine of fraud on powers. In the context of the application of the doctrine to a statutory law, this Court observed in Gullapally Nageswara Rao vs Andhra Pradesh Road Transport Corporation(1) thus : "The legislature can only make laws within its legislative competence. Its legislative field may be circumscribed by specific legislative entries or limited by fundamental rights created by the Constitution. The legislature can not overstep the field of its competency, directly or indirectly. The Court will scrutinize the law to ascertain whether the legislature by device purports to make a law which, though in form appears to be within its sphere, in effect and substance, reaches beyond it. If, in fact it has power to make the law, its motives in making the law are irrelevant. " To the same effect are the observations in Gajapati Narayan Deo vs The State of Orissa(2). On the same analogy, the President cannot overstep the limits of his power defined under article 359 of the Constitution. So long as he does not exceed his power, the effect of his order made within bounds could not conceivably sustain the plea of fraud on powers. Fraud on power implies that a power not conferred is exercised under the cloak of a power conferred. But if an act can legitimately be referred to a power conferred the intention of the person exercising (1) [1959] Supp. 1 S.C.R. 319, 329. (2 ) ; 867 the power or the effect of his exercise of the power is ir relevant. Now, on the construction placed by me on article 359, the President has clearly the constitutional power ' to suspend the aforesaid right. The fact that Parliament by taking shelter under that order may enforce void laws cannot make a valid exercise of a power of the President one in fraud of his power. The next argument is that the order issued by the President is in excess of the powers conferred under article 359 of the Constitution. Under article 359, the argument proceeds, the order made by the President can relate to a period or the whole or a part of the territory of India and cannot be confined to a class of persons. As the order is restricted to persons that have. been deprived of their rights under the Defence of India Ordinance, it is said that it is not sanctioned by the provisions of article 359. There are no merits in this contention. Under the order the right to move for the enforcement of the rights mentioned therein is suspended during the period of emergency and it applies to the entire country. The fact that only persons, who are deprived of their rights under the Defence of India Ordinance, cannot exercise their right to move the Court does not make the order one confined to a class of persons. The Ordinance has force throughout India and ex hypothesis only persons affected would move the Court. That does not mean that the order is confined only to a class of persons. The next contention is that the impugned section suffers from the vice of excessive delegation and that in any view the relevant rules framed are in excess of the power conferred upon the Government by the said Act. I cannot agree with either of the two contentions. On this aspect I have nothing more to add to that found in the judgment of my learned brother. But the order made by the President still leaves the door open for deciding some, questions even under article 32 or article 226 of the Constitution. The order is a conditional one. , In effect it says that the right remains suspended if such person has been deprived of any such right under the Defence of India Ordinance, 1962, or under any rule or order made thereunder. The condition is that the person should have been deprived of a right under the 868 Defence of India Ordinance or under any rule or order made thereunder. If a person was deprived of such a right not under the Ordinance or a rule or order made thereunder, his right would not be suspended. If the order was made in excess of the power conferred upon the Government by the said Ordinance, it would not be covered by that order. If the detention was made mala fide, it would equally be not an order made under the Ordinance. My view on the basis of the aforesaid discussion may be stated thus : (1) The detenus cannot exercise their right to enforce their fundamental rights under articles 21, 22 and 14 of the Constitution, during the period for which the said right was suspended by the President 's order. (2) This does not preclude the High Court to release the detenus in exercise of its power under section 491 of the Code of Criminal Procedure, if they were imprisoned under a void law, though the voidness of the law arose out of infringement of their fundamental rights under articles 14, 21 and 22 of the Constitution. (3) The President 's order does not preclude, even under article 32(1) and article 226 of the Constitution, the petitioners from proving that the orders of detention were not made under the Defence of India Ordinance or the Act either because they were made, (i) outside the provisions of the Ordinance of the Act, or (ii) in excess of the power conferred under them, or (iii) the detention were made mala fide or due to a fraudulent exercise of power. I would close with a few observations. In the view I have taken. there are three courses open to Parliament : either it can make a valid law without infringing the fundamental rights other than those enshrined in article 19 or amend section 491 of the Code in order to maintain the enforcement of void laws, or do both. It is not for me to suggest the right course. In the result, the petitions will now go to the Constitution Bench for disposal on the said questions. ORDER BY COURT In accordance with the opinion of the majority the constitutional points raised in the Appeals are dismissed. Appeals to be set down individually before a Constitution Bench for dealing with the other contentions raised in each one of them.

IN-Abs

The appellants were detained under r. 30(l) of the Defence of India Rules made by the Central Government under section 3 of the Defence of India Ordinance, 1962. They applied to the Punjab and Bombay High Courts under section 491(1)(b) of the Code of Criminal Procedure and their case was that sections 3(2)(15)(i) and 40 of the Defence of India Act, 1962, and r. 30(1)(b) of the Defence of India Rules, which were continued under the Act, were unconstitutional and invalid inasmuch as they contravened their fundamental rights under articles 14, 21, 22(4), (5) and (7) of the Constitution and that, therefore, they should be set at liberty. The High Courts held that the Presidential Order which had been issued on November 3, 1962, under article 359(1) of the Constitution, after a declaration of emergency under article 352, consequent on the Chinese invasion of India, barred their right to move the said petitions and dismissed them. These appeals raised two common questions in this Court, (1) what was the true scope and effect of the Presidential Order issued under article 359(1), and (2) did the bar created by the Order operate in respect of the applications under section 491(1)(b) of the Code. The Presidential Order was as follows: "G.S.R. 1464 In exercise of the powers conferred by cl. (1) of article 359 of the Constitution, the President hereby declares that the right of any person to move any court for the enforcement of the right conferred by article 21 and article 22 of the Constitution shall remain suspended for the period during which the Proclamation of Emergency issued under clause (1) of article 352 thereof on the 26th October 1962 is in force, if such person has been deprived of any such rights under the Defence of India Ordinance, 1962 (4 of 1962) or any rule or order made thereunder. " By a later amendment of the Order article 14 was incorporated into it. 798 Held:(per Gajendragadkar, Sarkar, Wanchoo, Hidayatullah, Das Gupta and Shah, JJ.) that the proceedings taken by the appellants in the High Courts under section 491(1)(b) of the Code were hit by the Presidential Order and must be held to be incompetent. Article 359 of the Constitution was not capable of two interpretations and it was, therefore not necessary to decide the controversy raised by the parties as to whether that Article should be interpreted in favour of the President 's power granted by it or the fundamental rights of the citizens. The King (At the Prosecution of Arthur Zadig) vs Halliday, ; , Liversidge vs Sir John Anderson, ; , Keshav Talpade vs The King Emperor, [1943] F.C.R. 49, Nakkuda Ali vs M. F. De section Jayaratne, and King Emperor vs Vimalabal Deshpande, L.R. 73 1. A. 144, considered. The words 'any court ' in article 359(1), construed in their plain grammatical meaning, must mean any court of competent jurisdiction including ' the Supreme Court and the High Courts before which the rights specified in the Presidential Order can be enforced. It was not correct to say that the use of the words was necessary so as to include such other courts as might be empowered in terms of article 32(3). Nor was it correct to say that the words could not include a High Court as its power to issue a writ under article 226(1) was discretionary. In judging whether a particular proceeding fell within the purview of the Presidential Order the determining factor was not its form nor the words in which the relief was couched but the substance of it. If in granting the relief the court had to consider whether any of the fundamental rights mentioned in the Presidential Order, had been contravened, the proceeding was within the Order, whether it was under article 32(l) or 226(1) of the Constitution. The right to move the court for writ of habeas corpus under section 491(1)(b) of the Code of Criminal Procedure was now a statutory right and could no longer be claimed under the common law. Girindra Nath Banerjee vs Birendra Nath Pal I.L.R. 54 Cal. 727, District Magistrate, Trivandrum vs K. C. Mammen Map pillai, I.L.R. , Matthen vs District Magistrate, Trivandrum L.R. 66 I.A. 222 and King Emperor vs Sibnath Banerji, L.R. 72 I.A. 241, referred to. Since the promulgation of the Constitution the two methods by which a citizen could enforce his right of personal freedom were (i) by a writ under article 226(1) or article 32(l), or (ii) under section 491(1)(b) of the Code of Criminal Procedure. Whichever method he adopted if the right he sought to enforce was a fundamental right guaranteed by the Constitution the matter must, come within article 359(1) of the Constitution. That the court could exercise its power under section 491(1)(b) suo motu could make no 799 difference and articles 372, 225 or 375 could provide no valid ground of attack. The suspension of the right to move any court, as under the Presidential Order, must necessarily suspend the Court 's jurisdiction accordingly. The right to challenge a detention order under section 491(1)(b) of the Code had been enlarged by the fundamental rights guaranteed by the Constitution and when a detenu relied upon such rights in his petition under that section he was in substance seeking to enforce his fundamental rights. The prohibition contained in article 359(1) and the Presidential Order must, therefore, apply. The expression "right to move any court" in article 359(1) and the Presidential Order takes in all legal actions, filed or to be filed, in which the specified rights are sought to be enforced and covers all relevant categories of jurisdictions of competent courts under which the said actions would other wise have been normally entertained and tried. Sree Mohan Chowdhury vs Chief Commissioner Union Territory of Tripura, ; , referred to. Even though the impugned Act may be invalid by reason of contravention of articles 14, 21 and 22, as contended by the appellants, that invalidity could not be challenged during the period prescribed by the Presidential Order and it could not be said that the President could not because of such invalidity issue the order. Where, however, the challenge to the validity of the detention order was based on any right other than those mentioned in the Presidential Order, the detenu 's right to move any court could not be suspended by the Presidential Order because the right was outside article 359(1). Where again the detention was challenged on the ground that it contravened the mandatory provisions of the relevant act or that it was malafide and was proved to be so and in all cases falling under the other categories of section 491(1) of the Code excepting those under section 491(1)(b), the bar of the Presidential Order could have no application. So also the plea that the operative provision of the law under which the order of detention was made suffered from the vice of excessive delegation, was an independent plea not relatable to the fundamental rights mentioned in the Presidential Order and its validity had to be examined. The plea that section 3(2)(15)(i) and section 40 of the impugned Act suffered from excessive delegation must fail. The legislative policy was broad stated in the preamble and the relevant provisions of sections 3(1) and 3(2) gave detailed and specific guidance to the rule making authority and it was not correct to say that the Act had by the impugned sections delegated essentially legislative function to that authority. Rule 30(1)(b) which was consistent with the operative provisions of the Act could not also be challenged on that ground. 800 In " The etc. ; , Harishankar Bagla vs The State of Madhya Pradesh, , Bhatanagars and Co. Ltd., vs The Union of India, ; , relied on. The impugned Act could not also he struck down as a piece of colourable legislation because the , was already on the Statute book. The Parliament had power under Entry 9, List I of the Seventh Schedule to the Constitution and if in view of the grave threat to the security of India it passed the Act, it could not be said to have acted malafide. If the Parliament thought that the executive would not be able to detain citizens reasonably suspected of prejudicial activities by a recourse to the , which provided for the required constitutional safeguards and the impugned Act which it enacted did not, it could not be suggested that it was acting malafide. Even if the impugned Act contravened articles 14 and 22 and the detentions thereunder were invalid, article 359(1) and the Presidential Order, which were precisely meant to meet such a situation, barred investigation on the merits during the period prescribed by the Order. The proceeding under section 491(1)(b) of the Code is one pro ceeding and the sole relief that can be claimed under it is release from the detention. If that could not be claimed because of the Presidential Order it was unreasonable to say that a mere declaration that the impugned Act and the detention thereunder were invalid could be made. Such a declaration is clearly outside the purview of section 491(1)(b) of the Code as also of articles 226(1) and 32(l) of the Constitution. The period for which the emergency should continue and the restrictions that should be imposed during its continuance are matters that must inevitably be left to the executive. In a democratic state the effective safeguard against any abuse of power in peace as also in emergency is the existence of enlightened, vigilant and vocal public opinion. Liversidge vs Sir John Anderson, [19421 A.C. 206, referred to. The inviolability of individual freedom and the majesty of law that sustains it are equally governed by the Constitution which has made this Court the custodian of the fundamental rights on the one hand and, on the other, provided for the declaration of the emergency. Consequently, in dealing with the right of a citizen to challenge the validity of his detention, effect must be given to article 359(1) and the Presidential Order issued under it. The right specified in that Article must be held to include such right whether constitutional or constitutionally guaranteed and the words "any court" must include the Supreme Court and the High Court. The Punjab and the Bombay High Courts were, therefore right in their decision that the applications under section 491(1)(b) of 801 the Code were incompetent in so far as they sought to challenge the validity of the detentions on the ground that the Act and the Rules under which the orders were made contravened articles 14, 21 and 22(4)(5) and (7) of the Constitution. Per Subba Rao, J. It was clear that section 3(2)(15)(i) of the Defence of India Act, 1962, and r. 30(1)(b) made under the Act contravened the relevant provisions of article 22 of the Constitution and were, therefore, void. Deep Chand vs The State of Uttar Pradesh, [1959] Supp. 2 S.C.R. 840, Mahendra Lal vs State of U.P., A.I.R. 1963 S.C. 1019, A. K. Gopalan vs State of Madras, ; , referred to. Under the Constitution, every person has a right to move the Supreme Court, the High Courts or any other court or courts constituted by the Parliament under article 32(3) for the enforcement of fundamental rights in the manner prescribed. But while the right to move the Supreme Court is a guaranteed right, the right to move the others is not so. Article 359, properly construed, meant that the bar imposed by the Presidential Order applied not only to the guaranteed right to move the Supreme Court but also the rights to move the other courts under article 32 and article 226 of the Constitution. There is no new rule of construction peculiar to war measures. It is always the same, whether in peace or in war. The fundamental rule is that the courts have to find out the expressed intention of the Legislature from the words of the enactment itself. Words must be given their natural and ordinary meaning unless there is ambiguity in the language in which case the court has to adopt that meaning which furthers the intention of the Legislature. A constitutional provision such as article 359, however, cannot be given a strained construction to meet a passing phase such as the present emergency. Rex vs Halliday, L.R. [19171 A.C. 260, Liversidge vs Sir John Anderson; , , Nakkuda A1i vs jayaratna, , Gibbon vs Ogden, (1824) 6 L. Ed. 23, discussed. Section 491 of the Code of Criminal Procedure is wide in its terms and gives a discretionary power to the High Courts. Unlike articles 32 and 226, the exercise of the power is not channelled through procedural writs or orders and their technicalities cannot circumscribe the court 's discretion. Girindra Nath Banerjee vs Birendra Nath Pal, (1927) I.L.R. , District Magistrate, Trivandrum vs Mammen Mappillai, I.L.R. , Matten vs District Magistrate, Trivandrum, L.R. (1939) 66 I.A. 222, referred to. Section 491 is continued by article 372 and article 225 preserves 802 the jurisdiction of the High Court. The power it confers on the High Court is not inconsistent either with article 32 or article 226 or any other Article of the Constitution and the section cannot, therefore, be said to have been impliedly superseded even to the extent article 226 empowers the High Court to give relief in cases of illegal detention. Though remedial in form the section postulates the existence of the substantive right that no person can be deprived of his liberty except in the manner prescribed by law. It assumes the existence of the rule of law and empowers High Court to act suo motu. The rights, substantive and procedural conferred by it arc different from those under articles 32 or 226 of the Constitution. It places the onus on the custodian to prove that the detention is legal and although in scrutinising the legality of the detention the court may have to consider whether the law offends any fundamental rights, that cannot make the proceeding one for the enforcement of fundamental rights or the decision anything but one on the unconstitutionality of a law because of infringement of fundamental rights generally. The mode of approach to the High Court under section 491 of the Code or the nature of the relief given thereunder cannot be equated with those under the Constitution. The absolute discretionary jurisdiction under it cannot be put on a par with the jurisdiction under article 226 which is hedged in by constitutional limitations. Alam Khan vs The Crown, Lahore 274, Ramji Lal vs The Crown, I.L.R. (1949) 11 E.P. 28, King Emperor vs Vimlabai Deshpande, (1946) L.R. 73 I.A. 144, referred to. While section 491 gives no right to enforce fundamental rights, operating as it does as a check on arbitrary action, article 359 is concerned not with statutory powers but deals with the constitutional right and the constitutional enforcement of it. It was not, therefore, correct to say that article 359 would be frustrated if section 491 was allowed to stand for Parliament might amend that section any time it liked. The expression "right to move any court for enforcement of such of the rights conferred by Part 111" in article 359 must refer only to the right to move under article 32 or article 226 for the said specific relief and could not be applied to the exercise of the statutory power of the High Courts under section 491 of the Code and, consequently, the expression "all proceedings pending in any court for the enforcement of the rights" must refer to the proceedings initiated in exercise of that right. The detenus could not, therefore, enforce their fundamental rights under articles 21, 32 and 14 while the Presidential Order lasted, but that did not affect the High Court 's power under section 491 of the Code. The President 's Order cannot bar the detenus from proving even under articles 32(l) and 226 that the detentions were not made 803 under the Defence of India Ordinance or the Act as they were outside the Ordinance or the Act or in excess of the power conferred by them or that the detentions were made malafide or in fraudulent exercise of power.

Appeal No. 405 of 1957. Appeal from the judgment and order dated May 15, 1956, of the Calcutta High Court in I.T.R. No. 20 of 1953. section Mitra, B. Das and section N. Mukherjee, for appellants Nos. 2 to 41. A. N. Kripal and D. Gupta, for the respondent. November 23. The Judgment of the Court was delivered by HIDAYATULLAH, J. The point involved in this appeal is a very short one; but it requires a long narration of facts to reach it. The appeal is against the judgment and order of the High Court of Calcutta dated May 15, 1956, arising out of an Income tax Reference. By the Calcutta Municipal Act VI of 1863, there was established a Corporation under the name of "The Justices of the Peace for the Town of Calcutta". By a notification issued on November 2, 1864, one square mile of land forming part of the Panchannagram Estate was acquired by the Government of Bengal at the instance of the Justices. Section CXII of the Municipal Act provided that the Justices might "agree with the owners of any land for the absolute purchase thereof. . for any other purpose whatever connected with the conservancy of the Town". Under section CXIII, it was provided that if there was any hindrance to acquisition by private treaty, the Government of Bengal upon the representation of the Justices would compulsorily acquire the land and vest 600 such land in the Justices on their paying compensation awarded to the proprietor. The action which was taken by the notification was under section CXIII of the Municipal Act, and the acquisition was under Act VI of 1857, an Act for the acquisition of land for public purposes. The Panchannagram Estate was permanently settled under Regulation 1 of 1793. After the acquisition, the proprietor of Panchannagram Estate was granted abatement of land revenue assessed on the Estate to the extent of Rs. 386 7 1. This represented the proportionate land revenue on the land acquired. In August, 1865, the Justices were required to pay Rs. 54,685 2 10 as compensation payable to the proprietor and to other persons holding interest in the land. Another piece of land which is described as an open level sewer, was also acquired about the same time, and separate compensation was paid for it. With the amount of conveyance charges, the total compensation thus paid by the Justices was Rs. 57,965 8 10. On October 27,1865, the Government called upon the Justices to pay a further sum of Rs. 7,728 13 8. This order has not been produced in the case; but from other correspondence, it is easy to see that the amount represented an amount capitalized at 20 years ' purchase of land revenue attributed to the area acquired, which, as has been stated above, came to Rs. 386 7 1. This payment was made on or about January 12, 1866. Similarly, another amount was paid in July of the same year for redemption of the land revenue in respect of the strip of land for the open sewer. On December 5, 1870, a conveyance was executed by the Secretary of State in favour of the Justices of the Peace. It was there stated, inter alia: "Whereas the Honourable the Lieutenant Governor of Bengal hath thought fit that the said land so acquired as aforesaid would be vested in the said Justices of the Peace for the Town of Calcutta a Corporation created by and authorised to hold land under the said Act No. VI of 1863 of the Council of the Lieutenant Governor of Bengal to the end and intent 601 that the said land may be held by the said Justices for a public purpose, namely, for the conservancy of the Town. . and subject in every way to the same ' Act but free and discharged from all payment of land revenue, land tax and all and every tax or imposition in the nature of revenue derivable from land payable to Government in respect thereof; NOW THIS IN DENTURE WITNESSETH. .to hold the saidpieces of land, hereditaments and premises intended to be conveyed with the appurtenances except as aforesaid unto the said Justices of the Peace for the Town of Calcutta and their successors for ever free and clear and for ever discharged from all Government land revenue whatever or any payment or charge in the nature thereof to the end and intent that the said land may be used for a public purpose namely for the conservancy of the town upon the trusts and subject to the powers, provisions, terms and conditions contained in the said Act No. VI of 1863 of the Council of the Lieutenant Governor of Bengal and to the rules heretofore passed or hereafter to be passed by the Government of Bengal under the the said last mentioned Act;". On January 23, 1880, a temporary lease of the land known as the 'Square Mile ' was granted by the Justices of the Peace to the predecessors in title of the appellant (assessee), Srish Chandra Sen who has, since the filing of the appeal, died, leaving behind 40 legal representatives who have been shown in the cause title of the appeal. The lease was renewed for further periods, and the rent was also progressively increased. The conservancy arrangements for which the land 'was held were carried out, but, the lessee had the right to carry on cultivation with the aid of sewage. The assessee derived from this land various kinds of income, some being purely agricultural and some, non agricultural. For the assessment year 1942 43, the total agricultural income was computed at Rs. 99,987 9 6, and non agricultural income, at Rs. 12,503 8 0. Agricultural income tax was charged by the State of Bengal under the Agricultural Income 602 tax Act, on the agricultural income less expenses. For the assessment years, 1943 44, 1944 45, 1945 46 and 1946 47, the assessments were made along similar lines. In 1947, the Income tax Officer reassessed the income for the assessment year, 1942 43 after reopening the assessment under section 34 of the Income tax Act on the ground that the so called agricultural income had escaped assessment to income tax under the Indian Income tax Act. Assessments for the other years, 1943 44, 1944 45, 1945 46 and 1946 47 were also reopened, and the income in those years wag also similarly reassessed. The assessee appealed to the Appellate Assistant Commissioner against all these orders of the Income tax Officer, but his appeals failed. Against the orders of the Appellate Assistant Commissioner, appeals were filed before the Income tax Appellate Tribunal (Calcutta Bench). The Tribunal dealt with the assessment for 1942 43 separately, and allowed the appeal as regards assessment for that year. It held that the reassessment was improper under section 34 of the Income tax Act, because the Income tax Officer had not proceeded on any definite information but in the course of a "roving enquiry". The Tribunal also held that the income was exempt from taxation to income tax under section 4(3)(viii) of the Act, inasmuch as this income was derived from land used for agricultural purposes, which continued to be assessed to land revenue. In the appeals arising out of assessments for the subsequent years, a common order was passed by the Tribunal, remanding the appeals to the Appellate Assistant Commissioner for a rehearing. The Tribunal stated that the appellants had filed a number of documents to establish that land revenue was assessed on the land which, the Department contended, proved the contrary. The Tribunal felt that the matter should be reconsidered by the Appellate Assistant Commissioner, and hence remanded the cases. The Appellate Assistant Commissioner in the rehearing held that the land in question continued subject to land revenue, and that the lump sum payment was merely payment of revenue in advance. He accordingly allowed the appeals, and ordered exclusion of the income 603 from the assessments for the four years in question. On appeal by the Department, the Tribunal changed its opinion, and came to the conclusion that the ' payment of a lump sum was not a payment in advance of the land revenue due from year to year but was land revenue capitalised. It referred to the deed by which the proprietorship in the land was ves ted in the Corporation by the Secretary of State, and stated that by the document and the capitalisation of land revenue, the demand for land revenue was extinguished for ever. It accordingly allowed the appeals, and restored the orders of assessment made by the Income tax Officer. The assessee next moved the Tribunal for a reference setting out a number of questions which, he contended, arose out of the Tribunal 's order. The Tribunal referred the following question of law for the opinion of the High Court: "Whether on the facts and in the circumstances of this case the Tribunal 's conclusion that the land was not assessed to land revenue within the meaning of section 2(1)(a) of the Indian Income tax Act is justified?" The reference was heard by Chakravarti, C. J., and Sarkar, J., (as he then was). In an elaborate judgment, the learned Chief Justice upheld the conclusions of the Tribunal, and answered the question in the affirmative. Sarkar, J., in an equally elaborate order expressed his doubts about the correctness of the Chief Justice 's reasons, but declined to disagree with him. The question that arises in this case, as we have stated in the opening of this judgment, is a very short one. It is an admitted fact that by payment of ' a lump sum the liability to pay land revenue was redeemed and no land revenue was de manded or was ever demandable from the Justices or their assigns in perpetuity. The contention of the assessee is that this redemption saved the Justices from the liability for payment but did not affect the assessability of the land to revenue under Regulation I of 1793. Unless, it is contended,. there was a cancellation of the assessment, a,% is to be found in the 604 Land Tax and Tithe Redemption Acts in England, the liability must be deemed% to continue and land would still be assessed to land revenue for purposes of section 2(1)(a) of the Indian Income tax Act. That section reads as follows: "2(1) 'Agricultural income ' means (a) any rent or revenue derived from land which is used for agricultural purposes, and is either assessed to land revenue in (the taxable territories) or subject to a local rate assessed and collected by Officers of (the Government) as such". It is not denied that both the conditions, namely, "used for agricultural purposes" and "is either assessed to land revenue or subject to a local rate. . . have to co exist. It is admitted by the Department that there is no question of subjection to a local rate assessed and collected, in this case. The income derived from the land was from its use for agricultural purposes, and the first condition is thus satisfied. The dispute centres round the point whether the land .can be said to be assessed to land revenue, in spite of the lump sum payment in 1865. In the High Court, the matter was examined from three different points of view. The first was the effect of acquisition of the land by Government upon the continued assessability of the land to land revenue. The learned Chief Justice held that by the acquisition the assessment ceased to subsist. The second was the effect of the redemption of land revenue by the Justices by a lump sum payment. The learned Chief Justice was of opinion that it had the effect of cancelling the assessment. The last was the effect of the grant free from land revenue, about which the learned Chief Justice was of opinion that it freed the land from assessment to land revenue. Sarkar, J., agreed as to the first, but expressed doubts about the second and third propositions. According to the learned Judge, the acceptance of a lump sum payment in lieu of recurring annual payments was more a matter of agreement than a cancellation of assessment to land revenue. The matter has been argued before us from the 605 argument about the interpretation to be placed on the, conveyance by the Secretary of State which, according to him, only freed the Justices from 'payment ' of the assessed land revenue but did not cancel the assessment. No Act of Legislature bearing upon the power of Government to accept a Iump sum payment in lieu of the annual demands for land revenue has been brought to our notice. Counsel admitted that they were unable to find any such legislative provision. We have thus to proceed, as did the High Court, without having before us the authority of a legislative enactment. The only materials to which reference was made are: an extract from the explanatory notes in the Revenue Roll of the Touzi which shows that an abatement of land revenue pro tanto was granted to the proprietor of Panchannagram Estate, and a despatch from the Secretary of State for India (Lord Stanley) No. 2 (Revenue) dated December 31, 1858 recommending redemption of land revenue by an immediate payment of a sum of equivalent value, together with a Resolution of Government (Home Department No. 3264 (Rev) dated October 17, 1861) on permission to redeem the existing land revenue by the immediate payment of one sum equal in value to the revenue redeemed. By the resolution, it was provided that such redemption would be limited to 10 per cent of the total revenue in the Collectorate and the price to be paid was to be fixed at 20 years ' purchase of the existing assessment. It may be mentioned that in Despatch No. 14 dated July 9, 1862, the Secretary of State for India (Sir Charles Wood) did not agree with the earlier policy, but did not cancel it. It may thus be assumed that what was done was under the authority of the Crown, which was then paramount, which paramountcy included the prerogative to free land from the demand of land revenue with or without conditions. We have, therefore, to examine three things: the effect of acquisition on the continuance of the assessment to land revenue, the effect of redemption by a down payment on the same, 77 606 and the effect of the grant, free from land revenue, to the Justices. The acquistion was under Act VI of 1857. That Act provided in B. XXVI as follows: "When any land taken under this Act forms part of an estate paying revenue to Government, the award shall specify the net rent of the land including the Government Revenue, and the computed value of such rent: and it shall be at the discretion of the Revenue authorities either to pay over the whole of such value to the owner of the estate on the condition of his continuing to pay the jumma thereof without abatement; or to determine what proportion of the net rent shall be allowed as a remission of revenue, in which case a deduction shall be made from the said value proportionate to the value of such remission. " This provision only saved the Estate assessed to land revenue from liability to pay land revenue proportionately falling upon the land acquired compulsorily, subject to a like proportionate reduction in the amount of compensation payable to the proprietor of the estate, but the provision cannot be stretched to mean that the liability of the land actually acquired, to land revenue in the hands of grantees from the Government also ceased. Be that as it may, it is hardly necessary to view the present case from this angle at all, because, whether the land acquired continued to be subject to an assessment or must be deemed to be reassessed as a separate estate, the result would be the same if Government demand still subsisted on it, as, in fact, it did. There could have been no redemption of the liability by a down payment if no land revenue could have been demanded. The fact that the recurring liability was redeemed by a lump sum payment itself shows that in the view of Government as well as of the Justices, the 'Square Mile ' was still subject to the recurring demand and was thus still assessed to land revenue. It is, therefore, not profitable to investigate the effect of acquisition on the continued liability of the land to land revenue between the time there was acquisition and the vesting of the land in the Justices. For the above reason, we need not examine at 607 length the case in Lord Colchester vs Kewnoy where the acquisition by the Crown was held not to make, the area acquired immune from land tax, because the burden of the tax would then have fallen upon the remaining land situated in the unit from which it was acquired and on which unit a quota of the land tax was chargeable. Such a position does not arise here, because the Panchannagram Estate was given abatement and a lump sum was paid to free the land acquired from the liability to land revenue. Similarly, the decision of this Court in The Collector of Bombay vs Nusserwanji Rattanji Mistri and Others (2), where on the acquisition of some Foras lands held under Foras Land Act (Bombay Act VI of 1851) the Foras tenure was declared to have come to an end and on the same lands being resold by Government as freehold, they were declared not to be subject to assessment to which they were previously subject, is not very helpful. There do not appear to be any rules prior to 1875, which were framed under the Land Acquisition Act of 1870 (Act X of 1870) and which are to be found in the Calcutta Gazette of July 7, 1875, p. 818. If there were, they have not been brought to our notice. But a practice similar to the rules seems to have obtained under section XXVI of the Act of 1857. That Act also did not contain any provision for making rules, as are to be found in the subsequent Acts for compulsory acquisition of land. In the absence of any statutory law or rules, we must take the facts to be that after acquisition the Panchannagram Estate was given abatement of land revenue, and the demand for land revenue was transferred to the land acquired and granted to the Justices. At that stage, the liability to assessment remained, and it was that liability which was redeemed by a down payment. We next consider the effect of redemption. Learned counsel for the appellant contends that redemption in this connection means that by a single payment, the liability for periodical payments is saved but the assessment on the land remains uncancelled. He has cited Wharton 's Law Lexicon to show the meaning of (1) (2) ; 608 the word "redemption", which is "commutation or the substitution of one lump payment for a succession of annual ones: e.g. See the Land Tax and the Tithe Redemption Acts and many other statutes". Redemption is the act of redeeming which in its ordinary meaning is equal to bringing off a charge or obligation by payment. To what extent this redemption freed the land or its holder from the obligation depends not so much upon what the obligation was before redemption as what remained of that obligation after it. Here, the payment itself was meant to be "an immediate payment of one sum equal in value to the revenue redeemed" (vide the Resolution of Government dated October 17, 1861). By the down payment, the entire land revenue to be recovered from that land was redeemed. The payment was equal to the capitalised value of the land revenue. When such a payment took place, it cannot be said that the assessment for land revenue remained. The land was freed from that assessment as completely as if there was no assessment. Thenceforward, the land would be classed as revenue free, in fact and in law. In The Land Law of Bengal (Tagore Law Lectures, 1895) p. 81 section C. Mitra described these revenue free lands as follows: "There is another class of revenue free lands which comes within these rules laid down in the Registration and Tenancy Acts, namely, lands of which Government has, in consideration of the payment of a capitalised sum, granted proprietary title free in perpetuity from any demand of land revenue. " That this is what had happened here is quite apparent from the conveyance by the Secretary of State vesting the land in the Justices. It is significant that there is no mention of the payment of Rs. 7,728 13 8, nor of the assessability of the lands to land revenue. On the other hand, the deed of conveyance merely reaffirmed the position, which existed before by stating: ". to hold the said pieces of land, hereditaments and premises intended to be conveyed with the appurtenances except as aforesaid unto the said Justices of the Peace for the Town of Calcutta and their successors for ever free and clear and for ever discharged 609 from all Government land revenue whatever or any payment or charge in the nature thereof. " There can be no doubt that the land revenue was for ever extinguished and the land became free from land revenue, assessment in perpetuity. It cannot thereafter be said that the land was still assessed to land revenue. Mr. Mitra made a great effort to construe the operative part quoted above with the aid of the recital in the deed, where it was stated: ". but free and discharged from all payment of land revenue, land tax and all and every tax or imposition in the nature of revenue derivable from land payable to Government. He drew attention to the word 'payment ', and contended that what was saved was payment of land revenue. He argued that in case of ambiguity it was permissible to construe the operative portion of a deed in the light of the recitals, and cited Halsbury 's Laws of England, 3rd Edn., Vol. XI, p. 421, para. 680, Gwyn vs Neath Canal Co. (1) and Orr vs Mitchell (2). If there was any ambiguity in the operative portion of the deed, we may have taken the aid of the recitals. But there is no ambiguity in the deed. The history of redemption is a matter of record, and it is plain that Government was accepting a down payment and freeing land from land revenue. This is precisely what was done, and the result of the down payment is set out with great clarity in the deed itself, and it is that there was no land revenue assessed on or demandable from that land. In fact, no demand or payment or charge in the nature of land revenue could ever be made on it. In view of this, it is, in our judgment, quite satisfactorily established that this land was not assessed to land revenue and the income from it did not fall within section 2(1)(a) of the Income tax Act. The answer given by the High Court was thus correct. In the result, the appeal fails, and will be dismissed with costs. (1868) L R. Appeal dismissed (2) , 254.

IN-Abs

By a notification dated November 2, 1864, a piece of land forming part of the Panchannagram Estate which was permanently settled under Regulation 1 of 1793, was acquired by the Government of Bengal at the instance of the justices of the Peace for the Town of Calcutta, which was a corporation established under the provisions of the Calcutta Municipal Act, 1863, and the justices were required to pay the compensation payable to the proprietor of the Estate. After the acquisition, the proprietor of the Estate was granted abatement of land revenue assessed on the Estate to the extent of Rs. 386 7 1, being the proportionate land revenue on the land acquired. On October 27, i865, the Government called upon the justices to pay a sum of Rs. 7,728 13 8, which represented the amount capitalised at 20 years ' purchase of land revenue attributed to the area acquired. On December 5, i870, the Secretary of State executed in favour of the justices of the Peace a conveyance of the land acquired, which stated, inter alia, that it was "ever free and clear and for ever discharged from all Government land revenue whatever or any payment or charge in the nature thereof to the end and intent that the said land may be used for a public purpose, namely, for the conservancy of the town." On January 23, 1880, a lease of the land was granted by the Justices to the predecessors in title of the appellant, under which the lessee had the right to carry on cultivation with the aid of sewage. Before the income tax authorities the appellant claimed that the agricultural income derived by him from the land was not liable to income tax, but the claim was rejected on the ground that on the payment of a lump sum in 1865 the liability to pay land revenue was redeemed and no land revenue was demanded thereafter; consequently, the income derived from the land was not agricultural income within the meaning of section 2(1) of the Indian Income tax Act, 1922, and was not, therefore, exempt from tax. The appellant 's contention was that the redemption only saved the justices from liability for payment but did not affect the assessability of the land to revenue under Regulation 1 of 1793. 599 Held, that by the down payment of a lump sum in 1865 the entire land revenue to be recovered from the land was redeemed and the land became free from land revenue assessment in perpetuity, as completely as if there was no assessment. Thereafter, the land could not be said to be assessed to land revenue within the meaning of section 2(1) of the Indian Income tax Act, 1922, and, consequently, the income derived therefrom could not be considered to be agricultural income under that section. The Collector of Bombay vs Nusserwanji Rattanji Mistri and others; , , distinguished.

Appeal No. 405 of 1957. Appeal from the judgment and order dated May 15, 1956, of the Calcutta High Court in I.T.R. No. 20 of 1953. section Mitra, B. Das and section N. Mukherjee, for appellants Nos. 2 to 41. A. N. Kripal and D. Gupta, for the respondent. November 23. The Judgment of the Court was delivered by HIDAYATULLAH, J. The point involved in this appeal is a very short one; but it requires a long narration of facts to reach it. The appeal is against the judgment and order of the High Court of Calcutta dated May 15, 1956, arising out of an Income tax Reference. By the Calcutta Municipal Act VI of 1863, there was established a Corporation under the name of "The Justices of the Peace for the Town of Calcutta". By a notification issued on November 2, 1864, one square mile of land forming part of the Panchannagram Estate was acquired by the Government of Bengal at the instance of the Justices. Section CXII of the Municipal Act provided that the Justices might "agree with the owners of any land for the absolute purchase thereof. . for any other purpose whatever connected with the conservancy of the Town". Under section CXIII, it was provided that if there was any hindrance to acquisition by private treaty, the Government of Bengal upon the representation of the Justices would compulsorily acquire the land and vest 600 such land in the Justices on their paying compensation awarded to the proprietor. The action which was taken by the notification was under section CXIII of the Municipal Act, and the acquisition was under Act VI of 1857, an Act for the acquisition of land for public purposes. The Panchannagram Estate was permanently settled under Regulation 1 of 1793. After the acquisition, the proprietor of Panchannagram Estate was granted abatement of land revenue assessed on the Estate to the extent of Rs. 386 7 1. This represented the proportionate land revenue on the land acquired. In August, 1865, the Justices were required to pay Rs. 54,685 2 10 as compensation payable to the proprietor and to other persons holding interest in the land. Another piece of land which is described as an open level sewer, was also acquired about the same time, and separate compensation was paid for it. With the amount of conveyance charges, the total compensation thus paid by the Justices was Rs. 57,965 8 10. On October 27,1865, the Government called upon the Justices to pay a further sum of Rs. 7,728 13 8. This order has not been produced in the case; but from other correspondence, it is easy to see that the amount represented an amount capitalized at 20 years ' purchase of land revenue attributed to the area acquired, which, as has been stated above, came to Rs. 386 7 1. This payment was made on or about January 12, 1866. Similarly, another amount was paid in July of the same year for redemption of the land revenue in respect of the strip of land for the open sewer. On December 5, 1870, a conveyance was executed by the Secretary of State in favour of the Justices of the Peace. It was there stated, inter alia: "Whereas the Honourable the Lieutenant Governor of Bengal hath thought fit that the said land so acquired as aforesaid would be vested in the said Justices of the Peace for the Town of Calcutta a Corporation created by and authorised to hold land under the said Act No. VI of 1863 of the Council of the Lieutenant Governor of Bengal to the end and intent 601 that the said land may be held by the said Justices for a public purpose, namely, for the conservancy of the Town. . and subject in every way to the same ' Act but free and discharged from all payment of land revenue, land tax and all and every tax or imposition in the nature of revenue derivable from land payable to Government in respect thereof; NOW THIS IN DENTURE WITNESSETH. .to hold the saidpieces of land, hereditaments and premises intended to be conveyed with the appurtenances except as aforesaid unto the said Justices of the Peace for the Town of Calcutta and their successors for ever free and clear and for ever discharged from all Government land revenue whatever or any payment or charge in the nature thereof to the end and intent that the said land may be used for a public purpose namely for the conservancy of the town upon the trusts and subject to the powers, provisions, terms and conditions contained in the said Act No. VI of 1863 of the Council of the Lieutenant Governor of Bengal and to the rules heretofore passed or hereafter to be passed by the Government of Bengal under the the said last mentioned Act;". On January 23, 1880, a temporary lease of the land known as the 'Square Mile ' was granted by the Justices of the Peace to the predecessors in title of the appellant (assessee), Srish Chandra Sen who has, since the filing of the appeal, died, leaving behind 40 legal representatives who have been shown in the cause title of the appeal. The lease was renewed for further periods, and the rent was also progressively increased. The conservancy arrangements for which the land 'was held were carried out, but, the lessee had the right to carry on cultivation with the aid of sewage. The assessee derived from this land various kinds of income, some being purely agricultural and some, non agricultural. For the assessment year 1942 43, the total agricultural income was computed at Rs. 99,987 9 6, and non agricultural income, at Rs. 12,503 8 0. Agricultural income tax was charged by the State of Bengal under the Agricultural Income 602 tax Act, on the agricultural income less expenses. For the assessment years, 1943 44, 1944 45, 1945 46 and 1946 47, the assessments were made along similar lines. In 1947, the Income tax Officer reassessed the income for the assessment year, 1942 43 after reopening the assessment under section 34 of the Income tax Act on the ground that the so called agricultural income had escaped assessment to income tax under the Indian Income tax Act. Assessments for the other years, 1943 44, 1944 45, 1945 46 and 1946 47 were also reopened, and the income in those years wag also similarly reassessed. The assessee appealed to the Appellate Assistant Commissioner against all these orders of the Income tax Officer, but his appeals failed. Against the orders of the Appellate Assistant Commissioner, appeals were filed before the Income tax Appellate Tribunal (Calcutta Bench). The Tribunal dealt with the assessment for 1942 43 separately, and allowed the appeal as regards assessment for that year. It held that the reassessment was improper under section 34 of the Income tax Act, because the Income tax Officer had not proceeded on any definite information but in the course of a "roving enquiry". The Tribunal also held that the income was exempt from taxation to income tax under section 4(3)(viii) of the Act, inasmuch as this income was derived from land used for agricultural purposes, which continued to be assessed to land revenue. In the appeals arising out of assessments for the subsequent years, a common order was passed by the Tribunal, remanding the appeals to the Appellate Assistant Commissioner for a rehearing. The Tribunal stated that the appellants had filed a number of documents to establish that land revenue was assessed on the land which, the Department contended, proved the contrary. The Tribunal felt that the matter should be reconsidered by the Appellate Assistant Commissioner, and hence remanded the cases. The Appellate Assistant Commissioner in the rehearing held that the land in question continued subject to land revenue, and that the lump sum payment was merely payment of revenue in advance. He accordingly allowed the appeals, and ordered exclusion of the income 603 from the assessments for the four years in question. On appeal by the Department, the Tribunal changed its opinion, and came to the conclusion that the ' payment of a lump sum was not a payment in advance of the land revenue due from year to year but was land revenue capitalised. It referred to the deed by which the proprietorship in the land was ves ted in the Corporation by the Secretary of State, and stated that by the document and the capitalisation of land revenue, the demand for land revenue was extinguished for ever. It accordingly allowed the appeals, and restored the orders of assessment made by the Income tax Officer. The assessee next moved the Tribunal for a reference setting out a number of questions which, he contended, arose out of the Tribunal 's order. The Tribunal referred the following question of law for the opinion of the High Court: "Whether on the facts and in the circumstances of this case the Tribunal 's conclusion that the land was not assessed to land revenue within the meaning of section 2(1)(a) of the Indian Income tax Act is justified?" The reference was heard by Chakravarti, C. J., and Sarkar, J., (as he then was). In an elaborate judgment, the learned Chief Justice upheld the conclusions of the Tribunal, and answered the question in the affirmative. Sarkar, J., in an equally elaborate order expressed his doubts about the correctness of the Chief Justice 's reasons, but declined to disagree with him. The question that arises in this case, as we have stated in the opening of this judgment, is a very short one. It is an admitted fact that by payment of ' a lump sum the liability to pay land revenue was redeemed and no land revenue was de manded or was ever demandable from the Justices or their assigns in perpetuity. The contention of the assessee is that this redemption saved the Justices from the liability for payment but did not affect the assessability of the land to revenue under Regulation I of 1793. Unless, it is contended,. there was a cancellation of the assessment, a,% is to be found in the 604 Land Tax and Tithe Redemption Acts in England, the liability must be deemed% to continue and land would still be assessed to land revenue for purposes of section 2(1)(a) of the Indian Income tax Act. That section reads as follows: "2(1) 'Agricultural income ' means (a) any rent or revenue derived from land which is used for agricultural purposes, and is either assessed to land revenue in (the taxable territories) or subject to a local rate assessed and collected by Officers of (the Government) as such". It is not denied that both the conditions, namely, "used for agricultural purposes" and "is either assessed to land revenue or subject to a local rate. . . have to co exist. It is admitted by the Department that there is no question of subjection to a local rate assessed and collected, in this case. The income derived from the land was from its use for agricultural purposes, and the first condition is thus satisfied. The dispute centres round the point whether the land .can be said to be assessed to land revenue, in spite of the lump sum payment in 1865. In the High Court, the matter was examined from three different points of view. The first was the effect of acquisition of the land by Government upon the continued assessability of the land to land revenue. The learned Chief Justice held that by the acquisition the assessment ceased to subsist. The second was the effect of the redemption of land revenue by the Justices by a lump sum payment. The learned Chief Justice was of opinion that it had the effect of cancelling the assessment. The last was the effect of the grant free from land revenue, about which the learned Chief Justice was of opinion that it freed the land from assessment to land revenue. Sarkar, J., agreed as to the first, but expressed doubts about the second and third propositions. According to the learned Judge, the acceptance of a lump sum payment in lieu of recurring annual payments was more a matter of agreement than a cancellation of assessment to land revenue. The matter has been argued before us from the 605 argument about the interpretation to be placed on the, conveyance by the Secretary of State which, according to him, only freed the Justices from 'payment ' of the assessed land revenue but did not cancel the assessment. No Act of Legislature bearing upon the power of Government to accept a Iump sum payment in lieu of the annual demands for land revenue has been brought to our notice. Counsel admitted that they were unable to find any such legislative provision. We have thus to proceed, as did the High Court, without having before us the authority of a legislative enactment. The only materials to which reference was made are: an extract from the explanatory notes in the Revenue Roll of the Touzi which shows that an abatement of land revenue pro tanto was granted to the proprietor of Panchannagram Estate, and a despatch from the Secretary of State for India (Lord Stanley) No. 2 (Revenue) dated December 31, 1858 recommending redemption of land revenue by an immediate payment of a sum of equivalent value, together with a Resolution of Government (Home Department No. 3264 (Rev) dated October 17, 1861) on permission to redeem the existing land revenue by the immediate payment of one sum equal in value to the revenue redeemed. By the resolution, it was provided that such redemption would be limited to 10 per cent of the total revenue in the Collectorate and the price to be paid was to be fixed at 20 years ' purchase of the existing assessment. It may be mentioned that in Despatch No. 14 dated July 9, 1862, the Secretary of State for India (Sir Charles Wood) did not agree with the earlier policy, but did not cancel it. It may thus be assumed that what was done was under the authority of the Crown, which was then paramount, which paramountcy included the prerogative to free land from the demand of land revenue with or without conditions. We have, therefore, to examine three things: the effect of acquisition on the continuance of the assessment to land revenue, the effect of redemption by a down payment on the same, 77 606 and the effect of the grant, free from land revenue, to the Justices. The acquistion was under Act VI of 1857. That Act provided in B. XXVI as follows: "When any land taken under this Act forms part of an estate paying revenue to Government, the award shall specify the net rent of the land including the Government Revenue, and the computed value of such rent: and it shall be at the discretion of the Revenue authorities either to pay over the whole of such value to the owner of the estate on the condition of his continuing to pay the jumma thereof without abatement; or to determine what proportion of the net rent shall be allowed as a remission of revenue, in which case a deduction shall be made from the said value proportionate to the value of such remission. " This provision only saved the Estate assessed to land revenue from liability to pay land revenue proportionately falling upon the land acquired compulsorily, subject to a like proportionate reduction in the amount of compensation payable to the proprietor of the estate, but the provision cannot be stretched to mean that the liability of the land actually acquired, to land revenue in the hands of grantees from the Government also ceased. Be that as it may, it is hardly necessary to view the present case from this angle at all, because, whether the land acquired continued to be subject to an assessment or must be deemed to be reassessed as a separate estate, the result would be the same if Government demand still subsisted on it, as, in fact, it did. There could have been no redemption of the liability by a down payment if no land revenue could have been demanded. The fact that the recurring liability was redeemed by a lump sum payment itself shows that in the view of Government as well as of the Justices, the 'Square Mile ' was still subject to the recurring demand and was thus still assessed to land revenue. It is, therefore, not profitable to investigate the effect of acquisition on the continued liability of the land to land revenue between the time there was acquisition and the vesting of the land in the Justices. For the above reason, we need not examine at 607 length the case in Lord Colchester vs Kewnoy where the acquisition by the Crown was held not to make, the area acquired immune from land tax, because the burden of the tax would then have fallen upon the remaining land situated in the unit from which it was acquired and on which unit a quota of the land tax was chargeable. Such a position does not arise here, because the Panchannagram Estate was given abatement and a lump sum was paid to free the land acquired from the liability to land revenue. Similarly, the decision of this Court in The Collector of Bombay vs Nusserwanji Rattanji Mistri and Others (2), where on the acquisition of some Foras lands held under Foras Land Act (Bombay Act VI of 1851) the Foras tenure was declared to have come to an end and on the same lands being resold by Government as freehold, they were declared not to be subject to assessment to which they were previously subject, is not very helpful. There do not appear to be any rules prior to 1875, which were framed under the Land Acquisition Act of 1870 (Act X of 1870) and which are to be found in the Calcutta Gazette of July 7, 1875, p. 818. If there were, they have not been brought to our notice. But a practice similar to the rules seems to have obtained under section XXVI of the Act of 1857. That Act also did not contain any provision for making rules, as are to be found in the subsequent Acts for compulsory acquisition of land. In the absence of any statutory law or rules, we must take the facts to be that after acquisition the Panchannagram Estate was given abatement of land revenue, and the demand for land revenue was transferred to the land acquired and granted to the Justices. At that stage, the liability to assessment remained, and it was that liability which was redeemed by a down payment. We next consider the effect of redemption. Learned counsel for the appellant contends that redemption in this connection means that by a single payment, the liability for periodical payments is saved but the assessment on the land remains uncancelled. He has cited Wharton 's Law Lexicon to show the meaning of (1) (2) ; 608 the word "redemption", which is "commutation or the substitution of one lump payment for a succession of annual ones: e.g. See the Land Tax and the Tithe Redemption Acts and many other statutes". Redemption is the act of redeeming which in its ordinary meaning is equal to bringing off a charge or obligation by payment. To what extent this redemption freed the land or its holder from the obligation depends not so much upon what the obligation was before redemption as what remained of that obligation after it. Here, the payment itself was meant to be "an immediate payment of one sum equal in value to the revenue redeemed" (vide the Resolution of Government dated October 17, 1861). By the down payment, the entire land revenue to be recovered from that land was redeemed. The payment was equal to the capitalised value of the land revenue. When such a payment took place, it cannot be said that the assessment for land revenue remained. The land was freed from that assessment as completely as if there was no assessment. Thenceforward, the land would be classed as revenue free, in fact and in law. In The Land Law of Bengal (Tagore Law Lectures, 1895) p. 81 section C. Mitra described these revenue free lands as follows: "There is another class of revenue free lands which comes within these rules laid down in the Registration and Tenancy Acts, namely, lands of which Government has, in consideration of the payment of a capitalised sum, granted proprietary title free in perpetuity from any demand of land revenue. " That this is what had happened here is quite apparent from the conveyance by the Secretary of State vesting the land in the Justices. It is significant that there is no mention of the payment of Rs. 7,728 13 8, nor of the assessability of the lands to land revenue. On the other hand, the deed of conveyance merely reaffirmed the position, which existed before by stating: ". to hold the said pieces of land, hereditaments and premises intended to be conveyed with the appurtenances except as aforesaid unto the said Justices of the Peace for the Town of Calcutta and their successors for ever free and clear and for ever discharged 609 from all Government land revenue whatever or any payment or charge in the nature thereof. " There can be no doubt that the land revenue was for ever extinguished and the land became free from land revenue, assessment in perpetuity. It cannot thereafter be said that the land was still assessed to land revenue. Mr. Mitra made a great effort to construe the operative part quoted above with the aid of the recital in the deed, where it was stated: ". but free and discharged from all payment of land revenue, land tax and all and every tax or imposition in the nature of revenue derivable from land payable to Government. He drew attention to the word 'payment ', and contended that what was saved was payment of land revenue. He argued that in case of ambiguity it was permissible to construe the operative portion of a deed in the light of the recitals, and cited Halsbury 's Laws of England, 3rd Edn., Vol. XI, p. 421, para. 680, Gwyn vs Neath Canal Co. (1) and Orr vs Mitchell (2). If there was any ambiguity in the operative portion of the deed, we may have taken the aid of the recitals. But there is no ambiguity in the deed. The history of redemption is a matter of record, and it is plain that Government was accepting a down payment and freeing land from land revenue. This is precisely what was done, and the result of the down payment is set out with great clarity in the deed itself, and it is that there was no land revenue assessed on or demandable from that land. In fact, no demand or payment or charge in the nature of land revenue could ever be made on it. In view of this, it is, in our judgment, quite satisfactorily established that this land was not assessed to land revenue and the income from it did not fall within section 2(1)(a) of the Income tax Act. The answer given by the High Court was thus correct. In the result, the appeal fails, and will be dismissed with costs. (1868) L R. Appeal dismissed (2) , 254.

IN-Abs

By a notification dated November 2, 1864, a piece of land forming part of the Panchannagram Estate which was permanently settled under Regulation 1 of 1793, was acquired by the Government of Bengal at the instance of the justices of the Peace for the Town of Calcutta, which was a corporation established under the provisions of the Calcutta Municipal Act, 1863, and the justices were required to pay the compensation payable to the proprietor of the Estate. After the acquisition, the proprietor of the Estate was granted abatement of land revenue assessed on the Estate to the extent of Rs. 386 7 1, being the proportionate land revenue on the land acquired. On October 27, i865, the Government called upon the justices to pay a sum of Rs. 7,728 13 8, which represented the amount capitalised at 20 years ' purchase of land revenue attributed to the area acquired. On December 5, i870, the Secretary of State executed in favour of the justices of the Peace a conveyance of the land acquired, which stated, inter alia, that it was "ever free and clear and for ever discharged from all Government land revenue whatever or any payment or charge in the nature thereof to the end and intent that the said land may be used for a public purpose, namely, for the conservancy of the town." On January 23, 1880, a lease of the land was granted by the Justices to the predecessors in title of the appellant, under which the lessee had the right to carry on cultivation with the aid of sewage. Before the income tax authorities the appellant claimed that the agricultural income derived by him from the land was not liable to income tax, but the claim was rejected on the ground that on the payment of a lump sum in 1865 the liability to pay land revenue was redeemed and no land revenue was demanded thereafter; consequently, the income derived from the land was not agricultural income within the meaning of section 2(1) of the Indian Income tax Act, 1922, and was not, therefore, exempt from tax. The appellant 's contention was that the redemption only saved the justices from liability for payment but did not affect the assessability of the land to revenue under Regulation 1 of 1793. 599 Held, that by the down payment of a lump sum in 1865 the entire land revenue to be recovered from the land was redeemed and the land became free from land revenue assessment in perpetuity, as completely as if there was no assessment. Thereafter, the land could not be said to be assessed to land revenue within the meaning of section 2(1) of the Indian Income tax Act, 1922, and, consequently, the income derived therefrom could not be considered to be agricultural income under that section. The Collector of Bombay vs Nusserwanji Rattanji Mistri and others; , , distinguished.

minal Appeal No. 118 of 1959. Appeal by special leave from the judgment and order dated July 2, 1957, of the Calcutta High Court in Criminal Appeal No. 101 of 1956 arising out of the judgment and order dated January 16, 1956, of the Second Court of the Municipal Magistrate, Calcutta, in case No. 208B of 1955. C. B. Aggarwala, B. B. Tawakley and B. P. Maheshwari, for the appellant. Nalin Chandra Bannerjee, Sunil K. Basu, section N. Mukherjee for P. K. Bose, for the respondent No. 2. 1960. November 24. The Judgment of the Court was delivered by RAGHUBAR DAYAL, J. This is an appeal by special leave against the 'Order of the Calcutta High Court affirming the conviction of the appellants Messrs. Madan Mohan Damma Mal Ltd., and Om Prokash Manglik, its Manager, under section 462 of the Calcutta Municipal Act, 1951 (W. B. XXXIII of 1951) hereinafter called the Act. The facts leading to this appeal are that Messrs. Madan Mohan Damma Mal Ltd., (hereinafter called appellant No. 1) sent a consignment of mustard oil, about 499 maunds in weight, from Firozabad, the place of manufacture, to itself, at Calcutta, on December 25, 1954, in tank wagon No. 75612. This wagon was placed at the Pathuriaghat siding at Calcutta at 666 about 8.45 a.m., on January 3, 1955. Dr. Nityananda Bagui, Food Inspector of the Calcutta Corporation, accompanied by certain police officers, went to that siding and took three samples of mustard oil contained in this wagon, after arranging with Om Prokash Manglik, appellant No. 2, who was found near the wagon, the purchase of 12 ounces of oil for annas eight. He took the sample of oil in three phials. They were properly sealed. One of them was given to appel lant No. 2. The other two were kept by Dr. Bagui. He sent one of them to the Public Analyst for examination, the same day. Ashit Ranjan Sen, the Public Analyst, examined the oil contained in that phial on January 3, 1955, but could not come to any positive opinion about its purity. Dr. Bagui, however, seized the tank wagon that evening, sealed it with the Corporation 's seal and left it in the custody of appellant No. 2. The oil in the tank was allowed to be removed to the godown of the appellants on January 6, 1955. The lock of the godown was then sealed with the seal of the Corporation. Mr. Sen reported on January 4, 1955, that the oil was adulterated. He sent a detailed report about the result of the examination on January 24, 1955. On receipt of the report about the mustard oil being adulterated, Dr. Bagui filed a complaint against the appellants on February 4, 1955, with respect to their. selling and keeping for sale mustard oil, a sample of which was found on analysis to be mustard oil which was adulterated with groundnut oil. During the course of the trial, the trial Court, on an application on behalf of the appellants, ordered the despatch of the third sample phial of the oil in the custody of the Corporation 's Health Officer, to the Director of Health Services, Government of West Bengal, for analysis and report. This sample was analysed by Dulal Chandra Dey, Court Witness No. 1, and found to be adulterated with groundnut oil. The report of the Analyst was, however, sent to the Court under the signature of Dr. section K. Chatterjee, D. W. 2, Deputy Director of Health Services, Government of West Bengal. 667 The appellants appear to have sent the sample of oil in their possession to Om Prakash, Oil Expert to the U.P. Government, who reported on July 27, 1955, that the sample 'conforms to Agmark Specification for Mustard Oil and is considered to be free from adulterants such as sesame, groundnut and linseed oil '. This report, however, has not been proved. The Deputy Commissioner of Police, Enforcement Branch, Calcutta, sent a sample of mustard oil on January 10, 1955, to the Public Analyst, Food & Water, West Bengal Public Health Laboratory. Sri section N. Mitra, D. W. 7, examined this sample and reported, on the basis of its saponification value to be 173.3, and iodine value to be 105, that the sample approximated to the standards of genuine mustard oil. This report does not establish that the sample was of pure mustard oil. Sri Mitra 's reply to the query from the Deputy Commissioner of Police for clarification, makes this very clear. It is: "But, unless conclusive evidence of the presence of a foreign oil, corroborated in some instances by the figures of the usual oil contents, is obtained, the sample is not and cannot be declared adulterated. In the present case the sample of mustard oil has already been examined exhaustively and has been certified as `approximating to standards ' but not as genuine. The legal implication of the expression is that the sample will have the benefit of doubt. " Further, there is no good evidence on the record to establish that the sample sent to Sri Mitra was a sample from the appellants ' tank wagon. Dr. Bagui does not depose about the police people taking a sample of oil. He was not questioned about the police taking any sample of the oil. There seems to be no good reason for the police taking a sample of oil for the purpose of analysis and finding out whether the mustard oil was pure or not. The case put to Dr. Bagui during his cross examination, on behalf of the appellants, appears to have been that he himself had taken four samples of the mustard oil in question and that one of those samples was sent to the Enforcement Branch. Dr. Bagui denied that he had taken 668 four samples of the mustard oil, His statement is fully corroborated by the statement of Kalidas Ganguli, Sub Inspector, Calcutta Enforcement Branch, Police Department, who had accompanied Dr. Bagui on the occasion. He stated that the Corporation Food Inspector took three samples and the police took the one ,,sample which was sealed with the Corporation seal. We are not satisfied that the police actually took one sample of the oil and had it sealed with the Corporation seal as deposed to by Kalidas Ganguli. The Courts below found on the evidence that the mustard oil in the appellants ' tank wagon was adulterated with groundnut oil, that the appellants were in possession of that oil and had stored that oil for sale, in view of the presumption arising under subs. (4) of section 462 of the Act, and which had not been rebutted on behalf of the appellants. Learned counsel for the appellants has questioned the correctness of these findings. We have considered the evidence in connection with the analysis of the samples of mustard oil by the Chemists. Ashit Ranjan Sen, P.W. 2, Public Analyst, who examined the first sample sent by Dr. Bagui on January 3 4, 1955, found it adulterated, on the basis of the data that the B. R. Index at 40 degree C was 60.4 and the Bellier 's test for groundnut oil was positive inasmuch as it gave turbidity at 28 degree C. Court Witness No. 1, Dulal Chand Dey, who actually analysed the sample sent by the Court, also found it adulterated, on the basis of his obtaining the saponification value to be 175.5, iodine value to be 106degree 8 and the appearance of turbidity at 27 degree C. He also found indication of the presence of a small amount of linseed oil. The correctness of his opinion on these data is admitted by Sri Mitra, D.W. 7. In these circumstances, the finding of the Courts below that the mustard oil in the appellant 's tank wagon was adulterated is correct. It is not established that the sample of mustard oil sent to Sri Mitra by the Deputy Commissioner of the Enforcement Branch contained mustard oil from this tank wagon. The opinion of Sri Mitra about the nature of that sample therefore does not go against the opinion 669 of Sri Sen and Sri Dey that the mustard oil analysed by them was adulterated with groundnut oil. The other contention for the appellants is that they were not in possession of the oil when the sample of mustard oil was taken by Dr. Bagui and that therefore no presumption under sub section (4) of section 462 of the Act can be raised against them for holding that the oil was stored for sale. It appears from the judgment of the High Court under appeal that it was not disputed at the hearing before it that the appellants were in possession of the mustard oil whose sample had been taken. On the evidence on the record we are of opinion that they were in possession of the mustard oil. The consignment of oil was from the manufacturing firm, appellant No. 1, to itself at Calcutta. Its manager, appellant No. 2, took delivery of the wagon from the railway authorities on January 3, 1955. There is no direct evidence to the effect that such delivery was taken prior to Dr. Bagui 's taking sample of the mustard oil. But the circumstances, in our opinion, conclusively establish that appellant No. 2 had taken delivery of the wagon prior to Dr. Bagui 's visit and taking samples of oil from the wagon. Appellant No. 2 is not expected to and could not have got the wagon opened for 'the purpose of taking samples of oil, if he had not taken delivery of the wagon from the railway authorities. The railway authorities themselves would have seen to it that nobody tampers with the contents of the wagon in its charge. Appellant No. 2 must have therefore paid the freight for the wagon prior to Dr. Bagui 's visit and thus obtained delivery of the wagon. It was thereafter that he got control over the wagon and was in a position to take out oil from it or to permit anyone else to take out oil. We therefore hold that the appellants were in possession of the oil in the tank wagon when Dr. Bagui took samples of the oil from it. The main contention, however, for the appellants is that the presumption that the mustard oil was stored for sale by the appellants, under sub section (4) of section 462 of the Act, is rebuttable and has been fully rebutted in view of certain arrangements between the 83 670 U.P. Oil Millers Association and the Deputy Commissioner of Police, Enforcement Branch, and the letter of the appellants to the Secretary of the Association (Exhibit R) on January 3, 1955. We have considered the various documents which have been referred to in support of the arrangement between the Association stand the Deputy Commissioner, Enforcement Branch, but do not find therein anything which would restrain legally the appellants from selling the oil even if it is found to be adulterated. The proceedings of the meeting of the U. P. Oil Millers Association held on June 9, 1954, and attended by the Deputy Commissioner and Assistant Commissioner of the Enforcement Branch show that no such agreement has been arrived at. Even the suggestion of the Deputy Commissioner that all the members of the Association should write to their respective mills that all the quantity of oil which would be imported should at first be passed and then made delivery of, was not fully accepted, the members simply stating that they always and invariably imported pure mustard oil. It was, however, decided that the samples of oil be taken from the next morning, i.e., June 10, 1954. We however find that in November 1954 the U. P. Oil Millers Association wrote to appellant No. I that according to the decision of the Deputy Commissioner of Police, Enforcement Branch, every application to draw sample and test it should be accompanied by a certificate signed by the Chemist or the Manager or the Proprietor of the Mills to the effect that the mustard oil in the tank wagon was pure mustard oil free from Argemoni, linseed or any other adulteration, and that in February 1955 and April 1955, the Deputy Commissioner of Police, Enforcement Branch had to remind the U. P. Oil Millers Association that it should advise all its members that whenever they indent any mustard oil from outside Bengal, they would see that the railway receipts be accompanied by a clear certificate of examination from the Chemist of the factory who examined the same. Such directions from the Deputy Commissioner of Police, Enforcement Branch, do not appear to have 671 had any great effect, as the consignment of oil received by the appellants was without any such certificate. Mahendra Kumar Gupta, D.W. 1, Chemist of the appellants ' mill, deposed however that he had taken the sample of the oil sent in that wagon and found it to be genuine mustard oil, free from any adulteration. Any such certificate about the purity of the mustard oil sent is not proved to have accompanied the railway receipt and to have been shown or made over to Dr. Bagui, or to the Police Officers who had accompanied him at the time. Letter Exhibit R was sent on behalf of appellant No. I to the Secretary of the U. P. Oil Millers Association at 10 a.m., on January 3, 1955. The letter said: "Please arrange for sample and test through the proper authorities concerned, so that we may take the delivery of oil only if it is found pure on analysis." Any such statement can hardly be sufficient to rebut the presumption that the oil which was consigned by appellant No. I to itself at Calcutta was stored for sale. The letter itself does not say that the oil will not be sold. It simply says that they may take the delivery of the oil only if it is found pure on analysis. What would be done to the oil if it is found to be impure, is not stated. The Association was not in any arrangement with the Corporation which had the sole authority to take action with respect to the adulterat ed mustard oil. The Enforcement Branch of the Police had nothing to do with it. In the circumstances, all the so called arrangement with the Enforcement Branch of the Police and the consequent letters, similar to letter Exhibit R, seem to be a subtle device to make things difficult for the proper authorities responsible to see that mustard oil fit for sale be pure. It is obvious in this case itself, how this sort of arrangement has provided an occasion for the coming into existence of the alleged fourth sample of mustard oil from the appellants ' tank wagon and the non committal report about its purity. We are therefore of opinion that this letter Exhibit R, or the arrangement which led to such communication, does not establish 672 that the mustard oil in the wagon which will be otherwise presumed to be stored for sale by the appellants, was not stored for sale. We are therefore of opinion that the conviction of the appellants of the offence under section 462 of the Act is correct. The appeal therefore stands dismissed. Appeal dismissed.

IN-Abs

The first appellant No. 1 sent a consignment of mustard oil in a tank wagon from Firozabad, U. P. to itself at Calcutta where it took delivery of the wagon from the railway authorities. The Food Inspector took samples of the oil from the wagon which on analysis were found to be adulterated. The appellants were prosecuted under section 462 of the Calcutta Municipal Act, 951 for storing adulterated mustard oil for sale. The 665 appellants contended that the presumption under sub section (4) of section 462 that the mustard oil was stored for sale was rebutted in view of certain arrangements between the U. P. Oil Millers Association and the Deputy Commissioner of Police and of a letter written by the appellants to the Association asking that a sample may be taken and tested so that the appellants "may take the delivery of oil only if it is found pure on analysis. " Held, that this was not sufficient to rebut the presumption '. that the oil was stored for sale. The letter did not say that the oil would not be sold; it was not stated as to what would be done if the oil was found to be impure. There was no arrangement between the Association and the Corporation which was the sole authority to take action. The arrangement and the letter were a device to make detection difficult.

Appeal No.110 of 1957. Appeal by special leave from the judgment and order dated February 25, 1955, of the former Bombay High Court in I.T.R. No. 57/X of 1954. N. A. Palkhivala and I. N. Shroff, for the Appellant. A. N. Kripal and D. Gupta, for the Respondent. November 24. The Judgment of the Court was delivered by KAPUR, J. This is an appeal by special leave against the judgment and order of the High Court of Bombay answering the question submitted to it. against the assessee firm who is the appellant before 653 us, the respondent being the Commissioner of Income tax. The appeal relates to the assessment year 1949 50, the accounting year ended on July 25, 1948. The appellant is a firm doing the business of importing dates from abroad and selling them in India. During the accounting year the appellant imported dates from Iraq. At the relevant time the import of dates by steamers was prohibited by two notifications dated December 12, 1946, and June 4, 1947, but they were permitted to be brought by country craft. Goods which had been ordered by the appellant were received partly by steamer and partly by country craft. Consignments, which were imported by steamer and were valued at Rs. 5 lacs were confiscated by the Customs Authorities under section 167, item 8 of the Sea Customs Act but under section 183 of that Act the, appellant was given an option to pay fines aggregating Rs. 1,63,950 which sum on appeal was reduced to Rs. 82,250. This sum was paid and the dates were released. On the sale of the goods certain profits accrued out of which it sought to deduct Rs. 82,250 paid as penalty on ordinary principles of commercial accounting. The Income tax Officer disallowed this claim which was also disallowed by the Appellate Assistant Commissioner. On appeal to the Income tax Appellate Tribunal this sum was held to be allowable by a majority of two to one. At the instance of the respondent the Tribunal referred the following question to the High Court for its opinion: "Whether on the facts and in the circumstances of the case, the payment of Rs. 82,250 is an allowable expenditure under Section 10(2) (xv) of the Indian Income tax Act?" The High Court held that the above amount of Rs. 82,250 could not be said to have been paid for salvaging the goods but was paid as a penalty incurred in consequence of an illegal, act on the part of the appellant and was therefore not an allowable item under section 10(2)(xv) of the Income tax Act. Against this judgment the appellant firm has come in appeal to this Court by special leave. 83 654 any contract of hire purchase was contemplated, cannot be applied simpliciter, because such a contract has in it not only the element of bailment but also the element of sale. At common law the term 'hire purchase ' properly applies only to contracts of hire conferring an option to purchase, but it is often used to describe contracts which are in reality agreements to purchase chattels by instalments, subject to a condition that the property in them is not to pass until all instalments have been paid. The distinction between these two types of hire purchase contracts is, however, a most important one, because under the latter type of contract there is a binding obligation on the hirer to buy and the hirer can therefore pass a good title to a purchaser or pledgee dealing with him in good faith and without notice of the rights of the true owner, whereas in the case of a contract which merely confers an option to purchase there is no binding obligation on the hirer to buy, and a purchaser or pledgee can obtain no better title than the hirer had, except in the case of a sale in market overt, the contract not being an agreement to buy within the Factors Act, 1889, or the Sale of Goods Act, 1893." The observations quoted above are based mostly on two leading cases which have come to be regarded as the locus classicus upon the subject, namely Lee vs Butler (1) in which the transaction was described by Lord Esher, M.R., as "Hire and Purchase Agreements" and Helby vs Matthews (2) in which the House of Lords distinguished the former case on the ground that in that case there was a binding contract to buy and not merely an option to buy, without any obligation to buy. Both these cases were decided in terms of Factors Act of 1889 (52 & 53 Viet. c. 45, section 9). Both the kinds of agreements exemplified by the two leading cases aforesaid would now be included in the definition of 'hire purchase ' as contained in section 21 of the Hire Purchase Act, 1938 (1 & 2 Geo., 6, c. 53): " 'Hire purchase agreement ' means an agreement for the bailment of goods under which the bailee (1) (2) (1895] A.C. 471. 655 may buy the goods or under which the property in the goods will or may pass to the bailee, and where, by virtue of two or more agreements, none of which by itself constitutes a hire purchase agreement, there is a bailment of goods and either the bailee may buy the goods, or the property therein will or may pass to the bailee, the agreements shall be treated for the purposes of this Act as a single agreement made at the time when the last of the agreements was made. " It is clear that under the Law, as it now stands, which has now been crystallised into the section of the Hire Purchase Act, quoted above, the transaction partakes of the nature of a contract or bailment with an element of sale, as aforesaid, added to it. 'in such an agreement, the hirer may not be bound to purchase the thing hired;. he may or may not be. But in either case, if there is an obligation to buy, or an option to buy, the goods delivered to the hirer by the owner on the terms that the hirer, on payment of a premium as also of a number of instalments, shall enjoy the use of the goods, which ultimately may become his property, the transaction amounts to one of hire purchase, even though the title to the goods has remained with the owner and shall not pass to the hirer until a certain event has happened, namely, that all the stipulated instalments have been paid, or that the hirer has exercised his option to finalise the purchase on payment of a sum, nominal or otherwise. But it has been contended on behalf of the petitioners that there is no binding agreement to purchase the goods and that title is retained by the owner not as a security for payment of the price but absolutely. According to third term of the agreement, on the hirer duly performing and observing the terms of the agreement, with particular reference to the payment of the monthly instalments, "the hiring shall come to an end and the vehicle shall, at the option of the hirer, become his absolute property; but until such payments as aforesaid have been made, the vehicle shall remain the property of the owners. The hirer shall also have the option of purchasing the vehicle at any 656 belonging to him may be, the name and residence of the said person and the amount of penalty or increased rate of duty unrecovered; and such Magistrate shall thereupon proceed to enforce payment of the said amount in like manner as if such penalty or increased rate had been a fine inflicted by himself. " These sections show the punishments provided for the breach of the prohibitions in regard to importation or exportation of goods under sections 18 and 19; the power of the Customs Authorities to give an option to pay in lieu of confiscation and how the penalties are to be imposed. Therefore when the appellants incurred the liability they did so as a penalty for an infraction of the law; but it cannot be said that the money which they had to pay was not paid as a penalty and in fact under section 167(8) it was a penalty. In support of his argument counsel for the appellant firm referred to Maqbool Hussain etc. vs The State of Bombay etc. (1) and to the following passage at p. 742 where Bhagwati, J., said: "Confiscation is no doubt one of the penalties which the Customs Authorities can impose but that is more in the nature of proceedings in rem than proceedings in personam, the object being to confiscate the offending goods which have been dealt with contrary to the provisions of the law and in respect of the confiscation also an option is given to the owner of the goods to pay in lieu of confiscation such fine as the officer thinks fit. All this is for the enforcement of the levy of and safeguarding the recovery of the sea customs duties. " Similar observations were made by section K. Das, J., in Shewpujanrai Indrasanrai Ltd. vs The Collector of Customs & Ors. (2) where it was said that a distinction must be drawn between an action in rem and proceeding in personam and that confiscation of the goods is a proceeding in rem and the penalties are enforced against the goods whether the offender is known or not. The view taken by this Court in the other two cases cited by counsel for the appellants, i.e., Leo Roy (1) ; (2) ; , 836. 657 Frey vs The Superintendent, District Jail, Amritsar (1) and Thomas Dana vs The State of Punjab (2) is the same. In Dana case (2) Subba Rao, J., said at p. 298: "If the authority concerned makes an order of confiscation it is only a proceeding in rem and the penalty is enforced against the goods. On the other hand, if it imposes a penalty against the person concerned, it is a proceeding against the person and he is punished for committing the offence. It follows that in the case of confiscation there is no prosecution against the person or imposition of a penalty on him." In Maqbool Hussain 's case (3) the question for decision was whether after proceedings had been taken under the Sea Customs Act an accused person could be prosecuted and could or could not rely upon the plea of double jeopardy, it was held that he could not. In Shewpujanrai 's case (4) the contention raised was that after proceedings had been taken under the Foreign Exchange Regulation Act it was not open to the Customs Authorities to take any action under the Sea Customs Act. The other two cases were similar to Maqbool Hussain 's case (3). The contention now raised before us is quite different. What is to be decided in the present case is whether the penalty which was paid by the appellant firm was an allowable deduction within section 10(2)(xv) of the Income tax Act which provides: section 10(2)(xv) "any expenditure (not being in the nature of capital expenditure or personal expenses of the assessee) laid out or expended wholly and exclusively for the purpose of such business, profession or vocation. " The words "for the purpose of such business" have been construed in Inland Revenue vs Anglo Brewing Co. Ltd. (5) to mean "for the purpose of keeping the trade going and of making it pay". The essential condition of allowance is that the expenditure should have been laid out or expended wholly and exclusively for the purpose of such business. (1) ; (2) [1959] Supp. I S.C.R. 274, 298. (3) ; (4) ; , 836. (5) , 813. 658 In deciding this case, reference to decisions in some English cases will be fruitful. In Commissioners of Inland Revenue vs Warnes & Co. (1), the assessee who carried on the business of oil exporters were sued for a penalty on an information exhibited by the Attorney General under the Sea Customs Consolidation Act for breach of orders and proclamations. The matter was settled by consent on the assessee agreeing to pay a mitigated penalty of pound 2,000. All imputations on the moral culpability of the assessees were withdrawn. The provisions of the Act under which this information was lodged and penalty paid was similar to the provisions of the Indian Sea Customs Act. This amount was held not to be a proper deduction because in order to be within the provision similar to section 10(2) (xv) of the Indian Act the loss had to be something within commercial contemplation and in the nature of a commercial loss. Rowlatt, J., relying on the observation of Lord Loreburn, L. C., in Strong & Co. vs Woodifield (2) said at p. 452: "but it seems to me that a penal liability of this kind cannot be regarded as a loss connected with or arising out of a trade. I think that a loss connected with or arising out of a trade must, at any rate, amount to something in the nature of a loss which is contemplable and in the nature of a commercial loss. I do not intend that to be an exhaustive definition, but I do not think it is possible to say that when a fine which is what the penalty in the present case amounted to has been inflicted upon a trading body, it can be said that that is a "loss connected, with or arising out of" the trade within the meaning of this rule. " This statement of the law was approved in the Commissioners of Inland Revenue vs Alexander Von Glehn & Co. Ltd. (3) where also in similar circumstances by consent of the assessee penalty of pound 3,000 was paid and the penalty plus the costs were claimed as deduction in arriving at the profits. The Special Commissioners had found that the penalty and costs were incurred by the assessee in the course of carrying on (1) (2) ; (3) [1920] .2 K.B. 553. 659 their trade and so incidental thereto and were admissible deductions. Rowlatt, J., on a reference held it to be a non deductible item. This judgment was affirmed on appeal by the Court of Appeal. Lord Sterndale, M. R., was of the opinion that it was immaterial whether technically the proceedings were criminal or not. The money that was paid was paid as a penalty and it did not matter if in the information it was called a forfeiture. It was argued by the assessee in that case that no moral obliquity was attributed to them and that it did not matter whether the expense was incurred in consequence of an infraction of the law or whether it was a penalty for doing an illegal act. At p. 565 Lord Sterndale said: "Now what is the position here? This business could perfectly well be carried on without any infraction of the law. This penalty was imposed because of an infraction of the law, and that does not seem to me to be, any more than the expense which had to be paid in Strong & Co. vs Woodifield (1) appeared to Lord Davey to be, a disbursement or expense which was laid out or expended for the purpose of such trade. ." Warrington L.J. said at p.569: "It is a sum which the persons conducting the trade have had to pay because in conducting it they have so acted as to render themselves liable to this penalty. It is not a commercial loss, and I think when the Act speaks of a loss connected with or arising out of such trade it means a commercial loss, connected with or arising out of the trade. " In Strong & Co. vs Woodifield (1) a brewing company owned a licensed house in which they carried on the business of inn keepers. They incurred a liability to pay damages on account of injuries caused to a visitor, by the falling in of a chimney. This sum was held not to be allowable as a deduction in computing the profits ' Lord Loreburn, L. C., in his speech said no sum could be deducted unless it be money wholly and exclusively laid out or expended for the purpose of such (1) ; 660 trade and that only such losses could be deducted as were connected with it in the sense that they were really incidental to the trade itself and they could not be deducted if they were mainly incidental to some other vocation or fell on the trader in some character other than that of a trader. Lord Davey observed:"I think the disbursements permitted are such as are made for that purpose. It is not enough that the disbursement is made in the course of, or arise out of, or is connected with the trade or is made out of the profits of the trade. It must be made for the purpose of earning profits. " The following passage from Lord Sterndale 's judgment at p. 566 in Von Glehn 's case (1) from which we have already quoted shows the effect of incurring a penalty as a result of a breach of the law: "During the course of the trading this company committed a breach of the law. As I say, it has been agreed that they did not intend to do anything wrong in the sense that they were willingly and knowingly sending these goods to an enemy destination; but they committed a breach of the law, and for that breach of the law, they were fined. That, as it seems to me, was not a loss connected with the business, but was a fine imposed upon the company personally, so far as a company can be considered to be a person, for a breach of the law which it had committed. It is perhaps a little difficult to put the distinction into very exact language, but there seems to me to be a difference between a commercial loss in trading and a penalty imposed upon a person or a company for a breach of the law which they have committed in that trading. For that reason I think that both the decision of Rowlatt, J., in this case, and his former decision in Inland Revenue Commissioners vs Warnes & Co. (2) which he followed were right, and that this appeal should be dismissed with costs." In Spofforth and Prince vs Glider (3) the assessee was a firm of chartered accountants, who claimed a deduction for certain legal costs paid in connection with a (1) [1920) 2 K.B. 55.3. (2) (3) 661 successful defence of one of the partners in a Police Court. The assessee firm also sought legal advice in regard to matters connected with some proceedings. Summons were issued against the assessee firm but were eventually dismissed. The assessee contended that the whole of the costs incurred in connection with the proceedings were "wholly and exclusively" laid out or expended for the appellant 's profession and were therefore allowable deductions. The Special Commissioner had held against the assessee which was upheld by the Court. The test laid down by Lord Davey in Strong & Co. vs Woodifield (1) was applied and applying that test it was held that except the expenses for obtaining legal advice the other expenses were not admissible. In Farrie vs Hall (2) F, a sugar broker was sued in the High Court for libel and the Court held that F had acted maliciously and that the defence of privilege could not prevail and awarded damages against him. F sought to claim the amount of damages as an allowable deduction contending that it was an expenditure laid out wholly and exclusively for the purposes of his trade or was a loss connected with or arising out of the trade. Relying on the cases above mentioned this amount was disallowed because it fell on the assessee in his character of a calumniator of a rival sugar broker and it was only remotely connected with his trade as a sugar broker. Therefore it was not laid out exclusively and wholly for the purpose of his business. We were also referred to the observations of Danckwerts, J. in Newson vs Robertson (3) where it was said that if the expenditure is incurred by the tax payer for more than one purpose including the commercial purposes in the sense that it is incurred for the purposes of earning profits of the trade and also some outside purpose then the expenses cannot be claimed at all as not being wholly and exclusively laid out or expended for the purpose of the trade. In that case expenses claimed by a Barrister for (1) ; (2) (3) , 459. 84 662 travelling between his house and his chambers were disallowed because his object and purpose in travelling was mixed and not wholly and exclusively for the purpose of the profession. Coming now to Indian cases; In Mask & Co. vs Commissioner of Income tax, Madras (1) the assessee in breach of his contract sold crackers at a lower rate and a decree was passed against him for damages for breach of contract which he claimed as an allowable deduction. It was held that as the assessee had disregarded the undertaking given and his conduct was palpably dishonest it did not constitute an allowable expenditure. Sir Lionel Leach, C. J., after referring to Warne 's case (2) and Von Glehn 's case (3) held that the amount did not constitute an expenditure falling within section 10(2)(xii). The Madras High Court in Senthikumara Nadar & Sons vs Commissioner of Income tax, Madras (4) held that payments of penalty for an in. fraction of the law fell outside the scope of permissible deductions under section 10(2)(xv). In that case the assessee had to pay liquidated damages which was akin to penalty incurred for an act opposed to public policy a policy underlying the Coffee Market Expansion Act, 1942, and which was left to the Coffee Board to enforce. Reference was also made during the course of arguments to Commissioner of Income tax vs Hirjee (1). In that case the assessee was prosecuted under the Hoarding and Profiteering Ordinance but was finally acquitted and claimed the amount spent in defending himself under section 10(2)(xv) in his assessment. It was held that the distinction between the legal expenses on a successful and unsuccessful defence was not sound and that the deductibility of such expenses under section 10(2)(xv) must depend on the nature and purpose of the legal proceedings in relation to the business whose profits are in computation and are unaffected by the final outcome of the proceedings. A review of these cases shows that expenses which (1) (3) (2) (4) (5) ; 663 are permitted as deductions are such as are made for the purpose of carrying on the business, i.e., to enable a person to carry on and earn profit in that business. It is not enough that the disbursements are made in the course of or arise out of or are concerned with or made out of the profits of the business but they must also be for the purpose of earning the profits of the business. As was pointed out in Von Glehn 's case (1) an expenditure is not deductible unless it is a commercial loss in trade and a penalty imposed for breach of the law during the course of trade cannot be described as such. If a sum is paid by an assessee conducting his business, because in conducting it he has acted in a manner, which has rendered him liable to penalty it cannot be claimed as a deductible expense. It must be a commercial loss and in its nature must be con templable as such. Such penalties which are incurred by an assessee in proceedings launched against him for an infraction of the law cannot be called commercial losses incurred by an assessee in carrying on his business. Infraction of the law is not a normal incident of business and therefore only such disbursements can be deducted as are really incidental to the business itself. They cannot be deducted if they fall on the assessee in some character other than that of a trader. Therefore where a penalty is incurred for the contravention of any specific statutory provision, it cannot be said to be a commercial loss falling on the assessee as a trader the test being that the expenses which are for the purpose of enabling a person to carry on trade for making profits in the business are permitted but not if they are merely connected with the business. It was argued that unless the penalty is of a nature which is personal to the assessee and if it is merely ordered against the goods imported it is an allowable deduction. That, in our opinion, is an erroneous distinction because disbursement is deductible only if it falls within section 10(2)(xv) of the Income tax Act and no such deduction can be made unless it falls within the test laid down in the cases discussed above and it can be said to be expenditure wholly and exclusively laid for the purpose of the business. Can it be said (1) 664 that a penalty paid for an infraction of the law, even though it may involve no personal liability in the sense of a fine imposed for an offence committed, is wholly and exclusively laid for the business in the sense as those words are used in the cases that have been discussed above. In our opinion, no expense which is paid by way of penalty for a breach of the law can be said to be an amount wholly and exclusively laid for the purpose of the business. The distinction sought to be drawn between a personal liability and a liability of the kind now before us is not sustainable because anything done which is an infraction of the law and is visited with a penalty cannot on grounds of public policy be said to be a commercial expense for the purpose of a business or a disbursement made for the purposes of earning the profits of such business. In our opinion the High Court rightly held that the amount claimed was not deductible and we therefore dismiss this appeal with costs. Appeal dismissed.

IN-Abs

The appellant firm imported dates from abroad partly by steamer and partly by country craft. At the relevant time import of dates by steamers had been prohibited by Government (1) [1945] 1 3 I.T.R. Supp. (2) ; 652 notification, and the consignments which were imported by steamer were, therefore, confiscated by the customs authorities under section 167, item 8, of the Sea Customs Act, i878, but under section 183 of the Act the appellant was given an option to pay Rs. 82,250 as penalty in lieu of confiscation. The appellant paid the amount and got the dates released. Before the Income tax authorities it claimed to deduct the amount paid as penalty as an allowable expenditure under section 1O(2)(XV) of the Indian Income tax Act, 1922, but the claim was rejected. It was contended that the order of confiscation was against the stock in trade and not against the person of the appellant firm and as the amount paid was expended for the release of the stock in trade, it was an allowable expenditure. Held, that the amount paid by the appellant by way of penalty for a breach of the law could not be considered to be an expenditure laid out wholly and exclusively for the purpose of the business and was not an allowable deduction under section 1O(2) (xv) of the Indian Income tax Act, 1922. Expenses which are permitted as deductions are such as are made in order to enable a person to carry on and earn profit in the business. It is not enough that the disbursements are made in the course of or arise out of or are concerned with or made out of the profits of the business but they must also be for the purpose of earning the profits of the business. An expenditure is not deductible unless it is a commercial loss in trade and a penalty imposed for breach of the law during the course of trade cannot on grounds of public policy be said to be a commercial expense for the purpose of a business or disbursement made for the purpose of earning the profits of such business. Case law reviewed.

Appeal No.110 of 1957. Appeal by special leave from the judgment and order dated February 25, 1955, of the former Bombay High Court in I.T.R. No. 57/X of 1954. N. A. Palkhivala and I. N. Shroff, for the Appellant. A. N. Kripal and D. Gupta, for the Respondent. November 24. The Judgment of the Court was delivered by KAPUR, J. This is an appeal by special leave against the judgment and order of the High Court of Bombay answering the question submitted to it. against the assessee firm who is the appellant before 653 us, the respondent being the Commissioner of Income tax. The appeal relates to the assessment year 1949 50, the accounting year ended on July 25, 1948. The appellant is a firm doing the business of importing dates from abroad and selling them in India. During the accounting year the appellant imported dates from Iraq. At the relevant time the import of dates by steamers was prohibited by two notifications dated December 12, 1946, and June 4, 1947, but they were permitted to be brought by country craft. Goods which had been ordered by the appellant were received partly by steamer and partly by country craft. Consignments, which were imported by steamer and were valued at Rs. 5 lacs were confiscated by the Customs Authorities under section 167, item 8 of the Sea Customs Act but under section 183 of that Act the, appellant was given an option to pay fines aggregating Rs. 1,63,950 which sum on appeal was reduced to Rs. 82,250. This sum was paid and the dates were released. On the sale of the goods certain profits accrued out of which it sought to deduct Rs. 82,250 paid as penalty on ordinary principles of commercial accounting. The Income tax Officer disallowed this claim which was also disallowed by the Appellate Assistant Commissioner. On appeal to the Income tax Appellate Tribunal this sum was held to be allowable by a majority of two to one. At the instance of the respondent the Tribunal referred the following question to the High Court for its opinion: "Whether on the facts and in the circumstances of the case, the payment of Rs. 82,250 is an allowable expenditure under Section 10(2) (xv) of the Indian Income tax Act?" The High Court held that the above amount of Rs. 82,250 could not be said to have been paid for salvaging the goods but was paid as a penalty incurred in consequence of an illegal, act on the part of the appellant and was therefore not an allowable item under section 10(2)(xv) of the Income tax Act. Against this judgment the appellant firm has come in appeal to this Court by special leave. 83 654 any contract of hire purchase was contemplated, cannot be applied simpliciter, because such a contract has in it not only the element of bailment but also the element of sale. At common law the term 'hire purchase ' properly applies only to contracts of hire conferring an option to purchase, but it is often used to describe contracts which are in reality agreements to purchase chattels by instalments, subject to a condition that the property in them is not to pass until all instalments have been paid. The distinction between these two types of hire purchase contracts is, however, a most important one, because under the latter type of contract there is a binding obligation on the hirer to buy and the hirer can therefore pass a good title to a purchaser or pledgee dealing with him in good faith and without notice of the rights of the true owner, whereas in the case of a contract which merely confers an option to purchase there is no binding obligation on the hirer to buy, and a purchaser or pledgee can obtain no better title than the hirer had, except in the case of a sale in market overt, the contract not being an agreement to buy within the Factors Act, 1889, or the Sale of Goods Act, 1893." The observations quoted above are based mostly on two leading cases which have come to be regarded as the locus classicus upon the subject, namely Lee vs Butler (1) in which the transaction was described by Lord Esher, M.R., as "Hire and Purchase Agreements" and Helby vs Matthews (2) in which the House of Lords distinguished the former case on the ground that in that case there was a binding contract to buy and not merely an option to buy, without any obligation to buy. Both these cases were decided in terms of Factors Act of 1889 (52 & 53 Viet. c. 45, section 9). Both the kinds of agreements exemplified by the two leading cases aforesaid would now be included in the definition of 'hire purchase ' as contained in section 21 of the Hire Purchase Act, 1938 (1 & 2 Geo., 6, c. 53): " 'Hire purchase agreement ' means an agreement for the bailment of goods under which the bailee (1) (2) (1895] A.C. 471. 655 may buy the goods or under which the property in the goods will or may pass to the bailee, and where, by virtue of two or more agreements, none of which by itself constitutes a hire purchase agreement, there is a bailment of goods and either the bailee may buy the goods, or the property therein will or may pass to the bailee, the agreements shall be treated for the purposes of this Act as a single agreement made at the time when the last of the agreements was made. " It is clear that under the Law, as it now stands, which has now been crystallised into the section of the Hire Purchase Act, quoted above, the transaction partakes of the nature of a contract or bailment with an element of sale, as aforesaid, added to it. 'in such an agreement, the hirer may not be bound to purchase the thing hired;. he may or may not be. But in either case, if there is an obligation to buy, or an option to buy, the goods delivered to the hirer by the owner on the terms that the hirer, on payment of a premium as also of a number of instalments, shall enjoy the use of the goods, which ultimately may become his property, the transaction amounts to one of hire purchase, even though the title to the goods has remained with the owner and shall not pass to the hirer until a certain event has happened, namely, that all the stipulated instalments have been paid, or that the hirer has exercised his option to finalise the purchase on payment of a sum, nominal or otherwise. But it has been contended on behalf of the petitioners that there is no binding agreement to purchase the goods and that title is retained by the owner not as a security for payment of the price but absolutely. According to third term of the agreement, on the hirer duly performing and observing the terms of the agreement, with particular reference to the payment of the monthly instalments, "the hiring shall come to an end and the vehicle shall, at the option of the hirer, become his absolute property; but until such payments as aforesaid have been made, the vehicle shall remain the property of the owners. The hirer shall also have the option of purchasing the vehicle at any 656 belonging to him may be, the name and residence of the said person and the amount of penalty or increased rate of duty unrecovered; and such Magistrate shall thereupon proceed to enforce payment of the said amount in like manner as if such penalty or increased rate had been a fine inflicted by himself. " These sections show the punishments provided for the breach of the prohibitions in regard to importation or exportation of goods under sections 18 and 19; the power of the Customs Authorities to give an option to pay in lieu of confiscation and how the penalties are to be imposed. Therefore when the appellants incurred the liability they did so as a penalty for an infraction of the law; but it cannot be said that the money which they had to pay was not paid as a penalty and in fact under section 167(8) it was a penalty. In support of his argument counsel for the appellant firm referred to Maqbool Hussain etc. vs The State of Bombay etc. (1) and to the following passage at p. 742 where Bhagwati, J., said: "Confiscation is no doubt one of the penalties which the Customs Authorities can impose but that is more in the nature of proceedings in rem than proceedings in personam, the object being to confiscate the offending goods which have been dealt with contrary to the provisions of the law and in respect of the confiscation also an option is given to the owner of the goods to pay in lieu of confiscation such fine as the officer thinks fit. All this is for the enforcement of the levy of and safeguarding the recovery of the sea customs duties. " Similar observations were made by section K. Das, J., in Shewpujanrai Indrasanrai Ltd. vs The Collector of Customs & Ors. (2) where it was said that a distinction must be drawn between an action in rem and proceeding in personam and that confiscation of the goods is a proceeding in rem and the penalties are enforced against the goods whether the offender is known or not. The view taken by this Court in the other two cases cited by counsel for the appellants, i.e., Leo Roy (1) ; (2) ; , 836. 657 Frey vs The Superintendent, District Jail, Amritsar (1) and Thomas Dana vs The State of Punjab (2) is the same. In Dana case (2) Subba Rao, J., said at p. 298: "If the authority concerned makes an order of confiscation it is only a proceeding in rem and the penalty is enforced against the goods. On the other hand, if it imposes a penalty against the person concerned, it is a proceeding against the person and he is punished for committing the offence. It follows that in the case of confiscation there is no prosecution against the person or imposition of a penalty on him." In Maqbool Hussain 's case (3) the question for decision was whether after proceedings had been taken under the Sea Customs Act an accused person could be prosecuted and could or could not rely upon the plea of double jeopardy, it was held that he could not. In Shewpujanrai 's case (4) the contention raised was that after proceedings had been taken under the Foreign Exchange Regulation Act it was not open to the Customs Authorities to take any action under the Sea Customs Act. The other two cases were similar to Maqbool Hussain 's case (3). The contention now raised before us is quite different. What is to be decided in the present case is whether the penalty which was paid by the appellant firm was an allowable deduction within section 10(2)(xv) of the Income tax Act which provides: section 10(2)(xv) "any expenditure (not being in the nature of capital expenditure or personal expenses of the assessee) laid out or expended wholly and exclusively for the purpose of such business, profession or vocation. " The words "for the purpose of such business" have been construed in Inland Revenue vs Anglo Brewing Co. Ltd. (5) to mean "for the purpose of keeping the trade going and of making it pay". The essential condition of allowance is that the expenditure should have been laid out or expended wholly and exclusively for the purpose of such business. (1) ; (2) [1959] Supp. I S.C.R. 274, 298. (3) ; (4) ; , 836. (5) , 813. 658 In deciding this case, reference to decisions in some English cases will be fruitful. In Commissioners of Inland Revenue vs Warnes & Co. (1), the assessee who carried on the business of oil exporters were sued for a penalty on an information exhibited by the Attorney General under the Sea Customs Consolidation Act for breach of orders and proclamations. The matter was settled by consent on the assessee agreeing to pay a mitigated penalty of pound 2,000. All imputations on the moral culpability of the assessees were withdrawn. The provisions of the Act under which this information was lodged and penalty paid was similar to the provisions of the Indian Sea Customs Act. This amount was held not to be a proper deduction because in order to be within the provision similar to section 10(2) (xv) of the Indian Act the loss had to be something within commercial contemplation and in the nature of a commercial loss. Rowlatt, J., relying on the observation of Lord Loreburn, L. C., in Strong & Co. vs Woodifield (2) said at p. 452: "but it seems to me that a penal liability of this kind cannot be regarded as a loss connected with or arising out of a trade. I think that a loss connected with or arising out of a trade must, at any rate, amount to something in the nature of a loss which is contemplable and in the nature of a commercial loss. I do not intend that to be an exhaustive definition, but I do not think it is possible to say that when a fine which is what the penalty in the present case amounted to has been inflicted upon a trading body, it can be said that that is a "loss connected, with or arising out of" the trade within the meaning of this rule. " This statement of the law was approved in the Commissioners of Inland Revenue vs Alexander Von Glehn & Co. Ltd. (3) where also in similar circumstances by consent of the assessee penalty of pound 3,000 was paid and the penalty plus the costs were claimed as deduction in arriving at the profits. The Special Commissioners had found that the penalty and costs were incurred by the assessee in the course of carrying on (1) (2) ; (3) [1920] .2 K.B. 553. 659 their trade and so incidental thereto and were admissible deductions. Rowlatt, J., on a reference held it to be a non deductible item. This judgment was affirmed on appeal by the Court of Appeal. Lord Sterndale, M. R., was of the opinion that it was immaterial whether technically the proceedings were criminal or not. The money that was paid was paid as a penalty and it did not matter if in the information it was called a forfeiture. It was argued by the assessee in that case that no moral obliquity was attributed to them and that it did not matter whether the expense was incurred in consequence of an infraction of the law or whether it was a penalty for doing an illegal act. At p. 565 Lord Sterndale said: "Now what is the position here? This business could perfectly well be carried on without any infraction of the law. This penalty was imposed because of an infraction of the law, and that does not seem to me to be, any more than the expense which had to be paid in Strong & Co. vs Woodifield (1) appeared to Lord Davey to be, a disbursement or expense which was laid out or expended for the purpose of such trade. ." Warrington L.J. said at p.569: "It is a sum which the persons conducting the trade have had to pay because in conducting it they have so acted as to render themselves liable to this penalty. It is not a commercial loss, and I think when the Act speaks of a loss connected with or arising out of such trade it means a commercial loss, connected with or arising out of the trade. " In Strong & Co. vs Woodifield (1) a brewing company owned a licensed house in which they carried on the business of inn keepers. They incurred a liability to pay damages on account of injuries caused to a visitor, by the falling in of a chimney. This sum was held not to be allowable as a deduction in computing the profits ' Lord Loreburn, L. C., in his speech said no sum could be deducted unless it be money wholly and exclusively laid out or expended for the purpose of such (1) ; 660 trade and that only such losses could be deducted as were connected with it in the sense that they were really incidental to the trade itself and they could not be deducted if they were mainly incidental to some other vocation or fell on the trader in some character other than that of a trader. Lord Davey observed:"I think the disbursements permitted are such as are made for that purpose. It is not enough that the disbursement is made in the course of, or arise out of, or is connected with the trade or is made out of the profits of the trade. It must be made for the purpose of earning profits. " The following passage from Lord Sterndale 's judgment at p. 566 in Von Glehn 's case (1) from which we have already quoted shows the effect of incurring a penalty as a result of a breach of the law: "During the course of the trading this company committed a breach of the law. As I say, it has been agreed that they did not intend to do anything wrong in the sense that they were willingly and knowingly sending these goods to an enemy destination; but they committed a breach of the law, and for that breach of the law, they were fined. That, as it seems to me, was not a loss connected with the business, but was a fine imposed upon the company personally, so far as a company can be considered to be a person, for a breach of the law which it had committed. It is perhaps a little difficult to put the distinction into very exact language, but there seems to me to be a difference between a commercial loss in trading and a penalty imposed upon a person or a company for a breach of the law which they have committed in that trading. For that reason I think that both the decision of Rowlatt, J., in this case, and his former decision in Inland Revenue Commissioners vs Warnes & Co. (2) which he followed were right, and that this appeal should be dismissed with costs." In Spofforth and Prince vs Glider (3) the assessee was a firm of chartered accountants, who claimed a deduction for certain legal costs paid in connection with a (1) [1920) 2 K.B. 55.3. (2) (3) 661 successful defence of one of the partners in a Police Court. The assessee firm also sought legal advice in regard to matters connected with some proceedings. Summons were issued against the assessee firm but were eventually dismissed. The assessee contended that the whole of the costs incurred in connection with the proceedings were "wholly and exclusively" laid out or expended for the appellant 's profession and were therefore allowable deductions. The Special Commissioner had held against the assessee which was upheld by the Court. The test laid down by Lord Davey in Strong & Co. vs Woodifield (1) was applied and applying that test it was held that except the expenses for obtaining legal advice the other expenses were not admissible. In Farrie vs Hall (2) F, a sugar broker was sued in the High Court for libel and the Court held that F had acted maliciously and that the defence of privilege could not prevail and awarded damages against him. F sought to claim the amount of damages as an allowable deduction contending that it was an expenditure laid out wholly and exclusively for the purposes of his trade or was a loss connected with or arising out of the trade. Relying on the cases above mentioned this amount was disallowed because it fell on the assessee in his character of a calumniator of a rival sugar broker and it was only remotely connected with his trade as a sugar broker. Therefore it was not laid out exclusively and wholly for the purpose of his business. We were also referred to the observations of Danckwerts, J. in Newson vs Robertson (3) where it was said that if the expenditure is incurred by the tax payer for more than one purpose including the commercial purposes in the sense that it is incurred for the purposes of earning profits of the trade and also some outside purpose then the expenses cannot be claimed at all as not being wholly and exclusively laid out or expended for the purpose of the trade. In that case expenses claimed by a Barrister for (1) ; (2) (3) , 459. 84 662 travelling between his house and his chambers were disallowed because his object and purpose in travelling was mixed and not wholly and exclusively for the purpose of the profession. Coming now to Indian cases; In Mask & Co. vs Commissioner of Income tax, Madras (1) the assessee in breach of his contract sold crackers at a lower rate and a decree was passed against him for damages for breach of contract which he claimed as an allowable deduction. It was held that as the assessee had disregarded the undertaking given and his conduct was palpably dishonest it did not constitute an allowable expenditure. Sir Lionel Leach, C. J., after referring to Warne 's case (2) and Von Glehn 's case (3) held that the amount did not constitute an expenditure falling within section 10(2)(xii). The Madras High Court in Senthikumara Nadar & Sons vs Commissioner of Income tax, Madras (4) held that payments of penalty for an in. fraction of the law fell outside the scope of permissible deductions under section 10(2)(xv). In that case the assessee had to pay liquidated damages which was akin to penalty incurred for an act opposed to public policy a policy underlying the Coffee Market Expansion Act, 1942, and which was left to the Coffee Board to enforce. Reference was also made during the course of arguments to Commissioner of Income tax vs Hirjee (1). In that case the assessee was prosecuted under the Hoarding and Profiteering Ordinance but was finally acquitted and claimed the amount spent in defending himself under section 10(2)(xv) in his assessment. It was held that the distinction between the legal expenses on a successful and unsuccessful defence was not sound and that the deductibility of such expenses under section 10(2)(xv) must depend on the nature and purpose of the legal proceedings in relation to the business whose profits are in computation and are unaffected by the final outcome of the proceedings. A review of these cases shows that expenses which (1) (3) (2) (4) (5) ; 663 are permitted as deductions are such as are made for the purpose of carrying on the business, i.e., to enable a person to carry on and earn profit in that business. It is not enough that the disbursements are made in the course of or arise out of or are concerned with or made out of the profits of the business but they must also be for the purpose of earning the profits of the business. As was pointed out in Von Glehn 's case (1) an expenditure is not deductible unless it is a commercial loss in trade and a penalty imposed for breach of the law during the course of trade cannot be described as such. If a sum is paid by an assessee conducting his business, because in conducting it he has acted in a manner, which has rendered him liable to penalty it cannot be claimed as a deductible expense. It must be a commercial loss and in its nature must be con templable as such. Such penalties which are incurred by an assessee in proceedings launched against him for an infraction of the law cannot be called commercial losses incurred by an assessee in carrying on his business. Infraction of the law is not a normal incident of business and therefore only such disbursements can be deducted as are really incidental to the business itself. They cannot be deducted if they fall on the assessee in some character other than that of a trader. Therefore where a penalty is incurred for the contravention of any specific statutory provision, it cannot be said to be a commercial loss falling on the assessee as a trader the test being that the expenses which are for the purpose of enabling a person to carry on trade for making profits in the business are permitted but not if they are merely connected with the business. It was argued that unless the penalty is of a nature which is personal to the assessee and if it is merely ordered against the goods imported it is an allowable deduction. That, in our opinion, is an erroneous distinction because disbursement is deductible only if it falls within section 10(2)(xv) of the Income tax Act and no such deduction can be made unless it falls within the test laid down in the cases discussed above and it can be said to be expenditure wholly and exclusively laid for the purpose of the business. Can it be said (1) 664 that a penalty paid for an infraction of the law, even though it may involve no personal liability in the sense of a fine imposed for an offence committed, is wholly and exclusively laid for the business in the sense as those words are used in the cases that have been discussed above. In our opinion, no expense which is paid by way of penalty for a breach of the law can be said to be an amount wholly and exclusively laid for the purpose of the business. The distinction sought to be drawn between a personal liability and a liability of the kind now before us is not sustainable because anything done which is an infraction of the law and is visited with a penalty cannot on grounds of public policy be said to be a commercial expense for the purpose of a business or a disbursement made for the purposes of earning the profits of such business. In our opinion the High Court rightly held that the amount claimed was not deductible and we therefore dismiss this appeal with costs. Appeal dismissed.

IN-Abs

The appellant firm imported dates from abroad partly by steamer and partly by country craft. At the relevant time import of dates by steamers had been prohibited by Government (1) [1945] 1 3 I.T.R. Supp. (2) ; 652 notification, and the consignments which were imported by steamer were, therefore, confiscated by the customs authorities under section 167, item 8, of the Sea Customs Act, i878, but under section 183 of the Act the appellant was given an option to pay Rs. 82,250 as penalty in lieu of confiscation. The appellant paid the amount and got the dates released. Before the Income tax authorities it claimed to deduct the amount paid as penalty as an allowable expenditure under section 1O(2)(XV) of the Indian Income tax Act, 1922, but the claim was rejected. It was contended that the order of confiscation was against the stock in trade and not against the person of the appellant firm and as the amount paid was expended for the release of the stock in trade, it was an allowable expenditure. Held, that the amount paid by the appellant by way of penalty for a breach of the law could not be considered to be an expenditure laid out wholly and exclusively for the purpose of the business and was not an allowable deduction under section 1O(2) (xv) of the Indian Income tax Act, 1922. Expenses which are permitted as deductions are such as are made in order to enable a person to carry on and earn profit in the business. It is not enough that the disbursements are made in the course of or arise out of or are concerned with or made out of the profits of the business but they must also be for the purpose of earning the profits of the business. An expenditure is not deductible unless it is a commercial loss in trade and a penalty imposed for breach of the law during the course of trade cannot on grounds of public policy be said to be a commercial expense for the purpose of a business or disbursement made for the purpose of earning the profits of such business. Case law reviewed.

Appeal No. 358 of 1958. 645 Appeal by special leave from the judgment and order dated 8th March, 1956, of the former Bombay High Court in I.T.R. No. 55 of 1955. A. N. Kripal and D. Gupta, for the appellant. N. A. Palkhivala and B. P. Maheshwari, for the respondents. November 24. The Judgment of the Court was delivered by KAPUR, J. This is an appeal by special leave against the judgment and order of the High Court of Bombay in Income tax Reference No. 55 of 1955, in which two questions of law were stated for opinion and both were answered in favour of the assessee and against the Commissioner of Income tax who is the appellant before us and the assessee is the respondent. The facts of this case are these: The respondent is a registered firm carrying on business as commission agents in Bombay. For purposes of its business it borrowed money from time to time from Banks on joint promissory notes executed by it and by others with joint and several liability. On September 26, 1949, the respondent borrowed Rs. 1,00,000 from the Bank of India on a pronote executed jointly with one Kishorilal. Out of this amount a sum of Rs. 50,000 was taken by the respondent for purposes of its business and the rest by Kishorilal. Kishorilal however failed to meet his liability and became a bankrupt. The respondent had therefore to pay the Bank the whole amount, i.e., Rs. 1,00,000 with interest. Out of the amount taken by Kishorilal the respondent received in the accounting year, from the Official Assignee, a sum of Rs. 18,805 and claimed the balance, i.e., Rs. 31,740 as deduction. The accounting year was from August 26, 1949 to July 17, 1950, the assessment year being 1951 52. This claim was disallowed both by the Income tax Officer as well as the Appellate Assistant Commissioner. On Appeal to the Income tax Appellate Tribunal this sum was allowed ,as an allowable deduction under section 10(2)(xv) of the Income tax Act and as business loss. 82 646 At the instance of the Commissioner a case was stated to the High Court of Bombay by the Income tax Appellate Tribunal. In the statement of the case which was agreed to by both parties the Tribunal said: "For the purpose of his business, he borrows from time to time money on joint and several liability from banks. The Commercial practice is to borrow money from banks on joint and several liability. An illustration will explain what we mean. A and B require Rs. 50,000 each. They find that the Bank would not advance Rs. 50,000 to each on his individual security. They however, find that the Bank would be prepared to advance Rupees one lach on their joint and several liability. They take Rupees one lac on joint and several liability and then divide the money equally between themselves. " It also found that the Banks advanced monies to some constituents on their personal security also but they had to pay a higher rate of interest than when the money was borrowed on joint and several responsibility; that Rs. 1,00,000 borrowed from the Bank was in accordance with the commercial practice of Bombay. On these facts the following two questions of law were referred to the High Court: "(1) Whether the assessee 's claim is sustainable under section 10(2)(xv) of the Act? (2) Whether the assessee 's claim that the loss was a business loss and, therefore, allowable as a deduction in computing the profits of the assessee 's business is sustainable under law?" Both these questions were answered in favour of the respondent and against the appellant. Counsel for the Commissioner challenged the findings of the Tribunal in regard to the existence of commercial practice in Bombay but this ground of attack is not available to him because not only did the Tribunal give this finding in its Order, but in the agreed statement of the case also this finding was repeated as is shown by the passage quoted above. The High Court also has proceeded on the basis of this commercial practice. In the judgment under appeal the learned Chief Justice said: 647 "The finding of the Tribunal is clear and explicit that what the assessee was doing was not something out of the ordinary, but in borrowing this money on joint and several liability he was following a practice which was established as a commercial practice. Therefore, the transaction was clearly in the course of the business and incidental to the business and it is this transaction which resulted in a loss to the assesses, he having to pay the liability of the surety. " Therefore this appeal has to be decided on the basis that a commercial practice of financing business by borrowing money on joint and several liability was established. It was argued on behalf of the appellant that this court in Madan Gopal Bagla vs Commissioner of Income Tax, West Bengal (1) had decided against the allowability of such losses. But the facts of that case when carefully scrutinised are distinguishable and the decision does not support the contentions of the appellant. No doubt certain features of that case and the present one are similar but they differ in essential features. In that case the assessee was a timber merchant who obtained a loan of Rs. 1 lac from the Bank of India on the joint security of himself and one Mamraj, which the assessee paid off. Mamraj also obtained a loan of Rs. I lac on the joint security of himself and the assessee. Mamraj became an insolvent and the assessee had to pay the whole of the amount borrowed with interest thereon. The assessee there received a certain amount of money by way of dividends from the Receiver and the balance he wrote off as bad debt in the assessment year and claimed it as an allowable deduction under section 10. The High Court there held that the debt could not be said to be a debt in respect of the business of the assessee as he was not carrying on the business of standing surety for other persons nor was he a money lender, he being simply a timber merchant; that it had not been established nor was it alleged that he was in the habit of standing surety for other persons "along with them for purposes of securing loans for their use and benefit" and even if money (1) ; 648 had been so borrowed and there had been a loss the loss would have been a capital loss and not a business loss to the assessee. This statement of the law was approved by this Court but there mutuality, as an essential ingredient of the custom established, was found to be lacking as is shown by the following passage from the judgment of the court. "The custom stated before the Appellate Assistant Commissioner was that persons carrying on business in Bombay used to borrow monies on joint security from the Banks in order to facilitate getting financial assistance from the Banks and that too at lower rates of interest. A businessman could procure financial assistance from the Banks on his own, but he would in that case have to pay a higher rate of interest. He would have to pay a lower rate of interest if he could procure as surety another business man, who would be approved by the Bank. This, however, did not mean that mutual accommodation by businessmen was necessarily an ingredient part of that custom. A could procure B, C or D to join him as surety in order to achieve this objective, but it did not necessarily follow that if A wanted to procure B, C or D to thus join him as surety he could only do so if he in his own turn joined B, C or D as surety in the loans which B, C or D procured in their turns from the Banks for financing their respective businesses. Unless that factor was established, the mere procurement by A of B, C or D as surety would not be sufficient to establish the custom sought to be relied upon by the appellant so as to make the transaction of his having joined Mumraj Rambhagat as surety in the loan procured by Mumraj Rambhagat from Imperial Bank of India, a transaction in the course of carrying on his own timber business and to make the loss in the transaction a trading loss or a bad debt of the timber business of the appellant. " Continuing at page 558 it was observed: "There were thus elements of mutuality and the essential ingredient in the carrying on of the money lending business, which were elements of the custom 649 proved in that case, both of which are wanting in the present case before us." Mr. Palkhivala for the respondent rightly argued that Madan Gopal Bagla 's case (1) was decided against the assessee because the custom of persons standing surety for each other for borrowing money and the element of mutuality which was an essential ingredient in the case of Commissioner of Income Tax, Madras vs section A. section Ramaswamy Chettiar (2) was not proved. In the latter case it was established that there was a well recognised custom amongst Chettiars of raising funds for their business of money lenders by the execution of joint pronotes and that if a loss was sustained by one of the executants having to pay the whole on account of inability of the other it was a deductible loss. The appellant also relied on a judgment of the Madras High Court in Commissioner of Income Tax vs section R. Subramanya Pillai (3). In that case the assessee was a book seller who from time to time jointly with another person borrowed money out of which he employed a portion in his business. One of such amounts borrowed was Rs. 16,200 out of which the assessee took Rs. 10,450 for his business needs and the other debtor took the balance. The latter became insolvent and the assessee had to pay the whole of the money borrowed and claimed it as allowable deduction under section 10(2)(xi) or section 10(2)(xv) of the Act or as business loss and it was hold that he was not entitled, because the loss sustained by the assessee was too remote from the business of book selling carried on by him and was not sufficiently connected with the trade and therefore fell outside the range of those amounts which could properly be brought into profit and loss account of the business. The decision in Commissioner of Income Tax vs section A. section Ramaswamy Chettiar (2) was there distinguished on the ground that the decision must be confined to its own peculiar facts and did not apply to business as the one in Subramanya Pillai 's Case (3). The following passage from (1) ; , (2) (3) 650 the judgment of Viswanatha Sastri, J., in that case is relevant: "But there the business was one of money lending and the Court found that according to the wellknown and well recognised mercantile custom of Nattukottai bankers, they were in the habit of raising 'funds which formed the stock in trade of their money lending business by the execution of joint promissory notes in favour of bankers. That was apparently the usual technique of obtaining credit adopted by the Nattukottai Chetti community money lenders. In the context this Court held that where a Nattukottai Chetti money lender paid off in their entirety the debts jointly due by him and another as a result of the latter 's inability to pay, the loss sustained as a result of this transaction was a loss of the moneylending business itself and therefore a deductible item in computing profits. " In the instant case it has been found that there was a well recognised commercial practice in Bombay of carrying on business by borrowing money from Banks on joint and several liability. It was also found that by so doing the borrower could borrow money at a lower rate of interest than he otherwise would have paid; that the respondent had, in accordance with the commercial practice, borrowed the money, the whole of which he had to return because the joint promisor Kishori Lal had become bankrupt; mutuality was also held proved. It cannot be said that the essential feature of the case now before us is in principle different from that of the Commissioner of Income tax vs Ramaswamy Chettiar (1). In both cases the finding is that there is mutuality and custom of borrowing money on joint pronotes for the carrying on of business. In our opinion in the circumstances proved in the present case, and on the facts established and on the findings given, the respondent was rightly held to be entitled to deduct the loss which was suffered by him in the transaction in dispute. Counsel for the assessee drew our attention to a (1) 651 Privy Council judgment Montreal Coke and Manufacturing Co. vs Minister of National Revenue (1) but that, case can have no application to the facts of the present case because it was found there as a fact that the assessees 's financial arrangements were quite distinct from the activities by which they earned their income and expenditure incurred in relation to the financing ' of their business was not expenditure in the earning of their income within the statute. It was then contended that the loss of the respondent was a 0capital loss and for this again reliance was placed on the judgment of this Court in Madan Gopal Bagla 's case (2 ) and particularly on the observation at page 559 where Bhagwati, J., quoted with approval the observations of the High Court in the judgment but as we have pointed out the facts of that case are distinguishable and what was said there has no application to the facts and circumstances proved in the present case. In our view the judgment of the High Court is right and we therefore dismiss this appeal with costs. Appeal dismissed.

IN-Abs

For the purposes of its business the respondent borrowed a certain sum of money from the Bank of India on a pronote executed jointly by him and one Kishorilal in accordance with a commercial practice of carrying on business by borrowing money from Banks on joint and several liability. The money was divided half and half between the respondent and Kishorilal but Kishorilal failed to pay off his liability as he became a bankrupt and the respondent had to pay the whole amount to the Bank. The respondent, however, received from the Official Assignee a part of the sum taken by the Kishorilal leaving a balance still unpaid. The respondent 's claim to deduct this unpaid balance under section 10(2)(XV) of the Income tax Act was refused by the Income tax Officer and the Appellate Assistant Commissioner but was allowed by the Income tax Appellate Tribunal on appeal. On a reference made at the instance of the appellant the High Court decided the question in favour of the respondent assessee. On appeal by the appellant by special leave, Held, that the view taken by the High Court was correct. On the finding that there was a well establised Commercial practice of financing business by borrowing money on joint and several liability and by so doing the respondent could borrow at a lower rate of interest, and that there was mutuality between the borrowers for standing surety for each other for loans taken for business purposes, the respondent assessee in computing his business profits was entitled to deduct the loss suffered by him in paying the sum not paid by his co borrower. Commissioner of Income tax vs Ramaswami Chettiar, , applied. Madan Gopal Bagla vs Commissioner of Income tax, West Bengal, ; , Commissioner or Income tax vs section R. Subramanya Pillai, distinguished. Montreal Coke and Manufacturing Co. vs Minister of National Revenue, [1945] 13 I.T.R. Supp. 1, not applicable.

Appeal No. 285 of 1959. Appeal by Special Leave from the Judgment and Decree dated the 13th July, 1956, of the Patna High Court in M. J. C. No. 404 of 1954. M. C. Setalvad, Attorney General for India and section P. Varma, for the Appellants. A. V. Viswanatha Sastri, Suresh Aggarwala and D. P. Singh, for the Respondent. 1960. November 21. The Judgment of the Court was delivered by 524 SINHA, C.J. This appeal, by special leave, is directed against the judgment and order of the High Court of Patna dated July 13, 1956 disposing of a reference under section 25(1) of the Bihar Sales Tax Act, 1947, which hereinafter will be referred to as the Act, made by the Board of Revenue, Bihar. The facts of this case have never been in dispute and may shortly be stated as follows. The appellant is a Corporation incorporated under the Damodar Valley Corporation Act (XIV of 1948) and will hereinafter be referred to as the Corporation. It is a multipurpose Corporation, one of its objects being the construction of a number of dams in Bihar and Bengal with a view to controlling floods and utilising the stored water for purposes of generation of electricity. One of such dams is the Konar Dam in the district of Hazaribagh in Bihar. For the construction of the aforesaid Dam the Corporation entered into an agreement with Messrs Hind Construction Ltd. and Messrs Patel Engineering Co. Ltd. on May 24, 1950, and appointed them contractors for the aforesaid purpose. They will hereinafter be referred to as the Contractors. As a result of a change in the design of the Dam, it became necessary to enter into a supplementary agreement and on March 10, 1951, cl. 8 of Part II of the original agreement was amended and a fresh cl. 8 was substituted. Under the new cl. 8 of the agreement, as amended, the Corporation agreed to make available to the contractors such equipment as was necessary and suitable for the construction aforesaid. The Contractors are charged the actual price paid by the Corporation for the equipment and machinery thus made available, inclusive of freight and customs duty, if any, as also the cost of transport, but excluding sales tax. The equipment thus supplied by the Corporation to the Contractors was classified into two groups, Group A and Group B, as detailed in Schedule No. 2. The machinery in Group A was to be taken over from the Contractors by the Corporation, after the completion of the work at their "residual value" which was to be calculated in the manner set out in the agreement. The machinery in Group B was to become the 525 property of the Contractors after its full price had been paid by them. No more need be said about the machinery in Group B, because there is no dispute about that group, the Contractors having accepted the position that Group B machinery had been sold to them. The controversy now remaining between the parties relates to the machinery in Group A. On August 12, 1952, the Superintendent of Sales Tax, Hazaribagh, assessed the Corporation under section 13(5) of the Act for the period April, 1950 to March, 1952. It is not necessary to set out the details of the tax demand, because the amount is not in controversy. What was contended before the authorities below and in this Court was that the transaction in question did not amount to a "sale" within the meaning of the Act. The Superintendent rejected the contention raised on behalf of the Corporation that it was not liable to pay the tax in respect of the machinery sup plied to the Contractors. The Corporation went up in appeal to the Deputy Commissioner of Sales Tax against the said order of assessment. By his order dated May 5, 1953, the Deputy Commissioner rejected the contention of the appellant as to its liability under the Act, but made certain amendments in the assessment which are not material to the points in controversy before us. The Deputy Commissioner repelling the Corporation 's contentions based on the Act, held inter alia that the supply of equipment in Group A of the agreement aforesaid amounted to a sale and was not a hire ; that the condition in the agreement for the "taking over" of the equipment on conditions laid down in the agreement was in its essence a condition of repurchase and that the Corporation was a "dealer" within the meaning of the Act. The Corporation moved the Board of Revenue, Bihar, in its revisional jurisdiction under section 24 of the Act. The Board of Revenue by its resolution dated October 1, 1953, rejected the revisional application and upheld the order of the authorities below. Thereafter, the Corporation made an application to the Board of Revenue under section 25 of the Act for a reference to refer the following 67 526 questions to the High Court at Patna, namely, (a) whether the assessment under section 13(5) of the Act is maintainable, (b) whether, in the facts and circumstances of the case, it can be held that the property in the goods included in Schedule A did pass to the Contractors and the transaction amounted to a sale, and (c) whether the terms of the agreement amount to sale transactions with the Contractors and taking over by the Corporation amounts to repurchase. This application was made on December 22, 1953, but when the application for making a reference to the High Court came up for hearing before the Board of Revenue on May 20, 1954, and after the parties had been heard, counsel for the Corporation sought leave of the Board to withdraw questions (a) and (c) from the proposed reference and the Board passed the following order: "Leave is sought by the learned advocate for the petitioner to drop questions (a) and (c) from the reference. The leave is granted. There remains only question (b) for reference to the High Court. . " Thus only question (b) set out above was referred to the High Court for its decision. After hearing the parties, a Division Bench of the High Court, Ramaswami, C. J. and Raj Kishore Prasad, J., heard the reference and come to the conclusion by its judgment dated July 13, 1956, that the reference should be answered in the affirmative, namely, that the transaction in question amounted to a sale within the meaning of section 2(g) of the Act. Thereupon the Corporation made an application headed as under article 132(1) of the Constitution and prayed that the High Court "be pleased to grant leave to appeal to the Supreme Court of India and grant the necessary certificate that this case is otherwise a fit case for appeal to the Supreme Court. . " Apart from raising the ground of attack dealt with by the High Court on the reference as aforesaid, the Corporation at the time of the hearing of the applica tion appears to have raised other questions as would appear from the following extract from the judgment and order of the High Court dated January 31, 1957 : 527 "It was conceded by learned counsel for the petitioner that the case does not fulfill the requirements of Article 133(1) of the Constitution; but the argument is that leave may be granted under Article 132 of the Constitution as there is a substantial question of law with regard to the interpretation of the Constitution involved in this case. We are unable to accept this argument as correct. It is not possible for us to hold that there is any substantial question of law as to the interpretation of the Constitution involved in this case. The question at issue was purely a matter of construction of section 2(g) of the Bihar Sales Tax Act and that question was decided by this Court in favour of the State of Bihar and against the petitioner. It is argued now on behalf of the petitioner that the provisions of section 2(g) of the Bihar Sales Tax Act are ultra vires of the Constitution, but no such question was dealt with or decided by the High Court in the reference. We do not, therefore, consider that this case satisfies the requirements of article 132(1) of the Constitution and the petitioner is not entitled to grant of a certificate for leave to appeal to the Supreme Court under this Article. The application is accordingly dismissed. " Having failed to obtain the necessary certificate from the High Court, the Corporation moved this Court and obtained special leave to appeal under article 136 of the Constitution. The leave was granted on March 31, 1958. Though the scope of the decision of the High Court under section 25 of the Act on a reference made to it is limited, the Corporation has raised certain additional points of controversy, which did not form part of the decision of the High Court. Apart from the question whether the transaction in question amounted to a sale within the meaning of the Act, the statement of the case on behalf of the appellant raises the following additional grounds of attack, namely, (1) that the Corporation is not a dealer within the meaning of the Act, (2) that the proviso to section 2(g) of the Act is ultra vires the Bihar Legislature and (3) that the Act itself is ultra vires the Bihar Legislature by reason of the 528 legislation being beyond the scope of entry 48 in List II of Schedule 7 of the Government of India Act, 1935. Hence, a preliminary objection was raised on behalf of the respondent that the additional grounds of attack were not open to the Corporation in this Court. It is, therefore, necessary first to determine whether the additional grounds of attack set out above are open to the Corporation. In our opinion, those additional grounds are not open. They were never raised at any stage of the proceedings before the authorities below, or in the High Court. This Court is sitting in appeal over the decision of the High Court under section 25 of the Act. The High Court in coming to its conclusion was acting only in an advisory capacity. It is well settled that the High Court acting in its advisory capacity under the taxing statute cannot go beyond the questions referred to it, or on a reference called by it. The scope of the appeal to this Court, even by special leave, cannot be extended beyond the scope of the controversy that could have been legally raised before the High Court. It is manifest that the High Court could not have expressed its opinion on any matter other than the question actually before it as a result of the reference made by the Board of Revenue. The preliminary objection must, therefore, be allowed and the appeal limited to the question whether the transaction in question in this case amounted to a sale within the meaning of the Act. It is manifest that this controversy between the parties has to be resolved with reference to the terms of the contract itself. Clause 8 of the agreement as amended is a very complex one as will presently appear from the following extracts, being the relevant portions of that clause : "The Corporation may hire or make available such of its equipment as is suitable for construction for the use of the Contractor. The actual prices paid by the Corporation for the equipment thus made available, inclusive of freight, insurance and custom duties, if any, and the cost of its transport to site but excluding such tax as sales tax whether local, municipal, State or Central, shall be charged to the 529 Contractor and the equipment shall remain the property of the Corporation until the full prices thereof have been realised from the Contractor. Equipment lent for the Contractor 's use, if any, shall be charged to him on terms of hiring to be mutually agreed upon; such terms will cover interest on capital cost and the depreciation of the equipment. The Corporation will supply to the Contractor the machinery mentioned in Schedule No. 2, Group A and Group B below." Then follows a description seriatim of the many items of machinery in Group A with the number of such machinery and the approximate cost thereof. In this Group A, there are fourteen items of which it is only necessary to mention the first one, that is to say, four excavators with accessories approximately valued at Rs. 12,46,390; and No. 14, two excavators of another model, approximately costing Rs. 3,35,000. The total approximate cost of the machinery in Group A is estimated to be Rs. 42,63,305. Then follow the descriptions of machinery in Group B, the approximate cost of which is Rs. 21,84,148. Then follow certain conditions in respect of equipments included in Group A, in these words: "The Corporation will take over from the Contractor item 1 and 14 on the completion of the work at a residual value calculated on the basis of the actual number of hours worked assuming the total life to be 30,000 hours and assuming that the machinery will be properly looked after during the period of its operation. The remaining items of this group will be taken over by the Corporation at their residual value taking into account the actual number of hours worked and the standard life of such machinery for which Schedule F. as last relished, ? of the U. section Bureau of Industrial Revenue, on the probable useful life and depreciation rates allowable for Income Tax purpose (vide Engineering News Record dated March 17, 1949) will serve as a basis, provided that the machinery shall be properly looked after by the Contractor during the period of its operation. Provided further that such residual value of the machinery shall be assessed 530 jointly by representatives of the Corporation and of the Contractor and that in case of difference of opinion between the two parties the matter shall be settled through arbitration by a third party to be agreed to both by the Corporation and the Contractor. The items included in this group will be taken over by the Corporation from the Contractor either on the completion of the work or at an earlier date if the Contractor so wishes, provided that in the latter case the equipments will be taken over by the Corporation only when they are declared surplus at Konar and such declaration is duly certified by the Consulting Engineer, within a period of 15 days of such declaration being received by the Corporation. In respect of the machinery which shall have been delivered to the Contractor on or before the 31st of December 1950, their cost shall be recovered from the Contractor in eighteen equal instalments beginning with January 1951 and in respect of the remaining items included in this group of machinery, their cost will be recovered from the Contractor in eighteen equal instalments beginning with July 1951, provided that these remaining items shall have been delivered to the Contractor prior to the last specified date. Provided (a) that the total actual price for these equipments which has been provisionally estimated at Rs. 42,63,305 will be chargeable to the Contractor as per first para of clause 1 above. (b) that after approximately two thirds of total cost or an amount of Rs. 28,43,000 (Rupees twenty eight lakhs forty three thousand) approximately has been recovered from the Contractor on account of these equipments the Corporation will consider the date or dates when it could take over the equipments still under use by the Contractor, assess the, extent to which they have already been depreciated and thereby arrive at, their residual value; and (c) that the recovery or refund of the amount payable by or to the Contractor on account of these equipments will be decided only if the Corporation is fully satisfied that their residual life at the time of 531 their being finally handed over to the Corporation shall under no circumstances fall below one third of their respective standard life as agreed upon by the Corporation and the Contractor." Then follow terms and conditions in respect of Group 'B ' which are not relevant to our purpose. Thereafter, the following conditions appear: "In respect of equipments whether in Group A or B made available by the Corporation to the Contractor. The following conditions shall apply to all equipments, i.e., those included in Group A and B above and others, if any (a) The Contractor shall continuously maintain proper machine cards separately in respect of each item of equipment, clearly showing therein, day by day, the number of actual hours the machine has worked together with the dates and other relevant particulars. (b) The Contractor shall maintain all such equipments in good running condition and shall regularly and efficiently give service to all plant and machinery, as may be required by the Corporation 's Chief Engineer who shall have the right to inspect, either personally or through his authorised representatives all such plant and equipment and the machine cards maintained in respect thereof at mutually convenient hours. (c) No item of equipment made available by the Corporation on loan or hire shall at any time be removed from the work site under any circumstances until the full cost thereof has been recovered from the Contractor by the Corporation and thereafter only if in the opinion of the Consulting Engineer the removal of such item or items is not likely to impede the satisfactory prosecution of the work. Similarly no item of equipment or material belonging to the Contractor but towards the cost of which money has been advanced by the Corporation shall at any time be removed from the work site under any circumstances until the amount of money so advanced has been recovered from the Contractor by 532 the Corporation and thereafter if in the opinion of the Consulting Engineer the removal of such item or items is not likely to impede the satisfactory prosecution of the work. (d) The Corporation shall supply to the Contractor whatever spares have been procured or ordered for the equipment already supplied or to be supplied by the Corporation to the Contractor under the terms of this Agreement and that thereafter the replenishment of the stock of spares shall be entirely the responsibility of the Contractor who shall therefore take active steps in time to procure fresh spares so as to maintain a sufficient reserve. The spares to be supplied by the Corporation will be issued to the Contractor by the Executive Engineer, Konar as and when required by the Contractor against indent accompanied by a certificate that the spares previously issued to him have been actually used up on the machines for which they were intended. (e) Whenever spares are issued to the Contractor in accordance with this provision, their actual prices inclusive of freight, insurance and customs but excluding storage and handling charges shall be debited against him and recovered from his next fortnightly bill. (f) In order to enable the Contractor to take active steps for planning the procurement of additional spares in advance, the Corporation shall forthwith furnish to him a complete list of all the spares which it has procured or ordered for the equipment to be supplied to the Contractor. " The portions quoted above contain the relevant terms and conditions in respect of the transaction in question, so far as it is necessary to know them for the purpose of this case. It will be noticed that the Corporation made available to the Contractors different kinds of machinery and equipment detailed in Group A of the approximate value of Rs. 42,63,000 odd, for which the price paid by the Corporation inclusive of freight, insurance, customs duty etc. has to be charged to them. But the machinery and the equipment so 533 made available to the Contractors were to remain the property of the Corporation until the, full price thereof had been realised from the Contractors. It is also noteworthy that the agreement makes a distinction between the aforesaid part of the agreement and the equipment lent to the contractors in respect of which the contractors had to be charged in terms of hiring, including interest on capital cost and the depreciation of equipment. Thus clearly the agreement between the parties contemplated two kinds of dealings between them, namely (1) the supply of machinery and equipments by the Corporation to the Contractors and (2) loan on hire of other equipment on terms to be mutually agreed between them in respect of the machinery and equipment supplied by the Corporation to the Contractors. There is a further condition that the Corporation will take over from the contractors items 1 and 14, specifically referred to above, and the other items in Group A at their "residual value" calculated on the basis indicated in the paragraph following the description of the machinery and the equipments. But there is a condition added that the "taking over" is dependent upon the condition that the machinery will be properly looked after during the period of its operation. There is an additional condition to the taking over by the Corporation, namely, the work for which they were meant had been completed, or earlier, at the choice of the Contractors, provided that they are declared surplus for the purposes of the construction of the Konar Dam and so certified by the Consulting Engineer. Hence, it is not an unconditional agreement to take over the machinery and equipment as in Group B. The total approximate price of Rs. 42,63,305 is payable by the Contractors in 18 equal instalments. Out of the total cost thus made realisable from the Contractors two thirds, namely, Rs. 28,42,000 approximately, has to be realised in any case. After the two thirds amount aforesaid has been realised from the contractors on account of supply of the equipments by the Corporation, the Corporation had to consider the date or dates of the "taking over" of the equipment after assessing the extent to which it 534 had depreciated as a result of the working on the project in order to arrive at the "residual value" of the same. The refund of the one third of the price or such other sum as may be determined as the "residual value" would depend upon the further condition that the Corporation was fully satisfied that their "residual life" shall, under no circumstances, fall below one third of their respective standard life as agreed upon by the parties. It would, thus, appear that the "taking over" of such of the equipments as were available to be returned was not an unconditional term. The Corporation was bound to take them over only if it was satisfied that their "residual life" was not less than one third of the standard life fixed by the parties. It is clear from the terms and conditions quoted above that there was no right in the contractors to return any of the machinery and equipments at any time they liked, or found it convenient to do so. The conditions which apply to all equipments, whether in Group A or in Group B, are also relevant to determine the nature of the transaction. The contractors are required to "continuously maintain proper machine cards showing certain relevant particulars". It is their duty to maintain the equipments in good running condition and to regularly and effectively service them. No item of machinery and equipment could be removed by the contractors under any circumstances until the full cost thereof had been recovered from them and even then only if the removal of those items of machinery or equipment was not likely to impede the satisfactory progress of the work. Then follows the most important condition that the Contractors themselves shall have to replenish their stock of spare parts of the machinery made available to them by the Corporation. When spare parts are supplied to the Contractors by the Corporation, they shall be liable for the actual price of those parts inclusive of freight, insurance and customs duty. Those substantially are the terms of the contract between the parties and the sole question for determination in this appeal is whether, in respect of the machinery and equipments admittedly supplied by the Corporation to the Contractors, it was a mere 535 contract of hiring, as contended on behalf of the appellant Corporation, or a sale or a hire purchase, as contended on behalf of the respondent State. The law on the subject is not in doubt, but the difficulty arises in applying that law to the facts and circumstances of a particular case on a proper construction of the document evidencing the transaction between the parties. It is well settled that a mere contract of hiring, without more, is a species of the contract of bailment, which does not create a title in the bailee, but the law of hire purchase has undergone consider able development during the last half a century or more and has introduced a number of variations, thus leading to categories, and it becomes a question of some nicety as to which category a particular contract between the parties comes under. Ordinarily, a contract of hire purchase confers no title on the hirer, but a mere option to purchase on fulfillment of certain conditions. But a contract of hire purchase may also provide for the agreement to purchase the thing hired by deferred payments subject to the condition that title to the thing shall not pass until all the instalments have been paid. There may be other variations of a contract of hire purchase depending upon the terms agreed between the parties. When rights in third parties have been created by acts of parties or by operation of law, the question, which does not arise here, may arise as to what exactly were the rights and obligations of the parties to the original contract. It is equally well settled that for the purpose of determining as to which category a particular contract comes under, the court will look at the substance of the agreement and not at the mere words describing the category. One of the tests to determine the question whether a particular agreement is a contract of mere hiring or whether it is a contract of purchase on a system of deferred payments 'of the purchase price is whether there is any binding obligation on the hirer to purchase the goods. Another useful test to determine such a controversy is whether there is a right reserved to the hirer to return the goods at any time during the subsistence of the contract. If there is such a right reserved, then 536 clearly there is no contract of sale, vide Helby vs Matthews and others (1). Applying these two tests to the transaction in the present case, it becomes clear that it was a case of sale of goods with a condition of repurchase on certain conditions depending upon the satisfaction of the Corporation as to whether the "residual life" of the machinery or the equipment was not less than one third of the standard life in accordance with the terms agreed between the parties. It is clear on those terms that there is no right reserved to the contractors to return the goods at any time that they found it convenient or necessary. On the other hand, they were bound to pay two thirds of the total approximate price fixed by the parties in equal instalments. The Contractors were not bound under the terms to return any of the machinery or the equipments, nor was the Corporation bound to take them back unconditionally. The term in the agreement regarding the "taking over" of the machinery or equipments by the Corporation on payment of the "residual value" is wholly inconsistent with a contract of mere hiring and is more consistent with the property in the goods having passed to the Contractors, subject to the payment of all the instalments of the purchase pride. Furthermore, the stipulation that the Contractors themselves will have to supply the spare parts, as and when needed, for replacements of the worn out parts is also consistent with the case of the respondent that title had passed to the contractors and that they were responsible for the upkeep of the machinery and equipments and for depreciation. If it were a mere contract of hiring, the owner of the goods would have continued to be liable for replacements of worn out parts and for depreciation. Applying those tests to the terms of the agreement between the parties, it is clear that the transaction was a sale on deferred payments with an option to repurchase and not a mere contract of hiring, as contended on behalf of the appellant. It must, therefore, be held that the judgment of the High Court is entirely correct and the appeal must be dismissed with costs. Appeal dismissed.

IN-Abs

The appellant Corporation was assessed to sales tax under section 13(5) of the Bihar Sales Tax Act, 1947, on the price of machinery and equipment, amounting approximately to Rs. 42,63,305, supplied to two contractor firms on the basis of an agreement which it entered into with them for the construction of a dam. The agreement provided, inter alia, that the price of the machinery and equipment supplied was to be paid by the contractors and until that was done they were to remain the property of the Corporation. It was further agreed that the Corporation would take them over after the completion of the work at their residual value, to be calculated in the manner set out in the agreement, provided that they were properly looked after during the period of operation; and if the contractors so chose earlier, if they were declared surplus and certified as such by the consulting Engineer. The price was to be paid in 18 equal instalments, two thirds of which was realisable in any case, and thereafter the Corporation was to consider the date or dates of taking them over after assessment of the depreciation in order to arrive at the residual value. The Corporation was not bound to take over if the residual life of the equipment fell below one third of the standard life as fixed by the parties. 523 The contractors were to replenish the stock of spare parts supplied to them at their own cost. The appellant 's case was that the transaction represented by the agreement was not a sale within the meaning of the Act. The Sales Tax authorities held against it and the only question that was ultimately referred to the High Court by the Board of Revenue under section 25 of the Act was whether the property in the equipment and machinery passed to the contractors and the transaction amounted to a sale. The High Court answered the question in the affirmative, holding that the transaction was a sale within the meaning of section 2(g) of the Act. The High Court having refused the necessary certificate, the appellant appealed by special leave granted by this court. Held, that the appeal must be confined to the question debated in the High Court. It is well settled that, while functioning in its advisory capacity under a taxing statute, the High Court cannot go beyond the question referred to it or on a reference called by it. That the appeal was by special leave could make no difference and the scope of the controversy could not be extended beyond what could be legally raised before the High Court. The two fold test to determine whether a particular agree ment is a contract of mere hiring or of purchase on deferred payments is (1) whether the hirer is under an obligation to purchase the goods and (2) whether he has the right to return the goods at any time during the subsistence of the contract. What has to be considered in each case is the substance of the agreement and not the words describing its category. Helby vs Matthews and others, , referred to. So judged, there could be no doubt that on the terms of the agreement between the parties the transaction in the instant case was clearly a sale on deferred payments with an option to repurchase and not a mere contract of hiring.

No. 528, of 1959. Appeal from the judgment and order dated September 20, 1957, of the former Bombay High Court in I.T.R. No. 15 of 1957. Hardayal Hardy and D. Gupta, for the appellant. R. J. Kolah, section N. Andley, J. B. Dadachanji, Rameshwar Nath and P. L. Vohra, for the respondent. 635 1960. November 24. The Judgment of the Court was delivered by HIDAYATULLAH, J. The Commissioner of Income tax, Bombay City 11, has filed this appeal with a certificate under section 66A(2) of the Income tax Act, against the judgment and order of the High Court of Bombay dated September 20, 1957, in Income tax Reference No. 15 of 1957. The question referred to the High Court for its opinion by the Income tax Appellate Tribunal, Bombay was: "Whether the assessee is entitled to a deduction of Rs. 1,350 and Rs. 18,000 from his total income of the previous year relevant to the assessment years, 1953 54, 1954 55?" The assessee, Sitaldas Tirathdas of Bombay, has many sources of income, chief among them being property, stocks and shares, bank deposits and share in a firm known as Messrs. Sitaldas Tirathdas. He follows the financial year as his accounting year. For the assessment years 1953 54 and 1954 55, his total income was respectively computed at Rs. 50,375 and Rs. 55,160. This computation was not disputed by him, but he sought to deduct therefrom a sum of Rs. 1,350 in the first assessment year and a sum of Rs. 18,000 in the second assessment year on the ground that under a decree he was required to pay these sums as maintenance to his wife, Bai Deviben and his children. The suit was filed in the Bombay High Court (Suit No. 102 of 1951) for maintenance allowance, separate residence and marriage expenses for the daughters and for arrears of maintenance, etc. A decree by consent was passed on March 11, 1953, and maintenance allowance of Rs. 1,500 per month was decreed against him. For the account year ending March 31, 1953 only one payment was made, and deducting Rs. 150 per month as the rent for the flat occupied by his wife and children, the amount paid as maintenance under the decree came to Rs. 1,350. For the second year, the maintenance at Rs. 1,500 per month came to Rs. 18,000 which was claimed as a deduction. 636 No charge on the property was created, and the matter does not fall to be considered under section 9(1)(iv) of the Income tax Act. The assessee, however, claimed this deduction on the strength of a ruling of the Privy Council in Bejoy Singh Dudhuria vs Commissioner of Income tax (1). This contention of the assesses was disallowed by the Income tax Officer, whose decision was affirmed on appeal by the Appellate Assistant Commissioner. On further appeal, the Tribunal observed: "This is a case, pure and simple, where an assessee is compelled to apply a portion of his income for the maintenance of persons whom he is under a personal and legal obligation to maintain. The Income tax Act does not permit of any deduction from the total income in such circumstances. " The Tribunal mentioned in the statement of the case that counsel for the assessee put his contention in the following words: "I claim a deduction of this amount from my total income because my real total income is whatever that is " computed, which I do not dispute, less the maintenance amount paid under the decree. " The assessee appears to have relied also upon a decision of the Lahore High Court in Diwan Kishen Kishore vs Commissioner of Income tax(2). The Tribunal, however, referred the above question for the opinion of the High Court. The High Court followed two earlier decisions of the same Court reported in Seth Motilal Manekchand vs Commissioner of Income tax (3) and Prince Khanderao Gaekwar vs Commissioner of Income tax (4), and held that, as observed in those two cases, the test was the same, even though there was no specific charge upon property so long as there was an obligation upon the assessee to pay, which could be enforeed in a Court of law. In Bejoy Singh Dudhuria 's case (1), there was a charge for maintenance created against the assessee, and the Privy Council had observed that the income must be deemed to have never reached that assessee, (1) (3) (2) (4) 637 having been diverted to the maintenance holders. In the judgment under appeal, it was held that the income to the extent of the decree must be taken to have been diverted to the wife and children, and never became income in the hands of the assessee. The Commissioner of Income tax questions the correctness of this decision and also of the two earlier decisions of the Bombay High Court. We are of opinion that the contention raised by the Department is correct. Before we state the principle on which this and similar cases are to be decided, we may refer to certain rulings, which illustrate the aspects the problem takes. The leading case on the subject is the decision of the Judicial Committee in Bejoy Singh Dudhuria 's case(1). There, the stepmother of the Raja had brought a suit for maintenance and a compromise decree was passed under which the stepmother was to be paid Rs. 1,100 per month, which amount was declared a charge upon the properties in the hands of the Raja, by the Court. The Raja sought to deduct this amount from his assessable income, which was disallowed by the High Court at Calcutta. On appeal to the Privy Council, Lord Macmillan observed as follows: "But their Lordships do not agree with the learned Chief Justice in his rejection of the view that the sums paid by the appellant to his step mother were not 'income ' of the appellant at all. This in their Lordships ' opinion is the true view of the matter. When the Act by Section 3 subjects to charge 'all income ' of an individual, it is what reaches the individual as income which it is intended to charge. In the present case the decree of the court by charging the appellant 's whole resources with a specific payment to his step mother has to that extent diverted his income from him and has directed it to his stepmother; to that extent what he receives for her is not his income. It is not a case of the application by the appellant of part of his income in a particular way, it is rather the allocation of a sum out of his revenue before it becomes income in his hands." (1) 81 638 Another case of the Privy Council may well be seen in this connection. That case is reported in P. C. Mullick vs Commissioner of Income tax, Bengal (1). There, a testator appointed the appellants as executors and directed them to pay Rs. 10,000 out of the income on the occasion of his addya sradh. The executors paid Rs. 5,537 for such expenses, and sought to deduct the amount from the assessable income. The Judicial Committee confirmed the decision of the Calcutta High Court disallowing the deduction, and observed that the payments were made out of the income of the estate coming to the hands of the executors and in pursuance of an obligation imposed upon them by the testator. It observed that it was not a case in which a portion of the income had been diverted by an over riding title from the person who would have received it otherwise, and distinguished the case in Bejoy Singh Dudhuria 's case (2). These cases have been diversely applied in India, but the facts of some of the cases bring out the distinction clearly. In Diwan Kishen Kishore vs Commissioner of Income tax (3), there was an impartible estate governed by the law of primogeniture, and under the custom applicable to the family, an allowance was payable to the junior member. Under an award given by the Deputy Commissioner acting as arbitrator and according to the will of the father of the holder of the estate and the junior member, a sum of Rs. 7,200 per year was payable to the junior member. This amount was sought to be deducted on the ground that it was a necessary and obligatory payment, and that the assessable income must, therefore, be taken to be pro tanto diminished. It was held that the income never became a part of the income of the family or of the eldest member but was a kind of a charge on the estate. The allowance given to the junior member, it was held, in the case of an impartible estate was the separate property of the younger member upon which he could be assessed and the rule that an allowance given by the head of a Hindu coparcenary to its members by way of maintenance was liable to be assessed (1) (2) (3) 639 as the income of the family, had no application. It was also observed that if the estate had been partible and partition could have taken place, the payment to the junior member out of the coparcenary funds would have stood on a different footing. In that case, the payment to the junior member was a kind of a charge which diverted a portion of the income from the assessee to the junior member in such a way that it could not be said that it became the income of the assessee. In Commissioner of Income tax, Bombay vs Makanji Lalji (1), it was stated that in computing the income of a Hindu undivided family monies paid to the widow of a deceased coparcener of the family as maintenance could not be deducted, even though the amount of maintenance had been decreed by the Court and had been made a charge on the properties belonging to the family. This case is open to serious doubt, because it falls within the rule stated in Bejoy Singh Dudhuria 's case (2); and though the High Court distinguished the case of the Judicial Committee, it appears that it was distinguished on a ground not truly relevant, namely, that in Bejoy Singh Dudhuria 's case (2) the AdvocateGeneral had abandoned the plea that the stepmother was still a member of the undivided Hindu family. It was also pointed out that this was a case of assessment as an individual and not an assessment of a Hindu undivided family. In Commissioner of Income tax, Bombay vs D. R. Naik (3), the assessee was the sole surviving member of a Hindu undivided family. There was a decree of Court by which the assessee was entitled to receive properties as a residuary legatee, subject, however, to certain payments of maintenance to widows. The widows continued to be members of the family. It was held that though section 9 of the Income tax Act did not apply, the assessee 's assessable income was only the balance left after payment of the maintenance charges. It appears from the facts of the case, however, that there was a charge for the maintenance (1) (2) (3) 640 upon the properties of the assessee. This case also brings out correctly the principles laid down by the Judicial Committee that if there be an overriding obligation which creates a charge and diverts the income to some one else, a deduction can be made of the amounts so paid. The last case may be contrasted with the case reported in P. C. Mullick and D. C. Aich, In re(1). There, under a will certain payments had to be made to the beneficiaries. These payments were to be made gradually together with certain other annuities. It was held that the payments could only be made out of the income received by the executors and trustees from the property, and the sum was assessable to income tax in the hands of the executors. It was pointed out that under the wilt it was stated that the amounts were to be paid "out of the income of my property", and thus, what had been charged was the income of the assessees, the executors. The case is in line with the decision of the Privy Council in P. C. Mullick vs Commissioner of Income tax, Bengal(2). In Hira Lal, In re,(3) there was a joint Hindu family, and under two awards made by arbitrators which were made into a rule of the Court, certain maintenance allowances were payable to the widows. These payments were also made a charge upon the property. It was held that inasmuch as the payments were obligatory and subject to an overriding charge they must be excluded. Here too, the amount payable to the widows was diverted from the family to them by an overriding obligation in the nature of a charge, and the income could not be said to accrue to the joint Hindu family at all. In Prince Khanderao Gaekwar vs Commissioner of Income tax (4), there was a family trust out of which two grandsons of the settlor had to be paid a portion of the income. It was provided that if their mother lived separately, then the trustees were to pay her Rs. 18,000 per year. The mother lived separately, and two deeds were executed by which the two grandsons agreed to pay Rs. 15,000 per year to the mother, (1) (3) (2) (4) 641 and created a charge on the property. The sons having paid Rs. 6,000 in excess of their obligations, sought to deduct the amount from their assessable income, and it was allowed by the Bombay High Court, observing that though the payment was a voluntary payment, it was subject to a valid and legal charge which could be enforced in a Court of law and the amount was thus deductible under section 9(1)(iv). There is Do distinction between a charge created by a decree of Court and one created by agreement of parties, provided that by that charge the income from property can be said to be diverted so as to bring the matter within section 9(1)(iv) of the Act. The case was one of application of the particular section of the Act and not one of an obligation created by a money decree, whether income accrued or not. The case is, therefore, distinguishable from the present, and we need not consider whether in the special circumstances of that case it was correctly decided. In V. M. Raghavalu Naidu & Sons vs Commissioner of Income tax (1), the assessees were the executors and trustees of a will, who were required to pay maintenance allowances to the mother and widow of the testator. The amount of these allowances was sought to be deducted, but the claim was disallowed. Satyanarayana Rao and Viswanatha Sastri, JJ. distinguished the case from that of the Privy Council in Bejoy Singh Dudhuria (2). Viswanatha Sastri, J. observed that the testator was under a personal obligation under the Hindu law to maintain his wife and mother, and if he had spent a portion of his income on such maintenance, he could not have deducted the amount from his assessable income, and that the position of the executor was no better. Satyanarayana Rao, J. added that the amount was not an allowance which was charged upon the estate by a decree of Court or otherwise and which the testator himself had no right or title to receive. The income which was received by the executors included the amount paid as maintenance, and a portion of it was thus applied in discharging the obligation. (1) (2) 642 The last cited case is again of the Bombay High Court, which seems to have influenced the decision in the instant case. That is reported in Seth Motilal Manekchand vs Commissioner of Income tax(1). In that case, there was a managing agency, which belonged to a Hindu joint family consisting of A, his son B and A 's wife. A partition took place, and it was agreed that the managing agency should be divided, A and B taking a moiety each of the managing agency remuneration but each of them paying A 's wife 2 as. 8 pies out of their respective 8 as. share in the managing agency remuneration. Chagla, C. J. and Tendolkar, J. held that under the deed of partition A and B had really intended that they were to receive only a portion of the managing agency commission and that the amount paid to A 's wife was diverted before it became the income of A and B and could be deducted. The learned Judge observed at p. 741 as follows: "We are inclined to accept the submission of Mr. Kolah that it does constitute a charge, but in our opinion, it is unnecessary to decide this question because this question can only have relevance and significance if we were considering a claim made for deduction under section 9(1)(iv) of the Income tax Act where a claim is made in respect of immovable property where the immovable property is charged or mortgaged to pay a certain amount. It is sufficient for the purpose of this reference if we come to the conclusion that Bhagirathibai had a legal enforceable right against the partner in respect of her 2 annas and 8 pies share and that the partner was under a legal obligation to pay that amount. " These are the cases which have considered the problem from various angles. Some of them appear to have applied the principle correctly and some, not. But we do Dot propose to examine the correctness of the decisions in the light of the facts in them. In our opinion, the true test is whether the amount sought to be deducted, in truth, never reaches the assessee as his income. Obligations, no doubt, there are in every case, but it is the nature of the obligation which is the (1) 643 decisive fact. There is a difference between an amount which a person is obliged to apply out of his income and an amount which by the nature of the obligation cannot be said to be a part of the income of the assessee. Where by the obligation income is diverted before it reaches the assessee, it is deductible; but where the income is required to be applied to discharge an obligation after such income reaches the assessee, the same consequence, in law, does not follow. It is the first kind of payment which can truly be excused and not the second. The second payment is merely an obligation to pay another a portion of one 's own income, which has been received and is since applied. The first is a case in which the income never reaches the assessee, who even if he were to collect it, does so, not as part of his income, but for and on behalf of the person to whom it is payable. In our opinion, the present case is one in which the wife and children of the assessee who continued to be members of the family received a portion of the income of the assessee, after the assessee had received the income as his own. The case is one of application of a portion of the income to discharge an obligation and not a case in which by an overriding charge the assessee became only a collector of another 's income. The matter in the present case would have been different, if such an overriding charge had existed either upon the property or upon its income, which is not the case. In our opinion, the case falls outside the rule in Bejoy Singh Dudhuria 's case and rather falls within the rule stated by the Judicial Committee in P. C. Mullick 's case For these reasons, we hold that the question referred to the High Court ought to have been answered in the negative. We, accordingly, discharge the answer given by the High Court, and the question will be answered in the negative. The appeal is thus allowed with costs here and in the High Court. Appeal allowed.

IN-Abs

A consent decree was passed against the assessee awarding maintenance to his wife and children. The decree did not create any charge upon the income of the assessee. The assessee claimed in the assessment of income tax deduction of the amount paid under the decree from his total income. Held, that the assessee was not entitled to the deduction. Where by the obligation income was diverted by an overriding title before it reached the assessee, it was deductible; but where the income was required to be applied to discharge an obligation after such income reached the assessee, it was not deductible. The true test was whether the amount sought to be deducted, in truth, never reached the assessee as his income. In the present case, the wife and children of the assessee received a portion of the income of the assessee, after the assessee had received the income as his own. Bejoy Singh Dudhuria vs Commissioner of Income tax, (1933) I I.T.R. 135, not applicable. P. C. Mullick vs Commissioner of Income tax, Bengal, , applied. Diwan Kishen Kishore vs Commissioner of Income tax, , Seth Motilal Menekchand vs Commissioner of Income tax, , Prince Khanderao Gaekway vs Commissioner of Income tax, , Commissioner of Income tax, Bombay vs Makanji Lalji, , Commissioner of Income tax, Bombay V. D. R. Naik, , D. C. Aich, It; re, , Hira Lal, In re, and V. M. Raghavalu Naidu & Sons vs Commissioner of Income tax, , referred to

Appeal No. 270 of 1959. Appeal by special leave from the judgment and order dated December 23, 1957, of the Allahabad High Court (Lucknow Bench) at Lucknow in Civil Miscellaneous Application (0. J.) No. 86 of 1954. C. B. Aggarwala, G. C. Mathur and C. P. Lal, for the appellants. Achhru Ram, section N. Andley, J. B. Dadachanji, Rameshwar Nath and P. L. Vohra, for the respondent. November, 25. The Judgment of Sarkar, Subba Rao and Mudholkar, JJ., was delivered by Subba Rao, J., and that of Gajendragadkar and Wanchoo, JJ., was delivered by Wanchoo, J. SUBBA RAO, J. This is an appeal by special leave against the judgment and order of the High Court of Judicature at Allahabad, Lucknow Bench, allowing the petition filed by the respondent under article 226 of the Constitution. The facts are in a small compass and may be briefly stated. In the year 1933 the respondent was appointed a constable in U. P. Police Force; on December 1, 1945, he was promoted to the rank of head constable and in May, 1952 he was posted as officer incharge of Police Station, Intiathok, District Gonda. Complaints were received by the District Magistrate, Gonda, to the effect that the respondent was receiving bribes in the discharge of his duties. On September 16, 1952, the District Magistrate, Gonda, directed the Sub Divisional Magistrate to make an enquiry in respect of the 674 said complaints. On November 3,1952, the Sub Divisional Magistrate, after making the necessary enquiries, submitted a report to the District Magistrate recommending the transfer of the respondent to some other station. On November 17, 1952, the District Magistrate sent an endorsement to the Superintendent of Police to the effect that the Sub Divisional Magistrate had found substantial complaints against the integrity of the respondent, that he had also received such complaints and that his general reputation for integrity was not good, but that his transfer should, however, come after sometime and that in the meantime his work might be closely watched. On being called upon by the Superintendent of Police to submit an explanation for his conduct, the respondent submitted his explanation on November 29, 1952. On December 17, 1952, the respondent was forced to go on leave for two months. Before the expiry of his leave, he was reverted to his substantive post of head constable and transferred to Sitapur. On February 17, 1953, he was promoted to the rank of officiating Sub Inspector and posted as Station Officer at Sidholi. On February 27, 1953, the Superintendent of Police made the following endorsement in his character roll: "A strong officer with plenty of push in him and met with a strong opposition in this new charge. Crime control was very good but complaints of corruption were received which could not be substantiated. Integrity certified. " Meanwhile on further complaints, the C.I.D. probed the matter further and on July 26, 1953, the Superintendent of Police, Investigation Branch, C.I.D., reported that the respondent was a habitual bribetaker. On July 28, 1953, he was placed under suspension and on August 18, 1953, he was charged under section 7 of the Police Act with remissness in the discharge of his duty and unfitness for the same inasmuch as while posted as a Station Officer, Police Station, Intiathok, he had been guilty of dishonesty, corruption and misbehaviour in that he had on nine occasions, particulars of which were given in the charge, accepted bribes. it may be mentioned that the magisterial inquiry 675 related to seven of the nine charges alleged against the respondent. The trial was conducted by the, Superintendent of Police and the respondent submitted his explanation on September 12, 1953. The Superintendent of Police, who conducted the trial, examined many witnesses and found that seven out of the nine charges had been established. Thereafter he issued a notice to the respondent calling upon him to show cause why he should not be dismissed from the police force. On February 20, 1954, the respondent sub mitted his explanation and the Superintendent of Police, by his order dated February 22, 1954, dismissed the respondent from service with effect from the said date. The appeal preferred by the respondent to the Deputy Inspector General of Police was dismissed by his order dated June 2, 1954. Thereafter the respondent on August 5, 1954, filed a petition under article 226 of the Constitution before the High Court of Judicature at Allahabad, Lucknow Bench, for quashing the order of dismissal. Before the High Court three points were raised, namely, (1) as the petitioner was officiating. as Sub Inspector of Police at the time of the departmental trial the Suprintendent of Police had no power to dismiss him, since an order in such circumstances could only be made by a police officer senior in rank to a Superintendent; (2) the trial was vitiated by a number of serious irregularities; and (3) the specific acts with which the petitioner was charged were cognizable offences and, therefore, the Superintendent of Police had no jurisdiction to proceed with a departmental trial without complying with the provisions of subparagraph (1) of para. 486 of the Police Regulations. The learned Judges of the High Court held that the respondent was charged with committing cognizable offences and therefore sub paragraph (1) of para. 486 governed the situation and that, as no case, as required by the said sub paragraph, was registered against the respondent in the police station, the order of dismissal was invalid. They further held that the case was not covered by the first proviso to sub paragraph (1) of para. 486, as, in their opinion, the information 676 about the commission of the offences was not in the first instance received by the Magistrate and forwarded to the police for inquiry. In view of that finding they found it unnecessary for them to express any opinion upon other arguments which had been advanced on behalf of the respondent. In the result they issued a writ in the nature of certiorari quashing the impugned orders. Hence the appeal. Mr. C. B. Agarwala, learned counsel appearing for the appellants, raised before us the following points: (1) The Governor exercised his pleasure through the Superintendent of Police, and, as the Police Regulations were only administrative directions, the non compliance therewith would not in any way affect the validity of the order of dismissal. (2) If the order of dismissal was held to have been made under the statutory power conferred upon the Superintendent of Police, the regulations providing for investigation in the first place under chapter XIV of the Criminal Procedure Code were only directory in nature, and inasmuch as no prejudice was caused to the respondent the non compliance with the said regulations would not affect the validity of the order of dismissal. (3) The Superintendent of Police was authorized to follow the alternative procedure prescribed by subparagraph (3) of para. 486 and, therefore, the inquiry held without following the procedure prescribed by rule I was not bad. (4) As the magisterial inquiry was held in regard to practically all the charges, the subject matter of the departmental trial, the case is not covered by the provisions of para. 486 of the Police Regulations. In the case of The State of U. P. vs Babu Ram Upadhya (1) in which we have just delivered the judgment, we have considered the first three point; and for the reasons mentioned therein we reject the first three contentions. The appellants must succeed on the fourth contention. From the facts already narrated, the conduct of the respondent, when he was officer incharge of the Police Station, Intiathok, was the subject matter of (1) Civil Appeal No. 119 of 1950; ; 677 magisterial inquiry. The Sub Divisional Magistrate made inquiry in respect of seven of the charges which were the subject matter of the departmental trial and. submitted a report to the District Magistrate. The District Magistrate, in his turn, made an endorsement on the report and communicated the same to the Superintendent of Police recommending the transfer of the respondent and suggesting that in the meanwhile the work of the respondent might be closely watched. Though the Superintendent of Police gave at first a good certificate to the respondent, in respect of the same a further probe was made through the C.I.D. Thereafter the Superintendent of Police conducted a departmental trial in respect of the aforesaid seven charges and two other new charges of the same nature. The inquiry ended in the dismissal of the respondent. In the circumstances it would be hypertechnical to hold that there was no magisterial inquiry in respect of the matter which was the subject matter of the departmental trial. On the said facts we hold that the departmental inquiry was only a further step in respect of the misconduct of the respondent in regard whereto the magisterial inquiry was held at an earlier stage. If so, the question is whether para. 486 would govern the present inquiry or it would fall out side its scope. The relevant provisions of the Police Regulations read: Paragraph 486: "When the offence alleged against a police officer amounts to an offence only under s: 7 of the Police Act, there can be no magisterial inquiry under the Criminal Procedure Code. In such cases, and in other cases until and unless a magisterial inquiry is ordered, inquiry will be made under the direction of the Superintendent of Police in accordance with the following rules;" Paragraph 489: "A police officer may be departmentally tried under section 7 of the Police Act (1) after he has been tried judicially; (2) after a magisterial inquiry under the Criminal Procedure Code; 86 678 (3) after a police investigation under the Criminal Procedure Code or a departmental enquiry under paragraph 486 III above." A combined reading of these provisions indicates that para. 86 does not apply to a case where a magisterial inquiry is ordered; and that a police officer can be departmentally tried under section 7 of the Police Act after such a magisterial inquiry. In this case the departmental trial was held subsequent to the completion of the magisterial inquiry and therefore it falls within the express terms of para. 489(2). The fact that in the interregnum the police received further complaints or that the C.I.D. made further enquiries do not affect the question, if substantially the subject matter of the magisterial inquiry and the departmental trial is the same. In this case we have held that it was substantially the same and therefore the departmental trial was validly held. We, therefore, set aside the order made by the High Court. As we have pointed out earlier, the High Court, in the view taken by it, did not express its opinion on the other questions raised and argued before it. In the circumstances, we remand the matter to the High Court for disposal in accordance with law. The costs of this appeal will abide the result. WANCHOO, J. We have read the judgment just delivered by our learned brother Subba Rao J. We agree with the order proposed by him. Our reasons for coming to this conclusion are, however, the same which we have given in C.A. 119 of 1959, The State of Uttar Pradesh vs Babu Ram Upadhya. Appeal allowed. Case remanded.

IN-Abs

The respondent was posted as officer incharge of a police station when complaints were received by the District Magis trate that the respondent was receiving bribes. The District Magistrate got an enquiry made by the Sub Divisional Magistrate and forwarded the report toghether with his own endorsement to the Superintendent of Police. The respondent was forced to go on 2 months leave and was reverted to his substantive post of Head Constable, but later he was promoted to the rank of officiating Sub Inspector and posted at another police station. Meanwhile on further complaints an investigation was made and it was reported that the respondent was a habitual bribe taker. He was charged under section 7 Police Act for 9 charges of bribery and after departmental trial was dismissed by the Superintendent of Police. He filed a Writ Petition before the High court challenging the order of dismissal inter alia on the ground that the offences charged being cognizable offences the Superintendent of Police had no jurisdiction to hold the departmental trial without first complying with the provisions of para. 486(1) of the U. P. Police Regulations. The High Court accepted this contention and quashed the order of dismissal. 673 Held (per Sarkar, Subba Rao and Mudholkar, JJ.) that the subject matter of the magisterial enquiry and of the depart mental trial was substantially the same and that the depart 'I mental trial was validly held. The fact that there was an interregnum between the magisterial enquiry and the departmental trial did not affect the question. Paragraph 486 did not apply to a case where a magisterial enquiry was ordered and a police officer could be departmentally tried under section 7 Police Act after such magisterial enquiry. Per Gajendragadkar and Wanchoo, JJ. The provisions of para. 486 were merely directory and even if there was non compliance therewith the order of dismissal was not invalidated.

No. 528, of 1959. Appeal from the judgment and order dated September 20, 1957, of the former Bombay High Court in I.T.R. No. 15 of 1957. Hardayal Hardy and D. Gupta, for the appellant. R. J. Kolah, section N. Andley, J. B. Dadachanji, Rameshwar Nath and P. L. Vohra, for the respondent. 635 1960. November 24. The Judgment of the Court was delivered by HIDAYATULLAH, J. The Commissioner of Income tax, Bombay City 11, has filed this appeal with a certificate under section 66A(2) of the Income tax Act, against the judgment and order of the High Court of Bombay dated September 20, 1957, in Income tax Reference No. 15 of 1957. The question referred to the High Court for its opinion by the Income tax Appellate Tribunal, Bombay was: "Whether the assessee is entitled to a deduction of Rs. 1,350 and Rs. 18,000 from his total income of the previous year relevant to the assessment years, 1953 54, 1954 55?" The assessee, Sitaldas Tirathdas of Bombay, has many sources of income, chief among them being property, stocks and shares, bank deposits and share in a firm known as Messrs. Sitaldas Tirathdas. He follows the financial year as his accounting year. For the assessment years 1953 54 and 1954 55, his total income was respectively computed at Rs. 50,375 and Rs. 55,160. This computation was not disputed by him, but he sought to deduct therefrom a sum of Rs. 1,350 in the first assessment year and a sum of Rs. 18,000 in the second assessment year on the ground that under a decree he was required to pay these sums as maintenance to his wife, Bai Deviben and his children. The suit was filed in the Bombay High Court (Suit No. 102 of 1951) for maintenance allowance, separate residence and marriage expenses for the daughters and for arrears of maintenance, etc. A decree by consent was passed on March 11, 1953, and maintenance allowance of Rs. 1,500 per month was decreed against him. For the account year ending March 31, 1953 only one payment was made, and deducting Rs. 150 per month as the rent for the flat occupied by his wife and children, the amount paid as maintenance under the decree came to Rs. 1,350. For the second year, the maintenance at Rs. 1,500 per month came to Rs. 18,000 which was claimed as a deduction. 636 No charge on the property was created, and the matter does not fall to be considered under section 9(1)(iv) of the Income tax Act. The assessee, however, claimed this deduction on the strength of a ruling of the Privy Council in Bejoy Singh Dudhuria vs Commissioner of Income tax (1). This contention of the assesses was disallowed by the Income tax Officer, whose decision was affirmed on appeal by the Appellate Assistant Commissioner. On further appeal, the Tribunal observed: "This is a case, pure and simple, where an assessee is compelled to apply a portion of his income for the maintenance of persons whom he is under a personal and legal obligation to maintain. The Income tax Act does not permit of any deduction from the total income in such circumstances. " The Tribunal mentioned in the statement of the case that counsel for the assessee put his contention in the following words: "I claim a deduction of this amount from my total income because my real total income is whatever that is " computed, which I do not dispute, less the maintenance amount paid under the decree. " The assessee appears to have relied also upon a decision of the Lahore High Court in Diwan Kishen Kishore vs Commissioner of Income tax(2). The Tribunal, however, referred the above question for the opinion of the High Court. The High Court followed two earlier decisions of the same Court reported in Seth Motilal Manekchand vs Commissioner of Income tax (3) and Prince Khanderao Gaekwar vs Commissioner of Income tax (4), and held that, as observed in those two cases, the test was the same, even though there was no specific charge upon property so long as there was an obligation upon the assessee to pay, which could be enforeed in a Court of law. In Bejoy Singh Dudhuria 's case (1), there was a charge for maintenance created against the assessee, and the Privy Council had observed that the income must be deemed to have never reached that assessee, (1) (3) (2) (4) 637 having been diverted to the maintenance holders. In the judgment under appeal, it was held that the income to the extent of the decree must be taken to have been diverted to the wife and children, and never became income in the hands of the assessee. The Commissioner of Income tax questions the correctness of this decision and also of the two earlier decisions of the Bombay High Court. We are of opinion that the contention raised by the Department is correct. Before we state the principle on which this and similar cases are to be decided, we may refer to certain rulings, which illustrate the aspects the problem takes. The leading case on the subject is the decision of the Judicial Committee in Bejoy Singh Dudhuria 's case(1). There, the stepmother of the Raja had brought a suit for maintenance and a compromise decree was passed under which the stepmother was to be paid Rs. 1,100 per month, which amount was declared a charge upon the properties in the hands of the Raja, by the Court. The Raja sought to deduct this amount from his assessable income, which was disallowed by the High Court at Calcutta. On appeal to the Privy Council, Lord Macmillan observed as follows: "But their Lordships do not agree with the learned Chief Justice in his rejection of the view that the sums paid by the appellant to his step mother were not 'income ' of the appellant at all. This in their Lordships ' opinion is the true view of the matter. When the Act by Section 3 subjects to charge 'all income ' of an individual, it is what reaches the individual as income which it is intended to charge. In the present case the decree of the court by charging the appellant 's whole resources with a specific payment to his step mother has to that extent diverted his income from him and has directed it to his stepmother; to that extent what he receives for her is not his income. It is not a case of the application by the appellant of part of his income in a particular way, it is rather the allocation of a sum out of his revenue before it becomes income in his hands." (1) 81 638 Another case of the Privy Council may well be seen in this connection. That case is reported in P. C. Mullick vs Commissioner of Income tax, Bengal (1). There, a testator appointed the appellants as executors and directed them to pay Rs. 10,000 out of the income on the occasion of his addya sradh. The executors paid Rs. 5,537 for such expenses, and sought to deduct the amount from the assessable income. The Judicial Committee confirmed the decision of the Calcutta High Court disallowing the deduction, and observed that the payments were made out of the income of the estate coming to the hands of the executors and in pursuance of an obligation imposed upon them by the testator. It observed that it was not a case in which a portion of the income had been diverted by an over riding title from the person who would have received it otherwise, and distinguished the case in Bejoy Singh Dudhuria 's case (2). These cases have been diversely applied in India, but the facts of some of the cases bring out the distinction clearly. In Diwan Kishen Kishore vs Commissioner of Income tax (3), there was an impartible estate governed by the law of primogeniture, and under the custom applicable to the family, an allowance was payable to the junior member. Under an award given by the Deputy Commissioner acting as arbitrator and according to the will of the father of the holder of the estate and the junior member, a sum of Rs. 7,200 per year was payable to the junior member. This amount was sought to be deducted on the ground that it was a necessary and obligatory payment, and that the assessable income must, therefore, be taken to be pro tanto diminished. It was held that the income never became a part of the income of the family or of the eldest member but was a kind of a charge on the estate. The allowance given to the junior member, it was held, in the case of an impartible estate was the separate property of the younger member upon which he could be assessed and the rule that an allowance given by the head of a Hindu coparcenary to its members by way of maintenance was liable to be assessed (1) (2) (3) 639 as the income of the family, had no application. It was also observed that if the estate had been partible and partition could have taken place, the payment to the junior member out of the coparcenary funds would have stood on a different footing. In that case, the payment to the junior member was a kind of a charge which diverted a portion of the income from the assessee to the junior member in such a way that it could not be said that it became the income of the assessee. In Commissioner of Income tax, Bombay vs Makanji Lalji (1), it was stated that in computing the income of a Hindu undivided family monies paid to the widow of a deceased coparcener of the family as maintenance could not be deducted, even though the amount of maintenance had been decreed by the Court and had been made a charge on the properties belonging to the family. This case is open to serious doubt, because it falls within the rule stated in Bejoy Singh Dudhuria 's case (2); and though the High Court distinguished the case of the Judicial Committee, it appears that it was distinguished on a ground not truly relevant, namely, that in Bejoy Singh Dudhuria 's case (2) the AdvocateGeneral had abandoned the plea that the stepmother was still a member of the undivided Hindu family. It was also pointed out that this was a case of assessment as an individual and not an assessment of a Hindu undivided family. In Commissioner of Income tax, Bombay vs D. R. Naik (3), the assessee was the sole surviving member of a Hindu undivided family. There was a decree of Court by which the assessee was entitled to receive properties as a residuary legatee, subject, however, to certain payments of maintenance to widows. The widows continued to be members of the family. It was held that though section 9 of the Income tax Act did not apply, the assessee 's assessable income was only the balance left after payment of the maintenance charges. It appears from the facts of the case, however, that there was a charge for the maintenance (1) (2) (3) 640 upon the properties of the assessee. This case also brings out correctly the principles laid down by the Judicial Committee that if there be an overriding obligation which creates a charge and diverts the income to some one else, a deduction can be made of the amounts so paid. The last case may be contrasted with the case reported in P. C. Mullick and D. C. Aich, In re(1). There, under a will certain payments had to be made to the beneficiaries. These payments were to be made gradually together with certain other annuities. It was held that the payments could only be made out of the income received by the executors and trustees from the property, and the sum was assessable to income tax in the hands of the executors. It was pointed out that under the wilt it was stated that the amounts were to be paid "out of the income of my property", and thus, what had been charged was the income of the assessees, the executors. The case is in line with the decision of the Privy Council in P. C. Mullick vs Commissioner of Income tax, Bengal(2). In Hira Lal, In re,(3) there was a joint Hindu family, and under two awards made by arbitrators which were made into a rule of the Court, certain maintenance allowances were payable to the widows. These payments were also made a charge upon the property. It was held that inasmuch as the payments were obligatory and subject to an overriding charge they must be excluded. Here too, the amount payable to the widows was diverted from the family to them by an overriding obligation in the nature of a charge, and the income could not be said to accrue to the joint Hindu family at all. In Prince Khanderao Gaekwar vs Commissioner of Income tax (4), there was a family trust out of which two grandsons of the settlor had to be paid a portion of the income. It was provided that if their mother lived separately, then the trustees were to pay her Rs. 18,000 per year. The mother lived separately, and two deeds were executed by which the two grandsons agreed to pay Rs. 15,000 per year to the mother, (1) (3) (2) (4) 641 and created a charge on the property. The sons having paid Rs. 6,000 in excess of their obligations, sought to deduct the amount from their assessable income, and it was allowed by the Bombay High Court, observing that though the payment was a voluntary payment, it was subject to a valid and legal charge which could be enforced in a Court of law and the amount was thus deductible under section 9(1)(iv). There is Do distinction between a charge created by a decree of Court and one created by agreement of parties, provided that by that charge the income from property can be said to be diverted so as to bring the matter within section 9(1)(iv) of the Act. The case was one of application of the particular section of the Act and not one of an obligation created by a money decree, whether income accrued or not. The case is, therefore, distinguishable from the present, and we need not consider whether in the special circumstances of that case it was correctly decided. In V. M. Raghavalu Naidu & Sons vs Commissioner of Income tax (1), the assessees were the executors and trustees of a will, who were required to pay maintenance allowances to the mother and widow of the testator. The amount of these allowances was sought to be deducted, but the claim was disallowed. Satyanarayana Rao and Viswanatha Sastri, JJ. distinguished the case from that of the Privy Council in Bejoy Singh Dudhuria (2). Viswanatha Sastri, J. observed that the testator was under a personal obligation under the Hindu law to maintain his wife and mother, and if he had spent a portion of his income on such maintenance, he could not have deducted the amount from his assessable income, and that the position of the executor was no better. Satyanarayana Rao, J. added that the amount was not an allowance which was charged upon the estate by a decree of Court or otherwise and which the testator himself had no right or title to receive. The income which was received by the executors included the amount paid as maintenance, and a portion of it was thus applied in discharging the obligation. (1) (2) 642 The last cited case is again of the Bombay High Court, which seems to have influenced the decision in the instant case. That is reported in Seth Motilal Manekchand vs Commissioner of Income tax(1). In that case, there was a managing agency, which belonged to a Hindu joint family consisting of A, his son B and A 's wife. A partition took place, and it was agreed that the managing agency should be divided, A and B taking a moiety each of the managing agency remuneration but each of them paying A 's wife 2 as. 8 pies out of their respective 8 as. share in the managing agency remuneration. Chagla, C. J. and Tendolkar, J. held that under the deed of partition A and B had really intended that they were to receive only a portion of the managing agency commission and that the amount paid to A 's wife was diverted before it became the income of A and B and could be deducted. The learned Judge observed at p. 741 as follows: "We are inclined to accept the submission of Mr. Kolah that it does constitute a charge, but in our opinion, it is unnecessary to decide this question because this question can only have relevance and significance if we were considering a claim made for deduction under section 9(1)(iv) of the Income tax Act where a claim is made in respect of immovable property where the immovable property is charged or mortgaged to pay a certain amount. It is sufficient for the purpose of this reference if we come to the conclusion that Bhagirathibai had a legal enforceable right against the partner in respect of her 2 annas and 8 pies share and that the partner was under a legal obligation to pay that amount. " These are the cases which have considered the problem from various angles. Some of them appear to have applied the principle correctly and some, not. But we do Dot propose to examine the correctness of the decisions in the light of the facts in them. In our opinion, the true test is whether the amount sought to be deducted, in truth, never reaches the assessee as his income. Obligations, no doubt, there are in every case, but it is the nature of the obligation which is the (1) 643 decisive fact. There is a difference between an amount which a person is obliged to apply out of his income and an amount which by the nature of the obligation cannot be said to be a part of the income of the assessee. Where by the obligation income is diverted before it reaches the assessee, it is deductible; but where the income is required to be applied to discharge an obligation after such income reaches the assessee, the same consequence, in law, does not follow. It is the first kind of payment which can truly be excused and not the second. The second payment is merely an obligation to pay another a portion of one 's own income, which has been received and is since applied. The first is a case in which the income never reaches the assessee, who even if he were to collect it, does so, not as part of his income, but for and on behalf of the person to whom it is payable. In our opinion, the present case is one in which the wife and children of the assessee who continued to be members of the family received a portion of the income of the assessee, after the assessee had received the income as his own. The case is one of application of a portion of the income to discharge an obligation and not a case in which by an overriding charge the assessee became only a collector of another 's income. The matter in the present case would have been different, if such an overriding charge had existed either upon the property or upon its income, which is not the case. In our opinion, the case falls outside the rule in Bejoy Singh Dudhuria 's case and rather falls within the rule stated by the Judicial Committee in P. C. Mullick 's case For these reasons, we hold that the question referred to the High Court ought to have been answered in the negative. We, accordingly, discharge the answer given by the High Court, and the question will be answered in the negative. The appeal is thus allowed with costs here and in the High Court. Appeal allowed.

IN-Abs

A consent decree was passed against the assessee awarding maintenance to his wife and children. The decree did not create any charge upon the income of the assessee. The assessee claimed in the assessment of income tax deduction of the amount paid under the decree from his total income. Held, that the assessee was not entitled to the deduction. Where by the obligation income was diverted by an overriding title before it reached the assessee, it was deductible; but where the income was required to be applied to discharge an obligation after such income reached the assessee, it was not deductible. The true test was whether the amount sought to be deducted, in truth, never reached the assessee as his income. In the present case, the wife and children of the assessee received a portion of the income of the assessee, after the assessee had received the income as his own. Bejoy Singh Dudhuria vs Commissioner of Income tax, (1933) I I.T.R. 135, not applicable. P. C. Mullick vs Commissioner of Income tax, Bengal, , applied. Diwan Kishen Kishore vs Commissioner of Income tax, , Seth Motilal Menekchand vs Commissioner of Income tax, , Prince Khanderao Gaekway vs Commissioner of Income tax, , Commissioner of Income tax, Bombay vs Makanji Lalji, , Commissioner of Income tax, Bombay V. D. R. Naik, , D. C. Aich, It; re, , Hira Lal, In re, and V. M. Raghavalu Naidu & Sons vs Commissioner of Income tax, , referred to

o. 273 of 1951. Appeal under articles 132 (1) and 134 (1)(c) of the Constitution of India from the Judgment and Order dated I3th October, 1950, of the High Court of Judicature at Patna (Shearer, Ramaswami and Sarjoo Prosad JJ.) in Miscellaneous Judicial Case No. 220 of 1949. S.K. Mitra (K. Dayal, with him), for the appellant. Basant Chandra Ghosh and Arun Chandra Mitra for the respondent. May 26. The Court delivered judgment as follows: MAHAJAN J. This appeal has been preferred by the State of Bihar against the judgment of a Special Bench of the High Court of Judicature at Patna allowing the application of the respondent under section 23 of the Indian Press (Emergency Powers)Act, XXIII of 1931. It appears that the petition was argued by both the sides as it was one made under article 926 of the Constitution. The respondent was the keeper at all relevant times of the Bharati Press at Purulia, A pamphlet under 85 656 the heading "Sangram" was printed at the said press and is alleged to have been circulated in the town of Purulia in the district of Manbhum. The Government of Bihar considered that the pamphlet contained objectionable matter of the nature described under section 4 (1) of the Indian Press (Emergency Powers) Act and required the press to furnish security in the sum of Rs. '2,000, under section 3(3) of the Act by the 19th September, 1949. On the 26th September, 1949, the respondent applied to the High Court under section 23 for setting aside the above order. This application was allowed by the majority of the Judges constituting the Bench. Shearer J. was of the view that the application should be dismissed. Several objections were raised to the validity of the order passed by the Bihar Government but it is unnecessary to mention all of them. The two points which were seriously pressed before the High Court were that the leaflet did not contain any words or signs or visible representation of the nature described in section 4 (1) of the Act, and that the provisions of section 4 (1) of the Act were inconsistent with article 19 (1) of the Constitution and as such void under article 13. The High Court reached the conclusion that the pamphlet did come within the mischief of the Act. Sarjoo Prosad J., with whom Ramaswami J. concurred, on a construction of the decisions of this Court in Romesh Thapar vs The State of Madras(1), and Brij Bhushan V. The State of Delhi(2), found, though with some reluctance, that section 4 (1) (a) of the Act was repugnant to the Constitution and therefore void. Mr. Justice Shearer, however, held that the pamphlet was a seditious libel and that there was nothing in the two decisions of the Supreme Court referred to above which compelled the court to hold the provisions of section 4 (1) (a) of the Act to be void. In my opinion, Shearer J. was right in the view that there is nothing in the two decisions of this Court which bears directly or indirectly on the point at issue in the present case and that both Sarjoo Prosad (1) [1950] S.C.R.594. (2) ; 657 and Ramaswami JJ. were in error in holding that these deci sions were conclusive on the question of the invalidity of clauses (a) and (b) of section 4 (1) of the Act. Towards the concluding part of his judgment Sarjoo Prosad J. ob served as follows: "I am compelled to observe that from the above discus sions of the Supreme Court judgments, it follows logically that if a person were to go on inciting murder or other cognisable offences either through the press or by word of mouth, he would be free to do so with impunity inasmuch as he would claim the privilege of exercising his fundamental right of freedom of speech and expression. Any legislation which seeks or would seek to curb this right of the person concerned would not be saved under article 19 (2) of the Constitution and would have to be declared void. This would be so, because such speech or expression on the part of the individual would fall neither under libel nor slander nor defamation nor contempt of court nor any matter which of fends against decency or morality or which undermines the security of or tends to overthrow the State. I cannot with equanimity contemplate such an anomalous situation but the conclusion appears to be unavoidable on the authority of the Supreme Court judgments with which we are bound. I, there fore, wish that my decision on the point would sooner than ever come to be tested by the Supreme Court itself and the position reexamined in the light of the anomalous situation pointed out above. It seems to me that the words used in the Constitution Act should be assigned a wide and liberal connotation even though they occur in a clause which pro vides an exception to the fundamental right vouchsafed under article 19 (1)(a) of the Constitution Act." These observations I speak with great respect disclose a complete lack of understanding of the precise scope of the two decisions of this Court referred to above. Section 3 (3) of the Act under which the notice was issued in the present case enacts as follows: "Whenever it appears to the Provincial Government that any printing press is used for the purpose 658 printing or publishing any newspaper, book or other document containing any words, signs or visible representation of the nature described in section 4,sub section (1), the Provin cial Government may, by notice in writing to the keeper of the press . .order the keeper to deposit with the Magis trate security . " Clause (a) of section 4 (1) deals with words or signs or visible representations which incite to or encourage, or tend to incite to or encourage the commission of any offence of murder or any cognizable of fence involving violence. It is plain that speeches or expressions on the part of an individual which incite to or encourage the commission of violent crimes, such as murder, cannot but be matters which would undermine the security of the State and come within the ambit of a law sanctioned by article. 19(2) of the Constitution. I cannot help observing that the decisions of this Court in Romesh Thapar 's case(1), and in Brij Bhushan 's case(2) have been more than once misapplied and misunderstood and have been construed as laying down the wide proposition that restrictions of the nature imposed by section 4(1)(a) of the Indian Press (Emergency Powers) Act or of similar character are outside the scope of article 19(2) of the Constitution inasmuch as they are conceived generally in the interests of public order. Sarjoo Prosad J. also seems to have fallen into the same error. The question that arose in Romesh Thapar 's case(1) was whether the impugned Act (Madras Maintenance Public Order Act, XXIII of 1949) in so far as it purported by section 9 (1 A) to authorise the Provincial Government "for the purpose of securing the public safety and the mainte nance of public order, to prohibit or regulate the entry.into or the circulation, sale or distribution in the Province of Madras or any part thereof any document or class of documents" was a law relating to any matter which under mined the security of or tended to overthrow the State, and it was observed that whatever ends the impugned Act may have been intended to subserve and whatever (1)[1950] section C.R. 594. (2) [1950] S.C.R. 605. 659 aims its framers may have had in view, its application and scope could not, in the absence of delimiting words in the statute itself, be restricted to those aggravated forms of prejudicial activity which are calculated to endanger the security of the State, nor was there any guarantee that those authorized to exercise the powers under the Act would in using them discriminate between those who act prejudical ly to the security of the State and those who do not. Sec tion 4(1)(a) of the impugned Act, however, is restricted to aggravated forms of prejudicial activity. It deals specifi cally with incitement to violent crimes and does not deal with acts that generally concern themselves with the mainte nance of public order. That being so, the decision in Romesh Thalbar 's case(1) given on the constitutionality of section 9(1 A) of the Madras Maintenance of Public Order Act has no relevancy for deciding the constitutionality of the provi sions of section 4(1)(a) of the Indian Press (Emergency Powers) Act. Towards the concluding portion in Romesh Tha par 's judgment(1) it was observed as follows : "We are therefore of opinion that unless a law restrict ing freedom of speech and expression is directed solely against the undermining of the security of the State or the overthrow of it, such law cannot fall within the reservation under clause (2) of article although the restrictions which it seeks to impose may have been conceived generally in the interests of public order. It follows that section 9(I A) which authorizes imposition of restrictions for the wider purpose of securing public safety or the maintenance of public order falls outside the scope of authorized restric tions under clause (2), and is therefore void and unconsti tutional. " The restrictions imposed by section 4(1)(a) of the Indian Press (Emergency Powers) Act on freedom of speech and expression are solely directed against the undermining of the security of the State or the overthrow of it and are within the ambit of article 19(2) (1) 94. 660 of the Constitution. The deduction that a person would be free to incite to murder or other cognizable offence through the press with impunity drawn from our decision in Romesh Thapar 's case(1) could easily have been avoided as it was avoided by Shearer J. who in very emphatic terms said as follows: " I have read and re read the judgments of the Supreme Court, and I can find nothing in them myself which bear directly on the point at issue, and leads me to think that, in their opinion, a restriction of this kind is no longer permissible. " Be that as it may, the matter is now concluded by the language of the amended article 19(2) made by the Constitu tion (First Amendment) Act which is retrospective in opera tion, and the decision of the High Court on this point cannot be sustained. Basant Chander Ghosh contended that the amendment made in article 19 (2) of the Constitution with retrospective operation was repugnant to article 20 of the Constitution inasmuch as it declared a certain act an offence which was not an offence at the time when the act was committed. This contention is untenable. The respondent is alleged to have violated the provisions of section 4(1)(a) of the Indian Press (Emergency Powers) Act which was a law in force in the year 1949 when the offending pamphlet was published. She has not been convicted of any offence so far and is not being again convicted for the same by reason of the amend ment in article 19(2). Article 20 has no application whatev er to the present case. Article 19(2) empowers a legislature to make laws imposing reasonable restrictions on the funda mental rights conferred under article 19(1) of the Constitu tion. It does not declare any acts which were not offences before as offences with retrospective effect. Moreover, in the year 1949 the respondent was not possessed of any funda mental right which could be said to have been contravened by the amendment. Though, as I have said above, the High Court is in error in the finding that the provisions of section ,4(1)(a) (1) [1950] S.C.R. 594, 661 of the Indian Press (Emergency Powers) Act are repugnant to the Constitution, its judgment has to be maintained as it is also in error in holding that the pamphlet in question fell within the mischief of section4 (1)(a) of the Indian Press (Emergency Powers) Act. The document is written in high flown Bengali language and contains a good deal of demagogic claptrap with some pretence to poetic flourish. It enunciates certain abstract propositions in somewhat involved language and it cannot be followed except with considerable effort. The High Court held that the document offended against the provisions of section 4(1)(a) inasmuch as certain parts of it contemplate a bloody and violent revolution and that the central theme that runs through the whole gamut of the offending pamphlet is that the author is anxious to bring about a bloody revo lution and change completely the present order of things by causing a total annihilation of the persons and the policies of those who according to him are in the opposite camp. Particular reference was made to the following passages in the writing which in the opinion of the learned Judges support that conclusion. The first of these passages is in these words : "Oh thou foolish oppressor, you want to cause abject terror in me with your red eyes and full throated voice do that, I am not afraid . . My pro test is against parochial national politics. "Another passage reads thus : `` Death is my secret love; poison is my drink the flames of fire are my sweet breeze; the wailing of a hundred be reaved childless mothers is just a tune in my flute; the weeping of widows at their widowhood is just a rhythm of my song. " The next passage referred to is in these terms : "I am the cremation ground. I am the bloodthirsty goddess Kali who lives and moves about in the cremation ground. Plague or famine is my great joy . . I am thirsty, I want blood, I want revolution,. 662 I want faith in the struggle. Tear, tear the chain of wrongs; Break thou the proud head of the oppressor. " Reference was also made to a passage in which the writer desires that his cries should be heard by people far and near, that his call should be hearkened far far away across the hills, the jungles, across the rivers and rivulets and all those who hear should come forward to join the ranks in destroying the oppressor and in which he claims that he is the messenger of death, that his revolutionary song signals the door of each of the listeners and signals to them to come out if they have life, if they have health, if they have courage to come and dash to pieces those who commit oppression on the mother, and he says that with the blood of those followers let the revolution grow. It winds up with an invocation to the readers in these terms : "If you are true, if you are the gift of God, if you are not a bastard, then come forward with a fearless heart to struggle against the oppressors ' improper conduct, oppres sion and injustice. We should not tolerate wrongful oppres sion. Oh, thou the people with the burning pain of thine heart burn the heart of the oppressive, high handed oppres sor. Let all wrongs, all high handedness, all oppressions, all tyrannies be burnt in the flame. " It seems to me that the learned Judges of the High Court took this writing too seriously. It did not deserve that consideration. It is some kind of patch up work, with no consistency or cohesion between its different parts. Por tions of it are unmeaning nonsense and in other parts it talks of revolution in the abstract. There is no appeal to anybody in particular or for any known or specific cause. No mention is made of any specific kind of oppression or injus tice that is intended to be remedied. The desire is. to change the face of the earth by ending all oppression, tyranny and injustice. Their is no evidence whatsoever for connecting this pamphlet with any agitation or movement at the time it was written in that locality. I have read the writing several times and I think that Mr. Ghosh is 663 right when he says that the pamphlet contains merely empty slogans, carrying no particular meaning except some amount of figurative expression or language borrowed at random from various authors with a touch of poetic flourish about it. Writings of this characters at the present moment and in the present background of our country neither excite nor have the tendency to excite any person from among the class which is likely to read a pamphlet of this nature. They will necessarily be educated people. Such writings leave their readers cold and nobody takes them seriously. People laugh and scoff at such stuff as they have become too familiar with it and such writings have lost all sting. Any non descript person who promises to change the order of things by bloody revolution and assumes the role of a new Messiah is merely the laughing stock of his readers and creates an adverse impression against himself, rather than succeed in stirring up any excitement in the minds of the readers. Rhetoric of this kind might in conceivable circumstances inflame passions as, for example, if addressed to an excited mob, but if such exceptional circumstances exist it was for the State Government to establish the fact. In the absence of any such proof we must assume that the pamphlet would be read by educated persons in the quietness of their homes or in other places where the atmosphere is normal. I would therefore hold, in the words of my brother Bose in Bhagwati Charan Shukla vs Government of C.P. & Berar(1), that though the pamphlet in question uses extravagant language and there is in it the usual crude emotional appeal which is the stock in trade of the demagogue as well as a blundering and ineffective attempt to ape the poets, that is all, and there is nothing more in it. The time is long past when writings of this kind can in normal circumstances excite people to commit crimes of violence or murder or tend to excite any body to commit acts of violence. Again the language employed is full of mysticism and (I) I.L.R. 664 cannot be easily understood and it creates no impression of any kind on any person. In order to determine whether a particular document falls within the ambit section 4(1), the writing has to be considered as a whole and in a fair and free and liberal spirit, not dwelling too much upon isolated passages or upon a strong word here and there, and an endeavour should be made to gather the general effect which the whole composi tion would have on the mind of the public. Expressions which are the stock in trade of political demagogues and have no tendency to excite anybody, and exaggerations in language cannot lead to that result. The learned Government Advocate placed reliance on the decision of Harries C.J. in Badri Narain vs Chief Secretary, Bihar Govermnent(2). The learned Chief Justice therein held that in order to show that cer tain words fall under section 4 (1) (a) it is not necessary to show that the words tend to incite or to encourage the commission of a particular offence or offences and that it is sufficient if they tend to incite to or to encourage the commission of cognizable offences of violence in general. In that case, a poem entitled "Labourers, the mainstay 'of the world" began by emphasising that labourers are the mainstay of the present world and then proceeded to describe their unfortunate and pitiful lot. In a subsequent portion the author stated that though speechless today, when organized, the labourers will be as powerful as millions and this portion of the poem ended with these words: "Why are you helplessly tolerating the exploitation of your masters." The remaining lines were as follows: "Labourers, raise now the cry of revolution. The heavens will tremble, the Universe will shake and the flames of revolution will burst forth from land and water. You who have been the object of exploitation, now dance the fearful dance of destruction on this earth; truly, labourers, only total destruction will (2) A.I.R. 1941 Pat.132 665 create a new world order and that will bring happiness to the whole world. " It is quite clear that here an appeal was made to la bourers inciting and encouraging them to commit acts of violence. The words used certainly tended to achieve that result. They were no empty slogans or abstract propositions. It had one consistent and coherent purpose, i.e., to excite labourers and to bring them into action. Any observation made about this writing can have no apt application for the determination of the present case. The learned Chief Justice in the concluding part of the judgment very pertinently pointed out that a commonsense interpretation must be given to the document complained of, the question to be answered always being, what impression will the documents or words give to a man of ordinary commonsense. My answer to this query in the present case is that the document read at first sight is not intelligible unless it is explained to that man of ordinary commonsense by a learned person and hence it can by itself create no impression of any kind on such a person. After the writing is explained to such a man, he will merely laugh at it and throw it in the waste paper basket without taking it seriously. He will refuse to believe that a person of this kind can create a new world order by appealing to a bloody revolution. As I pointed out in my judgment in Harkrishan Singh vs Emperor(1), the use of such words as appear in this document creates no impression on the mind of any reasonable reader. That case dealt with clause (d) of section 4 (1), but the principle underlying it also applies to the construction of writings which are alleged to fall under section 4 (1) (a). I do not mean to suggest or to lay down as a general propo sition that some of the words used in the pamphlet in ques tion in the context of any other writing would not fall within the mischief of section 4 (1) (a). Certain parts of the pamphlet, if read as isolated passages, may have the tendency to excite people to commit (I) A,I.R, 666 crimes of violence but that is not the effect if the pam phlet is read in its entirety. The result is that I would dismiss the appeal but in the circumstances would make no order as to costs. The State Government has succeeded in its contention that sec tion 4 (1) (a) of the Act is constitutional and that was the real ground on which it came to this Court. PATANJALI SASTRI C.J. I agree with the judgment just delivered by my learned brother Mahajan J. and have nothing to add. MUKHERJEA J. I concur in the judgment delivered by my learned brother Mahajan J. and I would like to say a few words, regarding the publication itself which led to the demand of security by the Government under the provision of the Indian Press (Emergency) Act. The point that requires consideration is, whether the words contained in the impugned publication are of the nature described in section 4 (1) (a) of the Act; or in other words whether they incite to or encourage or tend to incite to or to encourage the commission of any offence of murder or any cognizable offence involving violence. It is well settled that to arrive at a decision on this point, the writing is to be looked at as a whole without laying stress on isolated passages or particular expressions used here and there, and that the court should take into consideration what effect the writing is likely to produce on the minds of the readers for whom the publication is intended. Account should also be taken of the place, circumstances and occa sion of the publication, as a clear appreciation of the background in which the words are used is of very great assistance in enabling the court to view them in their proper perspective. The leaflet in question is entitled "Sangram" or struggle. It is written in high flown Bengali prose with a large mixture of poetic expressions borrowed at random from the writings of some well known 667 poets of Bengal. The object of the writing as far as could be gathered from the document is to give a poetic or ideal istic picture of what is meant and connotated by "struggle"or revolution. The aim and end of "struggle ", as stated in the leaflet, is to wipe outs, "oppression, injus tice or wrong" which is "pervading all over the world from the past to the future"; and it is only after all wrongs, injustice and oppression have perished that a new world could be built up. This seems to be the main or central theme of the composition, clothed, though it is, under much incoherent talk and seemingly meaningless utterances. There is no indication throughout the writing as to what kind of oppression, injustice or wrong the author had in mind. Far from referring to grievances of any specific character, the writer does not even hint at such general causes of discon tent as political inequality, economic exploitation or class warfare which are the subject matter of agitation in many parts of the world. The leaflet does not give indication also of any unpopular measure or act of injustice affecting the minds of the people in the particular area where it was published and within which it was intended to be circu lated. In one part of the document the following words are found to occur: "If mother be true, let no disgrace spread in the name of the mother. If mother tongue be equal to mother, then the said language is your most revered goddess. Do not allow disgrace to spread in her name". It is not the case of the Government and there is no statement or affidavit to that effect, that the passages here have any reference to the language controversy which agitated and probably is still agitating this particular district. In another part of the document the expression "narrow parochial politics" has been used, but here again the Government has not made any attempt to explain, what this expression could, in the particular context, mean or refer to. As no acts of injustice or oppression are actually mentioned in the document, it is difficult to say who the "oppressors" are, whose "proud heads" the author asks his 668 readers to break. It is quite clear that the "oppressor" mentioned here is neither the Government nor the party in power, nor has it any relation to any particular class of persons or a sect or community which might be harassing others and trampling upon their rights. It may be, that to attract the operation of section 4 (1) (a) of the Indian Press Act, the incitement to murder or violence need not be specifically directed against particular individuals or class of persons; but when the whole talk is about injustice or oppression in the abstract, which is stated by the author to be in existence from the beginning of time and when in hyperbolic language a hope is expressed of establishing a better and a cleaner world through struggle, sweat and blood, the words used may not improperly be looked upon as an effusion of poetic fancy which, having no relation to actual facts can have very little potency for doing mis chief. I will now proceed to examine the contents of the pamphlet in detail. The writer begins in an affected poetic vein and de scribes, in language, to which it is difficult to attach any rational meaning, what "struggle" or revolution is. The "struggle" which is personified in the article introduces itself in the following manner: "I am not wealth, nor popular strength, not the people nor fame;. I am not joy nor a brag, nor the timid look of the beloved 's eyes . I am not mother 's affection, nor sister 's love". If these words convey any sense, they can only mean that the struggle or revolution which the writer wants to depict is something different from what we ordinarily associate with our social life and happiness; it is a negation of all natural human feelings and sentiments. The next paragraph says in equal enigmatical language what "Sangram" or "strug gle" actually is. "I am old antiquated history" thus the article proceeds; " I am time eternal, I am the future, the present and the past, in my heart is written the story of the past, the problems of the present and the voice of the 669 future". I do not know whether this is a poetic way of depicting the entire life process which is said to lie through struggle and guide our evolution in this planet. Struggle, according to the author, is coeval with time and eternity. In the next paragraph the writer passes on to say with many repetitions of the word "wrong" that "it is wrong which is pervading all over from the past to the future", and it is this wrong that is to be righted by the struggle. The struggle here is likened for reasons best known to the author to a piece of torn grass in the middle stream of a turbulent river, and to a grain of dust thrown in the face of a cyclone. "It is dishonour, Unhappiness, endless pain. " It is again likened successively to the frown of the be loved, to famine, storm and evil days. The call is sent to everybody to come on "where the sky is cracking and the endless rough and thorny path is shrouded in darkness" and assist in building up a new world. Many of the expressions used here are taken verbatim from the writings of some well known Bengalee authors, though they sound nothing but a rigmarole in the present context. The next paragraph begins with the word "revolution". Struggle is revolution and through struggle and revolution the world is to be built anew. It is then said that "death is my darling and death is the only truth in this world". If one has to die, there is no sense in dying of illness. Let a man choose an honourable death by standing against oppressors. Quite abruptly the author brings in the name of Sri Subhas Chandra Bose in the midst of this talk and asks his readers to listen "far far away across the hills, across the jungle, across the rivers and rivulets the call of Subhas Chandra Bose, the greatest revolutionary leader of the world". The people are asked not to stop until the objective is attained. Again it is said "I am struggle, I am revolution . I am a Hindu, I am a Mussalman, I am a Christian, I am a Jew, I am a Keduin, I am severed from all religions by the fruits of my action in previous births". Without the least attention to any sequence of thought, immediately 670 after this, the imaginary oppressor is addressed by the author as follows: "Oh you foolish oppressor you want to terrify with your red eyes, I fear not." The author, or rather the personified "struggle" which purports to speak, then repeats the well known words of poet Tagore and says that he does not seek salvation through renunciation; he wants that salvation which lies in joy amidst innumerable dangers and difficulties. The idea of finding joy in all that is hated, avoided and dreaded in this world is elaborated in the passages that follow. "Death" it is said "is my secret love, poison is my drink, the flames of fire are my sweet breeze, the cry of childless mothers a tune in my flute and the weeping of widows a rythm of my song". In this vein the author goes on conjuring up all the uncanny and weird things in the world and associat ing them with struggle. "I am not joy, I am the remnant of the dying cries . I am the bloodthirsty goddess Kali who lives and moves about in the cremation ground. I want blood . . Break the proud head of the oppressor. I bathe in flames . . . Thunder is my kiss of affection . . I do not understand myself. I do not know myself. I do not recognise myself still I want revo lution, still I want struggle". The learned Judges of the High Court laid very great stress on these passages which in their opinion constitute a direct incitement to bloody revolution; and that is also the line of argument adopted by Mr. Mitter who appeared before us on behalf of the State. It has been argued by Mr. Ghosh appearing for the respondent that the "struggle" which the author has depicted and which he aims at is a non violent struggle and the blood that is to be shed is the blood of those who are called upon to resist oppression and injustice. On the other hand, it is argued on behalf of the State that the passages quoted above can only mean that it is a bloody and violent revolution which could carry men to their desired end. In my opinion, neither of these contentions furnish to us the proper method of approach to the question which requires 671 decision in the present case. We would have to look at the article as a whole and focus our attention on what can be regarded to be its central theme or purpose. As has been said already, what the writer wants is to draw an ideal picture of "struggle" or revolution quite unconnected with any particular place, or any particular political or social environment. Injustice or oppression exists, according to the author, from the very dawn of time and so also does struggle or revolution. It is an integral part of the world process and is a sort of irrational or blind impulse. This is expressed by saying "I do not understand myself,I do not recognise myself, still I want revolution". In painting death or war, the artist would naturally choose some uncanny associations. The trappings of revolution, as the author paints it, are all the fearful and hideous things in this world. It is linked up with thunder and storm, fire and devastation, cataclysm, famine, danger, destruction and death. It is immaterial so far as this ideal picture is concerned whether the blood that is spoken of is the blood of the oppressor or of the oppressed, and whether the strug gle is violent or pacific. The goddess Kali in the Hindu mythology is the goddess of destruction and death, but she is the benign goddess also whose protecting hands ward off all oppressions, danger and calamity. That is the reason why revolution or struggle is assimilated to this goddess. It cannot be denied that in painting this picture of "strug gle" or revolution the author has used very strong words; but they would not be unnatural if it is only an ideal picture that the author really desired to paint. If howev er, it can be shown that under the cloud of these general enigmatical words something concrete and tangible lies hidden, that the "oppression" and "oppressor" are not imagi nary abstractions but are real things not unknown to the people to whom the article is addressed and there is in fact a grievance agitating the popular mind, no matter whether it is well or ill founded, against which the author desires to inflame public opinion;then even though he uses veiled or covert language, there 672 can be no doubt that the article would come within the purview of section 4 (1) (a) of the Indian Press Act. But the difficulty is that the Government has not made any attempt to establish any of these facts. Without knowing the attendant circumstances and the actual background of the publication, it is not possible for us to ascertain the real intention that lies behind the writing; and absolutely no materials have been placed before us by the Government which might enable us to find out what in reality was the sub stance behind this camouflage of words, if camouflage it actually is. The rest of the article proceeds in the same hyperbol ic and enigmatical style There is repetition ad nauseam of the same stock phrases and expressions. It goes on to say "I am the messenger of death. I am untouchable, I am vague, I am queer, 1 am nightmare, I am robber, I am enemy, I am un known. 1 am not Falgoon with its sweet smelling flowers; I am eternal separation, I am restlessness". I am extremely doubtful whether expressions like these would not, to an ordinary reader, appear to be anything better than the ravings of a mad man. I will cull a few more expressions which occur subsequently and which loftily this impression. "I see struggle on my darling 's face, I see struggle in the honey of flowers. I am storm, I am the Deepak Ragini. I am misfortune. I am cry of distress, I am jealousy, I am evil days. " The concluding portion of the article reads as follows: `` Let me speak the last word: If you are true, if you are gift of God, if you are not a bastard. then come forward with a fearless heart, struggle against the oppressor 's improper conduct, oppression and injustice. We shall not tolerate wrongful oppression. Oh, the people, with the pain of your heart burn: the heart of the oppressive high handed oppressor, let all wrongs, all high handedness, all oppres sions, all tyrannies be burnt in the flame. " 673 There was a good deal of discussion before us as to whether these passages hint at a violent or a non. violent struggle. It may be capable of either interpretation. but as I have said already, that by itself would not afford a decisive solution of the question before us. It is also not much material to consider whether the author wants that "Jealousy and malice" which he has referred to at the end of the article, are to develop and spread or they are to be transformed into innocuous and sweet smelling flowers. This is certainly a matter upon which difference of opinion is possible. After all, we are to see what impres sion the article read as a whole would produce upon ordinary people. An ordinary reader is not expected to seek the assistance of an interpreter in trying to find out the true meaning of the words used. As has been said already, many of the expressions used here have been taken verbatim from the writings of certain noted Bengalee authors. They are stock phrases current in Bengal and amongst the Bengali speaking community elsewhere. If it strikes the reader that what the author wanted was to pass himself off as a noted writer by sheer plagiarism, then whatever else may be said about the article, it certainly does not come within the purview of section 4 (1) (a) of the Press Act. Taking the article as it is, it is nothing but a tissue of high sounding and meaningless words and whether the author wanted to imitate some of the welt known poets of Bengal in attempting to give a poetic description of "strug gle"or revolution or wanted to give himself the pose of a liberator of mankind, out to wipe out the last vestiges of oppression and injustice from the face of the earth, no rational person would take him seriously and would look upon this composition as the vapourings of a deranged brain. If, on the other hand, the whole thing is a clever ruse resorted to with the object of inflaming the popular mind against certain persons or authorities, and although only general and vague words are used, the words have their meaning and significance to those 674 who are acquainted with the actual situation, it was incum bent upon the Government to clear up these matters and present before us the background and the context without which no meaning could be attributed to this species of empty verbiage. As Government did not discharge the duty that lay upon them, I am clearly of opinion that no security order could be passed against the respondent under the provision of section 4 (1) (a) of the Press Emergency Act. DAS J. During the course of the arguments I enter tained some doubt as to the innocence of the meaning and implication of the pamphlet in question, but, in the light of the judgments of my learned brothers Mahajan J. and Mukherjea J., which I have had the advantage of perusing since, I do not feel that I would be justified in dissenting from the construction they have put upon the language used in the pamphlet. I accordingly concur in their conclusion. Bose J. I agree with my brothers Mahajan and Mukher jea. Appeal dismissed.

IN-Abs

Section 4 (1) (a)of the Indian Press (Emergency Pow ers) Act (XXIII of 1931) is not unconstitutional as the restrictions imposed on freedom of speech and expression by the said section are solely directed against the undermining of the security of the State or the overthrow of it and are within the ambit of article 19(2) of the Constitution. Romesh Thapar 's case ([1950] 655 S.C.R. 594]) and Brij Bhushan 's case ([1950] S.C.R. 605)do not lay down any wide proposition that restrictions of the nature imposed by section 4 (1) (a) are outside the scope of article 19 (2) as they are conceived generally in the interests of public order. At any rate, the amendment made to article 19 (2) by the Constitution (First Amendment) Act which is retro spective in operation makes the matter clear. In order to determine whether a particular document falls within the ambit of section 4(1) the writing has to be considered as a whole in a fair, free and liberal spirit, not dwelling too much on isolated passages or upon a strong word here and there, and an endeavour should be made to gather the general effect which the whole composition would have on the minds of the public. Expressions which are the stock in trade of political demagogues and have no tenden cy to excite anybody, and exaggerations in language, cannot lead to that result. Rhetoric of this kind might in con ceivable circumstances inflame passions, as for example, if addressed to an excited mob, but if such circumstances exist it is for the Government to establish the fact.

Appeal No. 358 of 1958. 645 Appeal by special leave from the judgment and order dated 8th March, 1956, of the former Bombay High Court in I.T.R. No. 55 of 1955. A. N. Kripal and D. Gupta, for the appellant. N. A. Palkhivala and B. P. Maheshwari, for the respondents. November 24. The Judgment of the Court was delivered by KAPUR, J. This is an appeal by special leave against the judgment and order of the High Court of Bombay in Income tax Reference No. 55 of 1955, in which two questions of law were stated for opinion and both were answered in favour of the assessee and against the Commissioner of Income tax who is the appellant before us and the assessee is the respondent. The facts of this case are these: The respondent is a registered firm carrying on business as commission agents in Bombay. For purposes of its business it borrowed money from time to time from Banks on joint promissory notes executed by it and by others with joint and several liability. On September 26, 1949, the respondent borrowed Rs. 1,00,000 from the Bank of India on a pronote executed jointly with one Kishorilal. Out of this amount a sum of Rs. 50,000 was taken by the respondent for purposes of its business and the rest by Kishorilal. Kishorilal however failed to meet his liability and became a bankrupt. The respondent had therefore to pay the Bank the whole amount, i.e., Rs. 1,00,000 with interest. Out of the amount taken by Kishorilal the respondent received in the accounting year, from the Official Assignee, a sum of Rs. 18,805 and claimed the balance, i.e., Rs. 31,740 as deduction. The accounting year was from August 26, 1949 to July 17, 1950, the assessment year being 1951 52. This claim was disallowed both by the Income tax Officer as well as the Appellate Assistant Commissioner. On Appeal to the Income tax Appellate Tribunal this sum was allowed ,as an allowable deduction under section 10(2)(xv) of the Income tax Act and as business loss. 82 646 At the instance of the Commissioner a case was stated to the High Court of Bombay by the Income tax Appellate Tribunal. In the statement of the case which was agreed to by both parties the Tribunal said: "For the purpose of his business, he borrows from time to time money on joint and several liability from banks. The Commercial practice is to borrow money from banks on joint and several liability. An illustration will explain what we mean. A and B require Rs. 50,000 each. They find that the Bank would not advance Rs. 50,000 to each on his individual security. They however, find that the Bank would be prepared to advance Rupees one lach on their joint and several liability. They take Rupees one lac on joint and several liability and then divide the money equally between themselves. " It also found that the Banks advanced monies to some constituents on their personal security also but they had to pay a higher rate of interest than when the money was borrowed on joint and several responsibility; that Rs. 1,00,000 borrowed from the Bank was in accordance with the commercial practice of Bombay. On these facts the following two questions of law were referred to the High Court: "(1) Whether the assessee 's claim is sustainable under section 10(2)(xv) of the Act? (2) Whether the assessee 's claim that the loss was a business loss and, therefore, allowable as a deduction in computing the profits of the assessee 's business is sustainable under law?" Both these questions were answered in favour of the respondent and against the appellant. Counsel for the Commissioner challenged the findings of the Tribunal in regard to the existence of commercial practice in Bombay but this ground of attack is not available to him because not only did the Tribunal give this finding in its Order, but in the agreed statement of the case also this finding was repeated as is shown by the passage quoted above. The High Court also has proceeded on the basis of this commercial practice. In the judgment under appeal the learned Chief Justice said: 647 "The finding of the Tribunal is clear and explicit that what the assessee was doing was not something out of the ordinary, but in borrowing this money on joint and several liability he was following a practice which was established as a commercial practice. Therefore, the transaction was clearly in the course of the business and incidental to the business and it is this transaction which resulted in a loss to the assesses, he having to pay the liability of the surety. " Therefore this appeal has to be decided on the basis that a commercial practice of financing business by borrowing money on joint and several liability was established. It was argued on behalf of the appellant that this court in Madan Gopal Bagla vs Commissioner of Income Tax, West Bengal (1) had decided against the allowability of such losses. But the facts of that case when carefully scrutinised are distinguishable and the decision does not support the contentions of the appellant. No doubt certain features of that case and the present one are similar but they differ in essential features. In that case the assessee was a timber merchant who obtained a loan of Rs. 1 lac from the Bank of India on the joint security of himself and one Mamraj, which the assessee paid off. Mamraj also obtained a loan of Rs. I lac on the joint security of himself and the assessee. Mamraj became an insolvent and the assessee had to pay the whole of the amount borrowed with interest thereon. The assessee there received a certain amount of money by way of dividends from the Receiver and the balance he wrote off as bad debt in the assessment year and claimed it as an allowable deduction under section 10. The High Court there held that the debt could not be said to be a debt in respect of the business of the assessee as he was not carrying on the business of standing surety for other persons nor was he a money lender, he being simply a timber merchant; that it had not been established nor was it alleged that he was in the habit of standing surety for other persons "along with them for purposes of securing loans for their use and benefit" and even if money (1) ; 648 had been so borrowed and there had been a loss the loss would have been a capital loss and not a business loss to the assessee. This statement of the law was approved by this Court but there mutuality, as an essential ingredient of the custom established, was found to be lacking as is shown by the following passage from the judgment of the court. "The custom stated before the Appellate Assistant Commissioner was that persons carrying on business in Bombay used to borrow monies on joint security from the Banks in order to facilitate getting financial assistance from the Banks and that too at lower rates of interest. A businessman could procure financial assistance from the Banks on his own, but he would in that case have to pay a higher rate of interest. He would have to pay a lower rate of interest if he could procure as surety another business man, who would be approved by the Bank. This, however, did not mean that mutual accommodation by businessmen was necessarily an ingredient part of that custom. A could procure B, C or D to join him as surety in order to achieve this objective, but it did not necessarily follow that if A wanted to procure B, C or D to thus join him as surety he could only do so if he in his own turn joined B, C or D as surety in the loans which B, C or D procured in their turns from the Banks for financing their respective businesses. Unless that factor was established, the mere procurement by A of B, C or D as surety would not be sufficient to establish the custom sought to be relied upon by the appellant so as to make the transaction of his having joined Mumraj Rambhagat as surety in the loan procured by Mumraj Rambhagat from Imperial Bank of India, a transaction in the course of carrying on his own timber business and to make the loss in the transaction a trading loss or a bad debt of the timber business of the appellant. " Continuing at page 558 it was observed: "There were thus elements of mutuality and the essential ingredient in the carrying on of the money lending business, which were elements of the custom 649 proved in that case, both of which are wanting in the present case before us." Mr. Palkhivala for the respondent rightly argued that Madan Gopal Bagla 's case (1) was decided against the assessee because the custom of persons standing surety for each other for borrowing money and the element of mutuality which was an essential ingredient in the case of Commissioner of Income Tax, Madras vs section A. section Ramaswamy Chettiar (2) was not proved. In the latter case it was established that there was a well recognised custom amongst Chettiars of raising funds for their business of money lenders by the execution of joint pronotes and that if a loss was sustained by one of the executants having to pay the whole on account of inability of the other it was a deductible loss. The appellant also relied on a judgment of the Madras High Court in Commissioner of Income Tax vs section R. Subramanya Pillai (3). In that case the assessee was a book seller who from time to time jointly with another person borrowed money out of which he employed a portion in his business. One of such amounts borrowed was Rs. 16,200 out of which the assessee took Rs. 10,450 for his business needs and the other debtor took the balance. The latter became insolvent and the assessee had to pay the whole of the money borrowed and claimed it as allowable deduction under section 10(2)(xi) or section 10(2)(xv) of the Act or as business loss and it was hold that he was not entitled, because the loss sustained by the assessee was too remote from the business of book selling carried on by him and was not sufficiently connected with the trade and therefore fell outside the range of those amounts which could properly be brought into profit and loss account of the business. The decision in Commissioner of Income Tax vs section A. section Ramaswamy Chettiar (2) was there distinguished on the ground that the decision must be confined to its own peculiar facts and did not apply to business as the one in Subramanya Pillai 's Case (3). The following passage from (1) ; , (2) (3) 650 the judgment of Viswanatha Sastri, J., in that case is relevant: "But there the business was one of money lending and the Court found that according to the wellknown and well recognised mercantile custom of Nattukottai bankers, they were in the habit of raising 'funds which formed the stock in trade of their money lending business by the execution of joint promissory notes in favour of bankers. That was apparently the usual technique of obtaining credit adopted by the Nattukottai Chetti community money lenders. In the context this Court held that where a Nattukottai Chetti money lender paid off in their entirety the debts jointly due by him and another as a result of the latter 's inability to pay, the loss sustained as a result of this transaction was a loss of the moneylending business itself and therefore a deductible item in computing profits. " In the instant case it has been found that there was a well recognised commercial practice in Bombay of carrying on business by borrowing money from Banks on joint and several liability. It was also found that by so doing the borrower could borrow money at a lower rate of interest than he otherwise would have paid; that the respondent had, in accordance with the commercial practice, borrowed the money, the whole of which he had to return because the joint promisor Kishori Lal had become bankrupt; mutuality was also held proved. It cannot be said that the essential feature of the case now before us is in principle different from that of the Commissioner of Income tax vs Ramaswamy Chettiar (1). In both cases the finding is that there is mutuality and custom of borrowing money on joint pronotes for the carrying on of business. In our opinion in the circumstances proved in the present case, and on the facts established and on the findings given, the respondent was rightly held to be entitled to deduct the loss which was suffered by him in the transaction in dispute. Counsel for the assessee drew our attention to a (1) 651 Privy Council judgment Montreal Coke and Manufacturing Co. vs Minister of National Revenue (1) but that, case can have no application to the facts of the present case because it was found there as a fact that the assessees 's financial arrangements were quite distinct from the activities by which they earned their income and expenditure incurred in relation to the financing ' of their business was not expenditure in the earning of their income within the statute. It was then contended that the loss of the respondent was a 0capital loss and for this again reliance was placed on the judgment of this Court in Madan Gopal Bagla 's case (2 ) and particularly on the observation at page 559 where Bhagwati, J., quoted with approval the observations of the High Court in the judgment but as we have pointed out the facts of that case are distinguishable and what was said there has no application to the facts and circumstances proved in the present case. In our view the judgment of the High Court is right and we therefore dismiss this appeal with costs. Appeal dismissed.

IN-Abs

For the purposes of its business the respondent borrowed a certain sum of money from the Bank of India on a pronote executed jointly by him and one Kishorilal in accordance with a commercial practice of carrying on business by borrowing money from Banks on joint and several liability. The money was divided half and half between the respondent and Kishorilal but Kishorilal failed to pay off his liability as he became a bankrupt and the respondent had to pay the whole amount to the Bank. The respondent, however, received from the Official Assignee a part of the sum taken by the Kishorilal leaving a balance still unpaid. The respondent 's claim to deduct this unpaid balance under section 10(2)(XV) of the Income tax Act was refused by the Income tax Officer and the Appellate Assistant Commissioner but was allowed by the Income tax Appellate Tribunal on appeal. On a reference made at the instance of the appellant the High Court decided the question in favour of the respondent assessee. On appeal by the appellant by special leave, Held, that the view taken by the High Court was correct. On the finding that there was a well establised Commercial practice of financing business by borrowing money on joint and several liability and by so doing the respondent could borrow at a lower rate of interest, and that there was mutuality between the borrowers for standing surety for each other for loans taken for business purposes, the respondent assessee in computing his business profits was entitled to deduct the loss suffered by him in paying the sum not paid by his co borrower. Commissioner of Income tax vs Ramaswami Chettiar, , applied. Madan Gopal Bagla vs Commissioner of Income tax, West Bengal, ; , Commissioner or Income tax vs section R. Subramanya Pillai, distinguished. Montreal Coke and Manufacturing Co. vs Minister of National Revenue, [1945] 13 I.T.R. Supp. 1, not applicable.

Appeal No. 270 of 1959. Appeal by special leave from the judgment and order dated December 23, 1957, of the Allahabad High Court (Lucknow Bench) at Lucknow in Civil Miscellaneous Application (0. J.) No. 86 of 1954. C. B. Aggarwala, G. C. Mathur and C. P. Lal, for the appellants. Achhru Ram, section N. Andley, J. B. Dadachanji, Rameshwar Nath and P. L. Vohra, for the respondent. November, 25. The Judgment of Sarkar, Subba Rao and Mudholkar, JJ., was delivered by Subba Rao, J., and that of Gajendragadkar and Wanchoo, JJ., was delivered by Wanchoo, J. SUBBA RAO, J. This is an appeal by special leave against the judgment and order of the High Court of Judicature at Allahabad, Lucknow Bench, allowing the petition filed by the respondent under article 226 of the Constitution. The facts are in a small compass and may be briefly stated. In the year 1933 the respondent was appointed a constable in U. P. Police Force; on December 1, 1945, he was promoted to the rank of head constable and in May, 1952 he was posted as officer incharge of Police Station, Intiathok, District Gonda. Complaints were received by the District Magistrate, Gonda, to the effect that the respondent was receiving bribes in the discharge of his duties. On September 16, 1952, the District Magistrate, Gonda, directed the Sub Divisional Magistrate to make an enquiry in respect of the 674 said complaints. On November 3,1952, the Sub Divisional Magistrate, after making the necessary enquiries, submitted a report to the District Magistrate recommending the transfer of the respondent to some other station. On November 17, 1952, the District Magistrate sent an endorsement to the Superintendent of Police to the effect that the Sub Divisional Magistrate had found substantial complaints against the integrity of the respondent, that he had also received such complaints and that his general reputation for integrity was not good, but that his transfer should, however, come after sometime and that in the meantime his work might be closely watched. On being called upon by the Superintendent of Police to submit an explanation for his conduct, the respondent submitted his explanation on November 29, 1952. On December 17, 1952, the respondent was forced to go on leave for two months. Before the expiry of his leave, he was reverted to his substantive post of head constable and transferred to Sitapur. On February 17, 1953, he was promoted to the rank of officiating Sub Inspector and posted as Station Officer at Sidholi. On February 27, 1953, the Superintendent of Police made the following endorsement in his character roll: "A strong officer with plenty of push in him and met with a strong opposition in this new charge. Crime control was very good but complaints of corruption were received which could not be substantiated. Integrity certified. " Meanwhile on further complaints, the C.I.D. probed the matter further and on July 26, 1953, the Superintendent of Police, Investigation Branch, C.I.D., reported that the respondent was a habitual bribetaker. On July 28, 1953, he was placed under suspension and on August 18, 1953, he was charged under section 7 of the Police Act with remissness in the discharge of his duty and unfitness for the same inasmuch as while posted as a Station Officer, Police Station, Intiathok, he had been guilty of dishonesty, corruption and misbehaviour in that he had on nine occasions, particulars of which were given in the charge, accepted bribes. it may be mentioned that the magisterial inquiry 675 related to seven of the nine charges alleged against the respondent. The trial was conducted by the, Superintendent of Police and the respondent submitted his explanation on September 12, 1953. The Superintendent of Police, who conducted the trial, examined many witnesses and found that seven out of the nine charges had been established. Thereafter he issued a notice to the respondent calling upon him to show cause why he should not be dismissed from the police force. On February 20, 1954, the respondent sub mitted his explanation and the Superintendent of Police, by his order dated February 22, 1954, dismissed the respondent from service with effect from the said date. The appeal preferred by the respondent to the Deputy Inspector General of Police was dismissed by his order dated June 2, 1954. Thereafter the respondent on August 5, 1954, filed a petition under article 226 of the Constitution before the High Court of Judicature at Allahabad, Lucknow Bench, for quashing the order of dismissal. Before the High Court three points were raised, namely, (1) as the petitioner was officiating. as Sub Inspector of Police at the time of the departmental trial the Suprintendent of Police had no power to dismiss him, since an order in such circumstances could only be made by a police officer senior in rank to a Superintendent; (2) the trial was vitiated by a number of serious irregularities; and (3) the specific acts with which the petitioner was charged were cognizable offences and, therefore, the Superintendent of Police had no jurisdiction to proceed with a departmental trial without complying with the provisions of subparagraph (1) of para. 486 of the Police Regulations. The learned Judges of the High Court held that the respondent was charged with committing cognizable offences and therefore sub paragraph (1) of para. 486 governed the situation and that, as no case, as required by the said sub paragraph, was registered against the respondent in the police station, the order of dismissal was invalid. They further held that the case was not covered by the first proviso to sub paragraph (1) of para. 486, as, in their opinion, the information 676 about the commission of the offences was not in the first instance received by the Magistrate and forwarded to the police for inquiry. In view of that finding they found it unnecessary for them to express any opinion upon other arguments which had been advanced on behalf of the respondent. In the result they issued a writ in the nature of certiorari quashing the impugned orders. Hence the appeal. Mr. C. B. Agarwala, learned counsel appearing for the appellants, raised before us the following points: (1) The Governor exercised his pleasure through the Superintendent of Police, and, as the Police Regulations were only administrative directions, the non compliance therewith would not in any way affect the validity of the order of dismissal. (2) If the order of dismissal was held to have been made under the statutory power conferred upon the Superintendent of Police, the regulations providing for investigation in the first place under chapter XIV of the Criminal Procedure Code were only directory in nature, and inasmuch as no prejudice was caused to the respondent the non compliance with the said regulations would not affect the validity of the order of dismissal. (3) The Superintendent of Police was authorized to follow the alternative procedure prescribed by subparagraph (3) of para. 486 and, therefore, the inquiry held without following the procedure prescribed by rule I was not bad. (4) As the magisterial inquiry was held in regard to practically all the charges, the subject matter of the departmental trial, the case is not covered by the provisions of para. 486 of the Police Regulations. In the case of The State of U. P. vs Babu Ram Upadhya (1) in which we have just delivered the judgment, we have considered the first three point; and for the reasons mentioned therein we reject the first three contentions. The appellants must succeed on the fourth contention. From the facts already narrated, the conduct of the respondent, when he was officer incharge of the Police Station, Intiathok, was the subject matter of (1) Civil Appeal No. 119 of 1950; ; 677 magisterial inquiry. The Sub Divisional Magistrate made inquiry in respect of seven of the charges which were the subject matter of the departmental trial and. submitted a report to the District Magistrate. The District Magistrate, in his turn, made an endorsement on the report and communicated the same to the Superintendent of Police recommending the transfer of the respondent and suggesting that in the meanwhile the work of the respondent might be closely watched. Though the Superintendent of Police gave at first a good certificate to the respondent, in respect of the same a further probe was made through the C.I.D. Thereafter the Superintendent of Police conducted a departmental trial in respect of the aforesaid seven charges and two other new charges of the same nature. The inquiry ended in the dismissal of the respondent. In the circumstances it would be hypertechnical to hold that there was no magisterial inquiry in respect of the matter which was the subject matter of the departmental trial. On the said facts we hold that the departmental inquiry was only a further step in respect of the misconduct of the respondent in regard whereto the magisterial inquiry was held at an earlier stage. If so, the question is whether para. 486 would govern the present inquiry or it would fall out side its scope. The relevant provisions of the Police Regulations read: Paragraph 486: "When the offence alleged against a police officer amounts to an offence only under s: 7 of the Police Act, there can be no magisterial inquiry under the Criminal Procedure Code. In such cases, and in other cases until and unless a magisterial inquiry is ordered, inquiry will be made under the direction of the Superintendent of Police in accordance with the following rules;" Paragraph 489: "A police officer may be departmentally tried under section 7 of the Police Act (1) after he has been tried judicially; (2) after a magisterial inquiry under the Criminal Procedure Code; 86 678 (3) after a police investigation under the Criminal Procedure Code or a departmental enquiry under paragraph 486 III above." A combined reading of these provisions indicates that para. 86 does not apply to a case where a magisterial inquiry is ordered; and that a police officer can be departmentally tried under section 7 of the Police Act after such a magisterial inquiry. In this case the departmental trial was held subsequent to the completion of the magisterial inquiry and therefore it falls within the express terms of para. 489(2). The fact that in the interregnum the police received further complaints or that the C.I.D. made further enquiries do not affect the question, if substantially the subject matter of the magisterial inquiry and the departmental trial is the same. In this case we have held that it was substantially the same and therefore the departmental trial was validly held. We, therefore, set aside the order made by the High Court. As we have pointed out earlier, the High Court, in the view taken by it, did not express its opinion on the other questions raised and argued before it. In the circumstances, we remand the matter to the High Court for disposal in accordance with law. The costs of this appeal will abide the result. WANCHOO, J. We have read the judgment just delivered by our learned brother Subba Rao J. We agree with the order proposed by him. Our reasons for coming to this conclusion are, however, the same which we have given in C.A. 119 of 1959, The State of Uttar Pradesh vs Babu Ram Upadhya. Appeal allowed. Case remanded.

IN-Abs

The respondent was posted as officer incharge of a police station when complaints were received by the District Magis trate that the respondent was receiving bribes. The District Magistrate got an enquiry made by the Sub Divisional Magistrate and forwarded the report toghether with his own endorsement to the Superintendent of Police. The respondent was forced to go on 2 months leave and was reverted to his substantive post of Head Constable, but later he was promoted to the rank of officiating Sub Inspector and posted at another police station. Meanwhile on further complaints an investigation was made and it was reported that the respondent was a habitual bribe taker. He was charged under section 7 Police Act for 9 charges of bribery and after departmental trial was dismissed by the Superintendent of Police. He filed a Writ Petition before the High court challenging the order of dismissal inter alia on the ground that the offences charged being cognizable offences the Superintendent of Police had no jurisdiction to hold the departmental trial without first complying with the provisions of para. 486(1) of the U. P. Police Regulations. The High Court accepted this contention and quashed the order of dismissal. 673 Held (per Sarkar, Subba Rao and Mudholkar, JJ.) that the subject matter of the magisterial enquiry and of the depart mental trial was substantially the same and that the depart 'I mental trial was validly held. The fact that there was an interregnum between the magisterial enquiry and the departmental trial did not affect the question. Paragraph 486 did not apply to a case where a magisterial enquiry was ordered and a police officer could be departmentally tried under section 7 Police Act after such magisterial enquiry. Per Gajendragadkar and Wanchoo, JJ. The provisions of para. 486 were merely directory and even if there was non compliance therewith the order of dismissal was not invalidated.

Appeal No. 119 of 1959. Appeal by special leave from the judgment and order dated January 9, 1958, of the Allahabad High Court (Lucknow Bench), Lucknow, in Civil Misc. Application No. 115 of 1955. 683 C. B. Agarwala and C. P. Lal, for the appellants. G. section Pathak, Achru Ram, section N. Andley, Rameshwar Nath, J. B. Dadachanji and P. L. Vohra for the respondent. November, 25. The Judgment of Sarkar, Subba Rao and Mudholkar, JJ., was delivered by Subba Rao, J., and that of Gajendragadkar and Wanchoo, JJ., was delivered by Wanchoo, J. SUBBA RAO, J. This is an appeal by special leave against the judgment of the High Court of Judicature at Allahabad, Lucknow Bench, allowing the petition filed by the respondent under article 226 of the Constitution. The respondent was appointed a Sub Inspector of Police in December, 1948, and was posted at Sitapur in June, 1953. On September 6, 1953, the respondent went to village Madhwapur in connection with an investigation of a case of theft. On the evening of the said date when he was returning, accompanied by one Lalji, an ex patwari of Mohiuddinpur, he saw one Tika Ram coming from the side of a canal and going hurriedly towards a field. As the movements of Tika Ram appeared to be suspicious and as he was carrying something in the folds of his dhoti, the respondent searched him and found a bundle containing currency notes. The respondent counted the currency notes and handed them over to Lalji for being returned to Tika Ram, who subsequently got them and went his way. Subsequently when Tika Ram counted the currency notes at his house, he found that they were short by Rs. 250. Tika Ram 's case is that the bundle when taken by the respondent contained notes of the value of Rs. 650, but when he counted them in his house they were only of the value of Rs. 400. On September 9, 1953 Tika Ram filed a complaint to the Superintendent of Police, Sitapur, to the effect that the respondent and one Lalji had misappropriated a sum of its. There is dispute in regard to the interpretation of the complaint. On receipt of the said complaint, the Superintendent of Police made enquiries 684 and issued a notice to the respondent to show cause why his integrity certificate should not be withheld, upon which the respondent submitted his explanation on October 3, 1953. Thereafter the Superintendent of Police forwarded the file of the case to the Deputy Inspector General of Police, Central Range, U. P., who directed the Superintendent of Police to take proceedings under section 7 of the Police Act against the respondent. The departmental proceedings were started against the respondent; on November 2, 1953, a charge sheet was served upon the respondent under section 7 of the Police Act stating that there were strong reasons to suspect that the respondent misappropriated a sum of Rs. 250 from the purse of Tika Ram; the respondent filed his explanation to the charge made against him; and ultimately the Superintendent of Police held an enquiry and found on the evidence that the respondent was guilty of the offence with which he was charged. On January 2, 1954, the Superin tendent of Police issued another notice to the respondent to show cause why he should not be reduced to the lowest grade of Sub Inspector for a period of three years. In due course the respondent showed cause against the action proposed to be taken against him on a consideration of which the Superintendent of Police, Sitapur, by his order dated January 16, 1954 reduced the respondent to the lowest grade of Sub Inspector for a period of three years. When this order came to the notice of the D. 1. G., U. P., on a consideration of the entire record, he came to the con clusion that the respondent should be dismissed from service and on October 19, 1954 he made an order to that effect. On February 28, 1955 the Inspector General of Police confirmed that order; and the revision filed by the respondent against that order to the State Government was also dismissed in August 1955. Thereafter the respondent filed a petition under article 226 of the Constitution before the High Court of Judicature at Allahabad, Lucknow Bench, for quashing the said orders and the same was heard by a division bench consisting of Randhir Singh and Bhargava, JJ. The learned judges held that the provisions of para. 685 486 of the Police Regulations had not been observed and, therefore, the proceedings taken under section 7 of the Police Act were invalid and illegal. On that finding, they quashed the impugned orders; with the result that the order dismissing the respondent from service was set aside. The State Government, the Deputy Inspector General of Police, Lucknow, and the Inspector General of Police, Uttar Pradesh, Lucknow, have preferred the present appeal against the said order of the High Court. We shall now proceed to consider the various contentions raised by learned counsel in the order they were raised and argued before us. At the outset Mr. C. B. Agarwala, learned counsel for the appellants, contended that there was no breach of the provisions of para. 486 of the Police Regulations. If this contention be accepted, no other question arises 'in this case; therefore, we shall deal with the same. The material part of para. 486 of the Police Regulations reads thus: "When the offence alleged against a police officer amounts to an offence only under section 7 of the Police Act, there can be no magisterial inquiry under the Criminal Procedure Code. In such cases, and in other cases until and unless a magisterial inquiry is ordered, inquiry will be made under the direction of the Superintendent of Police in accordance with the following rules: I.Every information received by the police relating to the commission of a cognizable offence by a police officer shall be dealt with in the first place under Chapter XIV, Criminal Procedure Code, according to law, a case under the appropriate section being registered in the police station concerned. . . . This provision expressly lays down that every information received by the police relating to the commission of a cognizable offence by a police officer shall be dealt with in the first place under Ch. XIV of the Criminal Procedure Code. This provision will not apply if the information received by the police does not 87 686 relate to the commission of a cognizable offence. Learned counsel contends that the information received in the present case does not relate to any offence committed by the respondent, much less to a cognizable offence. This is a point raised before us for the first time. This does not find a place even in the statement of case filed by the appellants. In the High Court it was not contended that the information did not disclose any offence committed by the respondent. Indeed, it was common case that the information disclosed an offence committed by the respondent, but it had been contended by the appellants that the misappropriation of the part of the money amounted to an offence under section 403 of the Indian Penal Code, which is not a cognizable offence; and it was argued on behalf of the respondent that it amounted to an offence under section 409 of the Indian Penal Code. The learned judges accepted the contention of the respondent. Even so, it is said that whatever might been the contentions of the parties, the information given by Tika Ram to the Superintendent of Police clearly disclosed that no offence was alleged to have been committed by the respondent and that this Court would, therefore, be justified, even at this very late stage, to accept the contention of the appellants. But the contents of the said information do not in any way support the assertion. Paragraph 3 of the application given by Tika Ram to the Superintendent of Police, Sitapur, reads thus: "That on Sunday last dated 6th September, 1953 the applicant had with him the currency notes of Rs. 650. The opposite party as well as Shri Babu Ram met the applicant on the west of Rampur near the Canal. The opposite party said to the Sub Inspector "This man appears to be clad in rags but is possessed of considerable money." After saying this the person of the applicant was searched. The Sub Inspector, having opened the bundle of notes, handed over the (notes) one by one to the opposite party. " This statement clearly indicates that either the Sub . Inspector or both the Sub Inspector and Lalji searched the person of Tika Ram, that the Sub Inspector took 687 the bundle of notes and handed the same over, one by one, to Lalji for being returned to the applicant, and that out of Rs. 650 a sum of Rs. 250 was not returned to him. The facts alleged make out an offence against both the Sub Inspector as well as Lalji. The mere fact that the respondent is not shown as one of the opposite parties in the application does not affect the question, for the information given in the application imputed the commission of an offence to both the respondent and Lalji. The notice issued by the Supe rintendent of Police on November 2, 1953 to the respondent also charges him with an offence of misappropriation. It is stated that the said notice only says that the Superintendent of Police had good reasons to suspect that the respondent misappropriated the sum of money and that it does not aver that he committed the offence of misappropriation. But what matters is 'that the Superintendent of Police also understood from the information given and the enquiry conducted by him that the respondent had committed the offence. Reliance is placed upon paragraph 3 of the writ petition wherein the respondent herein stated that Tika Ram filed a complaint against Lalji and not against the respondent. As a fact that is correct in the sense that the respondent was not shown in that application as the opposite party though in the body of that application definite allegations were made against the respondent. In the counter affidavit filed by the Superintendent of Police on behalf of the State it was clearly averred that on September 9, 1953 Tika Ram appeared before him and filed a petition to the effect fiat one Lalji and the respondent had misappropriated a sum of Rs. 250. Whatever ambiguity there might have been in the information we do not find any this allegation dispels it and it is not open to the appellants at this stage to contend that the petition did not disclose any offence against the respondent. In the circumstances, we must hold that the information received by the police related to the commission of an offence by the respondent. Even so, it is contended that the said offence is not a cognizable offence. It is said that there was no 688 entrustment made by Tika Ram to the respondent and that, therefore, the offence did not fall under section 409 of the Indian Penal Code, which is a cognizable offence, but only under section 403 of the Indian Penal Code, which is not a cognizable offence. Section 405 of the Indian Penal Code defines "criminal breach of trust" and section 409 thereof prescribes the punishment for the criminal breach of trust by a public servant. Under section 405 of the Indian Penal Code, "Whoever, being in any manner entrusted with property, or with any dominion over property, dishonestly misappropriates or converts to his own use that property, or dishonestly uses or disposes of that property in violation of any direction of law prescribing the mode in which such trust is to be discharged, or of any legal contract, express or implied, which he has made touching the discharge of such trust, or wilfully suffers any person so to do, commits "criminal breach of trust". To constitute an offence under this section, there must be an entrustment of property and dishonest misappropriation of it. The person entrusted may misappropriate it himself, or he may wilfully suffer another person to do so. In the instant case the respondent, being a police officer, was legally entitled to search a person found under suspicious circumstances; and Tika Ram in handing over the bundle of notes to the police officer must have done so in the confidence that he would get back the notes from him when the suspicion was cleared. In these circumstances, there cannot be any difficulty in holding that the currency notes were alleged to have been handed over by Tika Ram to the respondent for a specific purpose, but were dishonestly misappropriated by the respondent or at, any rate he wilfully suffered Lalji to misappropriate the same. We, therefore, hold that if the currency notes were taken by the respondent in discharge of his duty for inspection and return, he was certainly entrusted with the notes within the meaning of section 405 of the Indian Penal Code. If so, the information discloses a cognizable offence. We reject the first contention. The second objection of learned counsel for the appellants is that sub para. (3) of para. 486 of the 689 Police Regulations enables the appropriate police authority to initiate the departmental proceeding without complying with the provisions of sub para. (1) of para. The relevant portion of para. 486 of the Police Regulations reads: "When the offence amounts to an offence only under section 7 of the Police Act, there can be no magisterial inquiry under the Criminal Procedure Code. In such cases, and in other cases until and unless a magisterial inquiry is ordered, inquiry will be made under the direction of the Superintendent of Police in accordance with the following rules:. . " Rule I relates to a cognizable offence, r. II to a non cognizable. offence, including an offence under section 29 of the Police Act, and r. III to an offence under section 7 of the Police Act or a non cognizable offence, including an offence under section 29 of the Police Act. Rule III says: "When a Superintendent of Police sees reason to take action on information given to him, or on his own knowledge or suspicion, that a police officer subordinate to him has committed an offence under section 7 of the Police Act or a non cognizable offence (including an offence under section 29 of the Police Act) of which he considers it unnecessary at that stage to forward a report in writing to the District Magistrate under rule II above, he will make or cause to be made by an officer senior in rank to the officer charged, a departmental inquiry sufficient to test the truth of the charge. On the conclusion of this inquiry he will decide whether further action is necessary, and if so, whether the officer charged should be departmentally tried, or whether the District Magistrate should be moved to take cognizance of the case under the Criminal Procedure Code. " The argument is that the words "an offence under section 7 of the Police Act" take in a cognizable offence and that, therefore, this rule provides for a procedure alternative to that prescribed under r. I. We do not think that this contention is sound. Section 7 of the Police Act empowers certain officers to dismiss, suspend 690 or reduce any police officer of the subordinate rank whom they shall think remiss or negligent in the discharge of his duty, or unfit for the same. The grounds for punishment are comprehensive: they may take in offences under the Indian Penal Code or other penal statutes. The commission of such offences may also be a ground to hold that an officer is unfit to hold his office. Action under this section can, therefore, be taken in respect of, (i) offences only under section 7 of the Police Act without involving any cognizable or noncognizable offences, that is, simple remissness or negli gence in the discharge of duty, (ii) cognizable offences, and (iii) non cognizable offences. Paragraph 486 of the Police Regulations makes this clear. It says that when the offence alleged against a police officer amounts to an offence only under section 7 of the Police Act, there can be no magisterial inquiry under the Criminal Procedure Code. This part of the rule applies to an offence only under section 7 of the Police Act i. e., the first category mentioned above. Rule I refers to a cognizable offence i. e., the second category, rule 11 to a non cognizable offence i. e., the third category, and rule III applies to an offence under section 7 of the Police Act and to a noncognizable offence. Though the word "only" is not mentioned in rule 111, the offence under section 7 of the Police Act can, in the context, mean an offence only under section 7 of the said Act i.e., an offence falling under the first category. So understood, the three rules can be reconciled. We, therefore, hold that, as the offence complained of in the present case is a cognizable offence, it falls under rule I and not under rule 111. We, therefore, reject this contention. The third contention advanced by learned counsel for the appellants raises a constitutional point of considerable importance. The gist of the argument may be stated thus: In England, the service under the Crown is held at the Crown 's pleasure, unless the employment is for good behaviour or for a cause. But if there is a statute prescribing the terms of service and the mode of dismissal of the servant of the Crown, the statute would control the pleasure of the Crown. In India, the Constitution as well as the 691 earlier Constitution Acts of 1915, as amended in 1919, and 1935 embodied the incidents of "tenure at pleasure" of His Majesty, or the President or the Governor, as the case may be, but did not empower the Legislatures under the earlier Acts and the Parliament and the Legislatures under the Constitution to make a law abrogating or modifying the said tenure; therefore, any law made by appropriate authorities conferring a power on any subordinate officer to dismiss a servant must be construed not to limit the power of His Majesty, the President or the Governor, as the case may be, but only to indicate that they would express their pleasure only through the said officers. The rules made in exercise of a power conferred on a Government under a statute so delegating the power to a subordinate officer can only be administrative directions to enable the exercise of the pleasure by the concerned authorities in a reasonable manner and that any breach of those regulations cannot possibly confer any right on, or give a cause of action to, the aggrieved Government servant to go to a court of law and vindicate his rights. Mr. Pathak, learned counsel for the respondent, in countering this argument contends that the constitution Acts in India embodied the incidents of the tenure of the Crown 's pleasure in the relevant provisions and what the Parliament can do in England, the appropriate Legislatures in India also can do, that is, "the tenure at pleasure" created by the Constitution Acts can be abrogated, limited or modified by law enacted by the appropriate legislative bodies. Alternatively he contends that even if the Police Act does not curtail the tenure at pleasure, the Legislature validly made that law and the Government validly made statutory rules in exercise of the powers confered under that Act and that, therefore, the appropriate authorities can only dismiss the respondent in strict compliance with the provisions of the Act and the Rules made thereunder. To appreciate the problem presented and to afford a satisfactory answer it would be convenient to consider the relevant provisions. The Act we are concerned with in this case is the (Act V 692 of 1861). Its constitutional validity at the time it was ,made was not questioned. Under section 7 of the , as it originally stood, "the appointment of all police officers other than those mentioned in B. 4 of this Act shall, under such rules as the local Government shall from time to time sanction, rest with the Inspector General, Deputy Inspectors General, Assistant Inspectors General and District Superintendents of Police, who may, under such rules as aforesaid, at any time, dismiss, suspend or reduce any police officer. " That section was substituted by the present section in 1937 and later on some appropriate amend ments were made to bring it in conformity with the Constitution. Under the amended section, "Subject to such rules as the State Government may from time to time make under this Act, the Inspector General, Deputy Inspectors General, Assistant Inspectors General and District Superintendent of Police may at any time dismiss, suspend or reduce any police officer of the subordinate ranks whom they shall think remiss or negligent in the discharge of his duty, or unfit for the same". In exercise of the powers conferred on the Government by section 46 of the Act, the Government made the U. P. Police Regulations prescribing the procedure for investigation and inquiry. We shall ' deal with the Regulations at a later stage. In the Government of India Act, 1915, as amended by the Act of 1919, for the first time, the doctrine of "tenure at pleasure" was introduced by section 96 B. In exercise of the power conferred under sub section (2) certain classification rules were framed by the local Government. This Act was repealed by the Government of India Act, 1935, and the section corresponding to section 96 B was section 240(1) in the latter Act. Section 241(2) empowered, except as expressly provided by the Act, the Governor General and the Governor to prescribe the conditions of service of the servants they were empowered to appoint. The main difference between the Act of 1919 and that of 1935 was that in the former Act there was only one limitation on the Crown 's pleasure, namely, that no person in the service might be dismissed by 693 an authority subordinate to that by which he was appointed, whereas in the latter Act a second limitation was imposed, namely, that no such person should ' be dismissed or reduced in rank until he had been given a reasonable opportunity of showing cause against the action proposed to be taken in regard to him: see section 240, sub sections (2) and (3). Another difference between the said two Acts was that while under the former Act all the services were placed in the same position, under the latter Act special provision was made for the police force prescribing that the conditions of service of the subordinate ranks of the various police forces should be such as might be determined by or under the Acts relating to those forces respectively vide section 243. By the Constitution, the Act of 1935 was repealed, and, with certain changes in phraseology, cls. (1) and (2) of article 310 took the place of sub sections (1) and (4) of section 240 respectively, and article 309 took the place of section 241(2). Under article 313, "Until other provision is made in this behalf under this Constitution, all the laws in force immediately before the commencement of this Constitution and applicable to any public service or any post which continues to exist after the commencement of this Constitution, as an all India service or as service or post under the Union or a State shall continue in force so far as consistent with the provisions of this Constitution". The result is that the and the Police Regulations, made in exercise of the powers conferred on the Government under that Act, which .were preserved under section 243 of the Government of India Act, 1935, continue to be in force after the Con stitution so far as they are consistent with the provisions of the Constitution. It is common case, as the contentions of learned counsel disclose, that the Act and the Regulations framed thereunder were constitutionally valid at the inception and that they are also consistent with the provisions of the Constitution. The difference between the two contentions lies in the fact that according to one His Majesty 's pleasure cannot be modified 88 694 by a statute, according to the other it is subject to statutory provisions. The relevant provisions of the Constitution read thus: Article 309: "Subject to the provisions of this Constitution, Acts of the appropriate Legislature may regulate the recruitment, and conditions of service of persons appointed, to public services and posts in connection with the affairs of the Union or of any State: Provided that it shall be competent for the President or such person as he may direct in the case of services and posts in connection with the affairs of the Union, and for the Governor of a State or such person as he may direct in the case of services and posts in connection with the affairs of the State, to make rules regulating the recruitment, and the conditions of service of persons appointed, to such services and posts until provision in that behalf is made by or under an Act of the appropriate Legislature under this article, and any rules so made shall have effect subject to the provisions of any such Act. " Article 310: "Except as expressly provided by this Constitution, every person who is a member of a defence service or of a civil service or holds any post connected with defence or any Civil Post under the Union holds office during the pleasure of the President, and every person who is a member of a civil service of a State or holds any civil post under a State holds office during the pleasure of the Governor of the State." Under article 309 the appropriate Legislature may regulate the recruitment and conditions of service of persons appointed to public services. Under article 310 every person who is EC member of a public service described therein holds office during the pleasure of the President or the Governor, as the case may be. The words "conditions of service" in article 309 in their comprehensive sense take in the tenure of a civil servant: see N. W. F. Province vs Suraj Narain (1). Therefore, "the tenure at pleasure" is also one of the conditions of service. But article 309 opens out with a (i) A.I.R. (1949) P.C. 112. 695 restrictive clause, namely, "Subject to the provisions of this Constitution", and if there is no restrictive, clause in article 310, there cannot be any difficulty in holding that article 309 is subject to the provisions of ' Art 310; with the result that the power of the Legislature to lay down the conditions of service of persons appointed to public services would be subject to "the tenure at pleasure" under article 310. In that event, any law made by the Legislature could not affect the over riding power of the President or the Governor, as the case may be, in putting an end to the tenure at their pleasure. Would the opening words of the clause in article 310, namely, "Except as expressly provided by this Constitution", make any difference in the matter of interpretation? It should be noticed that the phraseology of the said clause in article 310 is different from that in article 309. If there is a specific provision in some part of the Constitution giving to a Government servant a tenure different from that provided for in article 310, that Government servant is excluded from the operation of article 310. The said words refer, inter alia, to articles 124, 148, 218 and 324 which provide that the Judges of the Supreme Court, the Auditor General, the Judges of the High Courts and the Chief Election Commissioner shall not be removed from their offices except in the manner laid down in those Articles. If the provisions of the Constitution specifically prescribing different tenures were excluded from article 310, the purpose of that clause would be exhausted and thereafter the Article would be free from any other restrictive operation. In that event, articles 309 and 310 should be read together, excluding the opening words in the latter Article, namely, "Except as expressly provided by this Constitution". Learne counsel seeks to confine the operation of the opening words in article 309 to the provisions of the Constitution which empower other authorities to make rules relating to the conditions of service of certain classes of public servants, namely, articles 146(2), 148(5) and 229(2). That may be so, but there is no reason why article 310 should be excluded therefrom. It follows that while article 310 provides for a tenure at pleasure 696 of the President or the Governor, article 309 enables the Legislature or the executive, as the case maybe, to make any law or rule in regard, inter alia, to conditions of service without impinging upon the overriding power recognized under article 310. Learned counsel for the respondent contends that this construction is inconsistent with that prevailing in the English law and that the intention of the framers of the Constitution could not have been to make a radical departure from the law of England. The law of England on the doctrine of "tenure at pleasure" has now become fairly crystallized. In England, all servants of the Crown hold office during the pleasure of the Crown; the right to dismiss at pleasure is an implied term in every contract of employment of the Crown, this doctrine is not based upon any prerogative of the Crown, but on public policy; if the terms of appointment definitely prescribe a tenure for good behaviour or expressly provide for a power, to determine for a cause, such an implication of a power to dismiss at pleasure is excluded, and an Act of Parliament can abrogate or amend the said doctrine of public policy in the same way as it can do in respect of any other part of common law. The said propositions are illustrated in the following decisions: Shenton vs Smith (1), Gould vs Stuart (2), Reilly vs The King(3), Terrell vs Secretary of State (4). This English doctrine was not incorporated in its entirety in the Indian enactments vide State of Bihar vs Abdul Majid (5), Parshotam Lal Dhingra vs Union of India (6). Section 96 B of the Government of India Act, 1915, for the first time in 1919, by amendment, statutorily recognized this doctrine, but it was made subject to a condition or s qualification, namely, that no person in that service might be dismissed by any authority subordinate to that by which he was appointed. Section 240 of the Act of 1935 imposed another limitation, namely, that a reasonable opportunity of showing cause against the action proposed to be taken in (i) (3) (5) ; (2) (4) (6) ; 697 regard to a person must be given to him. But neither of the two Acts empowered the appropriate Legislature to make a law abolishing or amending the said doctrine. The Constitution of India practically incorporated the provisions of sections 240 and 241 of the Act of 1935 in articles 309 and 310. But the Constitution has not made "the tenure at pleasure" subject to any law made by the appropriate Legislature. On the other hand, as we have pointed out, article 309 is expressly made subject to "the tenure at pleasure" in article 310. Nor the attempt of learned counsel for the respondent to discover such a power in the Legislature in the Entries of the appropriate Lists of the Seventh Schedule to the Constitution can be legally sustained. He referred, inter alia, to Entry 70 of List I and Entry 41 of List II. It is not disputed that Parliament can make law for the organization of the police and for the prevention and detection of crime. But under article 245 of the Constitution such a power is subject to the provisions of the Constitution and, therefore, is subject to the provisions of article 310. Nor can we imply such a power in Parliament or the Legislatures from article 154(2)(b) of the Constitution. Under article 154, "the executive power of the State shall be vested in the Governor and shall be exercised by him either directly or through officers subordinate to him in accordance with this Constitution", and under el. 2(b) thereof, "nothing in this Article shall prevent Parliament or the Legislature of the State from conferring by law functions on any authority subordinate to the Governor. " The argument is that a power to terminate the service at pleasure under article 310 is a part of the executive power of the State, that power under article 154 can be exercised by the Governor directly or through officers subordinate to him, and that under article 154(2)(b) the Parliament or the Legislature of the State can confer the same power on any authority subordinate to the Governor or, at any rate, can make a law prescribing that the Governor shall exercise the said pleasure through a particular officer. 698 We cannot agree either with the premises or the conclusion sought to be based on it. The first question is whether the power of the Governor under article 310 to terminate the services of a Government servant at pleasure is part of the executive power of the State under article 154 of the Constitution. Article 154 speaks of the executive power of the State vesting in the Governor; it does not deal with the constitutional powers of the Governor which do not form part of the executive power of the State. Article 162 says that, subject to the provisions of the Constitution, the executive power of the State shall extend to matters with respect to which the Legislature of the State has power to make laws. If the Legislature of the State has no power to make a law affecting the tenure at pleasure of the Governor, the said power must necessarily fall outside the scope of the executive power of the State. As we will presently show, the Legislature has no such power and, therefore, it cannot be a part of the executive power of the State. That apart, if the said power is part of the executive power in its general sense, article 162 imposes another limitation on that power, namely, that the said executive power is subject to the provisions of the Constitution and therefore, subject to article 310 of the Constitution. In either view, article 310 falls outside the scope of article 154 of the Constitution. That power may be analogous to that conferred on the Governor under articles 174, 175 and 176. Doubtless the Governor may have to exercise the said power whenever an occasion arises, in the manner prescribed by the Constitution, but that in itself does not make it a part of the executive power of the State or enable him to delegate his power. Even on the assumption that the power under article 310 is executive power within the meaning of article 154, it does not make any difference in the legal position so far as the present case is concerned. Article 310 of the Constitution says that unless expresssly provided by the Constitution to the contrary, every civil servant holds office during the pleasure of the Governor subject to the limitations prescribed under 699 article 311. Can it be said that article 154(2)(b) expressly provides for a different tenure? Can it be said that the said Article confers on the Parliament or the Legislature a power higher than that conferred on them under article 245 of the Constitution ? It only preserves the power of the Legislature, which it has under the Constitution, to make a law conferring functions on an authority subordinate to the Governor. That power under article 245 is not unlimited, but is subject to the provisions of the Constitution and there fore subject to article 310 thereof. It is then said that if the appellants ' contention were not accepted, it would lead to conflict of jurisdiction: while the Governor has the power under article 310 to dismiss a public servant at his pleasure, a statute may confer a power on a subordinate officer to dismiss a servant only subject to conditions; a subordinate officer functioning under an Act may not be able to dismiss a servant, but the Governor may be able to do so under similar circumstances; a subordi nate officer may dismiss a servant, but the Governor may order his continuance in office. This argument is based upon the misapprehension of the scope of article 309 of the Constitution. A law made by the appropriate Legislature or the rules made by the President or the Governor, as the case may be, under the said Article may confer a power upon a particular authority to remove a public servant from service; but the conferment of such a power does not amount to a delegation of the Governor 's pleasure. Whatever the said authority does is by virtue of express power conferred on it by a statute or rules made by competent authorities and not by virtue of any delegation by the Governor of his power. There cannot be conflict between the exercise of the Governor 's pleasure under article 310 and that of an authority under a statute, for the statutory power would be always subject to the overriding pleasure of the Governor. This conclusion, the argument proceeds, would throw a public servant in India to the mercy of the executive Government while their compeers in England 700 can be protected by legislation against arbitrary actions of the State. This apprehension has no real .basis, for, unlike in England, a member of the public service in India is constitutionally protected at least in two directions: (i) he cannot be dismissed by an authority subordinate to that by which he was appointed; (ii) he cannot be dismissed, removed or reduced in rank until he has been given a reasonable opportunity of showing cause against the action proposed to be taken in regard to him. A condition similar to the first condition in article 311 found in section 96 B of the Government of India Act, 1919, was hold by the Judicial Committee in R. T. Bangachari vs Secretary of State for India (1) to have a statutory force, and the second condition, which is only a reproduction of that found in sub section (2) of section 240 of the Government of India Act, 1935, was held in High Commissioner for India and High Commissioner for Pakistan vs I. M. Lall (2) as mandatory qualifying the right of the employer recognized in sub section (1) thereof. These two statutory protections to the Government servant are now incorporated in article 311 of the Constitution. This Article imposes two qualifications on the exercise of the pleasure of the President or the Governor and they quite clearly restrict the operation of the rule embodied in article 310(1) vide the observations of Das, C.J., in Dhingra 's case (3). The most important of these two limitations is the provision prescribing that a civil servant shall be given a reasonable opportunity of showing cause against the action proposed to be taken in regard to him. As this condition is a limitation on the "tenure at pleasure", a law can certainly be made by Parliament defining the content of "reasonable opportunity" and prescribing the procedure for giving the said opportunity. The appropriate High Court and the Supreme Court can test the validity of such a law on the basis whe ther the provisions prescribed provide for such an opportunity, and, if it is valid, to ascertain whether the reasonable opportunity so prescribed is really given to a particular officer. It may be that the (1) (1936) L.R. 64 I.A. 40. (2) (1948) L.R. 75 1.A. 225. (3) ; , 839. 701 framers of the Constitution, having incorporated in our Constitution the "tenure at pleasure" unhampered by legislative interference, thought that the said limitations and qualifications would reasonably protect the interests of the civil servants against arbitrary actions. The discussion yields the following results: (1) In India every person who is a member of a public service described in article 310 of the Constitution holds office during the pleasure of the President or the Governor, as the case may be, subject to the express provisions therein. (2) The power to dismiss a public servant at pleasure is outside the scope of article 154 and, therefore, cannot be delegated by the Governor to a subordinate officer, and can be exercised by him only in the manner prescribed by the Constitution. (3) This tenure is subject to the limitations or qualifications mentioned in article 311 of the, Constitution. (4) The Parliament or the Legislatures of States cannot make a law abrogating or modifying this tenure so as to impinge upon the overriding power conferred upon the President or the Governor under article 310, as qualified by article 311. (5) The Parliament or the Legislatures of States can make a law regulating the conditions of service of such a member which includes proceedings by way of disciplinary action, without affecting the powers of the President or the Governor under article 310 of the Constitution read with article 311 thereof. (6) The Parliament and the Legislatures also can make a law laying down and regulating the scope and content of the doctrine of "reasonable opportunity" embodied in article 311 of the Constitution; but the said law would be subject to judicial review. (7) If a statute could be made by Legislatures within the foregoing permissible limits, the rules made by an authority in exercise of the power conferred thereunder would likewise be efficacious within the said limits. What then is the effect of the said propositions in their application to the provisions of the and the rules made thereunder? The of 89 702 1861 continues to be good law under the Constitution. Paragraph 477 of the Police Regulations shows that the rules in Chapter XXXII thereof have been framed under section 7 of the . Presumably, they were also made by the Government in exercise of its power under section 46(2) of the . Under para. 479(a) the Governor 's power of punishment with reference to all officers is preserved; that is to say, this provision expressly saves the power of the Governor under article 310 of the Constitution. "Rules made under a statute must be treated for all purposes of construction or obligation exactly as if they were in the Act and are to be of the same effect as if contained in the Act, and are to be judicially noticed for all purposes of construction or obligation": see Maxwell "On the Interpretation of Statutes", 10th edn., pp. 5051. The statutory rules cannot be described as, or equated with, administrative directions. If so, the and the rules made thereunder constitute a self contained code providing for ' the appointment. of police officers and prescribing the procedure for their removal. It follows that where the appropriate authority takes disciplinary action under the or the rules made thereunder, it must conform to the provisions of the statute or the rules which have conferred upon it the power to take the said action. If there is any violation of the said provisions, subject to the question which we will presently consider whether the rules are directory or mandatory, the public servant would have a right to challenge the decision of that authority. Learned counsel for the appellants relied upon the following decisions of the Privy Council and this Court in support of his contention that the said rules are administrative directions: R. T. Rangachari vs Secretary of State for India (1), R. Venkata Rao vs Secretary of State for India (2), High Commissioner for India and High Commissioner for Pakistan vs I. M. Lall (3), section A. Venkataraman vs The Union of India(4), and Khem Chand vs The Union of India(5). In Venkata Rao 's (1) (1936) L.R. 64 I.A. 40. (3) (1948) L.R. 75 I.A. 225. (2) (1936) L.R. 64 I.A. 55. (4) ; (5) ; 703 case (1) a reader of the Government Press was dismissed and in the suit filed by him against the Secretary, of State for India he complained, inter alia, that the dismissal was contrary to the statute inasmuch as it was not preceded by any such inquiry as was prescribed by rule XIV of the Civil Services Classification Rules made under section 96B(2) of the Government of India Act. Under section 96B of the said Act, every person in civil service holds office during the pleasure of His Majesty. Sub section (2) of that section empowers the Secretary of State for India to make rules laying down, among others, the conditions of service, and sub section (5) declares that no rules so made shall be construed to limit or abridge the power of the Secretary of State in Council to deal with the case of any person in the civil service of the Crown in India in such manner as may appear to him to be just and equitable. On a construction of these provisions the Judicial Committee held that His Majesty 's pleasure was paramount and could not legally be controlled or limited by the rules. Two reasons were given for the conclusion, namely, (i) section 96B in express terms stated that the office was held during the pleasure and there was no room for the implication of a contractual term that the rules were to be observed; and (ii) sub section (2) of section 96B and the rules made careful provisions for redress of grievances by administrative process and that sub section (5) reaffirmed the superior authority of the Secretary of State in Council over the civil service. It may be noticed that the rules framed in exercise of the power conferred by the Act was to regulate the exercise of His Majesty 's pleasure. The observations were presumably coloured by the doctrine of "tenure at pleasure" obtaining in England, namely, that it could only be modified by statute, influenced by the princi ple that the rules made under a statute shall be consistent with its provisions and, what is more, based upon a construction of the express provisions of the Act. These observations cannot, in our opinion, be taken out of their context and applied to the provisions of our Constitution and the Acts of our Legislatures in derogation of the well settled principles of (1) (1936) L. R. 64 I. A. 55. 704 statutory construction. In Bangachari 's case (1) a police officer was dismissed by an authority subordinate to that by which he had been appointed. The appeal was heard along with that in Venkata Rao 's case (2) and the judgments in both the appeals were delivered on the same day. The Judicial Committee distinguished Venkata Rao 's case (2) with the following observations at p. 53: "It is manifest that the stipulation or proviso as to dismissal is itself of statutory force and stands on a footing quite other than any matters of rule which are of infinite variety and can be changed from time to time. " These observations do not carry the matter further an our remarks made in connection with Venkata Rao 's case (2) would equally apply to this case. I.M. Lall 's case (3) turns upon sub section (3) of section 240 of the Government of India Act, 1935. Again the Judicial Committee made a distinction between the rules and the provisions of the Act and ruled that sub sections (2) and (3) of section 240 indicated a qualification or exception to the antecedent provisions in sub section (1) of section 240. This decision only adopted the reasoning in the earlier decision. The remarks made by us in connection with Venkata Rao 's case (2) would equally apply to this decision. This Court in section A. Venkataraman 's case (4) incidentally noticed the observations of the Judicial Committee in Venkata Rao 's case (2) and observed that the rules, which were not incorporated in a statute, did not impose any legal restriction upon the right of the Crown to dismiss its servants at pleasure. This Court was not laying down any general proposition, but was only stating the gist of the reasoning in Venkata Rao 's case (2). Das, C.J., if we may say so, correctly stated the scope of the rule in Venkata Rao 's case (2) in the decision in Khem Chand 's case (5), when he stated at p. 1091 "The position of the Government servant was, therefore, rather insecure, for his office being held during the pleasure of the Crown under the Government of India Act, 1915, the rules could not override (1) (1936) L.R. 64 I.A. 40. (3) (1948) L.R. 75 I.A. 225. (2) (1936) L.R. 64 I.A. 55. (4) ; (5) ; 705 or derogate from the statute and the protection of the rules could not be enforced by action so as to nullify the statute itself." To state it differently, the Government of India Act, 1915, as amended in 1919, and that of 1935 expressly and clearly laid down that the tenure was at pleasure and therefore the rules framed under that Act must be consistent with the Act and not in derogation of it. These decisions and the observations made therein could not be understood to mark a radical departure from the fundamental principle of construction that rules made under a statute must be treated as exactly as if they were in the Act and are of the same effect as if contained in the Act. There is another principle equally fundamental to the rules of construction, namely, that the rules shall be consistent with the provisions of the Act. The decisions of the Judicial Committee on the provisions of the earlier Constitution Acts can be sustained on the ground that the rules made in exercise of power conferred under the Acts cannot override or modify the tenure at pleasure provided by section 96B or section 240 of the said Acts, as the case may be. Therefore, when the paramountcy of the doctrine was conceded or declared by the statute, there might have been justification for sustaining the rules made under that statute in derogation thereof on the ground that they were only administrative directions, for otherwise the rules would have to be struck down as inconsistent with the Act. In such a situation, if the statute was valid it would be valid in so far as it did not derogate from the provisions of article 310, read with article 311 the rules made thereunder would be as efficacious as the Act itself. So long as the statute and the rules made thereunder do not affect the power of the Governor in the present case the Governor 's pleasure is expressly preserved they should be legally enforceable. In this context the decisions of the different High Courts in India are cited at the Bar. It would not serve any purpose to consider every one of them in detail. It would suffice if their general trend be noticed. They express two divergent views: one line relies upon the observations 706 of the Privy Council in Venkata Rao 's case (1) and lays down that all statutory rules vis a vis the disciplinary proceedings taken against a Government servant are administrative directions, and the other applies the well settled rules of construction and holds that the appropriate authority is bound to comply with the mandatory provisions of the rules in making an inquiry under a particular statute. A close scrutiny of some of the decisions discloses a distinction implied, though not expressed, between statutory rules defining the scope of reasonable opportunity and those governing other procedural steps in the disciplinary process. In our view, subject to the overriding power of the President or the Governor under article 310, as qualified by the provisions of article 311, the rules governing disciplinary proceedings cannot be treated as administrative directions, but shall have the same effect as the provisions of the statute whereunder they are made, in so far a, , they are not inconsistent with the provisions thereof We have already negatived the contention of learned counsel that the Governor exercises his pleasure through the officers specified in section 7 of the , and therefore, it is not possible to equate the Governor 's pleasure with that of the specified officers ' statutory power. If so, it follows that the inquiry under the Act shall be made in accordance with its provisions and the rules made thereunder. Then learned counsel contends that even if the said rules have statutory force, they are only directory and the non compliance with the rules will not invalidate the order of dismissal made by the appropriate authority. Before we consider the principles governing the question whether the rules are mandatory or directory, it would be convenient at this stage to notice broadly the scope and the purpose of the inquiry contemplated by the rules. Section 2 of the constitutes the police establishment; section 7 empowers specified officers to (1) [1936] L.R. 64 I.A. 55. 707 punish specified subordinate officers who are remiss or negligent in discharge of their duties or unfit for the same; section 46 enables the Government to make rules. to regulate the procedure to be followed by the magistrate and police officers in discharge of any duty imposed on them by or under the Act; under section 7, read with section 46 of the , the Police Regulations embodied in chapter XXXII were framed. Paragraph 477 of the Regulations says that the rules in that chapter have been made under section 7 of the and apply only to officers appointed under section 2 of the and that no officer appointed under that section shall be punished by executive order otherwise than in the manner provided in that chapter. Paragraph 478 prescribes the nature of the punishment that can be imposed on the delinquent officers. Paragraph 479 empowers specified officers to punish specified subordinate officers. Paragraph 483 gives the procedure to be followed in the matter of the inquiry against a police officer. It reads: "Subject to the special provision contained in paragraph 500 and to any special orders which may be passed by the Governor in particular cases a proceeding against a police officer will consist of A A magisterial or police inquiry, followed, if this inquiry shows the need for further action, by B A judicial trial, or C A departmental trial, or both, consecutively." Paragraph 484 declares that the nature of the inquiry in any particular case will vary according to the nature of the offence. If the offence is cognizable or non cognizable, the inquiry will be according to Schedule II of the Criminal Procedure Code. If the information is received by the District Magistrate, he may in exercise of his powers under the Criminal Procedure Code either, (1) make or order a magisterial inquiry; or (2) order an investigation by the Police. Paragraph 485 reads: "When a magisterial inquiry is ordered it will be made in accordance with the Criminal Procedure Code and the Superintendent of Police will have no direct 708 concern with it until the conclusion of judicial proceedings or until and unless the case is referred to him for further disposal, but he must give any assistance to the inquiring magistrate that he may legally be called upon to give and he must suspend the accused should this become necessary under paragraph 496." Paragraph 486 says that there can be no magisterial inquiry under the Criminal Procedure Code when the offence alleged against a police officer amounts to an offence only under section 7 of the , and it provides further that in such cases, and in, other cases until and unless a magisterial inquiry is ordered, inquiry will be made under the direction of the Superintendent of Police in accordance with the rules given thereunder. Under rule I thereof, "Every information received by the police relating to the commission of a cognizable offence by a police officer shall be dealt with in the first place under Chapter XIV, Criminal Procedure Code, according to law, a case under the appropriate section being registered in the police station concerned". There are six provisos to that rule. Rule II provides for the inquiry of a non cognizable offence; and rule III prescribes the procedure in regard to an offence only under section 7 of the or a non cognizable offence of which the Superintendent of Police considers unnecessary at that stage to forward a report in writing to the District Magistrate. Paragraph 488 deals with a judicial trial and para. 489 with a departmental trial. Paragraph 489 says: "A police officer may be departmentally tried under section 7 of the (1) after he has been tried judicially; (2) after a magisterial inquiry under the Criminal Procedure Code; (3) after a police investigation under the Criminal Procedure Code or a departmental enquiry under paragraph 486,III above. " There are other provisions dealing with the manner of conducting the inquiries and other connected matters. The rules provide for the magisterial and police inquiry followed, if the inquiry showed the need for further action, by a judicial trial or a departmental 709 trial, or both, consecutively. In the case of cognizable offences the Superintendent of Police is directed to investigate under chapter XIV of the Criminal Pro p, cedure Code and in the case of non cognizable offences in the manner provided in rule II of para. 486, and in the case of an offence only under section 7 of the or a non cognizable offence in the manner provided under rule III of para. After one or other of the relevant procedure is followed, the Superintendent of Police is empowered to try a police officer departmentally. The question is whether rule I of para. 486 is directory. The relevant rule says that the police officer shall be tried in the first place under chapter XIV of the Criminal Procedure Code. The word "shall" in its ordinary import is "obligatory"; but there are many decisions wherein the courts under different situations construed the word to mean "may". This Court in Hari Vishnu Kamath vs Syed Ahmad Ishaque (1) dealt with this problem at p. 1125 thus: "It is well established that an enactment in form mandatory might in substance be directory and that the use of the word "shall" does not conclude the matter. " It is then observed: "They (the rules) are well known, and there is no need to repeat them. But they are all of them only aids for ascertaining the true intention of the legislature which is the determining factor, and that must ultimately depend on the context. " The following quotation from Crawford "On the Construction of Statutes", at p. 516, is also helpful in this connection: "The question as to whether a statute is mandatory or directory depends upon the intent of the legislature and not upon the language in which the intent is clothed. The meaning and intention of the legislature must govern, and these are to be ascertained, not only from the phraseology of the provision, but also by considering its nature, its design, and the (1) ; 90 710 consequences which would follow from construing it the one way or the other. " This passage was approved by this Court in State of U. P. vs Manbodhan Lal Srivastava (1). In Craies on Statute Law, 5th edition, the following passage appears at p. 242: "No universal rule can be laid down as to whether mandatory enactments shall be considered directory only or obligatory with an implied nullification for disobedience. It is the duty of Courts of Justice to try to get at the real intention of the Legislature by carefully attending to the whole scope of the statute to be construed. " A valuable guide for ascertaining the intention of the Legislature is found in Maxwell on "The Interpretation of Statutes", 10th edition, at p. 381 and it is: "On the other hand, where the prescriptions of a statute relate to the performance of a public duty and where the invalidation of acts done in neglect of them would work serious general inconvenience or injustice to persons who have no control over those entrusted with the duty without promoting the essential aims of the legislature, such prescriptions seem to be generally understood as mere instructions for the guidance and government of those on whom the duty is imposed, or, in other words, as directory only. The neglect of them may be penal, indeed, but it does not affect the validity of the act done in disregard of them. " This passage was accepted by the Judicial Committee of the Privy Council in the case of Montreal Street Railway Company vs Normandin (2 ) and by this Court in State of U. P. vs Manbodhan Lal Srivastava (1). The relevant rules of interpretation may be briefly stated thus: When a statute uses the word "shall", prima facie, it is mandatory, but the Court may ascertain the real intention of the legislature by carefully attending to the whole scope of the statute. For ascertaining the real intention of the Legislature the Court may consider, inter alia, the nature and the design of the statute, and the consequences which (1) ; , 545. (2) L.R. [1917] A.C.770. 711 would follow from construing it the one way or the other, the impact of other provisions whereby the necessity of complying with the provisions in question is avoided, the circumstance, namely, that the statute provides for a contingency of the non compliance with the provisions, the fact that the non compliance with the provisions is or is not visited by some penalty, the serious or trivial consequences that flow therefrom, and, above all, whether the object of the legislation will be defeated or furthered. Now what is the object of rule I of para. 486 of the Police Regulations? In our opinion, it is conceived not only to enable the Superintendent of Police to gather information but also to protect the interests of subordinate officers against whom departmental trial is sought to be held. After making the necessary investigation under chapter XIV of the Criminal Procedure Code, the Superintendent of Police may as well come to the conclusion that the officer concerned is innocent, and on that basis drop the entire proceedings. He may also hold that it is a fit case for criminal prosecution, which, under certain circumstances, an honest officer against whom false charges are framed may prefer to face than to submit himself to a departmental trial. Therefore,the rules are conceived in the interest of the department as well as the officer. From the stand point of the department as well as the officer against whom departmental inquiry is sought to be intiated, the preliminary inquiry is very important and it serves a real purpose. Here the setting aside of the order of dismissal will not affect the public in general and the only consequence will be that the officer will have to be proceeded against in the manner prescribed by the rules. What is more, para. 487 and para. 489 make it abundantly clear that the police investigation under the Criminal Procedure Code is a condition precedent for the departmental trial. Paragraph 477 emphasizes that no officer appointed under section 2 of the shall be punished by executive order otherwise than in the manner provided under chapter XXXII of the Police Regulations. This is an imperative injunction prohibiting 712 inquiry in non compliance with the rules. Paragraph 489 only empowers the holding of a departmental trial in regard to a police officer only after a police investigation under the Criminal Procedure Code. When a rule says that a departmental trial can be held only after a police investigation, it is not permissible to hold that it can be held without such investigation. For all the foregoing reasons, we hold that para. 486 is mandatory and that, as the investigation has not been held under chapter XIV of the Criminal Procedure Code, the subsequent inquiry and the order of dismissal are illegal. For the foregoing reasons we hold that, as the respondent was dismissed without complying with the provisions of para. 486(1), the order of dismissal is illegal and that the High Court is right in setting aside the order of dismissal. In the result, the appeal fails and is dismissed with costs. WANCHOO, J. We regret we are unable to agree that the appeal be dismissed. Babu Ram Upadhya (respondent) was a sub inspector of police who was appointed in December, 1948. In 1953, he was posted at Sitapur. On September 6, 1953, he was returning from a village called Madhwapur, when he saw a man who was subsequently found to be Tika Ram coming from the side of a canal and going hurriedly into a field. The movements of Tika Ram roused his suspicion. One Lalji, an ex patwari, was also with the sub inspector. Tika Ram was called and searched, and a bundle containing currencynotes was found on him. The sub inspector took the bundle and counted the notes and handed them over to Lalji. Lalji in his turn handed over the notes to Tika Ram. Thereafter Tika Ram, who is an old man, almost blind, went away. When he reached his house, he found that there was a shortage of Rs. 250. He then made a complaint to the Superintendent of Police on September 9, 1953, in which he gave the above facts. An inquiry was made by the Superintendent of Police and ultimately, departmental proceedings under section 7 of the were taken 713 against the respondent. These proceedings resulted in his dismissal and thereupon the respondent applied to the High Court under article 226 of the Constitution. The main contention of the respondent was that r. 486 of the Police Regulations framed under section 7 of the was not observed and therefore the departmental proceedings taken against him were illegal. The reply of the appellant was two fold: in the first place, it was urged that r. 486 did not apply as there was no report of a cognizable offence against the sub inspector; and in the next place, it was urged that the rules contained in the Police Regulations were only administrative rules and even if there was non compliance with any of them, it would not affect the departmental proceedings taken against the respondent, provided there was no breach of the guarantees contained in article 311 of the Constitution. The High Court held that there was a report of a cognizable offence under section 409 of the Indian Penal Code against the respondent and therefore the procedure provided by r. 486 ought to have been followed. It further held that r. 486 had been framed under section 7 of the and was a statutory provision, which had the force of law. As such, following the earlier view taken by the High Court in two other cases it held that a dismissal as a result of departmental proceedings which took place without complying with r. 486 would be illegal. In consequence, the writ petition was allowed. The appellant then applied for a certificate to enable it to appeal to this Court, which was refused. Thereupon special leave was prayed for from this Court, which was granted; and that is how the matter has come up before us. Mr. C. B. Aggarwala on behalf of the appellant urges the same two points before us. So far as the first point is concerned, we are of opinion that there is no force in it. There is no doubt that in the complaint made by Tika Ram, the name of the respondent was not shown in the heading; but from the facts disclosed in the body of the complaint it is clear that the sub inspector searched the person of Tika Ram and recovered a bundle containing currency notes. He 714 did so obviously under the authority vested in him as a police officer. When therefore he was satisfied that there was no reason to take any further action against Tika Ram, it was his duty to see that the entire amount taken by him from Tika Ram on search was returned to him (Tika Ram). The High Court was right in the view that where property is taken away with the intention that it will continue to be the property of the person from whose possession it has been taken away, there will be an entrustment of the property to the person taking it away, and if. subsequently the person taking it away converts it to his own use or suffers some other person to do so, there will be criminal breach of trust and not merely criminal misappropriation. Thus an offence under section 409 of the Indian Penal Code appears to have been committed prima facie on the facts of this case. As an offence under section 409 is a cognizable offence, r. 486 of the Police Regulations would apply. This brings us to the main point in the present appeal. Sec. 7 of the under which r. 486 has been framed is in these terms: "Subject to such rules as the State Government may from time to time make under this Act, the Inspector General, Deputy Inspectors General, Assistant Inspectors General and District Superintendents of Police may at any time dismiss, suspend or reduce any police officer of the subordinate ranks whom they shall think remiss or negligent in the discharge of his duty or unfit for the same; or may award any one or more, of the following punishments to any police officer of the subordinate ranks, who shall discharge his duty in a careless or negligent manner, or who, by any act of his own shall render himself unfit for the discharge thereof, name (a) fine to any amount not exceeding one month 's pay; (b) confinement to quarters for a term not exceeding fifteen days, with or without punishment, drill, extra guard, fatigue or other duty; (c) deprivation of good conduct pay; 715 (d) removal from any office of distinction or special emolument;". It gives power to four grades of police officers to dismiss, suspend or reduce any police officer of the subordinate ranks whom they think remiss or negligent in the discharge of his duty or unfit for the same. It also provides for infliction of four other kinds of punishment by these four grades of officers on any police officer of the subordinate ranks who discharges his duty in a careless or negligent manner or who by any act of his own renders himself unfit for the discharge thereof. In the present case we are concerned with dismissal and what we shall say hereafter should be taken to be confined to a case of dismissal. Sec tion 7 shows that the power of dismissal conferred by it on the four grades of police officers is to be exercised subject to such rules as the State Government may from time to time make under the . The contention on behalf of the respondent is that the power of dismissal has to be exercised subject to rules and therefore, when r. 486 of the Police Regulations (framed under section 7) provided a certain procedure to be followed with respect to cases in which a cognizable offence was involved it was not open to the authority concerned to disregard that procedure. In effect, it is urged that r. 486 is a mandatory provision and non compliance with it would invalidate the departmental proceedings. It is not in dispute in this case that the procedure provided by r. 486 was not followed. That procedural provision is that where a report of a cognizable crime is made against a police officer belonging to the subordinate ranks, it has to be registered as provided in Chapter XIV of the Code of Criminal Procedure and investigated as provided thereunder. Thereafter the authority concerned has to decide whether to send the case for trial before a court of law or to take departmental proceedings. In this case no report was registered as provided under Chapter XIV of the Code of Criminal Procedure and no investigation was made as provided in that Chapter. All that happened was that the Superintendent of Police to whom Tika Ram had complained inquired into the 716 complaint of Tika Ram and thereafter decided to hold a departmental inquiry under section 7 of the against the respondent. The main contention on behalf of the appellant is that the Rules framed under section 7 of the are administrative rules and in any case they are only directory and non compliance with them would not vitiate the subsequent proceedings unless there is a breach of the guarantee contained in article 311 of the Constitution, as all public servants hold their office at the pleasure of the President or the Governor, as the case may be, other than those expressly excepted under the Constitution. Reliance in this connection is placed on the case of R. Venkata Rao vs Secretary of State for India in Council (1). This brings us to a consideration of the tenure on which public servants hold office. The position in England is that all public servants hold office at the pleasure of His Majesty, that is to say, their service was terminable at any time without amuse: (see Shenton vs Smith (2 )). By law, however, it is open to Parliament to prescribe a different tenure and the King being a party to every Act of Parliament is understood to have accepted the change in the tenure when he gives assent to such law: (see Gould vs Stuart (3)). This principle applied in India also before the Government of India Act, 1915, was amended by the addition of section 96 B therein. Section 96 B for the first time provided by statute that every person in the civil service of the Crown held office during His Majesty 's pleasure, subject to the provisions of the Government of India Act and the rules made thereunder and the only protection to a public servant against the exercise of pleasure was that he could not be dismissed by any authority subordinate to that by which he was appointed. It was this section, which came for consideration before the Privy Council in Venkata Rao 's case (1) and the Privy Council held that in spite of the words ".subject to the rules made under the Government of India Act," Venkata Rao 's employment was not of a (1) (1936) L.R. 64 I.A. 55 (2) (3) 717 limited and special kind during pleasure with an added contractual term that the procedure prescribed, by the Rules must be observed; it was by the express terms of section 96 B held "during His Majesty 's pleasure" and no right of action as claimed by Venkata Rao existed. The Privy Council further held that the terms of section 96 B assured that the tenure of office, though at pleasure, would not be subject to capricious or arbitrary action but would be regulated by the rules which were manifold in number, most minute in particularity and all capable of change; but there was no right in the public servant enforceable by action to hold his office in accordance with those rules and he could therefore be dismissed notwithstanding the failure to observe the procedure prescribed by them. The main point which was urged in Venkata Rao 's case (1) was that under r. XIV of the Civil Services Classification Rules no public servant could be dismissed, removed or reduced in rank except after a properly recorded departmental inquiry. In Venkata Rao 's case (1) the departmental inquiry prescribed by the rules was found not to have been held. Even so, the Privy Council held that the words used in section 96 B could not and did not cut down the pleasure of His Majesty by rules though it was observed that the terms of the section contained a statutory and solemn assurance, that the tenure of office, though at pleasure., would not be subject to capricious or arbitrary, action, but would be regulated by rule. It was further added that supreme care should be taken that this assurance is carried out in the letter and in the spirit. The Privy Council further held that in ' the case before it, there had been a serious and complete failure to adhere to important and indeed fundamental rules, and mistakes of a serious kind had been made and wrongs had been done which called for redress; even so; they were of the view that as a matter of law that redress was not obtainable from courts by action. ,. This was the position under the Government of India Act 1915. There was however a material change in the Government of India Act, 1935. So far, there (1) (1936) L.R. 64 I. A. 55. 91 718 was one protection to a public servant, namely, that he could not be dismissed by an authority subordinate to that by which he was appointed. In the Government of India Act, 1935, section 240(1) laid down that " except as expressly provided by this Act, every person who is a member of a civil service of the Crown in India. holds office during His Majesty 's pleasure. " The words of this section are different from those of section 96 B and the tenure of all public servants other than those expressly provided for was to be during His Majesty 's pleasure. There were, however, two safeguards provided by sub sections (2) and (3) of section 240. The first was the same (namely, that no public servant will be dismissed by an officer subordinate to that who appointed him); but a further exception was added to the pleasure tenure, namely, no public servant shall be dismissed until he has been given a reasonable opportunity of showing cause against the action proposed to be taken in regard to him. This protection came to be considered by the Privy Council in High Commissioner for India and High Commissioner for Pakistan vs 1. M. Lall (1) and it was held that it was a mandatory provision and qualified the pleasure tenure and provided a condition precedent to the exercise of power by His Majesty provided by sub section (1) of section 240. Thus by the Government of India Act, 1935, there were two statutory guarantees to public servants against the exercise of the pleasure of his Majesty; but it is clear from section 240 of the Government of India Act, 1935, that the pleasure of His Majesty to dismiss was not otherwise subject to rules framed under the subsequent provisions of the Government of India Act appearing in Chapter 11 of Part X dealing with public services. This position continued till we come to the Constitution. Article 310(1) of the Constitution provides for what was contained in section 240(1) of the Government of India Act, 1935, and is in these terms: "(1) Except as expressly provided by this Constitution, every person who is a member of a defence (1) (1948) L.R. 75 I.A. 225. 719 service or of a civil service of the Union or of an all India service or holds any post connected with defence, or any civil post under the Union, holds office during the pleasure of the President, and every person who is a member of a civil service of a State or holds any civil post under a State holds office during the pleasure of the Governor of the State. " It will be clear therefore that all public servants except as expressly provided by the Constitution hold their office during the pleasure of the President or the Governor, as the case may be. Article 311 then provides for two guarantees and is similar in terms to section 240(2) and (3) of the Government of India Act, 1935 and the two guarantees are the same, (namely, (i) that no person shall be dismissed or removed by an authority subordinate to that by which he was appointed, and (ii) no such person shall be dismissed or removed or reduced in rank until he has been given a reason able opportunity of showing cause against the action proposed to be taken in regard to him). In Parshotam Lal Dhingra vs Union of India (1), this Court held that article 311 was in the nature of a proviso to article 310, that it provides two constitutional guarantees cutting down the pleasure of the President or the Governor, as the case may be, and that it was a mandatory provision which had to be complied with before the pleasure provided in article 310 can be exercised. Mr. Pathak for the respondent urges that in view of the words of article 310 statute or statutory rules can also cut down the nature of the pleasure tenure provided by article 310 in the same way as in England an Act of Parliament cuts down the ambit of His Majesty 's pleasure in the matter of dismissal. He relies on the words "as expressly provided by this Constitution" and urges that it is open to the legisla ture to cut down the pleasure tenure by law or to provide for its being affected by statutory rules. In this connection he relies on article 309 as well as article 154 of the Constitution. Now, article 309 begins with the words "subject to the provisions of this Constitution" land lays down that "Acts of the appropriate Legislature may regulate the recruitment, and conditions of (1) ; 720 service of person appointed, to public services and posts in connection with the affairs of the Union or of any State". The proviso to article 309 lays down that "it shall be competent for the President or the Governor as the case may be to make rules relating to recruitment and conditions of service until provision in that behalf is made by or under an Act of the appropriate Legislature". It will be clear immediately that article 309 is subject to the provisions of the Constitution and therefore subject to article 310 and therefore, any law passed or rules framed under article 309 must be subject to article 310 and cannot in any way affect the pleasure tenure laid down in article 310. The words "except as expressly provided by this Constitution" appearing in article 310 clearly show that the only exceptions to the pleasure tenure are those expressly contained in the Constitution and no more. These exceptions, for example, are contained inter alia in articles 124. 148, 280 and 324 and also in article 310 (2). Therefore, unless there is an express provision in the Constitution cutting down the pleasure tenure, every public servant holds office during the pleasure of the President or the Governor, as the case may be. We cannot accept the argument that a law passed under article 309 prescribing conditions of service would become an express provision of the Constitution and would thus cut down the pleasure tenure contained in article 310. As the Privy Council pointed in Venkata Rao 's case (1), the rules framed under article 309 or the laws passed thereunder amount to a statutory and solemn assurance that the tenure of office though at pleasure will not be subject to capricious or arbitrary action but will be regulated by rule. But if the rules or the law define the content of the guarantee contained in article 311 (2) they may to that extent be mandatory but only because they carry out the guarantee contained in article 311 (2). Excepting this, any law or rule framed under article 309 cannot cut down the pleasure tenure as provided in article 310. The same in our opinion applies to a law passed under article 154 (2)(b) which authorises Parliament or the legislature of a State to confer functions on any (1) (1936) L.R. 64 I.A. 55. 721 authority subordinate to the Governor. If any law is passed conferring on any authority the power to dismiss or remove or reduce in rank, that law cannot cut down the content of the pleasure tenure as contained in article 310; that law would be passed under article 245 and that article also begins with the words "subject to the provisions of this Constitution". Therefore, the law passed under article 154 (2) (b) would also in the same way as the law under article 309 be subject to the pleasure tenure contained in article 310 and cannot cut down the content of that tenure or impose any further fetters on it except those contained in article 311. The position therefore that emerges from the examination of the relevant Articles of the Constitution is that all public servants other than those who are excepted expressly by the provisions of the Constitution hold office during the pleasure of the President or the Governor, as the case may be, and that no law or rule passed or framed under article 309 or article 154 (2) (b) can cut down the content of the pleasure tenure as contained in article 310 subject to article 311. With this basic position in our Constitution, let us turn to the with which we are concerned. Section 7 thereof lays down that four grades of officers will have power to dismiss, suspend or reduce any police officer of the subordinate ranks subject to such rules as the State Government may from time to time make under the . Though the is a pre constitutional law which has continued under article 372 of the Constitution, it cannot in our opinion stand higher than a law passed under article 309 or article 154 (2) (b) and out down the content of the pleasure tenure as contained in article 310. The police officers of the subordinate ranks are not expressly excluded from the operation of the pleasure tenure by any provision of the Constitution; they, therefore, hold office during the pleasure of the Governor and the only protection that they can claim are the two guarantees contained in article 311. It is true that section 7 lays down that the four grades of officers empowered to dismiss will act according to rules framed by the State Government; but that does not in our opinion mean that 722 these rules could introduce any further fetter on the pleasure tenure under which the police officers of the subordinate ranks are in service. It was necessary to provide for the framing of rules because the section envisages conferment of, powers of punishment of various kinds on four grades of officers relating to various cadres of police officers in the subordinate ranks. It was left to the rules to provide which four grades of officers would dismiss police officers of which subordinate rank or would give which punishment to a police officer of which subordinate rank. Such rules would in our opinion be mandatory as they go to the root of the jurisdiction of the four grades of police officers empowered to act under section 7. But further rules may be framed under section 7 to guide these police officers how to act when they proceed to dismiss or inflict any other punishment on police officers of the subordinate ranks. These rules of procedure, however, cannot all be mandatory, for if they were so they would be putting further fetters than those provided in article 311 on the pleasure of the Governor to dismiss a public servant. of course, if any of the rules framed under section 7 carry out the purposes of article 311(2), to that extent they will be mandatory and in that sense their contravention would in substance amount to contravention of article 311 itself. If this were not so, it would be possible to forge further fetters on the pleasure of the Governor to dismiss a public servant and this in the light of what we have said above is clearly not possible in view of the provisions of the Constitution. On the other hand, it will not be possible by means of rules framed under section 7 to take away the guarantee provided by article 311(1), which lays down that no public servant shall be dismissed by an authority subordinate to that by which he was appointed. If any rule under section 7, for example, lays down otherwise it will clearly be ultra vires in view of article 311(1). The rules therefore that are framed under section 7 would thus be of two kinds, namely (1) those which define the jurisdiction of four grades of officers to inflict a particular kind of punishment on a particular police officer of the subordinate rank they will be mandatory 723 for they go to the root of the jurisdiction of the officer exercising the power, but even these rules cannot go against the provisions of article 31 1 (1); and (2) procedural rules, which again may be of two kinds. Some of them may prescribe the manner in which the guarantee contained in article 311 (2) may be carried out and if there are any such rules they will be mandatory. The rest will be merely procedural and can only be directory as otherwise if they are also mandatory further fetters on the power of the Governor to dismiss at his pleasure contained in article 310 would be forged and this is not permissible under the Constitution. It is from this angle that we shall have to consider 486. Before, however, we come to r. 486 itself, we may dispose of another argument, namely, that the four grades of officers who have the power to dismiss under section 7 are exercising the statutory authority vested in them and are not exercising the Governor 's pleasure of dismissal under article 310 and therefore their action in dismissing an officer is subject to all the rules framed for their guidance. We are of opinion that this argument is fallacious. Article 310 defines the pleasure tenure and by necessary implication gives power to the Governor to dismiss at pleasure any public servant subject to the exceptions contained in article 310 and also subject to the guarantees contained in article 311. This power of the Governor to dismiss is executive power of the State and can be exercised under article 154(1) by the Governor himself directly or indirectly through officers subordinate to him. Thus it is open to the Governor to delegate his power of dismissal to officers subordinate to him; but even when those officers exercise the power of dismissal, the Governor is indirectly exercising it through those to whom he has delegated it and it is still the pleasure of the Governor to dismiss, which is being exercised by the subordinate officers to whom it may be delegated. Further though the Governor may delegate his executive power of dismissal at pleasure to subordinate officers he still retains in himself the power to dismiss at pleasure if he thinks fit in a particular case in spite 724 of the delegation. There can be no question that where a delegation is made, the authority making the delegation retains in itself what has been delegated. Therefore, even where a subordinate officer is exercising the power to dismiss he is indirectly exercising the power of the Governor to dismiss at pleasure and so his power of dismissal can only be subject to the same limitations to which the power of the Governor would be subject if he exercised it directly. But it is said that in the present case the power has not been delegated by the Governor under article 154(1) and that it had been conferred on those police officers by law. In our opinion, that makes no difference to the nature of the power, which is being exercised by these four grades of officers under the . As we have already said article 154(2)(b) gives power to Parliament or the legislature of a State by law to confer functions on any authority subordinate to the Governor. When the function of dismissal is conferred by law on any authority subordinate to the Governor it is nothing more than delegation of the Governor 's executive power to dismiss at pleasure by means of law and stands in no better position than a delegation by the Governor himself under article 154(1). Whether it is delegation by the Governor himself or whether it is delegation by law under article 154(2)(b) or by an existing law, which must be treated as analogous to a law under article 154(2)(b), the officer exercising the power of dismissal is only indirectly exercising, the Governor 's power to dismiss at pleasure and his order of dismissal has the same effect as the order of the Governor to dismiss at pleasure. Therefore, his order also is only subject to the two fetters provided in article 311 of the Constitution and cannot be subjected to any more fetters by procedural rules other than those framed for carrying out the object of article 311(2). Therefore, when the four grades of officers proceed to dismiss any police officer of the subordinate rank under section 7 of the , they are merely exercising. the power of the Governor to dismiss at pleasure indirectly; and the only fetters that can be placed on that power are those contained in the Constitution, namely, article 311. 725 We may in this connection refer once again to the case of Venkata Rao (1) where the dismissal was by an, officer subordinate to the Governor of Madras; but ' that dismissal was also held to be an indirect exercise I of His Majesty 's pleasure to dismiss, and that is why it was held that if r. XIV of the Classification Rules was not complied with, a public servant had no right of action against an order dismissing him at His Majesty 's pleasure. Therefore, whenever a subordinate officer exercises the power to dismiss, whether that power is delegated by the Governor, or is delegated under a law made under article 154(2)(b) or under an existing law analogous to that, he is merely exercising indirectly the power of the Governor to dismiss at pleasure and his action is subject only to the two guarantees contained in article 311. The fact therefore that the police officer in this case made the order of dismissal by virtue of section 7 will make no difference and he will be deemed to be exercising the power of the Governor to dismiss at pleasure by delegation to him by law of that power. We may add that even where there is delegation by law of the power of the Governor to dismiss at pleasure, the power of the Governor himself to act directly and dismiss at pleasure cannot be taken away by that law, for that power he derives from article 310 of the Constitution. The present case therefore must be judged on the same basis as any case of dismissal directly by the Governor and would only be subject to the two limitations contained in article 311. We now come to r. 486. This rule, as we have already indicated, provides that if there is any complaint of the commission of any cognizable crime by a police officer, it must be registered in the relevant police station, under Chapter XIV of the Code of Criminal Procedure and investigated in the manner provided by that Chapter. After the investigation is complete, it is open to the authority concerned, be it the Superintendent of Police or the District Magistrate, to decide whether to proceed in a court of law (1) (1936) L.R. 64 I.A. 55. 92 726 or to hold a departmental inquiry or do both, though in the last case the departmental inquiry must take place only after the judicial trial is over. The first question then that arises is whether r. 486 is meant to carry out the purpose of article 311(2). As we read r. 486, we cannot see that it is meant for that purpose; it only provides for a police investigation under Chapter XIV of the Code of Criminal Procedure. The police officer making an investigation under Chapter XIV is not bound to examine the person against whom he is investigating, though there is nothing to prevent him from doing so. Nor is the person against whom an investigation is going on under Chapter XIV bound to make a statement to the police officer. In these circumstances, the purpose of an investigation under Chapter XIV is not relevant under article 311(2) which says that a public servant shall not be dismissed without giving him a reasonable opportunity of showing cause against the action proposed to be taken in regard to him. Therefore, r. 486 not being meant for the purpose of carrying out the object of article 311 (2) cannot be mandatory and cannot add a further fetter on the exercise of the power to dismiss or remove at the pleasure of the Governor over and above the guarantees contained in article 311. It appears to us that the object of r. 486 is that the authority concerned should first make a preliminary inquiry to find out if there is a case against the officer complained against either to proceed in a court or to take departmental action. The investigation prescribed by r. 486 is only for this purpose. Incidentally it may be that after such an investigation, the authority concerned may come to the conclusion that there in no case either ' to send the case to court or to hold a departmental inquiry. But that in our opinion is what would happen in any case of complaint against a public servant in any department of Government. No authority entitled to take action against a public servant would straightaway proceed to put the case in court or to hold a departmental inquiry. It seems to us axiomatic if a complaint is received against any public servant of any department, that the authority 727 concerned would first always make some kind of a preliminary inquiry to satisfy itself whether there is any case for taking action at all; but that is in our opinion for the satisfaction of the authority and has nothing to do with the protection afforded to a public servant under article 311. Rule 486 of the Police Regulations also in our opinion is meant for this purpose only and not meant to carry out the object contained in article 311(2). The opportunity envisaged by article 311(2) will be given to the public servant after the the authority has satisfied itself by preliminary inquiry that there is a case for taking action. Therefore, r. 486 which is only meant to gather materials for the satisfaction of the authority concerned, whether to take action or not, even though a statutory rule cannot be considered to be mandatory as that would be forging a further fetter than those contained in article 311 on the power of the Governor to dismiss at pleasure. We are therefore of opinion that r. 486 is only directory and failure to comply with it strictly or otherwise will not vitiate the subsequent proceedings. We may incidentally indicate two further aspects of the matter. In the first place, if the argument is that the Governor must exercise the pleasure himself so that only the two limitations provided in article 311 may come into play; it appears that the Governor has exercised his pleasure in this case inasmuch as he dismissed the revisional application made to him by the respondent. There appears no reason to hold that the Governor exercises his pleasure only when he passes the original order of dismissal but not otherwise. Secondly the fact that r. 486 contains the word "shall" is not decisive on the point that it is mandatory: (see Crawford on Statutory Construction, p. 519, para. 262). In view of what we have said already, the context shows that r. 486 can only be directory. If so, failure to observe it strictly or otherwise will not invalidate the subsequent departmental proceedings. This brings us to the last point which has been urged in this case; and that is whether there was substantial compliance with r. 486. We have already 728 pointed out that there was no strict compliance with r. 486 as no case wag registered on the complaint of Tika Ram and no investigation was made under Chapter XIV of the Code of Criminal Procedure. But there is no doubt in this case that before the Superintendent of Police gave the charge sheet to the respondent in November, 1953, which was the beginning of the departmental proceedings against the respondent, he made a preliminary inquiry into the complaint of Tika Ram and was satisfied that there was a case for proceeding against the respondent departmentally. In these circumstances it appears to us that the spirit of r. 486 was substantially complied with and action was only taken against the respondent when on a preliminary inquiry the Superintendent of Police was satisfied that departmental action was necessary. Even if r. 486 had been strictly complied with, this is all that could have happened. In these circumstances we are of opinion that r. 486 which in our opinion is directory was substantially complied with in spirit and therefore the subsequent departmental proceedings cannot be held to be illegal, simply because there was no strict compliance with r. 486. The High Court therefore in our opinion was wrong in holding that the subsequent departmental inquiry was illegal and its order quashing the order of dismissal on this ground alone cannot be sustained. We would therefore allow the appeal. BY COURT In accordance with the opinion of the majority, this appeal is dismissed with costs.

IN-Abs

The respondent was a sub Inspector of Police. A complaint was received by the Superintendent of Police that the com plainant was carrying currency notes of Rs. 650 in a bundle when he was stopped by the respondent and his person was searched, that the respondent opened the bundle of notes and handed over the notes one by one to one Lalji, who was with him and that Lalji returned the notes to him but on reaching home he found the notes short by Rs. 250. Proceedings under section 7 of the Police Act were taken against the respondent on the charge of misappropriation of Rs. 250 and he was dismissed from service by an order of the Deputy Inspector General of Police. The respondent filed a writ petition before the High Court challenging the order of the dismissal on the ground that the authorities had acted in violation of Rule I of Para. 486 of the U. P. Police Regulation. This rule required that every information received by the police relating to the commission of a cognizable offence by a Police Officer shall be dealt with in the first place under Ch. XIV, Code of Criminal Procedure. The High Court held that the provisions of para. 486 of the Police Regulations had not been observed and that the proceedings taken under section 7 of the Police Act were invalid and illegal and accordingly quashed the order of dismissal. The appellant contended (i) that the complaint did not make out any cognizable offence against the respondent and r. I of Para. 486 was not applicable in this case, (ii) that r. III of Para. 486 enabled the authorities to initiate departmental proceedings without complying with the provisions of r. I, (iii) that the Police Regulations made in exercise of the power conferred on the Government under the Police Act delegating the power of the Governor to dismiss at pleasure to a subordinate officer were only administrative directions for the exercise of the pleasure in a reasonable manner and any breach of the regulations did not confer any right or give a cause of action to the public servant, and (iv) that the regulations were only directory and the non compliance with the rules did not invalidate the order of dismissal. 680 Held, (per Sarkar, Subba Rao and Mudholkar, JJ.) that the order of dismissal was illegal as it was based upon an enquiry held in violation of r. I of Para 486 of the Police Regulations. The facts alleged in the complaint made out a cognizable offence under section 405 Indian Penal Code against the respondent, and the provisions of r. I of Para . 486 were applicable to it. A Police Officer making a search of a person was 'entrusted ' with the money handed over by the person searched. Rule III of Para. 486 did not deal with cognizable offences, it dealt with offences falling only under section 7 Police Act and to non cognizable offences. Rule III did not provide an alternative procedure to that prescribed under r. I. The position with regard to the tenure of public servants and to the taking of disciplinary action against them under the present Constitution was as follows: (i) Every person who was a member of a public service described in article 310 of the Constitution held office during the pleasure of the President or the Governor. (ii) The power to dismiss a public servant at pleasure was outside the scope of article I54 and, therefore, could not be delegated by the Governor to a subordinate officer, and could be exercised by him only in the manner prescribed by the Constitution. (iii) This tenure was subject to the limitations or qualifi cations mentioned in article 311. (iv )Parliament or the Legislature of States could not make a law abrogating or modifying this tenure so as to impinge upon the overriding power conferred upon the President or the Governor under article 310, as qualified by article 311. (v) Parliament or the Legislatures of States could make a law regulating the conditions of service of such a member which included proceedings by way of disciplinary action, without affecting the powers of the President or the Governor under article 310 read with article 311. (vi) Parliament and the Legislatures also could makea law laying down and regulating the scope and content of the doctrine of "reasonable opportunity" embodied in article 311 but the said law was subject to judicial review. (vii) If a statute could be made by Legislatures within the foregoing permissible limits, the rules made by an authority in exercise of the power conferred thereunder would likewise be efficacious within the said limits. N. W. F. Province vs Suraj Narain, A.I.R. 1949 P. C. 112, Shenton vs Smith, , Gould vs Stuart, , Reilly vs The King, , Terrell vs Secretary of State, , State of Bihar vs Abdul Majid; , , Parshotam Lal Dhingra vs Union of India, , R. T. Rangachari vs Secretary of State for India, (1936) L.R. 64 I.A. 40 and High Commissioner for India and High Commissioner for Pakistan vs I. M. Lall, (1948) L.R. 75 I.A. 225, referred to. The Police Act and the rules made thereunder constituted a self contained code providing for the appointment of police officers and prescribing the procedure for their removal. Any authority taking action under the Police Act or the rules made thereunder must conform to the provisions thereof and if there was any violation of those provisions the public servant had a right to challenge the order of the authority if the rules were mandatory Paragraph 486 of the Police Regulations was mandatory and not directory. The rules were made in the interests of both the department and the police officers. The word used in para 486 was "shall" and in the context it could not be read as "may". Hari Vishnu Kamath vs Syed Ahmed Ishaque, , State of U. P. vs Manbodhan Lal Srivastava, [1958] S.C.R. 533 and Montreal Street Railway Company v Noymandin, L.R. ; , referred to. Subject to the overriding power of the President or the Governor under article 310, as qualified by article 311, rules governing disciplinary proceeding could not be treated as administrative directions, but had the same effect as the provisions of the statute whereunder they were made, in so far as they were not inconsistent with the provisions thereof. The Governor did not exercise his pleasure through the officers specified in section 7 of the Police Act, and the Governor 's pleasure. could not be equated with the statutory power of the officers specified An inquiry under the Act had to be made in accordance with the provisions of the Act and the rules made thereunder. R. T. Rangachari vs Secretary of State for India, L.R. 64 I.A. 40, High Commissioner for India and High Commissioner for Pakistan vs I. M. Lall, (1948) L.R. 75 I.A. 225, R. Venkata Rao vs Secretary of State for India, (1936) L.R. 64 I.A. 55, section A. Venkataraman V. Union of India, [1954] S.C.R. 1150 and Khem Chand vs The Union of India, [1958] S.C.R. 1080, referred to. Per Gajendragadkar and Wanchoo, JJ. The provisions of para 486 were merely directory and a non compliance therewith did not invalidate the disciplinary action taken against the respondent. All public servants, other than those excepted expressly by the Constitution, held office during the pleasure of the President or the Governor, and no law or rule framed under article 300 or article I54(2)(b) could cut down the content of the pleasure tenure in article 310 subject to article 31i. The Police Act could not stand higher than a law passed under article 309 or article 154(2)(b) and could not cut down the content of the pleasure tenure in article 310 682 The Police officers held office during the pleasure of the Governor and the only protection they could claim was the two guarantees contained in article 311. The rules framed under section 7 Police Act would be of two kinds, namely (1) those which defined the jurisdiction of the four grades of officers specified in section 7 to inflict particular kind of punishment on particular police officers of the subordinate ranks such rules would be mandatory but they could not go against the provisions of article 311, and (2) procedural rules. The procedural rules could be of two kinds: (i) those that prescribed the manner in which the guarantee contained in article 311(2) May be carried out such rules would be mandatory, and (ii) other merely procedural rules they could only be directory. The power of the Governor to dismiss was executive power of the State and could be exercised under article 154(i) by the Governor himself directly or indirectly through officers subordinate to him. The officers specified in section 7 of the Police Act were exercising the powers of the Governor to dismiss at pleasure and their powers were subject to the same limitations to which the Governor was subject. Whether it was delegation by the Governor himself or whether it was delegation by law under article 154(2)(b) or by the existing law, which must be treated as analogous to a law under article 154(2)(b), the officer exercising the power of dismissal was only indirectly exercising the Governor 's power to dismiss at pleasure. His order also was subject to the two fetters under article 311 and could not be subjected to any more fetters by procedural rules other than those framed for carrying out the objects of article 311(2). R. Venkata Rao vs Secretary of State for India in Council, [1936] 64 I.A. 55, referred to. Paragraph 486 was not meant for the purpose of carrying out the object of article 311(2) and could not be mandatory and could not add a further fetter on the exercise of the power to dismiss at the pleasure of the Governor over and above the fetters contained in article 311. This rule was only meant to gather materials for the satisfaction of the authority concerned, whether to take action or not. As such para 486 was merely directory and a failure to comply therewith strictly or otherwise did not vitiate the disciplinary action.

Appeal No. 353 of 1959. Appeal from the judgment and order dated April 22, 1958, of the Punjab High Court (Circuit Bench) at Delhi in Civil Writ No. 257 D of 1957. M. C. Setalvad, Attorney General of India, section N. Andley, J. B. Dadachanji Rameshwar Nath and P. L. Vohra, for the Appellant. G. section Pathak, R. L. Anand and Janardan Sharma, for the respondent No. 2. 591 1960. November 22. The Judgment of the Court was delivered by WANCHOO, J. This is an appeal on a certificate granted by the Punjab High Court. Sharda Singh (hereinafter called the respondent) was in the service of the appellant mills. On August 28, 1956, the respondent was transferred from the night shift to the day shift in accordance with para 9 of the Standing Orders governing the workmen in the appellant mills. At that time an industrial dispute was pending bet ween the appellant mills and their workmen. The transfer was to take effect from August 30, 1956; but the respondent failed to report for work in the day shift and was marked absent. On September 1, 1956, he submitted an application to the General Manager to the effect that he had reported for duty on August 30, at 10 30 p.m. and had worked during the whole night, but had not been marked present. He had again gone to the mills on the night of August 31, but was not allowed to work on the ground that he had been transferred to the day shift. He complained that he had been dealt with arbitrarily in order to harass him. Though he said that he had no objection to carrying out the orders, he requested the manager to intervene and save him from the high handed action taken against him, adding that the mills would be responsible for his wages for the days he was not allowed to work. On September 4, 1956, he made an application to the industrial tribunal, where the previous dispute was pending, under section 33 A of the , No. XIV of 1947, (hereinafter called the Act) and complained that he had been transferred without any rhyme or reason from one shift to another and that this amounted to alteration in the conditions of his service, which was prejudicial and detrimental to his interest. As this alteration was made against the provisions of section 33 of the Act, he prayed for necessary relief from the tribunal under section 33 A. On September 5, 1956, the General Manager replied to the letter of September 1, and told the respondent that his transfer from. one shift to the other had been ordered on 592 August 28, and he had been told to report for work in the day shift from August 30; but instead of obeying the order which was made in the normal course and report for work as directed he had deliberately disobeyed the order and reported for work on August 30 in the night shift. He was then ordered to leave and report for work in the day shift. He however did not even then report for work in the day shift and absented himself intentionally and thus disobeyed the order of transfer. The General Manager therefore called upon the respondent to show cause why disciplinary action should not be taken against him for wailfully refusing to obey the lawful orders of the departmental officers and he was asked to submit his explanation within 48 hours. The respondent submitted his explanation on September 7, 1956. Soon after it appears the appellant mills received notice of the application under section 33 A and they submitted a reply of it on October 5, 1956. Their case was that transfer from one shift to another was within the power of the management and could not be said to be an alteration in the terms and conditions of service to the prejudice of the workman and therefore the complaint under section 33 A was not maintainable. The appellant mills also pointed out that a domestic inquiry was being held into the subsequent conduct of the respondent and prayed that proceedings in the application under section 33 A should be stayed till the domestic inquiry was concluded. No action seems to have been taken on this complaint under section 33 A, for which the appellant mills might as they had prayed for stay However, the domestic inquiry continued and on February 25, be partly responsible of those proceedings. against the respondent 1957, the inquiry officer reported that t e charge of misconduct was proved. Thereupon the General Manager passed an order on March 5, 1957, that in view of the serious misconduct of the respondent and looking into his past records, he should be dismissed; but as an industrial dispute was pending then, the General Manager ordered that the permission of the industrial tribunal should be taken before the order of dismissal was 593 passed and an application should be made for seeking such permission under section 33 of the Act. In the meantime, a notification was issued on March 1, 1957, by which 10th March, 1957, was fixed for the coming into force of certain provisions of the Central Act, No. XXXVI of 1956, by which sections 33 and 33 A were amended. The amendment made a substantial change in section 33 and this change came into effect from March 10, 1957. The change was that the total ban on the employer against altering any condition of ser vice to the prejudice of workmen and against any action for misconduct was modified. The amended section provided that where an employer intended to take action in regard to any matter connected with the dispute or in regard to any misconduct connected with the dispute, he could only do so with the express permission in writing of the authority before which the dispute was pending; but where the matter in regard to which the employer wanted to take action in accordance with the Standing Orders applicable to a workman was not connected with the dispute or the misconduct for which action was proposed to be taken was not connected with the dispute, the employer could take such action as he thought proper, subject only to this that in case of discharge or dismissal one month 's wages should be paid and an application should be made to the tribunal before which the dispute was pending for approval of the action taken against the employee by the employer. In view of this change in the law, the appellant mills thought that as the misconduct of the respondent in the present case was not connected with the dispute then pending adjudication, they were entitled to dismiss him after paying him one month 's wages and applying for approval of the action taken by them. Consequently, no application was made to the tribunal for permission in accordance with the order of the General Manager of March 5, 1957, already referred to. Later, on April 2, 19579 an order of dismissal was passed by the General Manager after tendering one month 's wages to the respondent and an application was made to the authority concerned for approval of the action taken against the respondent. 594 Thereupon the respondent filed another application under section 33 A of the Act on April 9, 1957, in which he complained that the appellant mills had terminated his services without the express permission of the tribunal and that this was a contravention of the provisions of section 33 of the Act; he therefore prayed for necessary relief. On April 18, 1957, an interim order was passed by the tribunal on this application by which as a measure of interim relief, the appellant mills were ordered to permit the respondent to work with effect from April 19 and the respondent was directed to report for duty. It was also ordered that if the management failed to take the respondent back, the respondent would be paid his full wages with effect from April 19 after he had reported for duty. On May 6, 1957, however, the application dated April 9, 1957, was dismissed as defective and therefore the interim order of April 18 also came to an end. On the same day (namely, May 6, 1957), the respondent made another application under section 33 A in which he removed the defects and again complained that his dismissal on April 2, 1957, without the express previous permission of the tribunal was against section 33 and prayed for proper relief. It is this application which is pending at present and has not been disposed of, though more than three years have gone by. It is also not clear what has happened to the first application of September 4,1956, in which the respondent complained that his conditions of service had been altered to his prejudice by his transfer from one shift to another. Applications under section 33 and section 33 A of the Act should be disposed of quickly and it is a matter of regret that this matter is pending for over three years, though the appellant mills must also share the blame for this state of affairs ' However, the appellant mills gave a reply on May 14,1957, to the last application under section 33 A and objected that there was no breach of section 33 of the Act, their case being that the amended section 33 applied to the order of dismissal passed on April 2, 1957. Further, on the merits, the appellant mills ' case was that the dismissal was in the circumstances justified. 595 The matter came up before the tribunal on May 16, 1957. On this date, the tribunal again passed an interim order, which was to the effect that as a measure of interim relief, the respondent should be permitted to work from May 17 and the respondent was directed to report for duty. It was further ordered that in case the management failed to take him back, they would pay him his full wages with effect from the date he reported for duty. Thereupon the appellant mills filed a writ petition before the High Court. Their main contention before the High Court was two fold. In the first place it was urged that the tribunal had no jurisdiction to entertain an application under section 33 A of the Act in the circumstances of this case after the amended sections 33 and 33 A came into force from March 10, 1957. In the alternative it was contended that the tribunal had no jurisdiction to pass an interim order of reinstatement or in lieu thereof payment of full wages to the respondent even before considering the questions raised in the application under section 33 A on the merits. The High Court held on the first point that in view of section 30 of the Industrial Disputes (Amendment and Miscellaneous Provisions) Act, No. XXXVI of 1956, the present case would be governed by section 33 as it was before the amendment and therefore the tribunal would have jurisdiction to entertain the complaint dated May 6, 1957, under section 33 A of the Act. On the second point, the High Court held that the order of the tribunal granting interim relief was within its jurisdiction and was justified. In consequence, the writ petition was dismissed. Thereupon the appellant mills applied and was granted a certificate by the High Court to appeal to this Court; and that is how the matter has come up before us. The same two points which were raised in the High Court have been urged before us. We are of opinion that it is not necessary in the present case to decide the first point because we have come to the conclusion that the interim order of May 16, 1957, is manifestly erroneous in law and cannot be supported. Apart from the question whether the tribunal had jurisdiction 596 to pass an interim order like this without making an interim award, (a point which was considered and left open by this Court in The Management of Hotel Imperial vs Hotel Workers ' Union (1)), we are of opinion that where the tribunal is dealing with an application under section 33 A of the Act and the question before it is whether an order of dismissal is against the provisions of section 33 it would be wrong in law for the tribunal to grant reinstatement or full wages in case the employer did not take the workman back in its service as an interim measure. It is clear that in case of a complaint under section 33 A based on dismissal against the provisions of section 33, the final order which the tribunal can pass in case it is in favour of the workman, would be for reinstatement. That final order would be passed only if the employer fails to justify the dismissal before the tribunal, either by showing that proper domestic inquiry was held which established the misconduct or in case no domestic inquiry was held by producing evidence before the tribunal to justify the dismissal: See Punjab National Bank Ltd. vs All India Punjab National Bank Employees ' Federation (2), where it was held that in an inquiry under section 33 A, the employee would not succeed in obtaining an order of reinstatement merely by proving contravention of section 33 by the employer. After such contravention is proved it would still be open to the employer to justify the impugned dismissal on the merits. That is a part of the dispute which the tribunal has to consider because the complaint made by the employee is to be treated as an industrial dispute and all the relevant aspects of the said dispute fall to be considered under section 33 A. Therefore, when a tribunal is considering a complaint under section 33 A and it has finally to decide whether an employee should be reinstated or not, it is not open to the tribunal to order reinstatement as an interim relief, for that would be giving the workman the very relief which he could get only if on a trial of the complaint the employer failed to justify the order of dismissal. The interim relief ordered in this case was that the work (1) ; (2) ; 597 man should be permitted to work: in other words he was ordered to be reinstated; in the alternative it was ordered that if the management did not take him back they should pay him his full wages. We are of opinion that such an order cannot be passed in law as an interim relief, for that would amount to giving the, respondent at the outset the relief to which he would be entitled only if the employer failed in the proceedings under section 33 A. As was pointed out in Hotel Imperial 's case (1),ordinarily, interim relief should not be the whole relief that the workmen would get if they succeeded finally. The order therefore of the tribunal in this case allowing reinstatement as an interim relief or in lieu thereof payment of full wages is manifestly erroneous and must therefore be set aside. We therefore allow the appeal, set aside the order of the High Court as well as of the tribunal dated May 16, 1957, granting interim relief. Learned counsel for the respondent submitted to us that we should grant some interim relief in case we came to the conclusion that the order of the tribunal should be set aside. In the circumstances of this case we do not think that interim relief to the respondent is justified hereafter. As we have pointed above, applications under sections 33 and 33 A should be dealt with expeditiously. We trust that the applications dated September 4, 1956, which appears to have been overlooked and of May 6, 1957, will now be dealt with expeditiously and finally disposed of by the tribunal, as all applications under section 33 A should be. In the circumstances we pass no order as to costs. Appeal allowed.

IN-Abs

One Sharda Singh, respondent, who was an employee of the appellant mills was dismissed for disobeying the orders of the managing authority. He filed an application before the Industrial tribunal under section 33 A of the , contesting his dismissal on various grounds, whereupon the tribunal passed an order to the effect that as an interim measure the respondent be permitted to work in the appellant mills and if the management failed to take him back his full wages be paid from the date he reported for duty. The appellant mills then filed a Writ Petition before the High Court contesting the interim order of the Tribunal and the High Court held that the interim relief granted to the respondent was justified. On appeal by a certificate of the High Court, Held, that the interim order passed by the tribunal reinsta ting the respondent was erroneous. Such an interim relief could not be given by the Tribunal as it would amount to prejudging the respondents ' case and granting him the whole relief at the outset without deciding the legality of his dismissal after hearing the appellant employer. The Management, Hotel Imperial and Ors. vs Hotel Workers ' Union, ; , and Punjab National Bank vs All India Punjab National Bank Employees ' Federation, A.I.R. , referred to.

Appeal No. 119 of 1959. Appeal by special leave from the judgment and order dated January 9, 1958, of the Allahabad High Court (Lucknow Bench), Lucknow, in Civil Misc. Application No. 115 of 1955. 683 C. B. Agarwala and C. P. Lal, for the appellants. G. section Pathak, Achru Ram, section N. Andley, Rameshwar Nath, J. B. Dadachanji and P. L. Vohra for the respondent. November, 25. The Judgment of Sarkar, Subba Rao and Mudholkar, JJ., was delivered by Subba Rao, J., and that of Gajendragadkar and Wanchoo, JJ., was delivered by Wanchoo, J. SUBBA RAO, J. This is an appeal by special leave against the judgment of the High Court of Judicature at Allahabad, Lucknow Bench, allowing the petition filed by the respondent under article 226 of the Constitution. The respondent was appointed a Sub Inspector of Police in December, 1948, and was posted at Sitapur in June, 1953. On September 6, 1953, the respondent went to village Madhwapur in connection with an investigation of a case of theft. On the evening of the said date when he was returning, accompanied by one Lalji, an ex patwari of Mohiuddinpur, he saw one Tika Ram coming from the side of a canal and going hurriedly towards a field. As the movements of Tika Ram appeared to be suspicious and as he was carrying something in the folds of his dhoti, the respondent searched him and found a bundle containing currency notes. The respondent counted the currency notes and handed them over to Lalji for being returned to Tika Ram, who subsequently got them and went his way. Subsequently when Tika Ram counted the currency notes at his house, he found that they were short by Rs. 250. Tika Ram 's case is that the bundle when taken by the respondent contained notes of the value of Rs. 650, but when he counted them in his house they were only of the value of Rs. 400. On September 9, 1953 Tika Ram filed a complaint to the Superintendent of Police, Sitapur, to the effect that the respondent and one Lalji had misappropriated a sum of its. There is dispute in regard to the interpretation of the complaint. On receipt of the said complaint, the Superintendent of Police made enquiries 684 and issued a notice to the respondent to show cause why his integrity certificate should not be withheld, upon which the respondent submitted his explanation on October 3, 1953. Thereafter the Superintendent of Police forwarded the file of the case to the Deputy Inspector General of Police, Central Range, U. P., who directed the Superintendent of Police to take proceedings under section 7 of the Police Act against the respondent. The departmental proceedings were started against the respondent; on November 2, 1953, a charge sheet was served upon the respondent under section 7 of the Police Act stating that there were strong reasons to suspect that the respondent misappropriated a sum of Rs. 250 from the purse of Tika Ram; the respondent filed his explanation to the charge made against him; and ultimately the Superintendent of Police held an enquiry and found on the evidence that the respondent was guilty of the offence with which he was charged. On January 2, 1954, the Superin tendent of Police issued another notice to the respondent to show cause why he should not be reduced to the lowest grade of Sub Inspector for a period of three years. In due course the respondent showed cause against the action proposed to be taken against him on a consideration of which the Superintendent of Police, Sitapur, by his order dated January 16, 1954 reduced the respondent to the lowest grade of Sub Inspector for a period of three years. When this order came to the notice of the D. 1. G., U. P., on a consideration of the entire record, he came to the con clusion that the respondent should be dismissed from service and on October 19, 1954 he made an order to that effect. On February 28, 1955 the Inspector General of Police confirmed that order; and the revision filed by the respondent against that order to the State Government was also dismissed in August 1955. Thereafter the respondent filed a petition under article 226 of the Constitution before the High Court of Judicature at Allahabad, Lucknow Bench, for quashing the said orders and the same was heard by a division bench consisting of Randhir Singh and Bhargava, JJ. The learned judges held that the provisions of para. 685 486 of the Police Regulations had not been observed and, therefore, the proceedings taken under section 7 of the Police Act were invalid and illegal. On that finding, they quashed the impugned orders; with the result that the order dismissing the respondent from service was set aside. The State Government, the Deputy Inspector General of Police, Lucknow, and the Inspector General of Police, Uttar Pradesh, Lucknow, have preferred the present appeal against the said order of the High Court. We shall now proceed to consider the various contentions raised by learned counsel in the order they were raised and argued before us. At the outset Mr. C. B. Agarwala, learned counsel for the appellants, contended that there was no breach of the provisions of para. 486 of the Police Regulations. If this contention be accepted, no other question arises 'in this case; therefore, we shall deal with the same. The material part of para. 486 of the Police Regulations reads thus: "When the offence alleged against a police officer amounts to an offence only under section 7 of the Police Act, there can be no magisterial inquiry under the Criminal Procedure Code. In such cases, and in other cases until and unless a magisterial inquiry is ordered, inquiry will be made under the direction of the Superintendent of Police in accordance with the following rules: I.Every information received by the police relating to the commission of a cognizable offence by a police officer shall be dealt with in the first place under Chapter XIV, Criminal Procedure Code, according to law, a case under the appropriate section being registered in the police station concerned. . . . This provision expressly lays down that every information received by the police relating to the commission of a cognizable offence by a police officer shall be dealt with in the first place under Ch. XIV of the Criminal Procedure Code. This provision will not apply if the information received by the police does not 87 686 relate to the commission of a cognizable offence. Learned counsel contends that the information received in the present case does not relate to any offence committed by the respondent, much less to a cognizable offence. This is a point raised before us for the first time. This does not find a place even in the statement of case filed by the appellants. In the High Court it was not contended that the information did not disclose any offence committed by the respondent. Indeed, it was common case that the information disclosed an offence committed by the respondent, but it had been contended by the appellants that the misappropriation of the part of the money amounted to an offence under section 403 of the Indian Penal Code, which is not a cognizable offence; and it was argued on behalf of the respondent that it amounted to an offence under section 409 of the Indian Penal Code. The learned judges accepted the contention of the respondent. Even so, it is said that whatever might been the contentions of the parties, the information given by Tika Ram to the Superintendent of Police clearly disclosed that no offence was alleged to have been committed by the respondent and that this Court would, therefore, be justified, even at this very late stage, to accept the contention of the appellants. But the contents of the said information do not in any way support the assertion. Paragraph 3 of the application given by Tika Ram to the Superintendent of Police, Sitapur, reads thus: "That on Sunday last dated 6th September, 1953 the applicant had with him the currency notes of Rs. 650. The opposite party as well as Shri Babu Ram met the applicant on the west of Rampur near the Canal. The opposite party said to the Sub Inspector "This man appears to be clad in rags but is possessed of considerable money." After saying this the person of the applicant was searched. The Sub Inspector, having opened the bundle of notes, handed over the (notes) one by one to the opposite party. " This statement clearly indicates that either the Sub . Inspector or both the Sub Inspector and Lalji searched the person of Tika Ram, that the Sub Inspector took 687 the bundle of notes and handed the same over, one by one, to Lalji for being returned to the applicant, and that out of Rs. 650 a sum of Rs. 250 was not returned to him. The facts alleged make out an offence against both the Sub Inspector as well as Lalji. The mere fact that the respondent is not shown as one of the opposite parties in the application does not affect the question, for the information given in the application imputed the commission of an offence to both the respondent and Lalji. The notice issued by the Supe rintendent of Police on November 2, 1953 to the respondent also charges him with an offence of misappropriation. It is stated that the said notice only says that the Superintendent of Police had good reasons to suspect that the respondent misappropriated the sum of money and that it does not aver that he committed the offence of misappropriation. But what matters is 'that the Superintendent of Police also understood from the information given and the enquiry conducted by him that the respondent had committed the offence. Reliance is placed upon paragraph 3 of the writ petition wherein the respondent herein stated that Tika Ram filed a complaint against Lalji and not against the respondent. As a fact that is correct in the sense that the respondent was not shown in that application as the opposite party though in the body of that application definite allegations were made against the respondent. In the counter affidavit filed by the Superintendent of Police on behalf of the State it was clearly averred that on September 9, 1953 Tika Ram appeared before him and filed a petition to the effect fiat one Lalji and the respondent had misappropriated a sum of Rs. 250. Whatever ambiguity there might have been in the information we do not find any this allegation dispels it and it is not open to the appellants at this stage to contend that the petition did not disclose any offence against the respondent. In the circumstances, we must hold that the information received by the police related to the commission of an offence by the respondent. Even so, it is contended that the said offence is not a cognizable offence. It is said that there was no 688 entrustment made by Tika Ram to the respondent and that, therefore, the offence did not fall under section 409 of the Indian Penal Code, which is a cognizable offence, but only under section 403 of the Indian Penal Code, which is not a cognizable offence. Section 405 of the Indian Penal Code defines "criminal breach of trust" and section 409 thereof prescribes the punishment for the criminal breach of trust by a public servant. Under section 405 of the Indian Penal Code, "Whoever, being in any manner entrusted with property, or with any dominion over property, dishonestly misappropriates or converts to his own use that property, or dishonestly uses or disposes of that property in violation of any direction of law prescribing the mode in which such trust is to be discharged, or of any legal contract, express or implied, which he has made touching the discharge of such trust, or wilfully suffers any person so to do, commits "criminal breach of trust". To constitute an offence under this section, there must be an entrustment of property and dishonest misappropriation of it. The person entrusted may misappropriate it himself, or he may wilfully suffer another person to do so. In the instant case the respondent, being a police officer, was legally entitled to search a person found under suspicious circumstances; and Tika Ram in handing over the bundle of notes to the police officer must have done so in the confidence that he would get back the notes from him when the suspicion was cleared. In these circumstances, there cannot be any difficulty in holding that the currency notes were alleged to have been handed over by Tika Ram to the respondent for a specific purpose, but were dishonestly misappropriated by the respondent or at, any rate he wilfully suffered Lalji to misappropriate the same. We, therefore, hold that if the currency notes were taken by the respondent in discharge of his duty for inspection and return, he was certainly entrusted with the notes within the meaning of section 405 of the Indian Penal Code. If so, the information discloses a cognizable offence. We reject the first contention. The second objection of learned counsel for the appellants is that sub para. (3) of para. 486 of the 689 Police Regulations enables the appropriate police authority to initiate the departmental proceeding without complying with the provisions of sub para. (1) of para. The relevant portion of para. 486 of the Police Regulations reads: "When the offence amounts to an offence only under section 7 of the Police Act, there can be no magisterial inquiry under the Criminal Procedure Code. In such cases, and in other cases until and unless a magisterial inquiry is ordered, inquiry will be made under the direction of the Superintendent of Police in accordance with the following rules:. . " Rule I relates to a cognizable offence, r. II to a non cognizable. offence, including an offence under section 29 of the Police Act, and r. III to an offence under section 7 of the Police Act or a non cognizable offence, including an offence under section 29 of the Police Act. Rule III says: "When a Superintendent of Police sees reason to take action on information given to him, or on his own knowledge or suspicion, that a police officer subordinate to him has committed an offence under section 7 of the Police Act or a non cognizable offence (including an offence under section 29 of the Police Act) of which he considers it unnecessary at that stage to forward a report in writing to the District Magistrate under rule II above, he will make or cause to be made by an officer senior in rank to the officer charged, a departmental inquiry sufficient to test the truth of the charge. On the conclusion of this inquiry he will decide whether further action is necessary, and if so, whether the officer charged should be departmentally tried, or whether the District Magistrate should be moved to take cognizance of the case under the Criminal Procedure Code. " The argument is that the words "an offence under section 7 of the Police Act" take in a cognizable offence and that, therefore, this rule provides for a procedure alternative to that prescribed under r. I. We do not think that this contention is sound. Section 7 of the Police Act empowers certain officers to dismiss, suspend 690 or reduce any police officer of the subordinate rank whom they shall think remiss or negligent in the discharge of his duty, or unfit for the same. The grounds for punishment are comprehensive: they may take in offences under the Indian Penal Code or other penal statutes. The commission of such offences may also be a ground to hold that an officer is unfit to hold his office. Action under this section can, therefore, be taken in respect of, (i) offences only under section 7 of the Police Act without involving any cognizable or noncognizable offences, that is, simple remissness or negli gence in the discharge of duty, (ii) cognizable offences, and (iii) non cognizable offences. Paragraph 486 of the Police Regulations makes this clear. It says that when the offence alleged against a police officer amounts to an offence only under section 7 of the Police Act, there can be no magisterial inquiry under the Criminal Procedure Code. This part of the rule applies to an offence only under section 7 of the Police Act i. e., the first category mentioned above. Rule I refers to a cognizable offence i. e., the second category, rule 11 to a non cognizable offence i. e., the third category, and rule III applies to an offence under section 7 of the Police Act and to a noncognizable offence. Though the word "only" is not mentioned in rule 111, the offence under section 7 of the Police Act can, in the context, mean an offence only under section 7 of the said Act i.e., an offence falling under the first category. So understood, the three rules can be reconciled. We, therefore, hold that, as the offence complained of in the present case is a cognizable offence, it falls under rule I and not under rule 111. We, therefore, reject this contention. The third contention advanced by learned counsel for the appellants raises a constitutional point of considerable importance. The gist of the argument may be stated thus: In England, the service under the Crown is held at the Crown 's pleasure, unless the employment is for good behaviour or for a cause. But if there is a statute prescribing the terms of service and the mode of dismissal of the servant of the Crown, the statute would control the pleasure of the Crown. In India, the Constitution as well as the 691 earlier Constitution Acts of 1915, as amended in 1919, and 1935 embodied the incidents of "tenure at pleasure" of His Majesty, or the President or the Governor, as the case may be, but did not empower the Legislatures under the earlier Acts and the Parliament and the Legislatures under the Constitution to make a law abrogating or modifying the said tenure; therefore, any law made by appropriate authorities conferring a power on any subordinate officer to dismiss a servant must be construed not to limit the power of His Majesty, the President or the Governor, as the case may be, but only to indicate that they would express their pleasure only through the said officers. The rules made in exercise of a power conferred on a Government under a statute so delegating the power to a subordinate officer can only be administrative directions to enable the exercise of the pleasure by the concerned authorities in a reasonable manner and that any breach of those regulations cannot possibly confer any right on, or give a cause of action to, the aggrieved Government servant to go to a court of law and vindicate his rights. Mr. Pathak, learned counsel for the respondent, in countering this argument contends that the constitution Acts in India embodied the incidents of the tenure of the Crown 's pleasure in the relevant provisions and what the Parliament can do in England, the appropriate Legislatures in India also can do, that is, "the tenure at pleasure" created by the Constitution Acts can be abrogated, limited or modified by law enacted by the appropriate legislative bodies. Alternatively he contends that even if the Police Act does not curtail the tenure at pleasure, the Legislature validly made that law and the Government validly made statutory rules in exercise of the powers confered under that Act and that, therefore, the appropriate authorities can only dismiss the respondent in strict compliance with the provisions of the Act and the Rules made thereunder. To appreciate the problem presented and to afford a satisfactory answer it would be convenient to consider the relevant provisions. The Act we are concerned with in this case is the (Act V 692 of 1861). Its constitutional validity at the time it was ,made was not questioned. Under section 7 of the , as it originally stood, "the appointment of all police officers other than those mentioned in B. 4 of this Act shall, under such rules as the local Government shall from time to time sanction, rest with the Inspector General, Deputy Inspectors General, Assistant Inspectors General and District Superintendents of Police, who may, under such rules as aforesaid, at any time, dismiss, suspend or reduce any police officer. " That section was substituted by the present section in 1937 and later on some appropriate amend ments were made to bring it in conformity with the Constitution. Under the amended section, "Subject to such rules as the State Government may from time to time make under this Act, the Inspector General, Deputy Inspectors General, Assistant Inspectors General and District Superintendent of Police may at any time dismiss, suspend or reduce any police officer of the subordinate ranks whom they shall think remiss or negligent in the discharge of his duty, or unfit for the same". In exercise of the powers conferred on the Government by section 46 of the Act, the Government made the U. P. Police Regulations prescribing the procedure for investigation and inquiry. We shall ' deal with the Regulations at a later stage. In the Government of India Act, 1915, as amended by the Act of 1919, for the first time, the doctrine of "tenure at pleasure" was introduced by section 96 B. In exercise of the power conferred under sub section (2) certain classification rules were framed by the local Government. This Act was repealed by the Government of India Act, 1935, and the section corresponding to section 96 B was section 240(1) in the latter Act. Section 241(2) empowered, except as expressly provided by the Act, the Governor General and the Governor to prescribe the conditions of service of the servants they were empowered to appoint. The main difference between the Act of 1919 and that of 1935 was that in the former Act there was only one limitation on the Crown 's pleasure, namely, that no person in the service might be dismissed by 693 an authority subordinate to that by which he was appointed, whereas in the latter Act a second limitation was imposed, namely, that no such person should ' be dismissed or reduced in rank until he had been given a reasonable opportunity of showing cause against the action proposed to be taken in regard to him: see section 240, sub sections (2) and (3). Another difference between the said two Acts was that while under the former Act all the services were placed in the same position, under the latter Act special provision was made for the police force prescribing that the conditions of service of the subordinate ranks of the various police forces should be such as might be determined by or under the Acts relating to those forces respectively vide section 243. By the Constitution, the Act of 1935 was repealed, and, with certain changes in phraseology, cls. (1) and (2) of article 310 took the place of sub sections (1) and (4) of section 240 respectively, and article 309 took the place of section 241(2). Under article 313, "Until other provision is made in this behalf under this Constitution, all the laws in force immediately before the commencement of this Constitution and applicable to any public service or any post which continues to exist after the commencement of this Constitution, as an all India service or as service or post under the Union or a State shall continue in force so far as consistent with the provisions of this Constitution". The result is that the and the Police Regulations, made in exercise of the powers conferred on the Government under that Act, which .were preserved under section 243 of the Government of India Act, 1935, continue to be in force after the Con stitution so far as they are consistent with the provisions of the Constitution. It is common case, as the contentions of learned counsel disclose, that the Act and the Regulations framed thereunder were constitutionally valid at the inception and that they are also consistent with the provisions of the Constitution. The difference between the two contentions lies in the fact that according to one His Majesty 's pleasure cannot be modified 88 694 by a statute, according to the other it is subject to statutory provisions. The relevant provisions of the Constitution read thus: Article 309: "Subject to the provisions of this Constitution, Acts of the appropriate Legislature may regulate the recruitment, and conditions of service of persons appointed, to public services and posts in connection with the affairs of the Union or of any State: Provided that it shall be competent for the President or such person as he may direct in the case of services and posts in connection with the affairs of the Union, and for the Governor of a State or such person as he may direct in the case of services and posts in connection with the affairs of the State, to make rules regulating the recruitment, and the conditions of service of persons appointed, to such services and posts until provision in that behalf is made by or under an Act of the appropriate Legislature under this article, and any rules so made shall have effect subject to the provisions of any such Act. " Article 310: "Except as expressly provided by this Constitution, every person who is a member of a defence service or of a civil service or holds any post connected with defence or any Civil Post under the Union holds office during the pleasure of the President, and every person who is a member of a civil service of a State or holds any civil post under a State holds office during the pleasure of the Governor of the State." Under article 309 the appropriate Legislature may regulate the recruitment and conditions of service of persons appointed to public services. Under article 310 every person who is EC member of a public service described therein holds office during the pleasure of the President or the Governor, as the case may be. The words "conditions of service" in article 309 in their comprehensive sense take in the tenure of a civil servant: see N. W. F. Province vs Suraj Narain (1). Therefore, "the tenure at pleasure" is also one of the conditions of service. But article 309 opens out with a (i) A.I.R. (1949) P.C. 112. 695 restrictive clause, namely, "Subject to the provisions of this Constitution", and if there is no restrictive, clause in article 310, there cannot be any difficulty in holding that article 309 is subject to the provisions of ' Art 310; with the result that the power of the Legislature to lay down the conditions of service of persons appointed to public services would be subject to "the tenure at pleasure" under article 310. In that event, any law made by the Legislature could not affect the over riding power of the President or the Governor, as the case may be, in putting an end to the tenure at their pleasure. Would the opening words of the clause in article 310, namely, "Except as expressly provided by this Constitution", make any difference in the matter of interpretation? It should be noticed that the phraseology of the said clause in article 310 is different from that in article 309. If there is a specific provision in some part of the Constitution giving to a Government servant a tenure different from that provided for in article 310, that Government servant is excluded from the operation of article 310. The said words refer, inter alia, to articles 124, 148, 218 and 324 which provide that the Judges of the Supreme Court, the Auditor General, the Judges of the High Courts and the Chief Election Commissioner shall not be removed from their offices except in the manner laid down in those Articles. If the provisions of the Constitution specifically prescribing different tenures were excluded from article 310, the purpose of that clause would be exhausted and thereafter the Article would be free from any other restrictive operation. In that event, articles 309 and 310 should be read together, excluding the opening words in the latter Article, namely, "Except as expressly provided by this Constitution". Learne counsel seeks to confine the operation of the opening words in article 309 to the provisions of the Constitution which empower other authorities to make rules relating to the conditions of service of certain classes of public servants, namely, articles 146(2), 148(5) and 229(2). That may be so, but there is no reason why article 310 should be excluded therefrom. It follows that while article 310 provides for a tenure at pleasure 696 of the President or the Governor, article 309 enables the Legislature or the executive, as the case maybe, to make any law or rule in regard, inter alia, to conditions of service without impinging upon the overriding power recognized under article 310. Learned counsel for the respondent contends that this construction is inconsistent with that prevailing in the English law and that the intention of the framers of the Constitution could not have been to make a radical departure from the law of England. The law of England on the doctrine of "tenure at pleasure" has now become fairly crystallized. In England, all servants of the Crown hold office during the pleasure of the Crown; the right to dismiss at pleasure is an implied term in every contract of employment of the Crown, this doctrine is not based upon any prerogative of the Crown, but on public policy; if the terms of appointment definitely prescribe a tenure for good behaviour or expressly provide for a power, to determine for a cause, such an implication of a power to dismiss at pleasure is excluded, and an Act of Parliament can abrogate or amend the said doctrine of public policy in the same way as it can do in respect of any other part of common law. The said propositions are illustrated in the following decisions: Shenton vs Smith (1), Gould vs Stuart (2), Reilly vs The King(3), Terrell vs Secretary of State (4). This English doctrine was not incorporated in its entirety in the Indian enactments vide State of Bihar vs Abdul Majid (5), Parshotam Lal Dhingra vs Union of India (6). Section 96 B of the Government of India Act, 1915, for the first time in 1919, by amendment, statutorily recognized this doctrine, but it was made subject to a condition or s qualification, namely, that no person in that service might be dismissed by any authority subordinate to that by which he was appointed. Section 240 of the Act of 1935 imposed another limitation, namely, that a reasonable opportunity of showing cause against the action proposed to be taken in (i) (3) (5) ; (2) (4) (6) ; 697 regard to a person must be given to him. But neither of the two Acts empowered the appropriate Legislature to make a law abolishing or amending the said doctrine. The Constitution of India practically incorporated the provisions of sections 240 and 241 of the Act of 1935 in articles 309 and 310. But the Constitution has not made "the tenure at pleasure" subject to any law made by the appropriate Legislature. On the other hand, as we have pointed out, article 309 is expressly made subject to "the tenure at pleasure" in article 310. Nor the attempt of learned counsel for the respondent to discover such a power in the Legislature in the Entries of the appropriate Lists of the Seventh Schedule to the Constitution can be legally sustained. He referred, inter alia, to Entry 70 of List I and Entry 41 of List II. It is not disputed that Parliament can make law for the organization of the police and for the prevention and detection of crime. But under article 245 of the Constitution such a power is subject to the provisions of the Constitution and, therefore, is subject to the provisions of article 310. Nor can we imply such a power in Parliament or the Legislatures from article 154(2)(b) of the Constitution. Under article 154, "the executive power of the State shall be vested in the Governor and shall be exercised by him either directly or through officers subordinate to him in accordance with this Constitution", and under el. 2(b) thereof, "nothing in this Article shall prevent Parliament or the Legislature of the State from conferring by law functions on any authority subordinate to the Governor. " The argument is that a power to terminate the service at pleasure under article 310 is a part of the executive power of the State, that power under article 154 can be exercised by the Governor directly or through officers subordinate to him, and that under article 154(2)(b) the Parliament or the Legislature of the State can confer the same power on any authority subordinate to the Governor or, at any rate, can make a law prescribing that the Governor shall exercise the said pleasure through a particular officer. 698 We cannot agree either with the premises or the conclusion sought to be based on it. The first question is whether the power of the Governor under article 310 to terminate the services of a Government servant at pleasure is part of the executive power of the State under article 154 of the Constitution. Article 154 speaks of the executive power of the State vesting in the Governor; it does not deal with the constitutional powers of the Governor which do not form part of the executive power of the State. Article 162 says that, subject to the provisions of the Constitution, the executive power of the State shall extend to matters with respect to which the Legislature of the State has power to make laws. If the Legislature of the State has no power to make a law affecting the tenure at pleasure of the Governor, the said power must necessarily fall outside the scope of the executive power of the State. As we will presently show, the Legislature has no such power and, therefore, it cannot be a part of the executive power of the State. That apart, if the said power is part of the executive power in its general sense, article 162 imposes another limitation on that power, namely, that the said executive power is subject to the provisions of the Constitution and therefore, subject to article 310 of the Constitution. In either view, article 310 falls outside the scope of article 154 of the Constitution. That power may be analogous to that conferred on the Governor under articles 174, 175 and 176. Doubtless the Governor may have to exercise the said power whenever an occasion arises, in the manner prescribed by the Constitution, but that in itself does not make it a part of the executive power of the State or enable him to delegate his power. Even on the assumption that the power under article 310 is executive power within the meaning of article 154, it does not make any difference in the legal position so far as the present case is concerned. Article 310 of the Constitution says that unless expresssly provided by the Constitution to the contrary, every civil servant holds office during the pleasure of the Governor subject to the limitations prescribed under 699 article 311. Can it be said that article 154(2)(b) expressly provides for a different tenure? Can it be said that the said Article confers on the Parliament or the Legislature a power higher than that conferred on them under article 245 of the Constitution ? It only preserves the power of the Legislature, which it has under the Constitution, to make a law conferring functions on an authority subordinate to the Governor. That power under article 245 is not unlimited, but is subject to the provisions of the Constitution and there fore subject to article 310 thereof. It is then said that if the appellants ' contention were not accepted, it would lead to conflict of jurisdiction: while the Governor has the power under article 310 to dismiss a public servant at his pleasure, a statute may confer a power on a subordinate officer to dismiss a servant only subject to conditions; a subordinate officer functioning under an Act may not be able to dismiss a servant, but the Governor may be able to do so under similar circumstances; a subordi nate officer may dismiss a servant, but the Governor may order his continuance in office. This argument is based upon the misapprehension of the scope of article 309 of the Constitution. A law made by the appropriate Legislature or the rules made by the President or the Governor, as the case may be, under the said Article may confer a power upon a particular authority to remove a public servant from service; but the conferment of such a power does not amount to a delegation of the Governor 's pleasure. Whatever the said authority does is by virtue of express power conferred on it by a statute or rules made by competent authorities and not by virtue of any delegation by the Governor of his power. There cannot be conflict between the exercise of the Governor 's pleasure under article 310 and that of an authority under a statute, for the statutory power would be always subject to the overriding pleasure of the Governor. This conclusion, the argument proceeds, would throw a public servant in India to the mercy of the executive Government while their compeers in England 700 can be protected by legislation against arbitrary actions of the State. This apprehension has no real .basis, for, unlike in England, a member of the public service in India is constitutionally protected at least in two directions: (i) he cannot be dismissed by an authority subordinate to that by which he was appointed; (ii) he cannot be dismissed, removed or reduced in rank until he has been given a reasonable opportunity of showing cause against the action proposed to be taken in regard to him. A condition similar to the first condition in article 311 found in section 96 B of the Government of India Act, 1919, was hold by the Judicial Committee in R. T. Bangachari vs Secretary of State for India (1) to have a statutory force, and the second condition, which is only a reproduction of that found in sub section (2) of section 240 of the Government of India Act, 1935, was held in High Commissioner for India and High Commissioner for Pakistan vs I. M. Lall (2) as mandatory qualifying the right of the employer recognized in sub section (1) thereof. These two statutory protections to the Government servant are now incorporated in article 311 of the Constitution. This Article imposes two qualifications on the exercise of the pleasure of the President or the Governor and they quite clearly restrict the operation of the rule embodied in article 310(1) vide the observations of Das, C.J., in Dhingra 's case (3). The most important of these two limitations is the provision prescribing that a civil servant shall be given a reasonable opportunity of showing cause against the action proposed to be taken in regard to him. As this condition is a limitation on the "tenure at pleasure", a law can certainly be made by Parliament defining the content of "reasonable opportunity" and prescribing the procedure for giving the said opportunity. The appropriate High Court and the Supreme Court can test the validity of such a law on the basis whe ther the provisions prescribed provide for such an opportunity, and, if it is valid, to ascertain whether the reasonable opportunity so prescribed is really given to a particular officer. It may be that the (1) (1936) L.R. 64 I.A. 40. (2) (1948) L.R. 75 1.A. 225. (3) ; , 839. 701 framers of the Constitution, having incorporated in our Constitution the "tenure at pleasure" unhampered by legislative interference, thought that the said limitations and qualifications would reasonably protect the interests of the civil servants against arbitrary actions. The discussion yields the following results: (1) In India every person who is a member of a public service described in article 310 of the Constitution holds office during the pleasure of the President or the Governor, as the case may be, subject to the express provisions therein. (2) The power to dismiss a public servant at pleasure is outside the scope of article 154 and, therefore, cannot be delegated by the Governor to a subordinate officer, and can be exercised by him only in the manner prescribed by the Constitution. (3) This tenure is subject to the limitations or qualifications mentioned in article 311 of the, Constitution. (4) The Parliament or the Legislatures of States cannot make a law abrogating or modifying this tenure so as to impinge upon the overriding power conferred upon the President or the Governor under article 310, as qualified by article 311. (5) The Parliament or the Legislatures of States can make a law regulating the conditions of service of such a member which includes proceedings by way of disciplinary action, without affecting the powers of the President or the Governor under article 310 of the Constitution read with article 311 thereof. (6) The Parliament and the Legislatures also can make a law laying down and regulating the scope and content of the doctrine of "reasonable opportunity" embodied in article 311 of the Constitution; but the said law would be subject to judicial review. (7) If a statute could be made by Legislatures within the foregoing permissible limits, the rules made by an authority in exercise of the power conferred thereunder would likewise be efficacious within the said limits. What then is the effect of the said propositions in their application to the provisions of the and the rules made thereunder? The of 89 702 1861 continues to be good law under the Constitution. Paragraph 477 of the Police Regulations shows that the rules in Chapter XXXII thereof have been framed under section 7 of the . Presumably, they were also made by the Government in exercise of its power under section 46(2) of the . Under para. 479(a) the Governor 's power of punishment with reference to all officers is preserved; that is to say, this provision expressly saves the power of the Governor under article 310 of the Constitution. "Rules made under a statute must be treated for all purposes of construction or obligation exactly as if they were in the Act and are to be of the same effect as if contained in the Act, and are to be judicially noticed for all purposes of construction or obligation": see Maxwell "On the Interpretation of Statutes", 10th edn., pp. 5051. The statutory rules cannot be described as, or equated with, administrative directions. If so, the and the rules made thereunder constitute a self contained code providing for ' the appointment. of police officers and prescribing the procedure for their removal. It follows that where the appropriate authority takes disciplinary action under the or the rules made thereunder, it must conform to the provisions of the statute or the rules which have conferred upon it the power to take the said action. If there is any violation of the said provisions, subject to the question which we will presently consider whether the rules are directory or mandatory, the public servant would have a right to challenge the decision of that authority. Learned counsel for the appellants relied upon the following decisions of the Privy Council and this Court in support of his contention that the said rules are administrative directions: R. T. Rangachari vs Secretary of State for India (1), R. Venkata Rao vs Secretary of State for India (2), High Commissioner for India and High Commissioner for Pakistan vs I. M. Lall (3), section A. Venkataraman vs The Union of India(4), and Khem Chand vs The Union of India(5). In Venkata Rao 's (1) (1936) L.R. 64 I.A. 40. (3) (1948) L.R. 75 I.A. 225. (2) (1936) L.R. 64 I.A. 55. (4) ; (5) ; 703 case (1) a reader of the Government Press was dismissed and in the suit filed by him against the Secretary, of State for India he complained, inter alia, that the dismissal was contrary to the statute inasmuch as it was not preceded by any such inquiry as was prescribed by rule XIV of the Civil Services Classification Rules made under section 96B(2) of the Government of India Act. Under section 96B of the said Act, every person in civil service holds office during the pleasure of His Majesty. Sub section (2) of that section empowers the Secretary of State for India to make rules laying down, among others, the conditions of service, and sub section (5) declares that no rules so made shall be construed to limit or abridge the power of the Secretary of State in Council to deal with the case of any person in the civil service of the Crown in India in such manner as may appear to him to be just and equitable. On a construction of these provisions the Judicial Committee held that His Majesty 's pleasure was paramount and could not legally be controlled or limited by the rules. Two reasons were given for the conclusion, namely, (i) section 96B in express terms stated that the office was held during the pleasure and there was no room for the implication of a contractual term that the rules were to be observed; and (ii) sub section (2) of section 96B and the rules made careful provisions for redress of grievances by administrative process and that sub section (5) reaffirmed the superior authority of the Secretary of State in Council over the civil service. It may be noticed that the rules framed in exercise of the power conferred by the Act was to regulate the exercise of His Majesty 's pleasure. The observations were presumably coloured by the doctrine of "tenure at pleasure" obtaining in England, namely, that it could only be modified by statute, influenced by the princi ple that the rules made under a statute shall be consistent with its provisions and, what is more, based upon a construction of the express provisions of the Act. These observations cannot, in our opinion, be taken out of their context and applied to the provisions of our Constitution and the Acts of our Legislatures in derogation of the well settled principles of (1) (1936) L. R. 64 I. A. 55. 704 statutory construction. In Bangachari 's case (1) a police officer was dismissed by an authority subordinate to that by which he had been appointed. The appeal was heard along with that in Venkata Rao 's case (2) and the judgments in both the appeals were delivered on the same day. The Judicial Committee distinguished Venkata Rao 's case (2) with the following observations at p. 53: "It is manifest that the stipulation or proviso as to dismissal is itself of statutory force and stands on a footing quite other than any matters of rule which are of infinite variety and can be changed from time to time. " These observations do not carry the matter further an our remarks made in connection with Venkata Rao 's case (2) would equally apply to this case. I.M. Lall 's case (3) turns upon sub section (3) of section 240 of the Government of India Act, 1935. Again the Judicial Committee made a distinction between the rules and the provisions of the Act and ruled that sub sections (2) and (3) of section 240 indicated a qualification or exception to the antecedent provisions in sub section (1) of section 240. This decision only adopted the reasoning in the earlier decision. The remarks made by us in connection with Venkata Rao 's case (2) would equally apply to this decision. This Court in section A. Venkataraman 's case (4) incidentally noticed the observations of the Judicial Committee in Venkata Rao 's case (2) and observed that the rules, which were not incorporated in a statute, did not impose any legal restriction upon the right of the Crown to dismiss its servants at pleasure. This Court was not laying down any general proposition, but was only stating the gist of the reasoning in Venkata Rao 's case (2). Das, C.J., if we may say so, correctly stated the scope of the rule in Venkata Rao 's case (2) in the decision in Khem Chand 's case (5), when he stated at p. 1091 "The position of the Government servant was, therefore, rather insecure, for his office being held during the pleasure of the Crown under the Government of India Act, 1915, the rules could not override (1) (1936) L.R. 64 I.A. 40. (3) (1948) L.R. 75 I.A. 225. (2) (1936) L.R. 64 I.A. 55. (4) ; (5) ; 705 or derogate from the statute and the protection of the rules could not be enforced by action so as to nullify the statute itself." To state it differently, the Government of India Act, 1915, as amended in 1919, and that of 1935 expressly and clearly laid down that the tenure was at pleasure and therefore the rules framed under that Act must be consistent with the Act and not in derogation of it. These decisions and the observations made therein could not be understood to mark a radical departure from the fundamental principle of construction that rules made under a statute must be treated as exactly as if they were in the Act and are of the same effect as if contained in the Act. There is another principle equally fundamental to the rules of construction, namely, that the rules shall be consistent with the provisions of the Act. The decisions of the Judicial Committee on the provisions of the earlier Constitution Acts can be sustained on the ground that the rules made in exercise of power conferred under the Acts cannot override or modify the tenure at pleasure provided by section 96B or section 240 of the said Acts, as the case may be. Therefore, when the paramountcy of the doctrine was conceded or declared by the statute, there might have been justification for sustaining the rules made under that statute in derogation thereof on the ground that they were only administrative directions, for otherwise the rules would have to be struck down as inconsistent with the Act. In such a situation, if the statute was valid it would be valid in so far as it did not derogate from the provisions of article 310, read with article 311 the rules made thereunder would be as efficacious as the Act itself. So long as the statute and the rules made thereunder do not affect the power of the Governor in the present case the Governor 's pleasure is expressly preserved they should be legally enforceable. In this context the decisions of the different High Courts in India are cited at the Bar. It would not serve any purpose to consider every one of them in detail. It would suffice if their general trend be noticed. They express two divergent views: one line relies upon the observations 706 of the Privy Council in Venkata Rao 's case (1) and lays down that all statutory rules vis a vis the disciplinary proceedings taken against a Government servant are administrative directions, and the other applies the well settled rules of construction and holds that the appropriate authority is bound to comply with the mandatory provisions of the rules in making an inquiry under a particular statute. A close scrutiny of some of the decisions discloses a distinction implied, though not expressed, between statutory rules defining the scope of reasonable opportunity and those governing other procedural steps in the disciplinary process. In our view, subject to the overriding power of the President or the Governor under article 310, as qualified by the provisions of article 311, the rules governing disciplinary proceedings cannot be treated as administrative directions, but shall have the same effect as the provisions of the statute whereunder they are made, in so far a, , they are not inconsistent with the provisions thereof We have already negatived the contention of learned counsel that the Governor exercises his pleasure through the officers specified in section 7 of the , and therefore, it is not possible to equate the Governor 's pleasure with that of the specified officers ' statutory power. If so, it follows that the inquiry under the Act shall be made in accordance with its provisions and the rules made thereunder. Then learned counsel contends that even if the said rules have statutory force, they are only directory and the non compliance with the rules will not invalidate the order of dismissal made by the appropriate authority. Before we consider the principles governing the question whether the rules are mandatory or directory, it would be convenient at this stage to notice broadly the scope and the purpose of the inquiry contemplated by the rules. Section 2 of the constitutes the police establishment; section 7 empowers specified officers to (1) [1936] L.R. 64 I.A. 55. 707 punish specified subordinate officers who are remiss or negligent in discharge of their duties or unfit for the same; section 46 enables the Government to make rules. to regulate the procedure to be followed by the magistrate and police officers in discharge of any duty imposed on them by or under the Act; under section 7, read with section 46 of the , the Police Regulations embodied in chapter XXXII were framed. Paragraph 477 of the Regulations says that the rules in that chapter have been made under section 7 of the and apply only to officers appointed under section 2 of the and that no officer appointed under that section shall be punished by executive order otherwise than in the manner provided in that chapter. Paragraph 478 prescribes the nature of the punishment that can be imposed on the delinquent officers. Paragraph 479 empowers specified officers to punish specified subordinate officers. Paragraph 483 gives the procedure to be followed in the matter of the inquiry against a police officer. It reads: "Subject to the special provision contained in paragraph 500 and to any special orders which may be passed by the Governor in particular cases a proceeding against a police officer will consist of A A magisterial or police inquiry, followed, if this inquiry shows the need for further action, by B A judicial trial, or C A departmental trial, or both, consecutively." Paragraph 484 declares that the nature of the inquiry in any particular case will vary according to the nature of the offence. If the offence is cognizable or non cognizable, the inquiry will be according to Schedule II of the Criminal Procedure Code. If the information is received by the District Magistrate, he may in exercise of his powers under the Criminal Procedure Code either, (1) make or order a magisterial inquiry; or (2) order an investigation by the Police. Paragraph 485 reads: "When a magisterial inquiry is ordered it will be made in accordance with the Criminal Procedure Code and the Superintendent of Police will have no direct 708 concern with it until the conclusion of judicial proceedings or until and unless the case is referred to him for further disposal, but he must give any assistance to the inquiring magistrate that he may legally be called upon to give and he must suspend the accused should this become necessary under paragraph 496." Paragraph 486 says that there can be no magisterial inquiry under the Criminal Procedure Code when the offence alleged against a police officer amounts to an offence only under section 7 of the , and it provides further that in such cases, and in, other cases until and unless a magisterial inquiry is ordered, inquiry will be made under the direction of the Superintendent of Police in accordance with the rules given thereunder. Under rule I thereof, "Every information received by the police relating to the commission of a cognizable offence by a police officer shall be dealt with in the first place under Chapter XIV, Criminal Procedure Code, according to law, a case under the appropriate section being registered in the police station concerned". There are six provisos to that rule. Rule II provides for the inquiry of a non cognizable offence; and rule III prescribes the procedure in regard to an offence only under section 7 of the or a non cognizable offence of which the Superintendent of Police considers unnecessary at that stage to forward a report in writing to the District Magistrate. Paragraph 488 deals with a judicial trial and para. 489 with a departmental trial. Paragraph 489 says: "A police officer may be departmentally tried under section 7 of the (1) after he has been tried judicially; (2) after a magisterial inquiry under the Criminal Procedure Code; (3) after a police investigation under the Criminal Procedure Code or a departmental enquiry under paragraph 486,III above. " There are other provisions dealing with the manner of conducting the inquiries and other connected matters. The rules provide for the magisterial and police inquiry followed, if the inquiry showed the need for further action, by a judicial trial or a departmental 709 trial, or both, consecutively. In the case of cognizable offences the Superintendent of Police is directed to investigate under chapter XIV of the Criminal Pro p, cedure Code and in the case of non cognizable offences in the manner provided in rule II of para. 486, and in the case of an offence only under section 7 of the or a non cognizable offence in the manner provided under rule III of para. After one or other of the relevant procedure is followed, the Superintendent of Police is empowered to try a police officer departmentally. The question is whether rule I of para. 486 is directory. The relevant rule says that the police officer shall be tried in the first place under chapter XIV of the Criminal Procedure Code. The word "shall" in its ordinary import is "obligatory"; but there are many decisions wherein the courts under different situations construed the word to mean "may". This Court in Hari Vishnu Kamath vs Syed Ahmad Ishaque (1) dealt with this problem at p. 1125 thus: "It is well established that an enactment in form mandatory might in substance be directory and that the use of the word "shall" does not conclude the matter. " It is then observed: "They (the rules) are well known, and there is no need to repeat them. But they are all of them only aids for ascertaining the true intention of the legislature which is the determining factor, and that must ultimately depend on the context. " The following quotation from Crawford "On the Construction of Statutes", at p. 516, is also helpful in this connection: "The question as to whether a statute is mandatory or directory depends upon the intent of the legislature and not upon the language in which the intent is clothed. The meaning and intention of the legislature must govern, and these are to be ascertained, not only from the phraseology of the provision, but also by considering its nature, its design, and the (1) ; 90 710 consequences which would follow from construing it the one way or the other. " This passage was approved by this Court in State of U. P. vs Manbodhan Lal Srivastava (1). In Craies on Statute Law, 5th edition, the following passage appears at p. 242: "No universal rule can be laid down as to whether mandatory enactments shall be considered directory only or obligatory with an implied nullification for disobedience. It is the duty of Courts of Justice to try to get at the real intention of the Legislature by carefully attending to the whole scope of the statute to be construed. " A valuable guide for ascertaining the intention of the Legislature is found in Maxwell on "The Interpretation of Statutes", 10th edition, at p. 381 and it is: "On the other hand, where the prescriptions of a statute relate to the performance of a public duty and where the invalidation of acts done in neglect of them would work serious general inconvenience or injustice to persons who have no control over those entrusted with the duty without promoting the essential aims of the legislature, such prescriptions seem to be generally understood as mere instructions for the guidance and government of those on whom the duty is imposed, or, in other words, as directory only. The neglect of them may be penal, indeed, but it does not affect the validity of the act done in disregard of them. " This passage was accepted by the Judicial Committee of the Privy Council in the case of Montreal Street Railway Company vs Normandin (2 ) and by this Court in State of U. P. vs Manbodhan Lal Srivastava (1). The relevant rules of interpretation may be briefly stated thus: When a statute uses the word "shall", prima facie, it is mandatory, but the Court may ascertain the real intention of the legislature by carefully attending to the whole scope of the statute. For ascertaining the real intention of the Legislature the Court may consider, inter alia, the nature and the design of the statute, and the consequences which (1) ; , 545. (2) L.R. [1917] A.C.770. 711 would follow from construing it the one way or the other, the impact of other provisions whereby the necessity of complying with the provisions in question is avoided, the circumstance, namely, that the statute provides for a contingency of the non compliance with the provisions, the fact that the non compliance with the provisions is or is not visited by some penalty, the serious or trivial consequences that flow therefrom, and, above all, whether the object of the legislation will be defeated or furthered. Now what is the object of rule I of para. 486 of the Police Regulations? In our opinion, it is conceived not only to enable the Superintendent of Police to gather information but also to protect the interests of subordinate officers against whom departmental trial is sought to be held. After making the necessary investigation under chapter XIV of the Criminal Procedure Code, the Superintendent of Police may as well come to the conclusion that the officer concerned is innocent, and on that basis drop the entire proceedings. He may also hold that it is a fit case for criminal prosecution, which, under certain circumstances, an honest officer against whom false charges are framed may prefer to face than to submit himself to a departmental trial. Therefore,the rules are conceived in the interest of the department as well as the officer. From the stand point of the department as well as the officer against whom departmental inquiry is sought to be intiated, the preliminary inquiry is very important and it serves a real purpose. Here the setting aside of the order of dismissal will not affect the public in general and the only consequence will be that the officer will have to be proceeded against in the manner prescribed by the rules. What is more, para. 487 and para. 489 make it abundantly clear that the police investigation under the Criminal Procedure Code is a condition precedent for the departmental trial. Paragraph 477 emphasizes that no officer appointed under section 2 of the shall be punished by executive order otherwise than in the manner provided under chapter XXXII of the Police Regulations. This is an imperative injunction prohibiting 712 inquiry in non compliance with the rules. Paragraph 489 only empowers the holding of a departmental trial in regard to a police officer only after a police investigation under the Criminal Procedure Code. When a rule says that a departmental trial can be held only after a police investigation, it is not permissible to hold that it can be held without such investigation. For all the foregoing reasons, we hold that para. 486 is mandatory and that, as the investigation has not been held under chapter XIV of the Criminal Procedure Code, the subsequent inquiry and the order of dismissal are illegal. For the foregoing reasons we hold that, as the respondent was dismissed without complying with the provisions of para. 486(1), the order of dismissal is illegal and that the High Court is right in setting aside the order of dismissal. In the result, the appeal fails and is dismissed with costs. WANCHOO, J. We regret we are unable to agree that the appeal be dismissed. Babu Ram Upadhya (respondent) was a sub inspector of police who was appointed in December, 1948. In 1953, he was posted at Sitapur. On September 6, 1953, he was returning from a village called Madhwapur, when he saw a man who was subsequently found to be Tika Ram coming from the side of a canal and going hurriedly into a field. The movements of Tika Ram roused his suspicion. One Lalji, an ex patwari, was also with the sub inspector. Tika Ram was called and searched, and a bundle containing currencynotes was found on him. The sub inspector took the bundle and counted the notes and handed them over to Lalji. Lalji in his turn handed over the notes to Tika Ram. Thereafter Tika Ram, who is an old man, almost blind, went away. When he reached his house, he found that there was a shortage of Rs. 250. He then made a complaint to the Superintendent of Police on September 9, 1953, in which he gave the above facts. An inquiry was made by the Superintendent of Police and ultimately, departmental proceedings under section 7 of the were taken 713 against the respondent. These proceedings resulted in his dismissal and thereupon the respondent applied to the High Court under article 226 of the Constitution. The main contention of the respondent was that r. 486 of the Police Regulations framed under section 7 of the was not observed and therefore the departmental proceedings taken against him were illegal. The reply of the appellant was two fold: in the first place, it was urged that r. 486 did not apply as there was no report of a cognizable offence against the sub inspector; and in the next place, it was urged that the rules contained in the Police Regulations were only administrative rules and even if there was non compliance with any of them, it would not affect the departmental proceedings taken against the respondent, provided there was no breach of the guarantees contained in article 311 of the Constitution. The High Court held that there was a report of a cognizable offence under section 409 of the Indian Penal Code against the respondent and therefore the procedure provided by r. 486 ought to have been followed. It further held that r. 486 had been framed under section 7 of the and was a statutory provision, which had the force of law. As such, following the earlier view taken by the High Court in two other cases it held that a dismissal as a result of departmental proceedings which took place without complying with r. 486 would be illegal. In consequence, the writ petition was allowed. The appellant then applied for a certificate to enable it to appeal to this Court, which was refused. Thereupon special leave was prayed for from this Court, which was granted; and that is how the matter has come up before us. Mr. C. B. Aggarwala on behalf of the appellant urges the same two points before us. So far as the first point is concerned, we are of opinion that there is no force in it. There is no doubt that in the complaint made by Tika Ram, the name of the respondent was not shown in the heading; but from the facts disclosed in the body of the complaint it is clear that the sub inspector searched the person of Tika Ram and recovered a bundle containing currency notes. He 714 did so obviously under the authority vested in him as a police officer. When therefore he was satisfied that there was no reason to take any further action against Tika Ram, it was his duty to see that the entire amount taken by him from Tika Ram on search was returned to him (Tika Ram). The High Court was right in the view that where property is taken away with the intention that it will continue to be the property of the person from whose possession it has been taken away, there will be an entrustment of the property to the person taking it away, and if. subsequently the person taking it away converts it to his own use or suffers some other person to do so, there will be criminal breach of trust and not merely criminal misappropriation. Thus an offence under section 409 of the Indian Penal Code appears to have been committed prima facie on the facts of this case. As an offence under section 409 is a cognizable offence, r. 486 of the Police Regulations would apply. This brings us to the main point in the present appeal. Sec. 7 of the under which r. 486 has been framed is in these terms: "Subject to such rules as the State Government may from time to time make under this Act, the Inspector General, Deputy Inspectors General, Assistant Inspectors General and District Superintendents of Police may at any time dismiss, suspend or reduce any police officer of the subordinate ranks whom they shall think remiss or negligent in the discharge of his duty or unfit for the same; or may award any one or more, of the following punishments to any police officer of the subordinate ranks, who shall discharge his duty in a careless or negligent manner, or who, by any act of his own shall render himself unfit for the discharge thereof, name (a) fine to any amount not exceeding one month 's pay; (b) confinement to quarters for a term not exceeding fifteen days, with or without punishment, drill, extra guard, fatigue or other duty; (c) deprivation of good conduct pay; 715 (d) removal from any office of distinction or special emolument;". It gives power to four grades of police officers to dismiss, suspend or reduce any police officer of the subordinate ranks whom they think remiss or negligent in the discharge of his duty or unfit for the same. It also provides for infliction of four other kinds of punishment by these four grades of officers on any police officer of the subordinate ranks who discharges his duty in a careless or negligent manner or who by any act of his own renders himself unfit for the discharge thereof. In the present case we are concerned with dismissal and what we shall say hereafter should be taken to be confined to a case of dismissal. Sec tion 7 shows that the power of dismissal conferred by it on the four grades of police officers is to be exercised subject to such rules as the State Government may from time to time make under the . The contention on behalf of the respondent is that the power of dismissal has to be exercised subject to rules and therefore, when r. 486 of the Police Regulations (framed under section 7) provided a certain procedure to be followed with respect to cases in which a cognizable offence was involved it was not open to the authority concerned to disregard that procedure. In effect, it is urged that r. 486 is a mandatory provision and non compliance with it would invalidate the departmental proceedings. It is not in dispute in this case that the procedure provided by r. 486 was not followed. That procedural provision is that where a report of a cognizable crime is made against a police officer belonging to the subordinate ranks, it has to be registered as provided in Chapter XIV of the Code of Criminal Procedure and investigated as provided thereunder. Thereafter the authority concerned has to decide whether to send the case for trial before a court of law or to take departmental proceedings. In this case no report was registered as provided under Chapter XIV of the Code of Criminal Procedure and no investigation was made as provided in that Chapter. All that happened was that the Superintendent of Police to whom Tika Ram had complained inquired into the 716 complaint of Tika Ram and thereafter decided to hold a departmental inquiry under section 7 of the against the respondent. The main contention on behalf of the appellant is that the Rules framed under section 7 of the are administrative rules and in any case they are only directory and non compliance with them would not vitiate the subsequent proceedings unless there is a breach of the guarantee contained in article 311 of the Constitution, as all public servants hold their office at the pleasure of the President or the Governor, as the case may be, other than those expressly excepted under the Constitution. Reliance in this connection is placed on the case of R. Venkata Rao vs Secretary of State for India in Council (1). This brings us to a consideration of the tenure on which public servants hold office. The position in England is that all public servants hold office at the pleasure of His Majesty, that is to say, their service was terminable at any time without amuse: (see Shenton vs Smith (2 )). By law, however, it is open to Parliament to prescribe a different tenure and the King being a party to every Act of Parliament is understood to have accepted the change in the tenure when he gives assent to such law: (see Gould vs Stuart (3)). This principle applied in India also before the Government of India Act, 1915, was amended by the addition of section 96 B therein. Section 96 B for the first time provided by statute that every person in the civil service of the Crown held office during His Majesty 's pleasure, subject to the provisions of the Government of India Act and the rules made thereunder and the only protection to a public servant against the exercise of pleasure was that he could not be dismissed by any authority subordinate to that by which he was appointed. It was this section, which came for consideration before the Privy Council in Venkata Rao 's case (1) and the Privy Council held that in spite of the words ".subject to the rules made under the Government of India Act," Venkata Rao 's employment was not of a (1) (1936) L.R. 64 I.A. 55 (2) (3) 717 limited and special kind during pleasure with an added contractual term that the procedure prescribed, by the Rules must be observed; it was by the express terms of section 96 B held "during His Majesty 's pleasure" and no right of action as claimed by Venkata Rao existed. The Privy Council further held that the terms of section 96 B assured that the tenure of office, though at pleasure, would not be subject to capricious or arbitrary action but would be regulated by the rules which were manifold in number, most minute in particularity and all capable of change; but there was no right in the public servant enforceable by action to hold his office in accordance with those rules and he could therefore be dismissed notwithstanding the failure to observe the procedure prescribed by them. The main point which was urged in Venkata Rao 's case (1) was that under r. XIV of the Civil Services Classification Rules no public servant could be dismissed, removed or reduced in rank except after a properly recorded departmental inquiry. In Venkata Rao 's case (1) the departmental inquiry prescribed by the rules was found not to have been held. Even so, the Privy Council held that the words used in section 96 B could not and did not cut down the pleasure of His Majesty by rules though it was observed that the terms of the section contained a statutory and solemn assurance, that the tenure of office, though at pleasure., would not be subject to capricious or arbitrary, action, but would be regulated by rule. It was further added that supreme care should be taken that this assurance is carried out in the letter and in the spirit. The Privy Council further held that in ' the case before it, there had been a serious and complete failure to adhere to important and indeed fundamental rules, and mistakes of a serious kind had been made and wrongs had been done which called for redress; even so; they were of the view that as a matter of law that redress was not obtainable from courts by action. ,. This was the position under the Government of India Act 1915. There was however a material change in the Government of India Act, 1935. So far, there (1) (1936) L.R. 64 I. A. 55. 91 718 was one protection to a public servant, namely, that he could not be dismissed by an authority subordinate to that by which he was appointed. In the Government of India Act, 1935, section 240(1) laid down that " except as expressly provided by this Act, every person who is a member of a civil service of the Crown in India. holds office during His Majesty 's pleasure. " The words of this section are different from those of section 96 B and the tenure of all public servants other than those expressly provided for was to be during His Majesty 's pleasure. There were, however, two safeguards provided by sub sections (2) and (3) of section 240. The first was the same (namely, that no public servant will be dismissed by an officer subordinate to that who appointed him); but a further exception was added to the pleasure tenure, namely, no public servant shall be dismissed until he has been given a reasonable opportunity of showing cause against the action proposed to be taken in regard to him. This protection came to be considered by the Privy Council in High Commissioner for India and High Commissioner for Pakistan vs 1. M. Lall (1) and it was held that it was a mandatory provision and qualified the pleasure tenure and provided a condition precedent to the exercise of power by His Majesty provided by sub section (1) of section 240. Thus by the Government of India Act, 1935, there were two statutory guarantees to public servants against the exercise of the pleasure of his Majesty; but it is clear from section 240 of the Government of India Act, 1935, that the pleasure of His Majesty to dismiss was not otherwise subject to rules framed under the subsequent provisions of the Government of India Act appearing in Chapter 11 of Part X dealing with public services. This position continued till we come to the Constitution. Article 310(1) of the Constitution provides for what was contained in section 240(1) of the Government of India Act, 1935, and is in these terms: "(1) Except as expressly provided by this Constitution, every person who is a member of a defence (1) (1948) L.R. 75 I.A. 225. 719 service or of a civil service of the Union or of an all India service or holds any post connected with defence, or any civil post under the Union, holds office during the pleasure of the President, and every person who is a member of a civil service of a State or holds any civil post under a State holds office during the pleasure of the Governor of the State. " It will be clear therefore that all public servants except as expressly provided by the Constitution hold their office during the pleasure of the President or the Governor, as the case may be. Article 311 then provides for two guarantees and is similar in terms to section 240(2) and (3) of the Government of India Act, 1935 and the two guarantees are the same, (namely, (i) that no person shall be dismissed or removed by an authority subordinate to that by which he was appointed, and (ii) no such person shall be dismissed or removed or reduced in rank until he has been given a reason able opportunity of showing cause against the action proposed to be taken in regard to him). In Parshotam Lal Dhingra vs Union of India (1), this Court held that article 311 was in the nature of a proviso to article 310, that it provides two constitutional guarantees cutting down the pleasure of the President or the Governor, as the case may be, and that it was a mandatory provision which had to be complied with before the pleasure provided in article 310 can be exercised. Mr. Pathak for the respondent urges that in view of the words of article 310 statute or statutory rules can also cut down the nature of the pleasure tenure provided by article 310 in the same way as in England an Act of Parliament cuts down the ambit of His Majesty 's pleasure in the matter of dismissal. He relies on the words "as expressly provided by this Constitution" and urges that it is open to the legisla ture to cut down the pleasure tenure by law or to provide for its being affected by statutory rules. In this connection he relies on article 309 as well as article 154 of the Constitution. Now, article 309 begins with the words "subject to the provisions of this Constitution" land lays down that "Acts of the appropriate Legislature may regulate the recruitment, and conditions of (1) ; 720 service of person appointed, to public services and posts in connection with the affairs of the Union or of any State". The proviso to article 309 lays down that "it shall be competent for the President or the Governor as the case may be to make rules relating to recruitment and conditions of service until provision in that behalf is made by or under an Act of the appropriate Legislature". It will be clear immediately that article 309 is subject to the provisions of the Constitution and therefore subject to article 310 and therefore, any law passed or rules framed under article 309 must be subject to article 310 and cannot in any way affect the pleasure tenure laid down in article 310. The words "except as expressly provided by this Constitution" appearing in article 310 clearly show that the only exceptions to the pleasure tenure are those expressly contained in the Constitution and no more. These exceptions, for example, are contained inter alia in articles 124. 148, 280 and 324 and also in article 310 (2). Therefore, unless there is an express provision in the Constitution cutting down the pleasure tenure, every public servant holds office during the pleasure of the President or the Governor, as the case may be. We cannot accept the argument that a law passed under article 309 prescribing conditions of service would become an express provision of the Constitution and would thus cut down the pleasure tenure contained in article 310. As the Privy Council pointed in Venkata Rao 's case (1), the rules framed under article 309 or the laws passed thereunder amount to a statutory and solemn assurance that the tenure of office though at pleasure will not be subject to capricious or arbitrary action but will be regulated by rule. But if the rules or the law define the content of the guarantee contained in article 311 (2) they may to that extent be mandatory but only because they carry out the guarantee contained in article 311 (2). Excepting this, any law or rule framed under article 309 cannot cut down the pleasure tenure as provided in article 310. The same in our opinion applies to a law passed under article 154 (2)(b) which authorises Parliament or the legislature of a State to confer functions on any (1) (1936) L.R. 64 I.A. 55. 721 authority subordinate to the Governor. If any law is passed conferring on any authority the power to dismiss or remove or reduce in rank, that law cannot cut down the content of the pleasure tenure as contained in article 310; that law would be passed under article 245 and that article also begins with the words "subject to the provisions of this Constitution". Therefore, the law passed under article 154 (2) (b) would also in the same way as the law under article 309 be subject to the pleasure tenure contained in article 310 and cannot cut down the content of that tenure or impose any further fetters on it except those contained in article 311. The position therefore that emerges from the examination of the relevant Articles of the Constitution is that all public servants other than those who are excepted expressly by the provisions of the Constitution hold office during the pleasure of the President or the Governor, as the case may be, and that no law or rule passed or framed under article 309 or article 154 (2) (b) can cut down the content of the pleasure tenure as contained in article 310 subject to article 311. With this basic position in our Constitution, let us turn to the with which we are concerned. Section 7 thereof lays down that four grades of officers will have power to dismiss, suspend or reduce any police officer of the subordinate ranks subject to such rules as the State Government may from time to time make under the . Though the is a pre constitutional law which has continued under article 372 of the Constitution, it cannot in our opinion stand higher than a law passed under article 309 or article 154 (2) (b) and out down the content of the pleasure tenure as contained in article 310. The police officers of the subordinate ranks are not expressly excluded from the operation of the pleasure tenure by any provision of the Constitution; they, therefore, hold office during the pleasure of the Governor and the only protection that they can claim are the two guarantees contained in article 311. It is true that section 7 lays down that the four grades of officers empowered to dismiss will act according to rules framed by the State Government; but that does not in our opinion mean that 722 these rules could introduce any further fetter on the pleasure tenure under which the police officers of the subordinate ranks are in service. It was necessary to provide for the framing of rules because the section envisages conferment of, powers of punishment of various kinds on four grades of officers relating to various cadres of police officers in the subordinate ranks. It was left to the rules to provide which four grades of officers would dismiss police officers of which subordinate rank or would give which punishment to a police officer of which subordinate rank. Such rules would in our opinion be mandatory as they go to the root of the jurisdiction of the four grades of police officers empowered to act under section 7. But further rules may be framed under section 7 to guide these police officers how to act when they proceed to dismiss or inflict any other punishment on police officers of the subordinate ranks. These rules of procedure, however, cannot all be mandatory, for if they were so they would be putting further fetters than those provided in article 311 on the pleasure of the Governor to dismiss a public servant. of course, if any of the rules framed under section 7 carry out the purposes of article 311(2), to that extent they will be mandatory and in that sense their contravention would in substance amount to contravention of article 311 itself. If this were not so, it would be possible to forge further fetters on the pleasure of the Governor to dismiss a public servant and this in the light of what we have said above is clearly not possible in view of the provisions of the Constitution. On the other hand, it will not be possible by means of rules framed under section 7 to take away the guarantee provided by article 311(1), which lays down that no public servant shall be dismissed by an authority subordinate to that by which he was appointed. If any rule under section 7, for example, lays down otherwise it will clearly be ultra vires in view of article 311(1). The rules therefore that are framed under section 7 would thus be of two kinds, namely (1) those which define the jurisdiction of four grades of officers to inflict a particular kind of punishment on a particular police officer of the subordinate rank they will be mandatory 723 for they go to the root of the jurisdiction of the officer exercising the power, but even these rules cannot go against the provisions of article 31 1 (1); and (2) procedural rules, which again may be of two kinds. Some of them may prescribe the manner in which the guarantee contained in article 311 (2) may be carried out and if there are any such rules they will be mandatory. The rest will be merely procedural and can only be directory as otherwise if they are also mandatory further fetters on the power of the Governor to dismiss at his pleasure contained in article 310 would be forged and this is not permissible under the Constitution. It is from this angle that we shall have to consider 486. Before, however, we come to r. 486 itself, we may dispose of another argument, namely, that the four grades of officers who have the power to dismiss under section 7 are exercising the statutory authority vested in them and are not exercising the Governor 's pleasure of dismissal under article 310 and therefore their action in dismissing an officer is subject to all the rules framed for their guidance. We are of opinion that this argument is fallacious. Article 310 defines the pleasure tenure and by necessary implication gives power to the Governor to dismiss at pleasure any public servant subject to the exceptions contained in article 310 and also subject to the guarantees contained in article 311. This power of the Governor to dismiss is executive power of the State and can be exercised under article 154(1) by the Governor himself directly or indirectly through officers subordinate to him. Thus it is open to the Governor to delegate his power of dismissal to officers subordinate to him; but even when those officers exercise the power of dismissal, the Governor is indirectly exercising it through those to whom he has delegated it and it is still the pleasure of the Governor to dismiss, which is being exercised by the subordinate officers to whom it may be delegated. Further though the Governor may delegate his executive power of dismissal at pleasure to subordinate officers he still retains in himself the power to dismiss at pleasure if he thinks fit in a particular case in spite 724 of the delegation. There can be no question that where a delegation is made, the authority making the delegation retains in itself what has been delegated. Therefore, even where a subordinate officer is exercising the power to dismiss he is indirectly exercising the power of the Governor to dismiss at pleasure and so his power of dismissal can only be subject to the same limitations to which the power of the Governor would be subject if he exercised it directly. But it is said that in the present case the power has not been delegated by the Governor under article 154(1) and that it had been conferred on those police officers by law. In our opinion, that makes no difference to the nature of the power, which is being exercised by these four grades of officers under the . As we have already said article 154(2)(b) gives power to Parliament or the legislature of a State by law to confer functions on any authority subordinate to the Governor. When the function of dismissal is conferred by law on any authority subordinate to the Governor it is nothing more than delegation of the Governor 's executive power to dismiss at pleasure by means of law and stands in no better position than a delegation by the Governor himself under article 154(1). Whether it is delegation by the Governor himself or whether it is delegation by law under article 154(2)(b) or by an existing law, which must be treated as analogous to a law under article 154(2)(b), the officer exercising the power of dismissal is only indirectly exercising, the Governor 's power to dismiss at pleasure and his order of dismissal has the same effect as the order of the Governor to dismiss at pleasure. Therefore, his order also is only subject to the two fetters provided in article 311 of the Constitution and cannot be subjected to any more fetters by procedural rules other than those framed for carrying out the object of article 311(2). Therefore, when the four grades of officers proceed to dismiss any police officer of the subordinate rank under section 7 of the , they are merely exercising. the power of the Governor to dismiss at pleasure indirectly; and the only fetters that can be placed on that power are those contained in the Constitution, namely, article 311. 725 We may in this connection refer once again to the case of Venkata Rao (1) where the dismissal was by an, officer subordinate to the Governor of Madras; but ' that dismissal was also held to be an indirect exercise I of His Majesty 's pleasure to dismiss, and that is why it was held that if r. XIV of the Classification Rules was not complied with, a public servant had no right of action against an order dismissing him at His Majesty 's pleasure. Therefore, whenever a subordinate officer exercises the power to dismiss, whether that power is delegated by the Governor, or is delegated under a law made under article 154(2)(b) or under an existing law analogous to that, he is merely exercising indirectly the power of the Governor to dismiss at pleasure and his action is subject only to the two guarantees contained in article 311. The fact therefore that the police officer in this case made the order of dismissal by virtue of section 7 will make no difference and he will be deemed to be exercising the power of the Governor to dismiss at pleasure by delegation to him by law of that power. We may add that even where there is delegation by law of the power of the Governor to dismiss at pleasure, the power of the Governor himself to act directly and dismiss at pleasure cannot be taken away by that law, for that power he derives from article 310 of the Constitution. The present case therefore must be judged on the same basis as any case of dismissal directly by the Governor and would only be subject to the two limitations contained in article 311. We now come to r. 486. This rule, as we have already indicated, provides that if there is any complaint of the commission of any cognizable crime by a police officer, it must be registered in the relevant police station, under Chapter XIV of the Code of Criminal Procedure and investigated in the manner provided by that Chapter. After the investigation is complete, it is open to the authority concerned, be it the Superintendent of Police or the District Magistrate, to decide whether to proceed in a court of law (1) (1936) L.R. 64 I.A. 55. 92 726 or to hold a departmental inquiry or do both, though in the last case the departmental inquiry must take place only after the judicial trial is over. The first question then that arises is whether r. 486 is meant to carry out the purpose of article 311(2). As we read r. 486, we cannot see that it is meant for that purpose; it only provides for a police investigation under Chapter XIV of the Code of Criminal Procedure. The police officer making an investigation under Chapter XIV is not bound to examine the person against whom he is investigating, though there is nothing to prevent him from doing so. Nor is the person against whom an investigation is going on under Chapter XIV bound to make a statement to the police officer. In these circumstances, the purpose of an investigation under Chapter XIV is not relevant under article 311(2) which says that a public servant shall not be dismissed without giving him a reasonable opportunity of showing cause against the action proposed to be taken in regard to him. Therefore, r. 486 not being meant for the purpose of carrying out the object of article 311 (2) cannot be mandatory and cannot add a further fetter on the exercise of the power to dismiss or remove at the pleasure of the Governor over and above the guarantees contained in article 311. It appears to us that the object of r. 486 is that the authority concerned should first make a preliminary inquiry to find out if there is a case against the officer complained against either to proceed in a court or to take departmental action. The investigation prescribed by r. 486 is only for this purpose. Incidentally it may be that after such an investigation, the authority concerned may come to the conclusion that there in no case either ' to send the case to court or to hold a departmental inquiry. But that in our opinion is what would happen in any case of complaint against a public servant in any department of Government. No authority entitled to take action against a public servant would straightaway proceed to put the case in court or to hold a departmental inquiry. It seems to us axiomatic if a complaint is received against any public servant of any department, that the authority 727 concerned would first always make some kind of a preliminary inquiry to satisfy itself whether there is any case for taking action at all; but that is in our opinion for the satisfaction of the authority and has nothing to do with the protection afforded to a public servant under article 311. Rule 486 of the Police Regulations also in our opinion is meant for this purpose only and not meant to carry out the object contained in article 311(2). The opportunity envisaged by article 311(2) will be given to the public servant after the the authority has satisfied itself by preliminary inquiry that there is a case for taking action. Therefore, r. 486 which is only meant to gather materials for the satisfaction of the authority concerned, whether to take action or not, even though a statutory rule cannot be considered to be mandatory as that would be forging a further fetter than those contained in article 311 on the power of the Governor to dismiss at pleasure. We are therefore of opinion that r. 486 is only directory and failure to comply with it strictly or otherwise will not vitiate the subsequent proceedings. We may incidentally indicate two further aspects of the matter. In the first place, if the argument is that the Governor must exercise the pleasure himself so that only the two limitations provided in article 311 may come into play; it appears that the Governor has exercised his pleasure in this case inasmuch as he dismissed the revisional application made to him by the respondent. There appears no reason to hold that the Governor exercises his pleasure only when he passes the original order of dismissal but not otherwise. Secondly the fact that r. 486 contains the word "shall" is not decisive on the point that it is mandatory: (see Crawford on Statutory Construction, p. 519, para. 262). In view of what we have said already, the context shows that r. 486 can only be directory. If so, failure to observe it strictly or otherwise will not invalidate the subsequent departmental proceedings. This brings us to the last point which has been urged in this case; and that is whether there was substantial compliance with r. 486. We have already 728 pointed out that there was no strict compliance with r. 486 as no case wag registered on the complaint of Tika Ram and no investigation was made under Chapter XIV of the Code of Criminal Procedure. But there is no doubt in this case that before the Superintendent of Police gave the charge sheet to the respondent in November, 1953, which was the beginning of the departmental proceedings against the respondent, he made a preliminary inquiry into the complaint of Tika Ram and was satisfied that there was a case for proceeding against the respondent departmentally. In these circumstances it appears to us that the spirit of r. 486 was substantially complied with and action was only taken against the respondent when on a preliminary inquiry the Superintendent of Police was satisfied that departmental action was necessary. Even if r. 486 had been strictly complied with, this is all that could have happened. In these circumstances we are of opinion that r. 486 which in our opinion is directory was substantially complied with in spirit and therefore the subsequent departmental proceedings cannot be held to be illegal, simply because there was no strict compliance with r. 486. The High Court therefore in our opinion was wrong in holding that the subsequent departmental inquiry was illegal and its order quashing the order of dismissal on this ground alone cannot be sustained. We would therefore allow the appeal. BY COURT In accordance with the opinion of the majority, this appeal is dismissed with costs.

IN-Abs

The respondent was a sub Inspector of Police. A complaint was received by the Superintendent of Police that the com plainant was carrying currency notes of Rs. 650 in a bundle when he was stopped by the respondent and his person was searched, that the respondent opened the bundle of notes and handed over the notes one by one to one Lalji, who was with him and that Lalji returned the notes to him but on reaching home he found the notes short by Rs. 250. Proceedings under section 7 of the Police Act were taken against the respondent on the charge of misappropriation of Rs. 250 and he was dismissed from service by an order of the Deputy Inspector General of Police. The respondent filed a writ petition before the High Court challenging the order of the dismissal on the ground that the authorities had acted in violation of Rule I of Para. 486 of the U. P. Police Regulation. This rule required that every information received by the police relating to the commission of a cognizable offence by a Police Officer shall be dealt with in the first place under Ch. XIV, Code of Criminal Procedure. The High Court held that the provisions of para. 486 of the Police Regulations had not been observed and that the proceedings taken under section 7 of the Police Act were invalid and illegal and accordingly quashed the order of dismissal. The appellant contended (i) that the complaint did not make out any cognizable offence against the respondent and r. I of Para. 486 was not applicable in this case, (ii) that r. III of Para. 486 enabled the authorities to initiate departmental proceedings without complying with the provisions of r. I, (iii) that the Police Regulations made in exercise of the power conferred on the Government under the Police Act delegating the power of the Governor to dismiss at pleasure to a subordinate officer were only administrative directions for the exercise of the pleasure in a reasonable manner and any breach of the regulations did not confer any right or give a cause of action to the public servant, and (iv) that the regulations were only directory and the non compliance with the rules did not invalidate the order of dismissal. 680 Held, (per Sarkar, Subba Rao and Mudholkar, JJ.) that the order of dismissal was illegal as it was based upon an enquiry held in violation of r. I of Para 486 of the Police Regulations. The facts alleged in the complaint made out a cognizable offence under section 405 Indian Penal Code against the respondent, and the provisions of r. I of Para . 486 were applicable to it. A Police Officer making a search of a person was 'entrusted ' with the money handed over by the person searched. Rule III of Para. 486 did not deal with cognizable offences, it dealt with offences falling only under section 7 Police Act and to non cognizable offences. Rule III did not provide an alternative procedure to that prescribed under r. I. The position with regard to the tenure of public servants and to the taking of disciplinary action against them under the present Constitution was as follows: (i) Every person who was a member of a public service described in article 310 of the Constitution held office during the pleasure of the President or the Governor. (ii) The power to dismiss a public servant at pleasure was outside the scope of article I54 and, therefore, could not be delegated by the Governor to a subordinate officer, and could be exercised by him only in the manner prescribed by the Constitution. (iii) This tenure was subject to the limitations or qualifi cations mentioned in article 311. (iv )Parliament or the Legislature of States could not make a law abrogating or modifying this tenure so as to impinge upon the overriding power conferred upon the President or the Governor under article 310, as qualified by article 311. (v) Parliament or the Legislatures of States could make a law regulating the conditions of service of such a member which included proceedings by way of disciplinary action, without affecting the powers of the President or the Governor under article 310 read with article 311. (vi) Parliament and the Legislatures also could makea law laying down and regulating the scope and content of the doctrine of "reasonable opportunity" embodied in article 311 but the said law was subject to judicial review. (vii) If a statute could be made by Legislatures within the foregoing permissible limits, the rules made by an authority in exercise of the power conferred thereunder would likewise be efficacious within the said limits. N. W. F. Province vs Suraj Narain, A.I.R. 1949 P. C. 112, Shenton vs Smith, , Gould vs Stuart, , Reilly vs The King, , Terrell vs Secretary of State, , State of Bihar vs Abdul Majid; , , Parshotam Lal Dhingra vs Union of India, , R. T. Rangachari vs Secretary of State for India, (1936) L.R. 64 I.A. 40 and High Commissioner for India and High Commissioner for Pakistan vs I. M. Lall, (1948) L.R. 75 I.A. 225, referred to. The Police Act and the rules made thereunder constituted a self contained code providing for the appointment of police officers and prescribing the procedure for their removal. Any authority taking action under the Police Act or the rules made thereunder must conform to the provisions thereof and if there was any violation of those provisions the public servant had a right to challenge the order of the authority if the rules were mandatory Paragraph 486 of the Police Regulations was mandatory and not directory. The rules were made in the interests of both the department and the police officers. The word used in para 486 was "shall" and in the context it could not be read as "may". Hari Vishnu Kamath vs Syed Ahmed Ishaque, , State of U. P. vs Manbodhan Lal Srivastava, [1958] S.C.R. 533 and Montreal Street Railway Company v Noymandin, L.R. ; , referred to. Subject to the overriding power of the President or the Governor under article 310, as qualified by article 311, rules governing disciplinary proceeding could not be treated as administrative directions, but had the same effect as the provisions of the statute whereunder they were made, in so far as they were not inconsistent with the provisions thereof. The Governor did not exercise his pleasure through the officers specified in section 7 of the Police Act, and the Governor 's pleasure. could not be equated with the statutory power of the officers specified An inquiry under the Act had to be made in accordance with the provisions of the Act and the rules made thereunder. R. T. Rangachari vs Secretary of State for India, L.R. 64 I.A. 40, High Commissioner for India and High Commissioner for Pakistan vs I. M. Lall, (1948) L.R. 75 I.A. 225, R. Venkata Rao vs Secretary of State for India, (1936) L.R. 64 I.A. 55, section A. Venkataraman V. Union of India, [1954] S.C.R. 1150 and Khem Chand vs The Union of India, [1958] S.C.R. 1080, referred to. Per Gajendragadkar and Wanchoo, JJ. The provisions of para 486 were merely directory and a non compliance therewith did not invalidate the disciplinary action taken against the respondent. All public servants, other than those excepted expressly by the Constitution, held office during the pleasure of the President or the Governor, and no law or rule framed under article 300 or article I54(2)(b) could cut down the content of the pleasure tenure in article 310 subject to article 31i. The Police Act could not stand higher than a law passed under article 309 or article 154(2)(b) and could not cut down the content of the pleasure tenure in article 310 682 The Police officers held office during the pleasure of the Governor and the only protection they could claim was the two guarantees contained in article 311. The rules framed under section 7 Police Act would be of two kinds, namely (1) those which defined the jurisdiction of the four grades of officers specified in section 7 to inflict particular kind of punishment on particular police officers of the subordinate ranks such rules would be mandatory but they could not go against the provisions of article 311, and (2) procedural rules. The procedural rules could be of two kinds: (i) those that prescribed the manner in which the guarantee contained in article 311(2) May be carried out such rules would be mandatory, and (ii) other merely procedural rules they could only be directory. The power of the Governor to dismiss was executive power of the State and could be exercised under article 154(i) by the Governor himself directly or indirectly through officers subordinate to him. The officers specified in section 7 of the Police Act were exercising the powers of the Governor to dismiss at pleasure and their powers were subject to the same limitations to which the Governor was subject. Whether it was delegation by the Governor himself or whether it was delegation by law under article 154(2)(b) or by the existing law, which must be treated as analogous to a law under article 154(2)(b), the officer exercising the power of dismissal was only indirectly exercising the Governor 's power to dismiss at pleasure. His order also was subject to the two fetters under article 311 and could not be subjected to any more fetters by procedural rules other than those framed for carrying out the objects of article 311(2). R. Venkata Rao vs Secretary of State for India in Council, [1936] 64 I.A. 55, referred to. Paragraph 486 was not meant for the purpose of carrying out the object of article 311(2) and could not be mandatory and could not add a further fetter on the exercise of the power to dismiss at the pleasure of the Governor over and above the fetters contained in article 311. This rule was only meant to gather materials for the satisfaction of the authority concerned, whether to take action or not. As such para 486 was merely directory and a failure to comply therewith strictly or otherwise did not vitiate the disciplinary action.

Appeal No. 419 of 1958. Appeal by special leave from the judgment and order dated August 20, 1957, of the Calcutta High a Court in Income tax Reference No. 1 of 1956. Hardyal Hardy and D. Gupta, for the appellant. N. C. Chatterjee, Dipak Choudhri and B. N. Ghosh, for the respondent. November 28. The Judgment of the Court was delivered by KAPUR, J. This is an appeal by special leave against the judgment and order of the High Court of Judicature at Calcutta in a reference made by the Income tax Appellate Tribunal under section 66(1) of the Income tax Act. The following question was referred: "Whether in the facts and circumstances of this case, the Appellate Tribunal was right in holding that Rs. 61,818 spent by the assessee to train Indian boys as jockeys, did not constitute expenses of the business of the assessee allowable under section 10(2)(xv)?" which was answered in favour of the respondent. The Commissioner is the appellant before us and the assessee is the respondent. The respondent is an association of persons whose business is to hold race meetings in Calcutta on a commercial basis. It holds two series of race meetings during the two seasons of the year. The respondent does not own any horses and therefore does not employ jockeys but they are employed by owners and trainers of horses which are run in the races. It is a matter of some importance to the respondent that there should be jockeys available to the owners with sufficient skill and experience because the success of races to a considerable extent depends upon the experience and skill of a jockey who rides a horse in a race. Because it was of the opinion that there was a risk of the jockeys becoming unavailable and that such unavailability would seriously affect its business which might result in its closing 731 down the business, the respondent considered it expedient to remedy that defect. Therefore in 1948, it, established a school for the training of Indian boys as jockeys so that after their training they might be available for purposes of race meetings held under its auspices. The school, however, did not prove a success and after having been in existence for three years it was closed down. During the year ending March 31, 1949, the respondent spent a sum of Rs. 62,818 on the running of its school and claimed that amount as a deduction under section 10(2)(xv) of the Income tax Act and also in the assessment under the Business Profits Tax for the chargeable accounting period ending March 31, 1949. This claim was disallowed by the Income Tax Officer and on appeal by Appellate Assistant Commissioner and also by the Income tax Appellate Tribunal. At the instancc of the respondent the question already quoted was referred to the High Court and was answered in favour of the respondent. This appeal is brought by special leave against that judgment. The decision under the Business Profits Tax Act will be consequential upon the decision of the deduction under the Income tax Act. The Tribunal found that it was not the business of the respondent to provide jockeys to owners and trainers, that the jockeys trained in the respondent 's school were not bound to ride only in the races run by the respondent and that the benefit, if any, which accrued was of an enduring nature. It also found that the respondent had been conducting race meetings since long, that it was not the case of the assessee that if it did not train jockeys they would become unavailable and that the mere policy of producing efficient Indian jockeys was not a sufficient consideration for treating the expenditure as one incurred for the business of the respondent. For these reasons the expenditure was disallowed. Before the Appellate Assistant Commissioner, it was contended by the respondent, that the reason for incurring the expenditure was "to promote efficient Indian jockeys" and it was in the interest of the respondent to see that the races are not abandoned on 732 account of the scarcity of jockeys. In the order of the Tribunal it is stated that this was not the case of the respondent, and therefore when the respondent wanted paragraph 5 of the statement to be substituted by the following: "It was the case of the assessee that unless it trained Indian Jockeys, time may come when there may not be sufficient number of trained jockeys to ride horses in the races conducted by the assessee. " the Tribunal did not agree to do so. Counsel for the appellant raised three points before us; (1) The question as to whether an item of expenditure is wholly and exclusively laid out for the purposes of business or not is a question of fact; (2) the connection between an expenditure and profit earning of the assessee should be direct and substantial and not remote and (3) to be admissible as revenue expenditure it should not be in the nature of a capital expense, i.e., it should not bring into existence an asset of an enduring nature. As to the first question this court has held in Eastern Investments Ltd. vs Commissioner of Income tax, West Bengal (1) that "though the question must be decided on the facts of each case, the final conclusion is one of law". In Commissioner of Income Tax vs Chandulal Keshavlal & Co. (2), this Court said: "Another test is whether the transaction is properly entered into as a part of the assessee 's legitimate commercial undertaking in order to facilitate the carrying on of its business; and it is immaterial that a third party also benefits thereby. (Eastern Investment Ltd. vs Commissioner of Income Tax, (1951) 20 I.T.R. 1). But in every case it is a question of fact whether the expenditure was expended wholly and exclusively for the purpose of trade or business of the assessee. In the present case the finding is that it was laid out for the purpose of the assessee 's business and there is evidence to support this finding." But those observations must be read in the context. In that case the assessee firm was the Managing Agent of a Company and at the request of the Directors of (1) ; , 598. (2) , 610. 733 the latter agreed to accept a lesser commission for the year of account than it was entitled to. It was found, by the Appellate Tribunal there that the amount was expended for reasons of commercial expediency and was not given as a bounty but to strengthen the managed company so that if its financial position became strong the assessee would benefit thereby, and an the evidence the Tribunal came to the conclusion that the amount was wholly and exclusively for the purpose of such business. It was on this evidence that the expense was held to be wholly and exclusively laid out for the purpose of the assessee 's business and this was the finding referred to. In that case the Tribunal had not misdirected itself as to the true scope and meaning of the words "wholly and exclusively laid out for the purpose of the assessee 's business". In the present case the Income tax Appellate Tribunal had misdirected itself as to the true scope and meaning of these words. In our opinion, in the circumstances of this case, it cannot be said that the finding of the Tribunal was one of fact. The question as to whether the expenses of running the school for jockeys is deductible has to be decided taking into consideration the circumstances of this case. The business of the respondent was to run race meetings on a commercial scale for which it is necessary to have races of as high an order as possible. For the popularity of the races run by the respondent and to make its business profitable it was necessary that there were jockeys of requisite skill and experience in sufficient numbers who would be available to the owners and trainers because without such efficient jockeys the running of race meetings would not be commercially profitable. It was for this purpose that the respondent started the school for training Indian jockeys. , If there were not sufficient number of efficient Indian jockeys to ride horses its interest would have suffered, and it might have had to abandon its business if it did not take steps to make jockeys of the necessary calibre available. Therefore any expenditure which was incurred for preventing the extinction 93 734 of the respondent 's business would, in our opinion, be expenditure wholly and exclusively laid out for the purpose of the business of the assessee and would be an allowable deduction. This finds support from decided cases. In Commissioner of Income tax vs Chandulal Keshavlal & Co. (1), this Court held that in order to justify a deduction the disbursement must be for reasons of commercial expediency; it may be voluntary but incurred for the assessee 's business; and if the expense is incurred for the purpose of the business of the assessee it does not matter that the payment also enures to the benefit of a third party. Another test laid down was that if the transaction is properly entered into as a part of the assessee 's legitimate commercial undertaking in order to facilitate the carrying on of its business it is immaterial that a third party also benefits thereby. In British Insulated and Helsby Cables vs Atherton (2), Viscount Cave L. C. held that a Bum of money expended, not of necessity and with a view to a direct and immediate benefit to the trade, but voluntarily and on the ground of commercial expediency and in order indirectly to facilitate the carrving on of the business may yet be expended wholly and exclusively for the purpose of the trade. In a case more recently decided Morgan vs Tate & Lyle Ltd. (3) the assessee company was engaged in sugar refining business and it incurred expenses in a propaganda campaign to oppose the threatened nationalisation of the industry. It was held by the House of Lords by a majority that the object of the expenditure being to preserve the assets of the company from seizure and so to enable it to carry on its business and earning profits, the expense was an admissible deduction being wholly and exclusively laid out for the purpose of the company 's trade. Lord Morton of Henryton said: "Looking simply at the words of the rule I would ask:"If money so spent is not spent for the purpose of the company 's trade, for what purpose is it spent?" If the assets are seized, the company can no longer (1) , 610. (2) (3) 735 carry on the trade which has been carried on by the use of these assets. Thus the money is spent to preserve the very existence of the company 's trade". See also Strong & Co. vs Woodifield(1), the observations of Lord Davey; and Smith vs Incorporated Council of Law Reporting (2). Counsel for the appellant relied upon the judgment of the Privy Council in Ward & Co. Ltd. vs Commissioner of Taxes (3 ), but that decision proceeds on a different statute where the words were of a very restrictive character, the words being: ". . . . Expenditure or loss of any kind not exclusively incurred in the production of the assessable income derived from that source. . . This case was distinguished in Morgan vs Tate & Lyle(4) on the ground that the language of the Now Zealand statute was much narrower than the language of r. 3A in England. Reference was also made by the appellant to Boarland vs Kramat Pulai Ltd. (5). In that case Directors of three Companies engaged in tin mining in Malaya incurred expenditure on printing. and circulating to shareholders a pamphlet containing remarks of the Chairman of the Company. The pamphlet was an attack on the policy and acts of the Socialist Government and it was held that the question whether the money was wholly and exclusively laid out or expended for the purpose of trade within the meaning of rules applicable to the question was one of law but on a consideration of the question it was held that the expenditure was not solely incurred with that object. It is not necessary to discuss that case at any length because what was held in that case was that the pamphlet was not wholly and exclusively for the purpose of the company 's trade. Applying the law, as laid down in those cases, to the present case the conclusion is that the amount in dispute was laid out wholly and exclusively for the purpose of the respondent 's business because if the (1) ; (2) [19I4] 3 K.B. 674. (3) [1923] A.C 145. (4) (5) 736 supply of jockeys of efficiency and skill failed the business of the respondent would no longer be possible. Thus the money was spent for the preservation of the respondent 's business. As to the third point there is no substance in the submission that the expenditure was in the nature of a capital expense because no asset of enduring nature was being created by this expense. In our opinion the High Court has rightly held that the expenditure claimed was one which was wholly and exclusively laid out for the purpose of the respondent 's business. It was to prevent the threatened extinction of the business of the respondent. In the result this appeal is dismissed with costs. Appeal dismissed.

IN-Abs

The business of the respondent club was to run race meetings on a commercial scale. The club did not own any horse, and therefore did not employ jockeys. it was a matter of some importance to the club that there were jockeys of requisite skill and experience in sufficient numbers who would be available to the owners and trainers because otherwise the running of the race meetings would not be commercially profitable and its interest would suffer and it might have had to abandon its business if it did not take steps to make jockeys of the necessary calibre available. Therefore it established a school for the training of Indian boys as jockeys and claimed the sums spent on the running of the school as deductable amount under section 10 (2)(XV) of the Indian Income Tax Act. The question was whether in the circumstances of the case the expenditure claimed was one which was wholly and exclusively laid out for the purpose of the respondent 's business. Held, that any expenditure which was incurred for preventing the extinction of a business would be expenditure wholly and exclusively laid opt for the purpose of the business of the assessee and would be an allowable deduction. In the instant case the amount in dispute was laid out wholly and exclusively for the purpose of the respondent 's business, because if the supply of jockeys of requisite efficiency and skill failed, the business of the respondent would no longer be possible. Eastern Investments Ltd. vs Commissioner of Income tax, West Bengal, ; and Commissioner of Income tax vs Chandulal Keshavlal & Co., ; relied on, British Insulated and Helsby Cables vs Atherton, [1926] A. C. 205, Morgan vs Tate & Lyle Ltd., and Boarland vs Kramat Pulai Ltd., , discussed. Strong & Co. vs Woodifield, ; and Smith vs Incorporated Council of Law Reporting, , referred to. Ward & Co. Ltd. vs Commissioner of Taxes, [1923] A. C. 145, distinguished.

Appeal No. 517 of 1958. Appeal from the judgment and order dated October 31, 1957, of the Kerala High Court in O. P. No. 215 of 1957. G. B. Pai and Sardar Bahadur, for the appellant. Hardyal Hardy and D. Gupta, for the respondents. November 29. The Judgment of the Court was delivered by SHAH, J. C. A. Abraham hereinafter referred to as the appellant and one M. P. Thomas carried on business in food grains in partnership in the name and style of M. P. Thomas & Company at Kottayam. M. P. Thomas died on October 11, 1949. For the account years 1123, 1124 and 1125 M.E. corresponding to August 1947 July 1948, August 1948 July 1949 and August 1949 July 1950, the appellant submitted as a partner returns of the income of the firm as an unregistered firm. In the course of the assessment proceedings, it was discovered that the firm had carried on transactions in different commodities in fictitious names and had failed to disclose substantial income earned therein. By order dated November 29, 1954, the Income Tax Officer assessed the suppressed income of the firm in respect of the assessment year 1124 M.E. under the Travancore Income Tax Act and in respect of assessment years 1949 50 and 1950 51 under the Indian Income Tax Act and on the same day issued notices under section 28 of the Indian Income Tax Act in respect of the years 1949 50 and 1950 51 and 767 under section 41 of the Travancore Income Tax Act for the year 1124 M.E., requiring the firm to show cause why penalty should not be imposed. These notices were served upon the appellant. The Income Tax Officer after considering the explanation of the appellant imposed penalty upon the firm, of Rs. 5,000 in respect of the year 1124 M. E., Rs. 2,O00 in respect of the year 1950 51 and Rs. 22,000 in respect of the year 1951 52. Appeals against the orders passed by the Income Tax Officer were dismissed by the Appellate Assistant Commissioner. The appellant then applied to the High Court of Judicature of Kerala praying for a writ of certiorari quashing the orders of assessment and imposition of penalty. It was claimed by the appellant inter alia that after the dissolution of the firm by the death of M. P. Thomas in October, 1949, no order imposing a penalty could be passed against the firm. The High Court rejected the application following the judgment of the Andhra Pradesh High Court in Mareddi Krishna Reddy vs Income Tax Officer, Tenali (1). Against the order dismissing the petition, this appeal is preferred with certificate of the High Court. In our view the petition filed by the appellant should not have been entertained. The Income Tax Act provides a complete machinery for assessment of tax and imposition of penalty and for obtaining relief in respect of any improper orders passed 'by the Income Tax authorities, and the appellant could not be permitted to abandon resort to that machinery and to invoke the jurisdiction of the High Court under article 226 of the Constitution when he had adequate remedy open to him by an appeal to the Tribunal. But the High Court did entertain the petition and has also granted leave to the appellant to appeal to this court. The petition having been entertained and leave having been granted, we do not think that we will be justified at this stage in dismissing the appeal in limine. On the merits, the appellant is not entitled to relief. The Income Tax Officer found that the appellant had, with a view to evade payment of tax, (1) 768 deliberately concealed material particulars of his income. Even though the firm was carrying on transactions in food grains in diverse names, no entries in respect of those transactions in the books of account were posted and false credit entries of loans alleged to have been borrowed from several persons were made. The conditions prescribed by section 28(1)(c) for imposing penalty were therefore fulfilled. But says the appellant, the assessee firm had ceased to exist on the death of M. P. Thomas, and in the absence of a provision in the Indian Income Tax Act whereby liability to pay penalty may be imposed after dissolution against the firm under section 28(1)(c) of the Act, the order was illegal. Section 44 of the Act at the material time stood as follows: "Where any business,. carried on by a firm. has been discontinued . every person who was at the time of such discontinuance . a partner of such firm,. shall in respect of the income, profits and gain of the firm be jointly and severally liable to assessment under Chapter IV for the amount of tax payable and all the provisions of Chapter IV shall, so far as may be, apply to any such assessment. " That the business of the firm was discontinued because of the dissolution of the partnership is not disputed. It is urged however that a proceeding for imposition of penalty and a proceeding for assessment of income tax are matters distinct, and section 44 may be resorted to for assessing tax due and payable by a firm business whereof has been discontinued, but an order imposing penalty under section 28 of the Act cannot by virtue of section 44 be passed. Section 44 sets up machinery for assessing the tax liability of firms which have discontinued their business and provides for three consequences, (1) that on the discontinuance of the business of a firm, every person who was at the time of its discontinuance a partner is liable in respect of income, profits and gains of the firm to be assessed jointly and severally, (2) each partner is liable to pay the amount of tax payable by the firm, and (3) that the provisions of Chapter, so far as may be, apply to such assessment. The liability declared by section 44 is 769 undoubtedly to assessment under Chapter IV, but the expression "assessment" used therein does not merely mean computation of income. The expression "assessment" as has often been said is used in the Income Tax Act with different connotations. In Commissioner of Income Tax, Bombay Presidency & Aden vs Khemchand Ramdas (1), the Judicial Committee of the Privy Council observed: "One of the peculiarities of most Income tax Acts is that the word "assessment" is used as meaning sometimes the computation of income, sometimes the determination of the amount of tax payable and sometimes the whole procedure laid down in the Act for imposing liability upon the tax payer. The Indian Income tax Act is no exception in this respect. . ". A review of the provisions of Chapter IV of the Act sufficiently discloses that the word "assessment" has been used in its widest connotation in that chapter. The title of the chapter is "Deductions and Assessment". The section which deals with assessment merely as computation of income is section 23; but several sections deal not with computation of income, but determination of liability, machinery for imposing liability and the procedure in that behalf. Section 18A deals with advance payment of tax and imposition of penalties for failure to carry out the provisions there in. Section 23A deals with power to assess individual members of certain companies on the income deemed to have been distributed as dividend, section 23B deals with assessment in case of departure from taxable territories, section 24B deals with collection of tax out of the estate of deceased persons; section 25 deals with assessment in case of discontinued business, section 25A with assessment after partition of Hindu Undivided families and sections 29, 31, 33 and 35 deal with the issue of demand notices and the filing of appeals and for reviewing assessment and section 34 deals with assessment of incomes which have escaped assessment. The expression "assessment" used in these sections is not used merely in the sense of computation of income and there is in our judgment no ground for holding (1) 770 that when by section 44, it is declared that the partners or members of the association shall be jointly and severally liable to assessment, it is only intended to declare the liability to computation of income under section 23 and not to the application of the procedure for declaration and imposition of tax liability and the machinery for enforcement thereof. Nor has the expression, "all the provisions of Chapter IV shall so far as may be apply to such assessment" a restricted content: in terms it says that all the provisions of Chapter IV shall apply so far as may be to assessment of firms which have discontinued their business. By section 28, the liability to pay additional tax which is designated penalty is imposed in view of the dishonest contumacious conduct of the assessee. It is true that this liability arises only if the Income tax Officer is satisfied about the existence of the conditions which give him jurisdiction and the quantum thereof depends upon the circumstances of the case. The penalty is not uniform and its imposition depends upon the exercise of discretion by the Taxing authorities; but it is imposed as a part of the machinery for assessment of tax liability. The use of the expression "so far as may be" in the last clause of section 44 also does not restrict the application of the provisions of Chapter IV only to those which provide for computation of income. By the use of the expression "so far as may be" it is merely intended to enact that the provisions in Ch. IV which from their nature have no application to firms will not apply thereto by virtue of section 44. In effect, the Legislature has enacted by section 44 that the assessment proceedings may be commenced and continued against a firm of which business is discontinued as if discontinuance has not taken place. It is enacted manifestly with a view to ensure continuity in the application of the machinery provided for assessment and imposition of tax liability notwithstanding discontinuance of the business of firms. By a fiction, the firm is deemed to continue after discontinuance for the purpose of assesment under Chapter IV. The Legislature has expressly enacted that the provisions of Chapter IV shall apply to the assessment of 771 a business carried on by a firm even after discontinuance of its business, and if the process of assessment includes taking steps for imposing penalties, the plea that the Legislature has inadvertently left a lacuna in the Act stands refuted. It is implicit in the contention of the appellant that it is open to the partners of a firm guilty of conduct exposing them to penalty under section 28 to evade penalty by the simple expedient of discontinuing the firm. This plea may be accepted only if the court is compelled, in view of unambiguous language, to hold that such was the intention of the Legislature. Here the language used does not even tend to such an interpretation. In interpreting a fiscal statute, the court cannot proceed to make good deficiencies if there be any: the court must interpret the statute as it stands and in case of doubt in a manner favourable to the tax payer. But where as in the present case, by the use of words capable of comprehensive import, provision is made for imposing liability for penalty upon tax payers guilty of fraud, gross negligence or contumacious conduct, an assumption that the words were used in a restricted sense so as to defeat the avowed object of the Legislature qua a certain class will not be lightly made. Counsel for the appellant relying upon Mahankali Subbarao vs Commissioner of Income Tax (1), in which it was held that an order imposing penalty under section 28(1)(c) of the Indian Income Tax Act upon a Hindu Joint Family after it had disrupted, and the disruption was accepted under section 25A(1) is invalid, because there is a lacuna in the Act, submitted that a similar lacuna exists in the Act in relation to dissolved firms. But whether on the dissolution of a Hindu Joint Family the liability for penalty under section 28 which may be incurred during the subsistence of the family cannot be imposed does not fall for decision in this case: it may be sufficient to observe that the provisions of section 25A and section 44 are not in pari materia. In the absence of any such phraseology in section 25A as is used in section 44, no real analogy between the content of that section and section 44 may be assumed. Undoubtedly, (1) 772 by section 44, the joint and several liability which is declared is liability to assessment in respect of income, profits or gains of a firm which has discontinued its business, but if in the process of assessment of income, profits or gains, any other liability such as payment of penalty or liability to pay penal interest as is provided under section 25, sub section (2) or under section 18A sub sections (4), (6), (7), (8) and (9) is incurred, it may also be imposed, discontinuation of the business notwithstanding. In our view, Chief Justice Subba Rao has correctly stated in Mareddi Krishna Reddy 's case (supra) that: "Section 28 is one of the sections in Chapter IV. It imposes a penalty for the concealment of income or the improper distribution of profits. The defaults made in furnishing a return of the total income, in complying with a notice under sub section (4) of section 22 or sub section (2) of section 23 and in concealing the particulars of income or deliberately furnishing inadequate particulars of such income are penalised under that section. The defaults enumerated therein relate to the process of assessment. Section 28, therefore, is a provision enacted for facilitating the proper assessment of taxable income and can properly be said to apply to an assessment made under Chapter IV. We cannot say that there is a lacuna in section 44 such as that found in section 25A of the Act. We are unable to agree with the view expressed by the Andhra Pradesh High Court in the later Full Bench decision in Commissioner of Income Tax vs Rayalaseema Oil Mills (1), which purported to overrule the judgment in Mareddi Krishna Reddy 's case (supra). We are also unable to agree with the view expressed by the Madras High Court in section V. Veerappan Chettiar vs Commissioner of Income Tax, Madras (2). In the view taken by us, the appeal fails and is dismissed with costs. (1) Appeal dismissed.

IN-Abs

The appellant who was carrying on business in food grains in partnership with another person submitted the returns of the income of the firm for the accounting years even after his partner 's death. It was found that certain income of the firm was concealed and the Income tax Officer not only assessed the firm to tax for the suppressed income but also imposed penalties for concealing the said income. Appeals to the higher income tax authorities failed and the appellant then applied to the High Court for a writ of certiorari quashing the orders of assessment and imposition of penalty on the ground inter alia that the firm was dissolved by his partner 's death and no penalty could be imposed after dissolution of the firm, The High Court rejected the petition. On appeal with the certificate of the High Court, Held, that by virtue of section 44 and other provisions of the Income Tax Act a partner of a dissolved partnership firm may not only be made liable to assessment for income tax for the accounting years but despite dissolution of the firm he may be made liable to pay penalty for concealing the income of the firm under section 28(1)(c) of the Act. The analogy of dissolution of a Hindu joint Family does not apply to dissolution of a partnership. Mareddi Krishna Reddy vs Income tax Officer, Tenali, , approved. Commissioner of Income tax vs Ravalaseema Oil Mills, and section V. Veerappan Chettiar vs Commissioner of Income tax, Madras, , disapproved. Mahankali Subbarao vs Commissioner of Income tax, , distinguished. The Legislature intended that the provisions of Ch. IV of the Act shall apply to a firm even after discontinuance of its business. In interpreting a fiscal statute the Court cannot proceed to make good deficiencies if there be any. In case of doubt it should be interpreted in favour of the tax payer. The expression "assessment" has different connotations an has been used in its widest connotation in Ch. IV and section 44 97 766 he Act. It is not restricted only to computation of tax but includes imposition of penalty on tax payers found in the process of assessment guilty of concealing income. Commissioner of Income tax, Bombay Presidency and Aden vs Khemchand Ramdas, , referred to. The Income tax Act provided a complete machinery for obtaining relief against improper orders passed by the Income tax Authorities and the appellant could not be permitted to abandon that machinery, and invoke the jurisdiction of the High Court under article 226 of the Constitution against the orders of the taxing authorities.

Appeal No. 419 of 1958. Appeal by special leave from the judgment and order dated August 20, 1957, of the Calcutta High a Court in Income tax Reference No. 1 of 1956. Hardyal Hardy and D. Gupta, for the appellant. N. C. Chatterjee, Dipak Choudhri and B. N. Ghosh, for the respondent. November 28. The Judgment of the Court was delivered by KAPUR, J. This is an appeal by special leave against the judgment and order of the High Court of Judicature at Calcutta in a reference made by the Income tax Appellate Tribunal under section 66(1) of the Income tax Act. The following question was referred: "Whether in the facts and circumstances of this case, the Appellate Tribunal was right in holding that Rs. 61,818 spent by the assessee to train Indian boys as jockeys, did not constitute expenses of the business of the assessee allowable under section 10(2)(xv)?" which was answered in favour of the respondent. The Commissioner is the appellant before us and the assessee is the respondent. The respondent is an association of persons whose business is to hold race meetings in Calcutta on a commercial basis. It holds two series of race meetings during the two seasons of the year. The respondent does not own any horses and therefore does not employ jockeys but they are employed by owners and trainers of horses which are run in the races. It is a matter of some importance to the respondent that there should be jockeys available to the owners with sufficient skill and experience because the success of races to a considerable extent depends upon the experience and skill of a jockey who rides a horse in a race. Because it was of the opinion that there was a risk of the jockeys becoming unavailable and that such unavailability would seriously affect its business which might result in its closing 731 down the business, the respondent considered it expedient to remedy that defect. Therefore in 1948, it, established a school for the training of Indian boys as jockeys so that after their training they might be available for purposes of race meetings held under its auspices. The school, however, did not prove a success and after having been in existence for three years it was closed down. During the year ending March 31, 1949, the respondent spent a sum of Rs. 62,818 on the running of its school and claimed that amount as a deduction under section 10(2)(xv) of the Income tax Act and also in the assessment under the Business Profits Tax for the chargeable accounting period ending March 31, 1949. This claim was disallowed by the Income Tax Officer and on appeal by Appellate Assistant Commissioner and also by the Income tax Appellate Tribunal. At the instancc of the respondent the question already quoted was referred to the High Court and was answered in favour of the respondent. This appeal is brought by special leave against that judgment. The decision under the Business Profits Tax Act will be consequential upon the decision of the deduction under the Income tax Act. The Tribunal found that it was not the business of the respondent to provide jockeys to owners and trainers, that the jockeys trained in the respondent 's school were not bound to ride only in the races run by the respondent and that the benefit, if any, which accrued was of an enduring nature. It also found that the respondent had been conducting race meetings since long, that it was not the case of the assessee that if it did not train jockeys they would become unavailable and that the mere policy of producing efficient Indian jockeys was not a sufficient consideration for treating the expenditure as one incurred for the business of the respondent. For these reasons the expenditure was disallowed. Before the Appellate Assistant Commissioner, it was contended by the respondent, that the reason for incurring the expenditure was "to promote efficient Indian jockeys" and it was in the interest of the respondent to see that the races are not abandoned on 732 account of the scarcity of jockeys. In the order of the Tribunal it is stated that this was not the case of the respondent, and therefore when the respondent wanted paragraph 5 of the statement to be substituted by the following: "It was the case of the assessee that unless it trained Indian Jockeys, time may come when there may not be sufficient number of trained jockeys to ride horses in the races conducted by the assessee. " the Tribunal did not agree to do so. Counsel for the appellant raised three points before us; (1) The question as to whether an item of expenditure is wholly and exclusively laid out for the purposes of business or not is a question of fact; (2) the connection between an expenditure and profit earning of the assessee should be direct and substantial and not remote and (3) to be admissible as revenue expenditure it should not be in the nature of a capital expense, i.e., it should not bring into existence an asset of an enduring nature. As to the first question this court has held in Eastern Investments Ltd. vs Commissioner of Income tax, West Bengal (1) that "though the question must be decided on the facts of each case, the final conclusion is one of law". In Commissioner of Income Tax vs Chandulal Keshavlal & Co. (2), this Court said: "Another test is whether the transaction is properly entered into as a part of the assessee 's legitimate commercial undertaking in order to facilitate the carrying on of its business; and it is immaterial that a third party also benefits thereby. (Eastern Investment Ltd. vs Commissioner of Income Tax, (1951) 20 I.T.R. 1). But in every case it is a question of fact whether the expenditure was expended wholly and exclusively for the purpose of trade or business of the assessee. In the present case the finding is that it was laid out for the purpose of the assessee 's business and there is evidence to support this finding." But those observations must be read in the context. In that case the assessee firm was the Managing Agent of a Company and at the request of the Directors of (1) ; , 598. (2) , 610. 733 the latter agreed to accept a lesser commission for the year of account than it was entitled to. It was found, by the Appellate Tribunal there that the amount was expended for reasons of commercial expediency and was not given as a bounty but to strengthen the managed company so that if its financial position became strong the assessee would benefit thereby, and an the evidence the Tribunal came to the conclusion that the amount was wholly and exclusively for the purpose of such business. It was on this evidence that the expense was held to be wholly and exclusively laid out for the purpose of the assessee 's business and this was the finding referred to. In that case the Tribunal had not misdirected itself as to the true scope and meaning of the words "wholly and exclusively laid out for the purpose of the assessee 's business". In the present case the Income tax Appellate Tribunal had misdirected itself as to the true scope and meaning of these words. In our opinion, in the circumstances of this case, it cannot be said that the finding of the Tribunal was one of fact. The question as to whether the expenses of running the school for jockeys is deductible has to be decided taking into consideration the circumstances of this case. The business of the respondent was to run race meetings on a commercial scale for which it is necessary to have races of as high an order as possible. For the popularity of the races run by the respondent and to make its business profitable it was necessary that there were jockeys of requisite skill and experience in sufficient numbers who would be available to the owners and trainers because without such efficient jockeys the running of race meetings would not be commercially profitable. It was for this purpose that the respondent started the school for training Indian jockeys. , If there were not sufficient number of efficient Indian jockeys to ride horses its interest would have suffered, and it might have had to abandon its business if it did not take steps to make jockeys of the necessary calibre available. Therefore any expenditure which was incurred for preventing the extinction 93 734 of the respondent 's business would, in our opinion, be expenditure wholly and exclusively laid out for the purpose of the business of the assessee and would be an allowable deduction. This finds support from decided cases. In Commissioner of Income tax vs Chandulal Keshavlal & Co. (1), this Court held that in order to justify a deduction the disbursement must be for reasons of commercial expediency; it may be voluntary but incurred for the assessee 's business; and if the expense is incurred for the purpose of the business of the assessee it does not matter that the payment also enures to the benefit of a third party. Another test laid down was that if the transaction is properly entered into as a part of the assessee 's legitimate commercial undertaking in order to facilitate the carrying on of its business it is immaterial that a third party also benefits thereby. In British Insulated and Helsby Cables vs Atherton (2), Viscount Cave L. C. held that a Bum of money expended, not of necessity and with a view to a direct and immediate benefit to the trade, but voluntarily and on the ground of commercial expediency and in order indirectly to facilitate the carrving on of the business may yet be expended wholly and exclusively for the purpose of the trade. In a case more recently decided Morgan vs Tate & Lyle Ltd. (3) the assessee company was engaged in sugar refining business and it incurred expenses in a propaganda campaign to oppose the threatened nationalisation of the industry. It was held by the House of Lords by a majority that the object of the expenditure being to preserve the assets of the company from seizure and so to enable it to carry on its business and earning profits, the expense was an admissible deduction being wholly and exclusively laid out for the purpose of the company 's trade. Lord Morton of Henryton said: "Looking simply at the words of the rule I would ask:"If money so spent is not spent for the purpose of the company 's trade, for what purpose is it spent?" If the assets are seized, the company can no longer (1) , 610. (2) (3) 735 carry on the trade which has been carried on by the use of these assets. Thus the money is spent to preserve the very existence of the company 's trade". See also Strong & Co. vs Woodifield(1), the observations of Lord Davey; and Smith vs Incorporated Council of Law Reporting (2). Counsel for the appellant relied upon the judgment of the Privy Council in Ward & Co. Ltd. vs Commissioner of Taxes (3 ), but that decision proceeds on a different statute where the words were of a very restrictive character, the words being: ". . . . Expenditure or loss of any kind not exclusively incurred in the production of the assessable income derived from that source. . . This case was distinguished in Morgan vs Tate & Lyle(4) on the ground that the language of the Now Zealand statute was much narrower than the language of r. 3A in England. Reference was also made by the appellant to Boarland vs Kramat Pulai Ltd. (5). In that case Directors of three Companies engaged in tin mining in Malaya incurred expenditure on printing. and circulating to shareholders a pamphlet containing remarks of the Chairman of the Company. The pamphlet was an attack on the policy and acts of the Socialist Government and it was held that the question whether the money was wholly and exclusively laid out or expended for the purpose of trade within the meaning of rules applicable to the question was one of law but on a consideration of the question it was held that the expenditure was not solely incurred with that object. It is not necessary to discuss that case at any length because what was held in that case was that the pamphlet was not wholly and exclusively for the purpose of the company 's trade. Applying the law, as laid down in those cases, to the present case the conclusion is that the amount in dispute was laid out wholly and exclusively for the purpose of the respondent 's business because if the (1) ; (2) [19I4] 3 K.B. 674. (3) [1923] A.C 145. (4) (5) 736 supply of jockeys of efficiency and skill failed the business of the respondent would no longer be possible. Thus the money was spent for the preservation of the respondent 's business. As to the third point there is no substance in the submission that the expenditure was in the nature of a capital expense because no asset of enduring nature was being created by this expense. In our opinion the High Court has rightly held that the expenditure claimed was one which was wholly and exclusively laid out for the purpose of the respondent 's business. It was to prevent the threatened extinction of the business of the respondent. In the result this appeal is dismissed with costs. Appeal dismissed.

IN-Abs

The business of the respondent club was to run race meetings on a commercial scale. The club did not own any horse, and therefore did not employ jockeys. it was a matter of some importance to the club that there were jockeys of requisite skill and experience in sufficient numbers who would be available to the owners and trainers because otherwise the running of the race meetings would not be commercially profitable and its interest would suffer and it might have had to abandon its business if it did not take steps to make jockeys of the necessary calibre available. Therefore it established a school for the training of Indian boys as jockeys and claimed the sums spent on the running of the school as deductable amount under section 10 (2)(XV) of the Indian Income Tax Act. The question was whether in the circumstances of the case the expenditure claimed was one which was wholly and exclusively laid out for the purpose of the respondent 's business. Held, that any expenditure which was incurred for preventing the extinction of a business would be expenditure wholly and exclusively laid opt for the purpose of the business of the assessee and would be an allowable deduction. In the instant case the amount in dispute was laid out wholly and exclusively for the purpose of the respondent 's business, because if the supply of jockeys of requisite efficiency and skill failed, the business of the respondent would no longer be possible. Eastern Investments Ltd. vs Commissioner of Income tax, West Bengal, ; and Commissioner of Income tax vs Chandulal Keshavlal & Co., ; relied on, British Insulated and Helsby Cables vs Atherton, [1926] A. C. 205, Morgan vs Tate & Lyle Ltd., and Boarland vs Kramat Pulai Ltd., , discussed. Strong & Co. vs Woodifield, ; and Smith vs Incorporated Council of Law Reporting, , referred to. Ward & Co. Ltd. vs Commissioner of Taxes, [1923] A. C. 145, distinguished.

Appeal No. 327 of 1959. Appeal from the order dated June 28, 1956, of the Bombay High Court at Nagpur in Misc. First Appeal No. 15 of 1954. 98 774 A. V. Viswanatha Sastri, Shankar Anand and A. G. Batnaparkhi, for the appellant. K. N. Rajagopal Sastri, as amicus curiae. November 29. The Judgment of the Court was delivered by SHAH, J. Ramachandra Dhondo Datar hereinafter referred to as the respondent was employed by the appellant company in its publications branch. By agreement dated March 23, 1943, the appellant company agreed to pay to the respondent as from April 1, 1943, remuneration per annum equal to 3 1/2% of the gross sales or Rs. 12,000 whichever was greater. The agreement was to remain in operation for ten years from April 1, 1943, in the first instance and was renewable at the option of the respondent for such period as he desired. By notice dated April 19, 1948, served on the respondent on April 22, 1948, the appellant company terminated the employment of the respondent. The respondent then filed a civil suit in the court of the Fifth Additional District Judge, Nagpur, for a decree for Rs. 1,30,000 being the amount of compensation for wrongful termination of employment, arrears of salary and interest. On July 17, 1953, the court after giving credit for the amount received by the respondent passed a decree for Rs. 42,359 (which was inclusive of Rs. 36,000 as compensation for termination of employment and Rs. 6,000 as salary in lieu of six months notice and interest) and costs and interest on judgment. The respondent then applied for execution of the decree and claimed Rs. 54,893 12 0 less Rs. 18,501 10 0 decreed against him in a cross suit filed by the appellant company. The Income Tax Officer, Nagpur, served a notice under section 46 of the Indian Income Tax Act upon the respondent and also gave intimation to the District Judge, Nagpur, that the appellant company be permitted to deduct at source and to pay into the Government Treasury Rs. 15,95613 0 as income tax, surcharge and super tax due on the sum of Rs. 50,972 2 0 awarded to the respondent. The appellant company also applied that the 775 executing Court do declare that the appellant company was entitled and in law bound to deduct the tax due on the amount. The learned Judge directed the appellant company to pay to the Income Tax Department Rs. 15,956 13 0 on account of income tax and super tax on the amount due to the respondent and directed it to pay the balance in court after filing a receipt for payment of tax from the Income Tax department. In appeal to the High Court of Judicature at Nagpur, the order passed by the District Judge was reversed and execution as claimed by the respondent was directed. The appellant company contends that under section 18(2) of the Income Tax Act, it was bound to deduct the tax computed at the appropriate rate on the salary payable to the respondent as the amount due under the decree represented salary. Section 18 sub section (2) of the Income Tax Act in so far as it is material provides that any person paying any amount chargeable under the head "salaries" shall at the time of payment deduct income tax and super tax at the rate representing the average of the rates applicable to the estimated total income of the assessee under the head "salary". Sub section (7) declares that a person failing to deduct the taxes required by the section shall be deemed to be an assessee in default in respect of such tax. The Legislature has, it is manifest, imposed upon the employer the duty to deduct tax at the appropriate rate on salary payable to the employee and if he fails to do so, the tax not deducted may be recovered from him. But the liability to deduct arises in law, if the amount is due and payable as salary. In this case, there has been no assessment of tax due by the Income Tax Officer on the amount payable to the respondent. Under section 46(5), any person paying salary to an assessee may be required by the Income Tax Officer to deduct arrears of tax due from the latter and the employer is bound to comply with such a requisition and to pay the amount deducted to the credit of the Government. But this order can only be passed if income tax has been assessed and has remained unpaid. It is undisputed that at the, material 776 time, no tax was assessed against the respondent; the Income Tax Officer had accordingly no authority to issue a notice under section 46(5). Nor could the Income Tax Officer claim to recover tax due by a proceeding in the nature of a garnishee proceeding by applying to the civil court to attach the Judgment debt payable by the company. The application submitted by the Income Tax Officer must therefore be ignored. Undoubtedly, the employer is by section 18 of the Act liable to deduct from the salary payable by him to his employee the amount of tax at the average rate appli cable to the estimated total income; but can it be said that as between the appellant company and the respondent the decretal amount represented salary? The respondent had filed a suit for a decree for arrears of salary, compensation for wrongful termination of employment and interest. The court having passed a decree on that claim, it became a judgment debt. It may have been open to the appellant company in the suit to apply to the court for making a provision in the decree for payment of income tax due by the respondent, but no such provision was made. We are not concerned to decide in this appeal whether in the hands of the respondent the amount due to him under the decree, when paid, will be liable to tax; that question does not fall to be determined in this appeal. The question to be determined is whether as between the appellant company and the respondent the amount decreed is due as salary payment of which attracts the statutory liability imposed by section 18. The claim decreed by the civil court was for compen sation, for wrongful termination of employment, arrears of salary, salary due for the period of notice and interest and costs, less withdrawals on salary account. The amount for which execution was sought to be levied was the amount decreed against which was set off the claim under the cross decree. A substantial part of the claim decreed represented compensation fir wrongful termination of employment and it would be difficult to predicate of the claim sought to be enforced what part thereof if any represented salary due. Granting that compensation payable to an 777 employee by an employer for wrongful termination of employment be regarded as in the nature of salary, when the claim is merged in the decree of the court, ' the claim assumes the character of a judgment debt and to judgment debts section 18 has not been made applicable. The decree passed by the civil court must be executed subject to the deductions and adjustments permissible under the Code of Civil Procedure. The judgment debtor may, if he has a cross decree for money, claim to set off the amount due thereunder. If there be any adjustment of the decree, the decree may be executed for the amount due as a result of the adjustment. A third person who has obtained a decree against the judgment creditor may apply for attachment of the decree and such decree may be executed subject to the claim of the third person: but the judgment debtor cannot claim to satisfy, in the absence of a direction in the decree to that effect the claim of a third person against the judgment creditor, and pay only the balance. The rule that the decree must be executed according to its tenor may be modified by a statutory provision. But there is nothing in the Income Tax Act which supports the plea that in respect of the amount payable under a judgment debt of the nature sought to be enforced, the debtor is entitled to deduct income tax which may become due and payable by the judgment creditor on the plea that the cause of action on which the decree was passed was the contract of employment and a part of the claim decreed represented amount due to the employee as salary or damages in lieu of salary. Counsel for the appellant company strongly relied upon the decision of the House of Lords in Westminster Bank Ltd. vs Riches (1). That was a case in which in an action brought by one R against the Westminster Bank trustee of the estate of one X R was awarded a decree for pound 36,255 principal and pound 10,028 as interest. The Bank thereafter brought an action for a declaration that it had satisfied the judg ment in the action by R by paying him the amount (1) 18 Tax Cases 159. 778 due less pound 5,014, the latter sum representing income tax on the interest awarded by the judgment. It was held by the House of Lords that pound 10,028 was "interest of money" within Schedule D and General Rule 21 of the Income Tax Act, 1918, and that income tax was deductible therefrom. In that case, the only argument advanced on behalf of the Bank is set out in the speech of Viscount Simon, L. C. at p. 187: "The appellant contends that the additional sum of pound 10,028 though awarded under a power to add interest to the amount of the debt, and though called interest in the judgment, is not really interest such as attracts Income Tax, but is damages. The short answer to this is that there is no essential incompatibility between the two conceptions. The real question, for the purposes of deciding whether the Income Tax Acts apply, is whether the added sum is capital or income, not whether the sum is damages or interest." The House of Lords in that case by a majority held that pound 10,028 awarded under the judgment represented not capital but interest and was liable to tax. In our view, ' this case has no application to the facts of the present case. In the case before us, there is a decree passed in favour of the respondent: under the scheme of the Civil Procedure Code, that decree has to be executed as it stands, subject to such deductions or adjustments as are permissible under the Code. There was no tax liability which the respondent was assessed to pay in respect of this amount till the date on which the appellant company sought to satisfy the alleged tax liability of the respondent. As between the appellant company and the respondent, the amount did not represent salary; it represented a judgment debt and for payment of income tax thereon, no provision was made in the decree. The Civil Procedure Code bars an action of the nature which was filed in Westminster Bank 's case (supra). The defence to the execution if any must be raised in the execution proceeding and not by a separate action. The amount payable by the appellant company to the respondent was not salary but a judgment debt, and before paying that debt the appellant company could not claim 779 to deduct at source tax payable by the respondent. Nor could the appellant company seek to justify its plea on the ground that the judgment creditor was indebted to a third person. The principle of the case in Manickam Chettiar vs Income Tax Officer, Madura (1), on which reliance was also sought to be placed by the appellant company has no application to this case. In Manickam Chettiar 's case (1), in execution of a money decree certain properties belonging to a judgment debtor were attached and sold and the sale proceeds were received by the court. The Income Tax Officer who had assessed the decree holder to tax payable by him on his other income applied to the court for an order directing payment to him out of the sale proceeds the amount of income tax due by the decree holder. It was held that the claim for income tax was entitled to priority in payment and the court had inherent power to make an order on the application for payment of money due as income tax. Tax had admittedly been assessed, and proceedings substantially for recovery of the tax so assessed were adopted by the Income Tax Officer. It was held in the circumstances that the court had jurisdiction to direct recovery of tax out of the amount standing to the credit of the decree holder. The principle of that case can have no application to the facts of the present case. The respondent had not appeared before us, but we have been assisted by Mr. Rajagopala Sastri and we are indebted to him for placing the evidence and the various aspects of the case on a true appreciation of which the question in issue fell to be determined. The appeal fails and is dismissed. As there was no appearance for the respondent, there will be no order for costs. Appeal dismissed. (1) VI I.T. R. 180.

IN-Abs

In a civil suit the respondent obtained a decree against his employer the appellant company for a sum which included com pensation for wrongful termination of his service, arrears of salary, interest and costs of the suit, and then applied for execution of the decree. The Income tax Officer served a notice upon the respondent under section 46 of the Indian Income tax Act and applied to the District Judge that the appellant be permitted to deduct at source the income tax, surcharge and super tax on the sum awarded to the respondent and pay the same in the Government Treasury. The appellant company also moved the executing court for a declaration that they were entitled and bound to deduct the tax due on the amount. The District judge directed the appellant company to pay the income tax and super tax to the Income Tax Department and pay the balance in Court together with a receipt for the income tax paid. In appeal the High Court reversed the order of the District judge and directed the execution of the decree as claimed by the respondent. On appeal by the appellant company, Held, that as no tax was assessed against the respondent the Income Tax Officer could not issue a notice under section 46(5) requiring the appellant company to deduct tax from the decretal amount. A substantial part of the decretal amount did not represent salary" of the respondent: it consisted of compensation for wrongful termination of the respondent 's service, salary in lieu of six months ' notice, interest and costs of the suit. It was a judgment debt and no provision for payment of income tax was made in the decree which was liable to be executed as prayed by the respondent. The appellant company was not therefore entitled or bound to deduct income tax under section 18 sub section (2) of the Act.

Appeal No. 650 of 1957. Appeal from the judgment dated July 13, 1956, of the Patna High Court in Miscellaneous Judicial Case No. 665 of 1954. R. Ganapathy Iyer and R. H. Dhebar, for the appellant. A. V. Viswanatha Sastri and R. C. Prasad, for the respondent. November 29. The Judgment of the Court was delivered by HIDAYATULLAH, J. This is an appeal by the Commissioner of Income tax with a certificate against the judgment and order of the High Court at Patna answering two questions of law referred to it under section 66(1) of the Income tax Act by the Tribunal, in the negative. Those questions were: "(1) Whether in the circumstances of the case assessment proceedings were validly initiated under section 34 of the Indian Income tax Act? (2) If so, whether in the circumstances of the case the amount received from interest on arrears of agricultural rent was rightly included in the income of the assessee ?" The assessee, the Maharaja Pratapsingh Bahadur of Gidhaur, had agricultural income from his zamindari for the four assessment years 1944 45 to 1947 48. In assessing his income to income tax, the authorities did not include in his assessable income interest received by him on arrears of rent. This was presumably so in view of the decision of the Patna High Court. When the Privy Council reversed the view of law taken by the Patna High Court in Commissioner of Income tax vs Kamakhya Narayan Singh (1), the Income tax Officer issued notices under section 34 of the (1) 762 Indian Income tax Act for assessing the escaped income. These notices were issued on August 8, 1948. The assessments after the returns were filed, were completed on August 26, 1948. Before the notices were issued, the Income tax Officer had not put the matter before the Commissioner for his approval, as the section then did not require it, and the assessments were completed on those notices. Section 34 was amended by the Income tax and Business Profits Tax (Amendment) Act, 1948 (No. 48 of 1948), which received the assent of the Governor General on Sep tember 8, 1948. The appeals filed by the assessee were disposed of on September 14 and 15, 1951, by the Appellate Assistant Commissioner, before whom no question as regards the validity of the notices under section 34 was raised. The question of the validity of the notices without the approval of the Commissioner appears to have been raised before the Tribunal for the first time. In that appeal, the Accountant Member and the Judicial Member differed, one holding that the notices were invalid and the other, to the contrary. The President agreed with the Accountant 'Member that the notices were invalid, and the assessments were ordered to be set aside. The Tribunal then stated a case and raised and referred the two questions, which have been quoted above. The High Court agreed with the conclusions of the majority, and the present appeal has been filed on a certificate granted by the High Court. Section 34, as it stood prior to the amendment Act No. 48 of 1948, did not lay any duty upon the Income tax Officer to seek the approval of the Commissioner before issuing a notice under section 34. The amending Act by its first section made sections 3 to 12 of the amending Act retrospective by providing "sections 3 to 12 shall be deemed to have come into force on the 30th day of March, 1948. . Section 8 of the amending Act substituted a new section in place of section 34, and in addition to textual changes with which we are not concerned, also added a proviso to the following effect : "Provided that 763 (1) the Income tax Officer shall not issue a notice under this sub section unless he has recorded his reasons for doing so and the Commissioner is satisfied on such reasons that it is a fit case for the issue of such notice. " The question is whether the notices which were issued were rendered void by the operation of this proviso. ' The Commissioner contends that section 6 of the , particularly cls. (b) and (c) saved the assessments as well as the notices. He relies upon a decision of the Privy Council in Lemm vs Mitchell (1), Eyre vs Wynn Mackenzie (2) and Butcher vs Henderson (3) in support of his proposition. The last two cases have no bearing upon this matter; but strong reliance is placed upon the Privy Council case. In that case, the earlier, action which had been commenced when the Ordinance had abrogated the right of action for criminal conversation, had already ended in favour of the defendant and no appeal therefrom was pending, and it was held that the revival of the right of action for criminal conversation did not invest the plaintiff with a right to begin an action again and thus expose the defendant to a double jeopardy for the same act, unless the statute expressly and by definite words gave him that right. The Privy Council case is thus entirely different. No doubt, under section 6 of the it is provided that where any Act repeals any enactment, then unless a different intention appears, the repeal shall not affect the previous operation of any enactment so repealed or anything duly done thereunder or affect any right, obligation or liability acquired, accrued or incurred under any enactment so repealed. It further provides that any legal proceedings may be continued or enforced as if the repealing Act had not been passed. Now, if the amending Act had repealed the original section 34, and merely enacted a new section in its place, the repeal might not have affected the operation of the original section by virtue of section 6. But the amending Act goes further than this. It (1) ; (2) (3) 764 repeals the original section 34, not from the day on which the Act received the assent of the Governor General but from a stated day, viz., March 30, 1948, and substitutes in its place another section containing the proviso above mentioned. The amending Act provides that the amending section shall be deemed to have come into force on March 30, 1948, and thus by this retrospectivity, indicates a different intention which excludes the application of section 6. It is to be noticed that the notices were all issued on August 8, 1948, when on the statute book must be deemed to be existing an enactment enjoining a duty upon the Income tax Officer to obtain prior approval of the Commissioner, and unless that approval was obstained, the notices could not be issued The notice were thus invalid. , The principle which was applied by this Court in Venkatachalam vs Bombay Dyeing & Mfg. Co. Ltd. (1) is equally applicable here. No question of law was raised before us, as it could not be in view of the decision of this Court in Narayana Chetty vs Income tax Officer (2), that the proviso was not mandatory in character. Indeed, there was time enough for fresh notices to have been issued, and we fail to see why the old notices were not recalled and fresh ones issued. For these reasons, we are in agreement with the High, Court in the answers given, and dismiss this appeal with costs. A appeal dismissed.

IN-Abs

The appellant who had agricultural income from his Zamindari was assessed to income tax for the four assessment years, 1944 45, to 1947 48. The income tax authorities did not include in his assessable income, interest received by him on arrears of rent, in view of a decision of the Patna High Court, but subsequently this view of law was reversed by the Privy Council. On August 8, 1948, the Income tax Officer issued notices under section 34of the Indian Income tax Act, 1922, for assessing the escaped income. Before the notices were issued the Income tax Officer had not put the matter before the Commissioner for his approval as the section then did not require it and the assessments were completed on those notices. In the meantime, certain amendments were made to the Indian Income tax Act by Act 48 of 1948, which received the assent of the Governor General on September 8, 1948. The Amending Act substituted a new section in place of section 34, which among other changes, added a proviso to the effect that "the Income tax Officer shall not issue a notice. unless he has recorded his reasons for doing so and the Commissioner is satisfied on such reasons that it is a fit case for the issue of such notice", and also made it retrospective by providing that the new section "shall be deemed to have come into force on the 30th day of March, 1948". The question was whether the notices issued by the Income tax Officer on August 8, 1948, without the approval of the Commissioner, were rendered void by reason of the operation of the amended section 34. The Commissioner claimed that section 6 of the , saved the assessments as well as the notices. Held, that section 6 of the , was in applicable as the Amending Act of 1948 indicated a different intention within the meaning of that section, inasmuch as the amended section 34 of the Indian Income tax Act, 1922, provided that it shall be deemed to have come into force on March 30, 1948. Lemm vs Mitchell, ; , distinguished, 761 Held, further, that the notices issued by the Income tax Officer on August 8, 1948, and the assessments based on them were invalid. Venkatachalam vs Bombay Dyeing & Mfg. Co., Ltd., ; , applied.

Appeal No. 55 of 1950. Appeal by special leave from the Judgment and Order dated March 18. 1949, of the High Court of Judicature at Bombay (Chagla C. J. 178 and Ten dolkar J.) in Income tax Reference No. 5 of. 1948, arising out of order dated September 27, 1947, of the Income tax Appellate Tribunal, Bombay Bench 'A ', in I.T.A. No. 2205 of 1946 47. C. K. Daphtary, Solicitor General for India, (K. T. Desai and A.M. Mehta, with him) for the appellant. M. C. Setalvad, Attorney General for India, (G. N. Joshi, with him) for the respondent. November 3. The Judgment of the Court ,Was delivered by Bose, J. This is an appeal from the High Court at Bombay in an Income tax Reference under section 66 (1) of the Indian Income tax Act of 1922. The reference was made to the Bombay High Court by the Bombay Bench of the Income tax Appellate Tribunal in the following circumstances. The appellant assessee is a company known its the Raghuvanshi Mills Ltd., of Bombay. The assessment year with which we are concerned is 1945 46. 'The assessee had insured its buildings, plant and machinery with various insurance companies and also took out, besides those policies, four policies of a type known as a "Consequential Loss Policy. " This kind of policy insures against loss of profit, standing charges and agency commission. The total insured against under, the latter heads was Rs. 37,75,000 account of loss.of profits and standing charges, and Rs. 2,26,000 account of agency commission, making a total of Rs. 40,00,000. On the 18th of January, 1944, a fire. broke out and the mill were completely destroyed. The various insurance companies therefore paid the assessee company an aggregate of Rs. 14,00,000 account in the year with which we are concerned under these policies. This was paid in two sums as follows: Rs. 8,25,0.00 8th September, 1944, and Rs. 5,75,000 22nd December, 1944. These payments have been treated as part of the assessee 's 'income and the 179 company has been taxed accordingly. The question is whether these sums are or are not liable to tax. Before we set out the question referred, it will be necessary to state that the whole of this Rs. 14,00, 000 has been treated as paid account of loss of profits. The learned Solicitor General, who appeared for the ) appellant assessee, contended that that was wrong because the portion of it assignable to standing charges and agency commission could not any construction be liable to tax. This contention is new and involves questions of fact and travels beyond the scope ' of the question referred. We are consequently not, able to entertain it. It has been assumed throughout the proceedings, tight up to this Court, that the whole of the Rs. 14,00,000 was assignable to loss of profits. There is nothing the record to show that it was ever split up among the other heads or that it was ever treated &a having been split up,either by the insurance com panies or by the assessee, nor is there any material which we would be able to apportion it. Our decision therefore proceeds the assumption that the whole sum is assignable to loss of profits and we make it clear that we 'decide nothing about other moneys which may be distributable among other heads. The question has been referred in these terms: "Whether in the circumstances of the case, the sum of Rs. 14,00,000 was the assessee company 's income within the meaning of Section 2(6C) of the Indian Income tax Act and liable to pay income tax under the Indian Income tax Act. " We are concerned in this case with four policies of insurance with four different insurance companies. The clauses relevant to the present matter are the same in all four cases though the sum insured against by. each insurance company differs. They are as follows "POLICY NO. C.L. 110018. . . 180 Rupees X Lacs only Loss of Profits, Standing Charges and Agency Commission of the above Co. 's Mills, situate at Haines o Road, Mahaluxmi; Bombay, following . . The total amount declared for insurance is Rs. 40,00,000 and for 18 months ' benefits only as under: Rs. 37,75,000 Loss of Profits and Standing Charges. Rs. 2,25,000 Agency Commission. Rs. 40,00,000 Out, of which this policy covers Rs. X lacs only. Schedule attached to and forming part of Po licy No. C. L. 10018. The company will pay to the assured: The loss of Gross Profit due to (a) Reduction in Output and (b@) increase in Cost of Working and the, amount payable as indemnity hereunder shall. . Definitions of those two terms follow. We need not reproduce talent. Then come the following definitions: "Gross profit. The sum produced by adding to the Net Profit the amount of the Insured Standing Charges, or if there be no Net Profit the amount of the Insured Standing Charges, less such a proportion of any net trading loss as the amount of the Insured Standing Charges bears to all the Standing Charges of the business. Net profit. The net trading profit (exclusive of all capital receipts and accretions and all outlay properly chargeable to capital) resulting from the business of the Insured at the premises after due provision has been made for all Standing 'and other charges including depreciation. Insured standing charges. Interest Loans and Bank Overdrafts, Rent Rates and Taxes, Salaries to Permanent Staff and Wages to Skilled Employees, 181 Directors ' Fees, Auditor 's Fees, Travelling Expenses, Insurance Premiums, Advertising and Agency Commission. Period of indemnity. The period beginning with the occurrence of the fire and ending not later than eighteen consecutive calendar months thereafter during which the results of the business shall be affected in consequence of the fire. Rate of Gross Profit. The rate of gross profit per unit earned the output during the financial year immediately before the date of the fire. . to which such adjustments shall be made as may be necessary to provide for the trend of the business and for variations in or special circumstances affecting the business either before or after the fire or which would have affected the business had the fire not occurred so that the figures thus adjusted shall represent as nearly as may be reasonably practicable the result which, but for the fire, would have been obtained during the relative period after the fire. " The underlined words show that the insurance in respect of profits was to represent as 'nearly as possible the profits which would have been made, had the mills been working in its normal way. We turn next to the Income tax Act. Under section 3 the "total income of the previous year" is liable to tax subject to the provisions of the Act. Section 4 defines the total income to include "all income, profits and gains from whatever source derived. " There are certain qualifications but they do not concern us here. It will be seen that the taxable commodity, "total income", embraces three elements, "income", "profits" and "gains". Now though these may overlap in many cases, they are nevertheless separate and severable, and the simple question is whether the Rs. 14 lacs Here italicised. 24 182 fall under any one or more of those heads. In our opinion, it is "income" and so is taxable. It was argued behalf of the assessee that it can not be called profits because the money is only pay able if and when there is a loss or partial loss and that something received from an outside source in circumstances like these is not money which is earned in the business and if there are no earnings and no profits there cannot be any income. But that only concentrates the word " ' profits". This may not be a "profit" but it is something which represents the profits and was intended to take the place of them and is therefore just as much income as profits or gains received in the ordinary way. Section 4 is so widely worded that everything which is received by a man and goes to swell the credit side of his total account is either an income or a profit or a gain. No attempt has been made in the Act to define "income" except to say in section 2 (6C) that it includes certain things which would possibly not have been regarded as income but for the special definition. That however does not limit the generality of its natural meaning except as qualifided in the section itself. The words which follow, namely, "from a whatever source derived", show how wide the net is spread. So also in section 6. After setting out the various heads of taxable income it brings in the all embracing phrase "income from other sources. " There is however a distinction between "income" and "taxable income". The Act does not purport to subject all sources of income to tax, for the liability is expressly made subject to the provisions of the Act and among the provisions are a series of exceptions and limitations. Most of them are set out in section 4 itself but none of them apply here. The nearest approach for present purposes is section 4 (3) (vii): "Any receipts. . not being receipts arising from business. . which are of a casual and non recurring nature. " 183 But the sting, so far as the assessee is concerned, lies in the words "not being receipts arising from business. " The assessee is a business company. Its aim is to make profits and to insure against loss. In the ordinary way it does this by buying raw material, manufacturing goods out of them and selling them so that balance there is a profit or gain to itself. But it also has other ways of acquiring gain, as do all prudent businesses, namely by insuring against loss of profits. It is indubitable that the money paid in such circumstances is a receipt and in so far as it represents loss of profits, as opposed to loss of capital and so forth, it is an item of income in any normal sense of the term. It is equally clear that the receipt is in separably connected with the ownership and conduct of the business and arises. from it. Accordingly, it is not exempt. This question was considered by the Supreme Court of Canada which decided that a receipt of this nature is not a "profit" and so is not taxable [B. C. Fir and Cedar Lumber Co. vs The King(1)]. But the Court did not examine the wider position whether it is "income" and in any event the decision was reversed appeal to the Privy Council(1). Their Lordships held it is "income". This was followed later by the Court of Appeal in England and endorsed by the House of Lords in Commissioners of inland Revenue vs William 's Executors(1) In so far as these decisions do not turn the special wording of the Acts with which they are respectively concerned and deal with the more general meaning of the word "income", we prefer the view taken in England. It is true the Judicial Committee attempted a narrower definition in Commissioner of income tax vs Shaw Wallace & Co.(1), by limiting income to "a periodical monetary return 'coming in ' with some sort of regularity, or expected regularity, from definite sources" but, in our opinion, those remarks must be (I) [1931] Canada L.R. 435. (2) [I932] A. C. 441 at 448. (3) (I944) (4) (1932) 59 I.A. 206. 184 read with reference to the particular facts of that case. The non recurring aspect of this kind of receipt was considered by the Privy Council in The King vs B. C. Fir and Cedar Lumber Co.(1), and we do not think $their Lordships had in mind a case of this nature when they decided Shaw Wallace & Company 's case (2). The learned Solicitor General relies strongly a clause which appears in three of the four policies with which we are concerned. That is a clause which states that the insured must do all he can to minimise the loss in profits and until he makes an endeavour to re start the business the moneys will not be paid. This, he argued, shows that the money was paid as an indemnity against the loss of profits and was niether income nor profits, nor was it a gain within the meaning of the section. We are unable to see how these receipts cease to be income simply because certain things must be done before the moneys can be claimed. In our opinion, the High Court was right in holding that the Rs. 14,00,000 is assessable to tax. The appeal fails and is dismissed with costs. Appeal dismissed. (1) [1032] A.C. 441, at 448. (2) [1932] 59 I.A. 206.

IN-Abs

The appellant mills had insured its building, plant and machinery with various insurance conapanies against fire and had also taken out some policies of the type known. as " consequential loss policies " which insured against loss of profits, standing charges and agency commission. The mills were completely destroyed by fire and the appellant received certain sums of money under the consequential loss policies. Held, that sums of money received under these policies were "income" within the meaning of section 2 (60) of the Indian Income tax Act, and as they were inseparably connected with the ownership and conduct of the business of the company and arose I from it, they were not exempt under section 4 (3) (vii), and were therefore assessable to income tax under the Indian Income tax Act. [Their Lordships, made it clear that they proceeded the assumption that the whole sum was assignable to loss of profits and that they decided nothing about other moneys which may be distributable amongst other beads, e.g., standing charges or agency commission.] The definition of "income" in Shaw Wallace & Co. 's case [(1932) 59 I.A. 206] as a "periodical monetary return 'coming in ' with some sort of regularity, or expected regularity, from definite sources " must be read with reference to the particular facts of that case and is not applicable to receipts, of this nature. The King vs B.C., Fir and Cedar Lumber Co. and Commissioners Of Inland Revenue vs Wi WiIliams 's Executors applied. Commissioner of Income tax, Bengal vs Shaw Wallace & Co. (1932) 59 I.A. 206, commented upon. Judgment o f the Bombay High Court affirmed.

Appeal No. 93 of 1959. Appeal by special leave from the Award dated May 13, 1957, of the Industrial Tribunal, Bombay, in Reference (I.T.) No. 166 of 1955. R. J. Kolah, section N. Andley, J. B. Dadachanji, Rameshwar Nath and P. L. Vohra, for the appellants. K. B. Chaudhury and Janardan Sharma, for the respondents Nos. 1 and 2. 379 1960. March 24. The Judgment of the Court was delivered by WANCHOO, J. This appeal by special leave raises two questions, namely, (i) bonus for the year 1952 and (ii) retrospective operation of the order of the Industrial Tribunal relating to increase in wages. The appellant is a company manufacturing barrels and drums at Bombay. There was a dispute between the appellant and its workmen about a number of matters, which was referred to the tribunal by the Government of Bombay on November 17, 1955. In respect of the two matters which are now raised in appeal the workmen claimed (i) four months wages including dearness allowance as bonus for the year 1952 and (ii) retrospective operation of the wage scale to be fixed by the tribunal from March 1, 1952. So far as the increase in wages, is concerned, the appellant agreed to the scale suggested by the tribunal but it opposed the grant of the increased scale retrospectively and also wanted that the increased wages should be linked to some guaranteed production. The reason for this was that the appellant felt that there had been deliberate slowing down of production by the workmen in the previous years. The tribunal was of opinion that there was some justification in the appellant 's contention that there had been considerable go slow which had affected production. Taking that into account it ordered that retrospective effect should be given to its order which was passed on May 13, 1957 from June 1, 1956. As to the linking of the increased wages to a certain guaranteed production it found it difficult to lay down any norm itself; but it made it clear that the increase in wages was made by it on the basis that the workers would give a certain reasonable production and noted that the workers were agreeable to do that. It, however, recommended that immediately after the. award had been given, an expert should be appointed by agreement, if possible, to go into this question. It also said that in case it was not possible to appoint an expert by agreement it would be open to the appellant to appoint one. 380 The appellant 's contention before us is that the tribunal having found some justification in its contention that there had been considerable go slow should not have given retrospective effect at all to the order relating to the increase in wages. This matter has been considered fully by the tribunal and it came to the conclusion that increase in wages should be granted from June 1, 1956. This could hardly be called retrospective considering that the reference was made in November 1955 ; in any case the tribunal rejected the claim of the workmen for retrospective operation for the period of over four years from March 1952 to May 1956 and a good deal of go slow was practised during this period. In the circumstances we see no reason for interference with the order of the tribunal fixing the date as June 1, 1956, from which the increased wages should come into force. This brings us to the next question relating to bonus. The tribunal has awarded five months ' basic wages by way of bonus. The first contention in this connection is that the workmen had only claimed four months ' basic wages and the tribunal could not have awarded anything more than what the workmen claimed. This in our opinion is incorrect. The workmen had claimed four months ' wages including dearness allowance as bonus. Five months ' basic wages which the tribunal has allowed are admittedly less than the claim put forward (namely, four months ' wages including dearness allowance). In the circumstances the tribunal certainly had jurisdiction to award what it has awarded to the workmen. The next question is whether the tribunal was justified in awarding as much as five months ' basic wages on the basis of the Full Bench formula, which is generally applied to these matters. The gross profit found by the tribunal is not challenged, namely, Rs. 5.05 lacs. The tribunal has then allowed Rs. 1.36 lacs as depreciation, leaving a balance of Rs. 3.69, lacs. Deducting income tax from this at seven annas in a rupee (i.e. Rs. 1.61 lacs), we are left with a balance of Rs. 2.08 lacs. Six per cent. per annum interest on the paid up capital along with four per cent. interest on the working capital comes to Rs. 16,000, leaving an available 381 surplus of Rs. 1.92 lacs. Out of this, the tribunal has allowed five months ' basic wages as bonus which according to its calculations comes to Rs. 91,000, leaving Rs. 1.01 lacs. There will be a rebate of Rs. 40,000 on this sum, leaving a total of Rs. 1.41 lacs with the appellant. On these figures, the bonus awarded by the tribunal cannot be interfered with. The appellant, however, draws our attention to two circumstances in this connection. In the first place it urges that the tribunal has not taken into account anything for rehabilitation. But it may be mentioned that the appellant had proved no rehabilitation amount as such. What it had done was to appropriate Rs. 3.16 lacs towards depreciation, which of course was not the proper amount of notional normal depreciation, which is allowable under the formula. Our attention is drawn, however, to the figures filed by the workmen in exhibit U 4 in which Rs. 40,000 has been allowed towards rehabilitation. Even accepting this concession by the workmen and deducting it from the figures given by us above, the appellant would still be left with Rs. 1.01 lacs after paying five months ' basic wages as bonus. There is thus no reason to interfere with the award of bonus on this ground. Lastly it is urged that according to the income tax assessment which was actually made in this case sometime after the order of the tribunal, the appellant has been assessed to income tax amounting to Rs. 2.35 lacs. The appellant claims that it should be allowed this entire amount and not the notional figure calculated by us, namely, Rs. 1.61 lacs as income tax. We are of opinion that for the purpose of the Full Bench formula, the income tax payable has to be deducted on the figures worked out according to the formula and it is immaterial what the actual income tax paid is whether more or less. In this particular case, the income tax appears to be more because certain items which were challenged by the workmen but were allowed as proper expense by the tribunal have apparently not been allowed as proper expense by the income tax department. The industrial tribunal, however, is not concerned directly with what the income 49 382 tax authorities assess as actual income tax in a particular year; it is concerned with working out the Full Bench formula in accordance with its notional calculations and this is what has been done in this case. There is no ground therefore for interference with the award of bonus for this reason either. We therefore dismiss the appeal, but in the circumstances pass no order as to costs. Appeal dismissed.

IN-Abs

The workmen of the appellant company claimed four months, wages including dearness allowance as bonus for the year 1952, and retrospective operation of the increased wage scale to be fixed by the Industrial Tribunal from March 1, 1952. The appellant agreed to the increased wage scale suggested by the Tribunal but wanted that it should be linked to some guaranteed production, and opposed its operation retrospectively on the ground that there had been eliberate slowing down of production by the workmen in the previous years. The Tribunal found that there was some justification in the appellant 's contention that there was considerable go slow which had affected production and ordered that retrospective effect should be given to its order relating to increase in wages which was passed on May 13, 1957, from June 1, 1956, and not March 1, 1952, as claimed by the workmen, The increased wages were not linked to any guaranteed production but it was made clear that the workers would give certain reasonable production to which the workmen agreed. The Tribunal granted five months basic wages by way of bonus on the basis of the Full Bench formula which is generally applied to these matters. On appeal by the Appellant company by special leave : Held, that there was no reason for interference with the order of the Tribunal fixing the date as June 1, 1956, from which the increased wages should come into force and that the Tribunal had jurisdiction to award five months ' basic wages by way of bonus. For the purpose of the Full Bench formula, the incometax payable has to be deducted on the figures worked out according to the formula and it is immaterial what the actual income tax paid is whether more or less.

Appeal No. 650 of 1957. Appeal from the judgment dated July 13, 1956, of the Patna High Court in Miscellaneous Judicial Case No. 665 of 1954. R. Ganapathy Iyer and R. H. Dhebar, for the appellant. A. V. Viswanatha Sastri and R. C. Prasad, for the respondent. November 29. The Judgment of the Court was delivered by HIDAYATULLAH, J. This is an appeal by the Commissioner of Income tax with a certificate against the judgment and order of the High Court at Patna answering two questions of law referred to it under section 66(1) of the Income tax Act by the Tribunal, in the negative. Those questions were: "(1) Whether in the circumstances of the case assessment proceedings were validly initiated under section 34 of the Indian Income tax Act? (2) If so, whether in the circumstances of the case the amount received from interest on arrears of agricultural rent was rightly included in the income of the assessee ?" The assessee, the Maharaja Pratapsingh Bahadur of Gidhaur, had agricultural income from his zamindari for the four assessment years 1944 45 to 1947 48. In assessing his income to income tax, the authorities did not include in his assessable income interest received by him on arrears of rent. This was presumably so in view of the decision of the Patna High Court. When the Privy Council reversed the view of law taken by the Patna High Court in Commissioner of Income tax vs Kamakhya Narayan Singh (1), the Income tax Officer issued notices under section 34 of the (1) 762 Indian Income tax Act for assessing the escaped income. These notices were issued on August 8, 1948. The assessments after the returns were filed, were completed on August 26, 1948. Before the notices were issued, the Income tax Officer had not put the matter before the Commissioner for his approval, as the section then did not require it, and the assessments were completed on those notices. Section 34 was amended by the Income tax and Business Profits Tax (Amendment) Act, 1948 (No. 48 of 1948), which received the assent of the Governor General on Sep tember 8, 1948. The appeals filed by the assessee were disposed of on September 14 and 15, 1951, by the Appellate Assistant Commissioner, before whom no question as regards the validity of the notices under section 34 was raised. The question of the validity of the notices without the approval of the Commissioner appears to have been raised before the Tribunal for the first time. In that appeal, the Accountant Member and the Judicial Member differed, one holding that the notices were invalid and the other, to the contrary. The President agreed with the Accountant 'Member that the notices were invalid, and the assessments were ordered to be set aside. The Tribunal then stated a case and raised and referred the two questions, which have been quoted above. The High Court agreed with the conclusions of the majority, and the present appeal has been filed on a certificate granted by the High Court. Section 34, as it stood prior to the amendment Act No. 48 of 1948, did not lay any duty upon the Income tax Officer to seek the approval of the Commissioner before issuing a notice under section 34. The amending Act by its first section made sections 3 to 12 of the amending Act retrospective by providing "sections 3 to 12 shall be deemed to have come into force on the 30th day of March, 1948. . Section 8 of the amending Act substituted a new section in place of section 34, and in addition to textual changes with which we are not concerned, also added a proviso to the following effect : "Provided that 763 (1) the Income tax Officer shall not issue a notice under this sub section unless he has recorded his reasons for doing so and the Commissioner is satisfied on such reasons that it is a fit case for the issue of such notice. " The question is whether the notices which were issued were rendered void by the operation of this proviso. ' The Commissioner contends that section 6 of the , particularly cls. (b) and (c) saved the assessments as well as the notices. He relies upon a decision of the Privy Council in Lemm vs Mitchell (1), Eyre vs Wynn Mackenzie (2) and Butcher vs Henderson (3) in support of his proposition. The last two cases have no bearing upon this matter; but strong reliance is placed upon the Privy Council case. In that case, the earlier, action which had been commenced when the Ordinance had abrogated the right of action for criminal conversation, had already ended in favour of the defendant and no appeal therefrom was pending, and it was held that the revival of the right of action for criminal conversation did not invest the plaintiff with a right to begin an action again and thus expose the defendant to a double jeopardy for the same act, unless the statute expressly and by definite words gave him that right. The Privy Council case is thus entirely different. No doubt, under section 6 of the it is provided that where any Act repeals any enactment, then unless a different intention appears, the repeal shall not affect the previous operation of any enactment so repealed or anything duly done thereunder or affect any right, obligation or liability acquired, accrued or incurred under any enactment so repealed. It further provides that any legal proceedings may be continued or enforced as if the repealing Act had not been passed. Now, if the amending Act had repealed the original section 34, and merely enacted a new section in its place, the repeal might not have affected the operation of the original section by virtue of section 6. But the amending Act goes further than this. It (1) ; (2) (3) 764 repeals the original section 34, not from the day on which the Act received the assent of the Governor General but from a stated day, viz., March 30, 1948, and substitutes in its place another section containing the proviso above mentioned. The amending Act provides that the amending section shall be deemed to have come into force on March 30, 1948, and thus by this retrospectivity, indicates a different intention which excludes the application of section 6. It is to be noticed that the notices were all issued on August 8, 1948, when on the statute book must be deemed to be existing an enactment enjoining a duty upon the Income tax Officer to obtain prior approval of the Commissioner, and unless that approval was obstained, the notices could not be issued The notice were thus invalid. , The principle which was applied by this Court in Venkatachalam vs Bombay Dyeing & Mfg. Co. Ltd. (1) is equally applicable here. No question of law was raised before us, as it could not be in view of the decision of this Court in Narayana Chetty vs Income tax Officer (2), that the proviso was not mandatory in character. Indeed, there was time enough for fresh notices to have been issued, and we fail to see why the old notices were not recalled and fresh ones issued. For these reasons, we are in agreement with the High, Court in the answers given, and dismiss this appeal with costs. A appeal dismissed.

IN-Abs

The appellant who had agricultural income from his Zamindari was assessed to income tax for the four assessment years, 1944 45, to 1947 48. The income tax authorities did not include in his assessable income, interest received by him on arrears of rent, in view of a decision of the Patna High Court, but subsequently this view of law was reversed by the Privy Council. On August 8, 1948, the Income tax Officer issued notices under section 34of the Indian Income tax Act, 1922, for assessing the escaped income. Before the notices were issued the Income tax Officer had not put the matter before the Commissioner for his approval as the section then did not require it and the assessments were completed on those notices. In the meantime, certain amendments were made to the Indian Income tax Act by Act 48 of 1948, which received the assent of the Governor General on September 8, 1948. The Amending Act substituted a new section in place of section 34, which among other changes, added a proviso to the effect that "the Income tax Officer shall not issue a notice. unless he has recorded his reasons for doing so and the Commissioner is satisfied on such reasons that it is a fit case for the issue of such notice", and also made it retrospective by providing that the new section "shall be deemed to have come into force on the 30th day of March, 1948". The question was whether the notices issued by the Income tax Officer on August 8, 1948, without the approval of the Commissioner, were rendered void by reason of the operation of the amended section 34. The Commissioner claimed that section 6 of the , saved the assessments as well as the notices. Held, that section 6 of the , was in applicable as the Amending Act of 1948 indicated a different intention within the meaning of that section, inasmuch as the amended section 34 of the Indian Income tax Act, 1922, provided that it shall be deemed to have come into force on March 30, 1948. Lemm vs Mitchell, ; , distinguished, 761 Held, further, that the notices issued by the Income tax Officer on August 8, 1948, and the assessments based on them were invalid. Venkatachalam vs Bombay Dyeing & Mfg. Co., Ltd., ; , applied.

Appeals Nos. 490 and 491 of 1958. Appeals from the judgment and decree dated February 18, 1955, of the Madras High Court in Second Appeals Nos. 2038 and 2039 of 1950. N. R. Raghavachariar, M. R. Krishnaswami and T. V. R. Tatachari, for the appellant. R. Ganapathi Iyer and D. Gupta, for the respondent. November 29. The Judgment of the Court was delivered by KAPUR, J. Two suits were brought by the appellants for a declaration against the levy of sales tax by the State of Madras and an injunction was also prayed for. Both the suits were decreed by the Subordinate Judge of Salem and the decrees were confirmed on appeal by the District Judge of Salem. Two appeals were taken to the High Court by the State of Madras against those decrees and by a judgment dated February 18, 1955, the decrees were set aside by a common judgment. Against these decrees the appellants have brought these appeals by a certificate of that Court. The appellants are merchants dealing in cotton yarn. They obtained a license under section 5 of the Madras General Sales Tax Act (Act IX of 1939), hereinafter referred to as the 'Act '. This license exempted 738 them from assessment to sales tax under section 3 of the Act on the sale of cotton yarn and on handloom cloth "subject to such restrictions and conditions as may be prescribed including conditions as to license and license fees". The license was issued on March 31,1941, and was renewed for the following years. On September 20, 1944, the Commercial Tax Authorities made a surprise inspection of the premises of the appellants and discovered that they were maintaining two separate sets of account on the basis of one of which the appellants submitted their returns to the Department. Because the other set of account books showed black market activities of the firm Balakrishna Chetty was prosecuted and sentenced to six months ' imprisonment for an offence connected with the breach of Cot. ton Yarn Control Order. During the pendency of those proceedings the Deputy Commercial Tax Officer made assessments for the years. 1943 44 and 1944 45, the tax for the former was Rs. 37,039 and for the latter Rs. 3,140. The appellants unsuccessfully appealed against these assessments and their revisions also failed. On August 24, 1945, the appellants brought a suit for a declaration and injunction in regard to the first assessment alleging that the assessment was against the Act. On September 2, 1946, a similar suit was brought in regard to the second assessment. It is out of these suits that the present appeal has arisen. The controversy between the parties centres round the interpretation of the words "subject to" in section 5 of the Act. The High Court has held that on a true interpretation of the provisions of the Act and the rules made thereunder, the observance of conditions of the license was necessary for the availability of exemption under section 5; that as the appellants had contravened those conditions they were liable to pay tax for both the years notwithstanding the license which had been issued to them under section 5 of the Act. it will be convenient at this stage to refer to the provisions of the Act which are relevant for the purpose of this appeal. section 2(b) " dealer" means any person who carries on the business of buying or selling goods;" 739 section 2(f) " "prescribed" means prescribed by rules made under this Act;". section 3(1) "Subject to the provisions of this Act, every dealer shall pay in each year a tax in accordance with the scale specified below: (a). . . . . . (b) if his turnover ex One half of I per ceeds twenty cent of such turn thousand rupees. over". section 5 "Subject to such restrictions and conditions as may be prescribed, including the conditions as to licenses and license fees, the sale of bullion and specie, of cotton, of cotton yarn and of any cloth woven on handlooms and sold by persons dealing exclusively in such cloth shall be exempt from taxation under Section 3". section 13 "Every dealer and every person licensed under section 8 shall keep and maintain a true and correct account showing the value of the goods sold and paid by them; and in case the accounts maintained in the ordinary course, do not show the same in an intelligible form, he shall maintain a true and correct account in such form as may be prescribed in this behalf.". The following rules are relevant for the purpose of this appeal and we quote the relevant portions: R. 5 "(1) Every person who (a). . . . . (b) deals with cotton and/or cotton yarn, (c). . . . . . (d). . . . . . (e) shall if he desires to avail himself of the exemption provided in sections 5 and 8 or of the concession of single point taxation provided in section 6, submit an application in Form I for a licence and the relevant portion of Form III is as follows: "Form III Cotton Licence to a dealer in Cotton yarn cloth woven on handlooms 740 See rule 6(5). Licence No. dated having paid a licence fee of Rs. (in words) hereby licensed as a dealer in Cotton/Cotton yarn Cotton woven on handlooms for the year ending at (place of business) subject to the provisions of the Madras General Sales Tax Act, 1939, and the rules made thereunder and to the following conditions:". R. 8 "Every licence granted or renewed under these rules shall be liable to cancellation by the Deputy Commercial Tax Officer in the event of a breach of any of the provisions of the Act, or of the Rules made thereunder or of the conditions of the licence. " The contention raised on behalf of the appellants was that as long as they held the licence it was immaterial if they were guilty of any infraction of the law and that they were not liable to any assessment of sales tax under the provisions of the Act and the only penalty they incurred was to have their licence cancelled and/or be liable to the penalty which under the criminal law they had already suffered. The contention comes to this that in spite of the breaches of the terms and conditions of the licence, having a licence was sufficient for the purpose of exemption under the Act. This contention, in our opinion, is wholly untenable. Section 3 is the charging section and section 5 gives exemption from taxation but that section clearly makes the holding of a licence subject to restrictions and conditions prescribed under the provisions of the Act and the rules made thereunder because the opening words of that section are "subject to such restrictions and conditions as may be prescribed." Under B. 13 an important condition imposed under the Act is the keeping by the dealer and every person licensed of true and correct accounts showing the value of the goods sold and paid by him. Next there is r. 5 of the General Sales Tax Rules which provided 741 that if any person desired to avail himself of the exemption provided in section 5, he had to submit an application in Form I for a licence and the Form of the licence shows that the licence was subject to the provisions of the Act and the rules made thereunder which required the licensee to submit returns as required and also to keep true accounts under section 13. This shows that the giving of the licence was subject to certain conditions being observed by the licensee and the licence itself was issued subject to the Act and the rules. But it was contended that the words "subject to" do not mean "conditional upon" but "liable to the rules and the provisions" of the Act. So construed section 5 will become not only inelegant but wholly meaningless. On a proper interpretation of the section it only means that the exemption under the licence is conditional upon the observance of the conditions prescribed and upon the restrictions which are imposed by and under the Act whether in the rules or in the licence itself ; that is, a licensee is exempt from assessment as long as he conforms to the conditions of the licence and not that he is entitled to exemption whether the conditions upon which the licence is given are fulfilled or not. The use of the words "subject to" has reference to effectuating the intention of the law and the correct meaning, in our opinion, is "conditional upon". The appellants have been found to have contravened the provisions of the Act as well as the rules and therefore it cannot be said that they have observed the conditions upon which the exemption under the licence is available. In that view of the matter, it was rightly held that they were not exempt from assessment under the Act. The appeals are therefore dismissed with costs. Appeals dismissed.

IN-Abs

The appellants, who were dealers in Cotton yarn, obtained a license under the Madras General Sales Tax Act, 1939 (IX of 1939). Section 5 of that Act exempted such dealers from pay ment of sales tax under section 3 of the Act subject to such restrictions and conditions as might be prescribed, including the conditions as to licenses and license fees. Section 13 required a licensee to keep and maintain true and correct accounts of the value of the goods sold and paid by him. Rule 5 of the General Sales Tax Rules provided that any person seeking exemption under section 5 of the Act must apply for license in Form 1 which made the license subject to the provisions of the Act and the rules made thereunder. The appellants on surprise inspection were found to maintain two separate sets of accounts, on the basis of one of which they submitted their returns and the other 737 showed black market activities. The question for determination in the appeal was whether the appellants who had been refused exemption and were assessed to tax, could claim exemption under the Act. Held, that the question must be answered in the negative. Section 5 of the Madras General Sales Tax Act, 1939, pro perly construed, leaves no manner of doubt that an exemption from assessment thereunder is clearly conditional upon the observance by the assessee of the conditions and restrictions imposed by the Act, either in the rules or in the license itself, and the words 'subject to ' used by the section means "conditional upon". It was not correct to say that licensee was exempt from assessment so long as he held the license notwithstanding any breach of the provision of the law and that the only penalty he could be subjected to was the cancellation of his license or criminal prosecution.

Appeal No.232 of 1960. Appeal from the Judgment and Order dated October 6, 1958, of the Bombay High Court in Income Tax Reference No. 10 of 1958. R. J. Kolah, Dwaraka Das, section N. Andley, Rameshwar Nath, J. B. Dadachanji and P. L. Vohra for the Appellants. Hardyal Hardy and D. Gupta for the Respondent. November 29. The Judgment of J. L. Kapur and J. C. Shah, JJ., was delivered by Kapur, J. M. Hidayatullah, J., delivered a separate Judgment. KAPUR, J. This is an appeal pursuant to a certificate of the High Court of Bombay against the judgment and order of that Court in Income tax Reference No. 10 of 1958, answering the question referred to it against the assesses whose legal representatives are 744 the appellants before, us, the respondent being the Commissioner of Income tax. The facts which have given rise to the appeal are that the late Mr. Annantrai P. Pattani, hereinafter called the assessee was, by Hazur Order dated December 10, 1937, appointed the Chief Dewan of Bhavnagar State. On January 15, 1948, the Maharaja of Bhavnagar introduced responsible Government in his State and appointed the assessee as the Chairman of the Bhavnagar Durbar Bank but he received no salary for that post. On the same date by another Hazur Order the Maharaja granted a monthly pension of Rs. 2,000 to the assessee. The order was in the following terms: "He looked after us well in our childhood and rendered valuable services sincerely and with single minded loyalty to us and our State during extremely difficult period of the last war and thereafter, which has enhanced the prestige and prosperity of the State and given the State and the people a place of pride in India. In appreciation of this, it is (hereby) decided to grant him a monthly pension of Rs. 2,000 two thousand which is the monthly salary he is drawing at present. Date 22 1 1948. " On May 31, 1950, the Maharaja directed Messrs. Premchand Roychand & Sons, Bombay, with whom he had an account "to pay by cheque to Mr. A.P. Pattani Rs. 5 lacs out of the amount lying to the credit of my account with you." This sum was paid to the assessee on June 12, 1950. It is stated that the accountant of the Maharaja asked for instructions as to how that amount of Rs. 5 lacs was to be adjusted in the accounts and on December 27, 1950, the Maharaja made the following order: "In consideration of Shri Annantrai P. Pattani the Ex Diwan of our Bhavnagar State having rendered loyal and meritorious services Rs. 5,00,000 (Rupees Five Lacs) are given to him as gift. Therefore, it is ordered that the said amount should be debited to our Personal Expense Account." On March 1, 1948, Bhavnagar State was merged in the United States of Saurashtra and the Maharaja ceased to be the ruler of the said State as from that 745 date. The assessability of this sum of Rs. 5 lacs was raised in the course of the assessment proceedings for the assessment year 1951 52 and at the request of the ' assessee which is stated to be oral the Maharaja wrote on March 10, 1953, the following: "I confirm that in June 1950, 1 gave you a sum of rupees five lacs (Rs. 5,00,000) which wag a gift as a token of my affection and regard for you and your family. This amount was paid to you by Premchand Roychand & Sons according to my letter of 31st May, 1950, from moneys in my account with them. " On these facts the Income tax Officer held that Rs. 5,00,000 received on June 12, 1950, was liable to income tax under section 7(1) read with explanation (2) of that section as it stood before the amendment by the Finance Act, 1955. The assessee took an appeal to the Appellate Assistant Commissioner which was dismissed. Against that order an appeal was taken to the Income tax Appellate Tribunal but the Tribunal also dismissed the appeal. The Tribunal held that looking to the circumstances they would attach more importance to the "contemporaneous document, i.e., the order of the 27th December, 1950"; which clearly mentioned why the sum of Rs. 5,00,000 was paid to the assessee. The Tribunal was not inclined to "believe in the contents of that letter and would leave the matter at that. " The reference is to the letter of the Maharaja dated March 10, 1953. The Tribunal further held that there was no distinction between the Maha raja and the State and "assuming for a moment that this view of ours is not found to be correct, still it is clear from the Huzur Order No. 13 dated 22 1 1948 (vide para 2 above) that the assessee rendered services not only to the State, if it is distinct from. the Maharaja but to the Maharaja as well; for that Huzur Order clearly refers to assessee rendering "valuable services sincerely and conscientiously to us and our State". We would, therefore, hold that the amount of Rs. 5 lacs is a taxable receipt falling under Section 7(1) read with Explanation 2. " At the instance of the assessee the following question of law was referred to the High Court: 746 "Whether the sum of Rs. 5 lacs has been properly ,brought to tax in the hands of the assessee for the assessment year 1951 52?" and a further question as to the applicability of section 4(3) (vii) of the Income tax Act was not referred on the ground that it did not arise out of the order of the Tribunal. The High Court, on the findings given by the Tribunal came to the conclusion that section 7(1) explanation (2) of the Income tax Act applied. It held that it was not possible to regard the receipt of this sum of money by the assessee as a windfall nor as a personal gift of the nature of a testimonial; that the gift was not made in appreciation of the personality or character of the assessee nor was it symbolical of its appreciation of his personal qualities; that the consideration for the gift was in terms stated to be past services and therefore it could not be treated as a mere gift by an employer to an employee when the Court did not know what motivated the making of that gift. On the facts of the case the High Court reached the conclusion, though with some reluctance, that the case fell within the ambit of section 7(1), Explanation (2). The High Court also held that this sum could not be exempted from tax on the ground that it was merely a casual or nonrecurring receipt because once connection with the employment was established there was no question of considering the recurring or the casual nature of the receipt. During the pendency of the proceedings in the High Court the assessee died and his heirs and legal representatives were brought on the record and hence they are the appellants. It was argued on behalf of the appellants that the facts showed that the sum paid cannot fall within section 7(1), Explanation (2), of the Income tax Act. By Hazur Order dated January 22, 1948, the Maharaja had compensated the assessee for valuable services rendered and single minded loyalty to the Maharaja and to his State during the difficult period of the war and thereafter, which had added to the prestige and prosperity of the State and in appreciation of that the 747 Maharaja had granted to the assessee a monthly pension of Rs. 2,000, which was paid to the assessee even after the merger and of the establishment of the. United States of Saurashtra from out of the public revenue. At the time when Rs. 5,00,000 were paid, the State of Bhavnagar as such had ceased to exist. The Maharaja was no longer a Ruling Chief but was the Governor of the State of Madras. The order by which Messrs. Premchand Roychand & Sons, Bombay, were directed to pay the sum of Rs. 5,00,000 out of the account of the Maharaja does not mention any reason for payment. When as is alleged an accountant of the Maharaja asked as to how that amount of Rs. 5,00,000 was to be adjusted in the accounts, the Maharaja wrote on December 27, 1950, what is described as an order and directed that the sum should be debited to his Personal Expense Account. It also stated, why it is not clear, that that sum was to be given to the assessee in consideration of the assessee 's loyal and meritorious services as a gift. When asked later to clarify the reasons for making this gift the Maharaja made it clear that the gift was as a token of affection and regard for the assessee and his family and that the amount was paid by Messrs. Premchand Roychand & Sons from out of the private monies of the Maharaja with that firm. The Income tax Appellate Tribunal took into account the two documents the first of which has been described as an order of December 27, 1950, which was treated as a "contemporaneous document" and the other the letter of March 10, 1953, which was about two years later. The Tribunal did not accept the correctness of what was stated in the letter but attached a great deal of importance to the document of December 27, 1950, which the Tribunal thought was a con temporaneous document. It appears to us that the Tribunal was in error in treating the document of December 27, 1950, as a contemporaneous document and because of this erroneous approach the finding that it has given cannot be treated as a finding of fact which should bind the court in its decision. It is obvious that the reason why the 748 Tribunal attached all this importance to the document of December 27, 1950, was that it was contemporaneous. It would be difficult to accept that a document written six months after the fact of payment could be termed as contemporaneous document particularly when the object of that document was only to instruct an accountant as to how he should make a particular entry. The letter which was written by the Maharaja on March 10, 1953, was rejected because of the circumstances of the case one of which was the contemporaneous document. It does not appear to us that the Tribunal gave sufficient or any consideration to the fact that the Maharaja had already passed an order of a liberal and almost generous grant of a pension of Rs. 2,000 per mensem which was in lieu of the services rendered by the assessee both to the State as well as to the Maharaja and his family and that pension was ordered before the merger of the State and when the employment of the assessee as the Dewan terminated. According to what was stated in the letter of the Maharaja dated March 10, 1953, the sum of Rs. 5,00,000 was given as a gift in token of Maharaja 's affection and regard for the assessee and the assessee 's family. There is no reason shown why the Maharaja should have aided and abetted the assessee in escaping income tax. The only reason stated by the Tribunal is based on a wrong assumption as. to the nature of the document of December 27, 1950. The payment of Rs. 5,00,000 was sought to be brought within the purview of section 7(1) of the Act read with explanation (2). This section at the relevant time provided: section 7(1) "The tax shall be payable by an assessee under the head "Salaries" in respect of any salary or wages, any annuity, pension or gratuity and any fees, commissions, perquisites or profits in lieu of, or in addition to, any salary or wages, which are due to him from; whether paid or not or are paid by or on behalf of. . . any private employer. . . . . Explanation 2: A payment due to or received by 749 an assessee from an employer or former employer or from a provident or other fund, is to the extent to, which it does not consist of contributions by the ', assessee or interest on such contributions a profit received in lieu of salary for the purpose of this subsection, unless the payment is made solely as compensation for loss of employment and not by way of remuneration for past services;. . . . Counsel for the appellants contended that the payment did not fall within this section because it was a gift made on account of personal qualifications and was a testimonial unconnected with any service rendered. The submission was that the assessee had already been compensated for his services to the Maharaja personally and the State and this sum of Rs. 5 lacs was a gift in token of affection and regard and not as a payment in consideration of the services already rendered to the State or the Maharaja or both. It will not be inappropriate to mention that in the document dated December 27, 1950, it is stated that Rs. 5,00,000 was paid to the assessee as ex Dewan of Bhavnagar State in consideration of his having rendered loyal and meritorious services to Bhavnagar State. There is no mention in the document of December, 1950, of any services rendered to the Maharaja and it does not seem to have been considered by the Tribunal as to why the Maharaja should make out of his personal account the gift of such a large amount for something which was not done for the Maharaja specifically, particularly when the services to the State and to the Maharaja and his family had already been well compensated. This lends support to the submission of the appellants that the amount was paid merely as a gift in token of Maharaja 's affection and regard for the assessee. Mr. Kolah for the appellants relied on several cases in support of his contention that the amount was not liable to tax under section 7. In Beynon vs Thorpe (1) the assessee resigned his position as a Managing Director of the Company; did no work for the company; did (1) 95 750 not attend any Board meetings and received no remuneration as a Director of the Company. It was, however, a custom of the company to give to its retiring employees voluntary pension or allowance and the company voted a pension of pound 5,000 a year to the assessee but this resolution was rescinded and by another resolution pound 5,000 was voted to the assessee" not as or because he is a Director but as a personal gift". The assessee was assessed under Schedule 'E ' in respect of both the pension and the final payment but these assessments were discharged on appeal by the Special Commissioners who decided that the allowances were gifts of personal nature only. It was hold that the payments were not income assessable to income tax in the hands of the assessee. Rowlatt, J., said at p. 14: "Now the question is whether this ceases to be a mere gift because what has led to it is a past employment, an employment which has ceased. It has been. made abundantly clear by the Court in Scotland in Duncan 's case(1) that this sort of sums received by a person cannot possibly be put as receipts from his office or in respect of his office or employment, and they said in terms of that kind in a case like this that these emoluments cannot be taxed under Schedule 'E ', and I am bound to say I think that goes a very long way to conclude this case. But it is said that nevertheless they are in respect of the employment. Well, it seems to me that is a complete fallacy. It is nothing but a gift moved by the remembrance of past services already efficiently remunerated as services in them. selves; it is merely a gift moved by that sort of gratitude or that sort of moral obligation if you please: it is merely a gift of that kind. In this ease it happens to be very large; in many cases it is very small, but in all the cases it seems to me, whether it is large gift like this or whether it is a small gift to a humble servant they are exactly on the same footing as gifts which are made to a child or gifts which are made to any other person whom the giver thinks he ought to supply with funds for one reason or another; and as the (1) 751 Lord President in Scotland points out it is only a matter of history that the feeling between the parties which has generated the gift arises out of an employment." Mr. Kolah also relied on Reed vs Seymour (1). In that case a committee of a Cricket Club granted a benefit match to a professional cricketer in their service. Out of the profits of the benefit match the beneficiary, who was the assessee purchased a farm and assessment was made on him under Schedule 'E ' in respect of the proceeds of the benefit match but this was discharged by the General Commissioner on appeal. This sum was held to be in the nature of a personal gift and not assessable *to income tax. Viscount Cave in his speech posed the question which Rowlatt, J., put, i.e., "is it in the end a personal gift or is it remuneration"; if the latter it is subject to tax, if the former it is not. In that case the test applied by Viscount Cave was that the terms of the assessee 's employment did not en title him to a benefit; the purpose for which the amount was paid was to express gratitude of the employers and of the cricket loving public for what he had done and in their appreciation of his personal qualities. It was also stated that if the benefit had taken place after Seymour 's retirement no one would have sought to tax the proceeds as his income and the circumstance that it was given before but in contemplation of, retirement does not alter its quality and the whole sum was a testimonial and not a perquisite and therefore it was not a remuneration for services but a personal gift. Counsel also relied on Moorehouse vs Dooland (2). In that case a cricket professional was employed under a contract in which it was provided that collections shall be made for any meritorious performance by him in accordance with the rules for the time being of the employing Cricket League Club. The assessee played twenty matches and on eleven occasions collections were made on his behalf under the rules of the Club and a total sum of pound 48 15s. was collected. This was sought to be taxed as fees, wages perquisites or profits (1) [1927] XI T.C. 625. (2) 752 arising from his employment. It was held that (1) the test of liability to tax on voluntary payments from the standpoint of the person who receives it was that it accrued to him by virtue of his office or employment, i.e., byway of remuneration of his services; (2) that if the assessee 's contract of employment entitled him to receive voluntary payments and (3) that the payment was of a periodic and recurring character. On the other hand if a voluntary payment was made in circumstances which showed that it was given by way of a present or a testimonial on grounds personal to the recipient, the proper conclusion was that the payment was not profit accruing to the recipient by virtue of his office or employment but a gift to him as an individual paid and received by reason of his personal needs or by reason of his personal qualities. Applying these principles the proceeds were by the terms of the contract of employment received by way of remuneration and were liable to tax. In that case the payment was treated as being subject to tax because it was substantially in respect of services and accrued to the assessee by reason of his office. It is quite clear that had the gift been as a testimonial or a contribution for specific performance peculiarly due to the personal qualities of the recipient, it would have been treated as a mere present. The next case relied upon was David Mitchell vs Commissioner of Income tax (1) where the test laid was whether the payment was made in appreciation of .the personality and character of the assessee or in appreciation of the professional services rendered by him in order to give him an extra profit over and above the share of profit he might get from the firm for the services rendered. Counsel for the respondent argued that the gift made by the Maharaja was not in respect of personal qualities of the recipient but was relatable to his office although made by an ex employer and was therefore taxable; that the gift was voluntary is clear but it is not quite clear how the amount can be said to be relatable to the office held by the recipient. Even (1) 753 according to the case of the respondent the amount was paid about two years after the assessee had ceased to be an employee of the Maharaja or the State and immediately on his ceasing to be the Dewan of Bhavnagar State, the Maharaja had granted him a pension from out of the public funds for his services to the State as Dewan and for services rendered to the Maharaja and his family a handsome and a generous monthly pension of Rs. 2,000 per mensem. Apart from the fact that the Tribunal relied upon a document which was not contemporaneous, it seems to have overlooked the fact that there was a gap of two years before the amount of Rs. 5,00,000 was paid by the Maharaja out of his personal funds. Counsel for the respondent relied upon a judgment of this Court in P. Krishna Xenon vs The Commissioner of Income tax, Mysore, Travancore Cochin and Coorg, Bangalore (1). In that case the assessee was a teacher who taught his disciples Vedanta philosophy without any motive or intention of making any profit. One of the disciples made gifts of money to him on several occasions and it was contended by the assessee that he was not liable to tax on the amounts received from his disciple as he was not carrying on any vocation. But it was held that in teaching Vedanta philosophy the assessee was carrying on a vocation and that the payments made by the disciple were received by the recipient from his vocation. It was also held that if the voluntary payments had been made for reasons purely personal to the donee and not connected with his office or vocation, they would not be taxable but if they were made because of the office they would be taxable. The question was not what the donor thought he was doing but why the donee received it. The first thing to notice about that case is that those gifts were not made by the disciple as a gift to mark his esteem and affection for his preceptor but as was stated by the disciple in his affidavit he had paid those amounts because he had obtained the benefit of the teachings by the preceptor on Vedanta. It was found in that case and the disciple admitted (1) [1959] Supp. 1 S.C.R. 133. 754 that he had received benefit from the teaching of his preceptor and that the gifts that he had made, even though as a mark of esteem and affection, were the result of teaching imparted by the preceptor and because the amounts were paid to the preceptor as preceptor and the imparting of the teaching was the causa causans of the making of the gift,; it was not merely causa sine qua non. The payments were repeated and came with some regularity as the disciple visited the preceptor for receiving instructions. It was in these circumstances that this court held the payments to the preceptor as payments because of the imparting of the teaching and therefore they were income arising from the vocation of the recipient as a teacher of Vedanta philosophy. In our opinion the sum of Rs. 5,00,000 was not paid to the assessee in token of appreciation for the services rendered as a Dewan of Bhavnagar State but as a personal gift for the personal qualities of the assessee and as a token of personal esteem. The appeal is therefore allowed and the order of the High Court set aside and the reference is answered against the Commissioner of Income tax. The appellants will have their costs throughout. HIDAYATULLAH, J. I have had the advantage of reading the judgment just delivered by my brother, Kapur, J. I regret very much my inability to agree that the appeal should be allowed and the order of the High Court set aside. In my opinion, the High Court had correctly answered the question referred to it. The facts of the case have been stated in detail in the judgment of my learned brother, and I need not repeat them but refer only to some of them briefly. On June 12, 1950, a sum of Rs. 5 lakhs was given by the Maharaja of Bhavnagar to the predecessor of the appellants, who was an ex Dewan of the State. This was paid by Messrs. Premchand Roychand & Sons, Bombay, with whom the Maharaja had an account. There is no contemporaneous record to show why this payment was made; but it appears that when the accountant of the Maharaja enquired how the amount 755 was to be entered in the books of account, the Maharaja issued an order on December 27, 1950, to the following effect: "In consideration of Shri Annantrai P. Pattani the Ex Diwan of our Bhavnagar State having rendered loyal and meritorious services Rs. 5,00,000 (Rupees Five lacs) are given to him as gift. Therefore, it is ordered that the said amount should be debited to our Personal Expense Account." After the assessment proceedings had commenced in this case, the original assessee produced a letter written by the Maharaja on March 10, 1953, as follows: "I confirm that in June, 1950, I gave you a sum of rupees five lacs (Rs. 5,00,000) which was a gift as a token of my affection and regard for you and your family. This amount was paid to you by Premchand Roychand & Sons according to my letter of 31st May, 1950, from moneys in my account with them. " The question in this case was whether section 7(1) of the Income tax Act read with Explanation 2 to that section as it stood prior to the amendment in 1955, applied to this payment. That section, so far as it is material, is as follows: "7(1). The tax shall be payable by an assessee under the head 'Salaries ' in respect of any salary or wages, any annuity, pension or gratuity and any fees, commissions, perquisites or profits in lieu of, or in addition to, any salary or wages, which are allowed to him by or are due to him, whether paid or not, from, or are paid by or on behalf of any private employer;. . . . . Explanation 2. A payment due to or received by an assessee from an employer or former employer or from a provident or other fund, is to the extent to which it does not consist of contributions by the assessee or interest on such contributions a profit received in lieu of salary for the purpose of this subsection, unless the payment is made solely as compensation for loss of employment and not by way of remuneration for past services;. . .". To determine whether the second Explanation applies 756 to the facts in this case, it has to be found if this pay ment was received by the assessee from a former employer by way of remuneration for past services. The Tribunal did not accept the letter of the Maharaja, and observed as follows: "In support of the latter view Mr. Tricumdas strongly relied upon the letter dated 10 3 1953 addressed by the Maharaja to the assessee, vide para 2 above. We have already indicated the circumstances in which that letter came to be written and would merely observe that we find it difficult to bring ourselves to believe in (sic) the contents of that letter and would leave the matter at that. " This, in my opinion, is a finding upon the evidentiary .value of the letter of the Maharaja, and though the order of the Tribunal is worded mellifluously, the Tribunal 's decision is quite clearly that it was not per suaded to accept it. Indeed, of the two documents, greater worth has to be attached to one which was issued before the controversy started and was written not to the assessee but to the Maharaja 's accountant who enquired how the account was to be adjusted. The use of the word 'contemporaneous ' to describe the order to the accountant meant no more than this that it was earlier in time and very soon after the amount was given. The Tribunal did not rely on any extra neous evidence in reaching its conclusion, but on something which had proceeded from the Maharaja himself. The motive of the Maharaja may be irrelevant, because what has to be seen is not why the payment was made but for what the assessee had received it. The Maharaja no doubt had been generous in fixing the pension at Rs. 2,000 per month. But the payment of such a large sum was not just bounty but to reward the past services, which judged from the scale of the pension had not adequately been paid for in the past. In this connection, the words of the Maharaja himself (and what better evidence can there be?) were that the amount was paid "in consideration of Shri Annantrai P. Pattani the Ex Dewan of our Bhavnagar State having rendered loyal and meritorious services Rs. 5,00,000 are given to him as gift". 757 The word gift ' does not alter the nature of the payment. The Maharaja indeed made a gift, as he had stated over again; but this order quite clearly disclosees that it was by way of remuneration for past services. The case, therefore, falls within the ruling of the a Supreme Court reported in P. Krishna Menon vs The Commissioner of Income tax, Mysore, Travancore Cochin and Coorg, Bangalore (1), and is indistinguishable from it. In the earlier case of this Court, the person who gave the money did not even mention any past services; but this Court found that because the recipient had taught him Vedanta philosophy, the payment was really in the nature of remuneration for past services. The facts in P. Krishna Menon 's case (1) were that the assessee was teaching his disciples Vedanta philosophy without any motive or intention of making a profit out of such activity. One J. H. Levy who used to go to Travancore from England at intervals attended his teachings. Levy had an account with Lloyd 's Bank at Bombay, and on December 31, 1944, Levy transferred the entire amount of Rs. 2,41,103 11 3 to the credit of an account which Levy got the assessee to open in his ' own name. Levy made further remittances and by August 19, 1951, had paid about Rs. 4,50,000. It was held by this Court that the assessee was carrying on a vocation. In deciding the question whether the amounts were assessable to tax, this Court observed as follows: ". it seems to us that the present case is too plain to require any authority. The only point is, whether the moneys were received by the appellant by virtue of his vocation. Mr. Sastri contended that the facts showed that the payments were purely personal gifts. He drew our attention to the affidavit of Levy where it is stated 'all sums of money paid into his account by me have been gifts to mark my esteem and affection for him and for no other reason '. But Levy also there said, 'I have had the benefit of his teachings on Vedanta '. It is important to remember however that the point is not what the donor (1) [1959] Supp. 1 S.C.R. 133. 96 758 thought he was doing but why the donee received it". Sarkar, J., then referred to the dictum of Collins, M. R., in Herbert vs Mc Quade (1), which may be quoted here: "Now that judgment, whether or not the particular facts justified it, is certainly an affirmation of a principle of law that a payment may be liable to income tax although it is voluntary on the part of the persons who made it, and that the test is whether, from the standpoint of the person who receives it, it accrues to him in virtue of his office; if it does, it does not matter whether it was voluntary or whether it was compulsory on the part of the persons who paid it. That seems to me to be the test; and if we once get to this that the money has come to or accrued to, a person by virtue of his office it seems to me that the liability to income tax is not negatived merely by reason of the fact that there was no legal obligation on the part of the persons who contributed the money to pay it." The learned Judge also referred to the observations of Rowlatt, J., in Reed vs Seymour (2) and of Viscount Cave, L. C., in Seymour vs Reed (3), and observed that the real question was, is the payment in the nature of a personal gift or is it a remuneration?, and quoted as the reply the words of the Lord Chancellor "If the latter, it is subject to the tax; if the former, it is not." Sarkar, J., also referred to the observations of Lord Ashbourne in Blakiston vs Cooper (4), which were: "It was suggested that the offerings were made as personal gifts to the Vicar as marks of esteem and respect. Such reasons no doubt played their part in obtaining and increasing the amount of the offerings, but I cannot doubt that they were given to the vicar as vicar and that they formed part of the profits accruing by reason of his office.", and concluded as follows: "We have no doubt in this case that the imparting (1) (3) (2) (4) [1909] A.C. 104. 759 of the teaching was the causa causans of the making of the gift; it was not merely a causa sine qua non. The payments were repeated and came with the same regularity as Levy 's visits to the appellant for receiving instructions in Vedanta. We do not feel impressed by Mr. Sastri 's contention that the first payment of Rs. 2,41,103 11 3 was too large a sum to be paid as consideration. In any case, we are not concerned in this case with that payment. We are concerned with payments which are of much smaller amounts and as to which it has not been said that they were too large to be a consideration for the teaching. And one must not forget that these are cases of voluntary payments and the question of the appraisement of the value of the teaching received in terms of money is not very material. If the first payment was too big to have been paid for the teaching received, it was too big to have been given purely by way of gift. " In my opinion, the case of this Court concludes the matter, and the Tribunal was within its rights in accepting one piece of evidence in preference to another, and the finding on the evidentiary value of the letter of the Maharaja was a matter essentially for the Tribunal to decide finally. I thus agree with the High Court in the answer which it gave, in agreement on facts with the Tribunal, and the reasons for which the answer was given. I would, therefore, dismiss the appeal with costs. BY COURT: In view of the majority judgment of the Court, the appeal is allowed with costs throughout. Appeal allowed.

IN-Abs

A who was the Dewan of the State of Bhavnagar before responsible government was introduced in the State, was granted a monthly pension of Rs. 2,000 by the Maharaja of the State by an order dated January 15, 1948. On March 1, 1948 the State of Bhavnagar was merged in the United States of Saurashtra and the Maharajah ceased to be the Ruler of the State. Subsequently on May 31, 1950, the Maharaja directed his banker in Bombay to pay A a sum of Rs. 5 lakhs out of the amount lying to his credit and when he was asked for instructions as to how that sum was to be entered in the books of account he passed an order on December 27, 1950, to the effect that in consideration of A having rendered loyal and meritorious services the said sum was given to him as a gift and that the amount should be debited to his personal expense account. The liability of the above sum for income tax was raised during the course of the assessment proceedings of A for the year 1951 52, and the assessee produced a letter dated March 10, 1953, written by the Maharajah at the request of the former, as follows: "I confirm that in June 1950, I gave you a sum of Rs. 5 lakhs which was a gift as a token of my affection and regard for you and your family. . The Income tax Officer held that the amount was liable to income tax under section 7(1), read with explanation (2), of the Indian Income tax Act, 1922. The Appellate Tribunal took into account the two documents dated December 27, 1950, and March 10, 1953, written by the Maharajah and considered that the first which clearly mentioned why the said sum was paid to the assessee, was more reliable for the reason that it was contemporaneous, than the second which was written more than 2 years later and the correctness of which they were not inclined to accept. The Tribunal agreed with the Income tax Officer that the amount was a taxable receipt. Held, (per Kapur and Shah, JJ.; Hidayatullah, J., dissenting), that on the facts of the case the sum of Rs. 5 lakhs was given to the assessee not as a payment in consideration of the services already rendered by him as the Dewan of the State, but merely as a gift in token of the Maharajah 's affection and regard for the assessee, and, therefore, was not liable to be assessed to tax 743 under section 7(1), explanation (2), of the Indian Income tax Act,1922. The Tribunal was in error in treating the document dated December 27, 1950, 'as a contemporaneous document while as a matter of fact it was written six months after the fact of payment, and because of this erroneous approach as a result of which the second letter had been rejected, the finding given by the Tribunal could not be treated as binding on the Court. P. Krishna Menon vs The Commissioner of Income tax, Mysore, Travancore Cochin and Coorg, Bangalore, [1959] Supp. 1 S.C.R. 133, distinguished. Per Hidayatullah, J. The use of the word "contemporaneous" to describe the order to the banker meant no more than this that it was earlier in time and very soon after the amount was given. The word "gift" did not alter the nature of pay ment; the Maharaja indeed made a gift, as he had stated over again, but the order disclosed that it was by way of remuneration for past services. The Tribunal was within its rights in accepting one piece of evidence in preference to another, and the finding on the evidentiary value of the letter of the Maharaja was a matter essentially for the Tribunal to decide finally. The decision in P. Krishna Menon vs The Commissioner of Income tax, Mysore, Travancore Cochin and Coorg, Bangalore, [1959] Supp. 11 S.C.R. 133, was applicable and concluded the present case.

Appeals Nos. 98 and 99 of 1957. Appeals from the judgment and order dated August 31, 1954, of the Madhya Pradesh High Court in Civil Misc. Case No. 9 of 1953. R. Ganapathi Iyer and D. Gupta, for the appellant in C. A. No. 98 of 1957 and respondents in C. A. No. 99 of 1957. section K. Kapur and Naunit Lal, for the respondents in C. A. No. 98 of 1957 and appellant in C. k. No. 99 of 1957. November 30. MUDHOLKAR, J. These are cross appeals from two judgments of the erstwhile High Court of Madhya Bharat. Both of them arise out of a writ petition presented by the Gwalior Sugar Company Ltd., who are respondents in C. A. 98 of 1957, in which they challenged the validity of the levy of a cess on sugarcane purchased by the respondents. The grounds on which the validity of the cess is challenged are two. The first ground is that it was not levied under any law and the second ground is that it is discriminatory against the respondents. In order to appreciate these contentions it is necessary to set out certain facts. In the year 1940 in pursuance of an agreement entered into between the Government of Gwalior State and Sir Homi Mehta and others a sugar factory was established at Dabra. The name of that factory is The Gwalior Sugar Co., Ltd. On June 20, 1946, the Maharaja Scindia, the ruler of Gwalior State constituted a Committee to consider the desirability of imposing a "cane cess on the lines of the United Provinces or Bihar and to recommend a procedure for fixation of sugar prices within the terms of the agreement subsisting between the Government and the factory". The Report of the 621 Committee was submitted to the Maharaja by the Chairman on July 23, 1946. In their report the Committee observed that in order to put the industry on a sure and stable footing it was absolutely necessary to develop the cane area and yield in the shortest possible time. For this purpose the Committee recommended that it was essential to levy a cane cess of one anna per maund on all sugar cane purchased by the respondent factory. At the foot of this report the Maharaja made the following endorsement "Guzarish sanctioned, J. M. Scindia, 27 7 46". It may be mentioned that the Committee also recommended the establishment of a Cane Development Board. This recommendation was also accepted by the Ruler. On August 26, 1946, the Economic Adviser to the Government of Gwalior wrote a letter to the Manager of the respondent factory. It will be useful to reproduce the text of that letter as it will have some relevance on the second ground on which the cess is challenged. The letter runs thus: "Dear air, With a view to expand cane area and cane yield in the Harsi commanded area so that the Gwalior Sugar Co., Ltd., be put on a sound and stable basis, the Gwalior Government have decided to impose a cane cess of one anna per maund on all sugarcane purchased by your factory. The operation of this cess will start from the coming sugarcane crushing season. The proceeds of the cess have been earmarked for cane development work in the Harsi region that will be undertaken by a Cane Development Board constituted for the purpose. The Cane Development Board expects your co operation in this development work, which is proposed to be undertaken as soon as possible. Yours sincerely, Secretary, Cane Development Board. " The respondent factory protested against this levy. After the formation of the State of Madhya Bharat, 79 622 the respondent made a representation to the Government of Madhya Bharat against the levy of the cess. That representation was, however, rejected. They, then, paid the cess for the years 1946 to 1948 amounting to Rs. 1,17,712 8 2. The Government of Madhya Bharat made a demand from the respondents for a sum of Rs. 2,79,632 14 9 for the years 1949 to 1951. The respondents challenged the demand upon the two grounds set out above and presented a petition before the High Court of Madhya Bharat for quashing the demand. The petition was opposed on behalf of the State of Madhya Bharat which was the successor State of the former Gwalior State. The High Court granted the petition partially by holding that the State of Madhya Bharat was not entitled to recover the cess due from the respondents after January 26, 1950. It may be mentioned that it was conceded on behalf of the respondent company before the High Court that the State was entitled to recover the cess prior to January 26, 1950. Later, however, the respondents preferred a review petition to the High Court in which they sought relief even in respect of the cess for the period prior to January 26, 1950. The review petition was dismissed by the High Court upon the ground that no such petition lay. The respondents are challenging the view of the High Court in C. A. No. 99 of 1957. After the coming into force of the States Reorganization Act, 1956, the State of Madhya Pradesh has been substituted for the State of Madhya Bharat and they are shown as appellants and respondents respectively in the two appeals. The High Court struck down the cess upon the ground that the order dated July 27, 1946, of the Gwalior Durbar was only an executive order and not a law under article 265 of the Constitution and that, therefore, there was no authority for the imposition of the cess after January 26, 1950. This point is covered by the decision of this Court in Madhaorao Phalke vs The State of Madhya Bharat and Another (1) decided on October 3, 1960. In the course of the judgment of this Court delivered by Gajendragadkar, J., he pointed out: (1) ; 623 "It would thus be seen that though Sir Madhya Rao was gradually taking steps to associate the public with the government of the State and with that object he was establishing institutions consistent with the democratic form of rule, he had maintained all his powers as a sovereign with himself and had not delegated any of his powers in favour of any of the said bodies. In other words, despite the creation of these bodies the Maharaja continued to be an absolute monarch in whom were vested the supreme power of th e legislature, the executive and the judiciary. "In dealing with the question as to whether the orders issued by such an absolute monarch amount to a law or regulation having the force of law, or whether they constitute merely administrative orders, it is important to bear in mind that the distinction between executive orders and legislative commands is likely to be merely academic where the Ruler is the source of all power. There was no constitutional limitation upon the authority of the Ruler to act in any capacity he liked; he would be the supreme legislature, the supreme judiciary and the supreme head of the executive, and all his orders, how ever issued, would have the force of law and would govern and regulate the affairs of the State including the rights of the citizens. "It is also clear that an order issued by an absolute monarch in an Indian State which had the force of law would amount to an existing law under article 372 of the Constitution." From these observations it would be quite clear that the endorsement of the Maharaja on the Guzarish whereby he accepted the recommendation of the Committee about imposing a cess on the sugarcane crushed by the factory amounted to a law, however informal that endorsement may appear to be. Since it was a law enacted by the Maharaja then, with the coming into force of the Constitution, it became an existing law under article 372 and thus it satisfies the requirements of article 265 of the Constitution. 624 Disagreeing with the High Court we therefore hold that the cess was imposed by authority of law. What remains to be considered is whether this cess violates the guarantee of equal protection contained in article 14 of the Constitution. What was urged Ltd. before the High Court and what was also urged before us was that this is the only sugar factory in the present State of Madhya Pradesh which is liable to pay the cess whereas other sugar factories are exempt therefrom. The result of this is that those other sugar factories do not have to pay this cess and are thus better placed in the matter of carrying on their business of manufacturing and marketing of sugar than the respondents and so there is discrimination against the respondents in that respect. It seems to us, however, that this cannot be regarded as discrimination at all, even after the formation of the State of Madhya Pradesh. The reason is that the difference arises out of the historical background to the imposition of this cess. It has recently been held by this Court in M. K. Prithi Rajji vs The State of Rajasthan & Ors (1) decided on November 2, 1960, that geographical classification based upon certain historical factors is a permissible mode of classification. In our opinion, the principle underlying that decision would also apply to the present case. In view of the decision, Mr. Kapur the learned counsel for the respondents sought to rest his argument on a somewhat different ground. That ground is that under the order of June 27, 1946, the respondent factory alone was made liable to pay cess and that no similar liability was imposed upon any other factory in Gwalior. It would, however, appear that at that time no other sugar factory was at all in existence in the Gwalior State. The respondent factory was the first to be established and for all we know is even today the only sugar factory in the area which formerly constituted the State of Gwalior. We have already quoted the letter written by the Economic Adviser to the Gwalior Government addressed to the Management of the Gwalior Sugar Co., Ltd. From that letter it would (1) C.A. NO. 327 of 1956. 625 appear that the cess was imposed for a definite purpose and that was to expand the cane area in the Harsi commanded region so that the Gwalior Sugar Co., Ltd., that is, the respondent factory would be put on a sound and stable basis. It will, therefore, be clear that far from discriminating against the factory, the whole object of the cess was to do something for the benefit of the factory and for the benefit of the sugar industry in the State which was at that date in its infancy. Apart from the fact that in the matter of taxation the legislature enjoys a wide discretion, it should be borne in mind that a tax cannot be struck down as discriminatory unless the Court finds that it has been imposed with a deliberate intention of differentiating between an individual and an individual or upon grounds of race, religion, creed, language or the like. There was no question of doing anything like this in the year 1946 when no other sugar factory existed in the State of Gwalior. The cess was thus good in law when enacted and it has not been rendered void under article 13 by reason of the coming into force of the Constitution on the ground that it violates article 14. In our opinion, therefore, both the grounds on which the validity of the cess is challenged are ill conceived and the cess is a perfectly valid one. It would, therefore, be competent to the State of Madhya Pradesh to realise that cess from the respondent factory. Upon the view we have taken in the matter in C. A. No. 98 of 1957 nothing remains to be considered in C. A. No. 99 of 1957. Accordingly we allow the appeal by the State and dismiss that of the respondents. The costs of the appeal will be borne by the respondents in C. A. No. 98 of 1957. As both the appeals were argued together, there will be only one set of hearing fees. Appeal No. 98 allowed. Appeal No. 99 dismissed.

IN-Abs

In order to put the sugar industry on a stable footing, for which it was necessary to develop the cane area, the Ruler of the erstwhile Gwalior State by an order dated 27 7 1946 sanctioned the levy of cess of one anna per maund on all sugar cane purchased by the respondent company. When the Government of Madhya Bharat, which was the successor state of the former Gwalior State, made a demand for payment of the cess, the respondent filed a petition before the High Court of Madhya Bharat challenging the legality of the levy on the grounds (1) that the order dated 27 7 1946 was only an executive order and not a law under article 265 of the Constitution of India and that, therefore, there was no authority for the imposition of the cess after January 26, 1950, and (2) that the levy was discriminatory and violated article 14 inasmuch as while the respondent was made liable to pay the cess the other sugar factories in the State were exempt. It was found that at the time when cess was first levied there was no sugar factory in existence in the Gwalior State other than that of the respondent. Held, that (i) the Ruler of an Indian State was an absolute monarch in which there was no constitutional limitation to act in any manner be liked, he being the supreme legislature, the supreme judiciary and the supreme head of the executive. , Consequently, the order dated 27 7 1946 issued by the Ruler of Gwalior State amounted to a law enacted by him and became an existing law under article 372 of the Constitution of India. The levy of cess was therefore by authority of law within the meaning of article 265; Madhaorao Phalke vs The State of Madhya Bharat, ; , followed. (2) the levy of cess did not contravene article 14 because (a) the object was cane development in the particular area and a geographical classification based upon historical factors was a permissible mode of classification, and (b) a tax could not be struck down as discriminatory unless it was found that it was imposed with a deliberate intention of differentiating between 620 an individual and individual; and particularly, in the instant case, where when cess was first sought to be levied, there was no other sugar factory existing in the State.

15 of 1959, 14 of 1960 and 21 of 1959. Petitions under article 32 of the Constitution of India for enforcement of Fundamental Rights. Frank Anthony and J. B. Dadachanji, for the petitioners (In Petns. Nos. 15 and 21 of 1959). 612 H. J. Umrigar, O. P. Rana and A. G. Ratnaparkhi, for the petitioners (In Petn. No. 14 of 1960). L. K. Jha and section P. Varma, for the respondent (In Petn. No. 15 of 1959). C. K. Daphtary, Solicitor General of India, M. Adhikari, Advocate General for the State of Madhya Pradesh and I. N. Shroff, for the respondent (In Petn. No. 14 of 1960). H. N. Sanyal, Additional Solicitor General of India and C. P. Lal, for the respondent (In Petn. No. 21 of 1959). November 23. The Judgment of the Court was delivered by section K. DAS, J. These three writ petitions have been heard together, as they raise common questions of law and fact. They relate, however, to three different enactments made by the Legislatures of three different States Bihar in writ petition No. 15, Uttar Pradesh in writ petition No. 21, and Madhya Pradesh in writ petition No. 14. The petitioners in the several petitions have challenged the 'validity of a number of provisions of the enactments in question and, in some cases, also of the rules made thereunder. The impugned provisions are similar in nature, but are not exactly the same. Therefore, we shall first state in general terms the case of the petitioners and then consider in detail and separately the impugned provisions in each case. But before we do so, it is necessary to refer to some background history of the legislation under consideration in these cases. In the year 1958 this Court had to consider the validity of certain provisions of three Acts: (1) The Bihar Preservation and Improvement of Animals Act, (Bihar Act II of 1956); (2) the Uttar Pradesh Prevention of Cow Slaughter Act, 1955 (U. P. Act 1 of 1956); and (3) the Central Provinces and Berar Animal Preservation Act, 1949 (C. P. and Berar Act LII of 1949). The Bihar Act put a total ban on the slaughter of all 613 categories of animals of the species of bovine cattle. The U. P. Act put a total ban on the slaughter of cows and her progeny which included bulls, bullocks, heifers and calves. The C. P. and Berar Act placed a total ban on the slaughter of cows, male or female calves of cows, bulls, bullocks, and heifers, and the slaughter of buffaloes (male or female, adults or calves) was permitted only under a certificate granted by the proper authorities. These three Acts were enacted in pursuance of the directive principle of State policy contained in article 48 of the Constitution. The petitioners who challenged the various provisions of the aforesaid Acts in 1958 were engaged in the butcher 's trade and its subsidiary undertakings; they challenged the constitutional validity of the Acts on the ground that they infringed their fundamental rights under articles 14, 19(1)(f) and (g) of the Constitution. In the decision which this Court gave in Mohd. Hanif Quareshi vs The State, of Bihar (1), it held (i) that a total ban on the slaughter of cows of all ages and calves of cows and of she buffaloes, male or female, was quite reasonable and valid; (ii) that a total ban on the slaughter of she buffaloes or breeding bulls, or working bullocks (cattle as well as buffaloes) so long as they were capable of being used as milch or draught cattle was also reasonable and valid; and (iii) that a total ban on slaughter of she buffaloes, bulls and bullocks (cattle or buffalo) after they ceased to be capable of yielding milk or of breeding or working as draught animals was not in the interests of the general public and was invalid. In the result this Court directed the respondent States not to enforce their respective Acts in so far as they were declared void by it. This led to some amending or new legislation, and we are concerned in these three cases with the provisions of these amending or new Acts and the rules made thereunder. In Bihar (Writ Petition No. 15 of 1959) the impugned Act is called the Bihar Preservation and Improvement of Animals (1) ; 78 614 (Amendment) Act, 1959 which received the assent of the Governor on January 13, 1959. in Uttar Pradesh (Writ Petition No. 21 of 1959) the impugned Act is called the Uttar Pradesh Prevention of Cow Slaughter (Amendment) Act, 1958 and in Madhya Pradesh (Writ Petition No ' 14 of 1960) a new Act was passed called the Madhya Pradesh Agricultural Cattle Preservation Act, 1959 (Act 18 of 1959) which received the assent of the President on July 24, 1959 and came into force on January 15, 1960. The rules made there under are called the Madhya Pradesh Agricultural Cattle Preservation Rules, 1959. The general case of the petitioners, who are several in number in each of the three cases, is that they are citizens of India and carry on their profession and trade of butchers; they allege that the various provisions of the impugned legislation infringe their fundamental rights in that they, for all practical purposes, have put a total ban on the slaughter of she buffaloes, bulls or bullocks, even after such animals have ceased to be useful, and have virtually put an end to their profession and trade. It is pointed out that the age up to which the animals referred to above cannot be slaughtered (20 or 25 years) has been put so high that the practical effect is that no animals can be slaughtered, and the amending or new legislation has put in other restrictions so arbitrary and unreasonable in nature that in effect they amount to a prohibition or destruction of the petitioner 's right to carry on their trade and profession. The following allegations quoted from one of the petitions (Writ Petition No. 15 of 1959) give a general idea of the nature of the case which the petitioners have put forward: "That there is good professional authority for the view that even in countries where animal husbandry is organised on a highly progressive and scientific basis, cattle seldom live beyond 15 or 16 years. That there is also good authority to the effect that even pedigree breeding bulls are usually discarded at the age of 12 or 14 years. , That in India bulls and bullocks and she buffaloes rarely live even up to the age of 15 years; draught bullocks begin to age after eight years, 615 That the raising of the age limit from 15 to 20 years is arbitrary, unreasonable and against the general public interests and is repugnant to and infringes the, fundamental rights of the, petitioners under Article 19 (1)(f) and (g) of the Constitution. That section 3 of the amending Act is a mala fide, colourable exercise of power, repugnant to the fundamental rights of the petitioners under Article 19 (1)(f) and (g). That this arbitrary raising of the age limit will be against the public interests For the following among ' other reasons: (i) That there will, in fact, be no bulls or bullocks or she buffaloes available for slaughter as few, if any, of such animals survive in India up to the age of 15 years; (ii) that the profession, trade and occupation of millions of Muslims will be permanently and irreparably injured; (iii) that millions of members of the minority communities such as Christians, Scheduled Castes, Scheduled Tribes and Muslims, for whom cattle beef is a staple item of their diet, will be deprived of this diet; (iv) that the menace of the rapidly increasing uneconomic cattle population in such matters as the destruction of crops, being a public nuisance, will be accentuated by this arbitrary age limit, and in effect will ensure that bulls and bullocks cannot be slaughtered; (v) that the menace of the rapidly increasing population of uneconomic cattle to the fodder and other animal food resources of the country will be accentuated. (vi) that the competition between the rapidly increasing cattle population, a large percentage I of which is uneconomic and useless, add the human population for available land will be accentuated; (vii) that this piece of legislation will ensure the steady increase of useless bulls and bullocks and must react disastrously against any attempt to improve milk production, bullock power or animal husbandry generally." 616 Similar allegations have been made in the other two petitions also. The correctness of these allegations has been con. tested on behalf of the respondent States, which through some of their officers have filed affidavits in reply. We shall presently examine at greater length the averments made in these affidavits, but we may indicate here in broad outline what their general effect is. In Bihar the age below which the slaughter of she buffaloes, bulls and bullocks is prohibited is 25 years. The respondent State has taken the plea that the usefulness or longevity of live stock for breeding and other purposes depends to a very great extent on (a) better animal husbandry facilities like feeding and management and (b) control of animal diseases, and as these facilities are now available in a greater measure, the legislature came to the conclusion that a bull or bullock or a she buffalo below 25 years of age continues to remain useful; if a bull, bullock or shebuffalo is permanently incapacitated below that age the impugned provision permits its slaughter and therefore the legislation which is challenged conforms to the decision of this Court and does not violate any fundamental right. In Uttar Pradesh the age is 20 years as respects bulls or bullocks, with a further restriction to be referred to later. The reply of the res pondent State is that bulls or bullocks do not become unfit at the age of 12 or 14 years as alleged by the petitioners; on the contrary, they continue to be useful and at no time they become entirely useless. It is then stated in the affidavit: "As a matter of fact, the age up to which the animals can live and are serviceable depends upon the care and attention they receive and the quality of the grass on which they are grazed. . . . . .According to a high authority the average age of an ox under favourable conditions would be between 15 to 20 years. Even under conditions prevailing in Uttar Pradesh, bulls can live upto 20 years or more as would appear from an analysis of a survey report of the animal husbandry department. " 617 On these averments the respondent State contends that the legislation is valid. In Madhya Pradesh also the age is 20 years. The Under Secretary to the( State Government in the Agricultural Department ' has made the reply affidavit in which it has been stated inter alia that conditions in Madhya Pradesh are different from conditions in other States. The affidavit then states: "The State of Madhya Pradesh has a total area of 107,589,000 acres, out of which total cropped area is 43,572,000 acres. Forest area is 33,443,000 acres, area not available for cultivation is 11,555,000 acres, uncultivated land is 18,405,000 acres and fallow land is 5,834,000 acres. It will thus be seen that this State has a large forest area and plenty of grass land for pasturage. As the forests supply the greater part of the fuel needs of the human population, the dung of animals is largely available as manure. The legislature considered that bulls, bullocks and buffaloes are useful in this State till they are well past twenty years of age and that they should not be slaughtered till they are past that age and are also unfit for work or breeding. The problem of animals dying of slow starvation or of worthless animals depriving useful animals of fodder needs no consideration in this State. The agricultural community in the State benefits by the existence of animals as long as they are useful. " There are also further averments as to the shortage of breeding bulls, working bullocks and she buffaloes in Madhya Pradesh. On these averments the contention of the respondent State is that the cattle in that State are useful up to the age of 20 years. We have indicated above in general terms the case of the petitioners and the reply which the respondent States have given. We proceed now to a detailed consideration of the impugned legislation in each case. (1) We take up first the Bihar Preservation and Improvement of Animals (Amendment) Act, 1959 and the rules made under the main Act of 1955. Section 3 of the Act as amended reads: "section 3.

IN-Abs

In Mohd. Hanif Quareshi vs The State of Bihar the Supreme Court held that a total ban on the slaughter of bulls, bullocks and she buffaloes after they had ceased to be useful was not in the interests of the general public and was invalid. Thereafter, the Bihar Legislature passed the Bihar Preservation and Improvement of Animals (Amendment) Act, 1958, the Uttar Pradesh Legislature passed the U. P. Prevention of Cow Slaughter (Amendment) Act, 1958 and the Madhya Pradesh Legislature passed a new Act, the M. P. Agricultural Cattle Preservation Act, 1959. Section 3 of the Bihar Act prohibited the slaughter of a bull, bullock or she buffalo except when it was over 25 years of age and had become useless. Rule 3 of the Bihar Preservation and Improvement of Animals Rules, 1960 prescribed that the certificate for slaughtering an animal could be granted only with the concurrence of the Veterinary Officer and the Chairman or Chief Officer of a District Board, Municipality etc., and if the two differed, then according to the decision of the Sub Divisional Animal Husbandary Officer. Section 3 of the U. P. Act permitted the slaughter of a bull or bullock only if it was over 20 years of age and was permanently unfit. It further provided that the animal could not be slaughtered within 20 days of the grant of 'a certificate that it was fit to be slaughtered and gave a right of appeal to any person aggrieved by the order granting the certificate. Section 4(1)(b) of the Madhya Pradesh Act provided that no bull, bullock or buffallo could be slaughtered except upon a certificate issued by the competent authority and section 4(2)(a) provided that no certificate could be issued unless the animal was over 20 years of age and was unfit for work or breeding. Section 4(3) gave a right of appeal to any person aggrieved by the order of the competent authority. Section 5 provided that no animal 611 shall be slaughtered within 10 days of the date of the issue of the certificate and where an appeal was preferred against the grant of the certificate, till the time such appeal was disposed of. The petitioners, who carried on the profession and trade of butchers, contended that the various provisions of the three Acts set out above infringed their fundamental rights by practically putting a total ban on the slaughter of bulls, bullocks and she buffaloes even after the animal had ceased to be useful and thus virtually put an end to their profession and trade. Held, (i) that the ban on the slaughter of bulls, bullocks and she buffaloes below the age of 20 or 25 years was not a reasonable restriction in the interests of the general public and was void. A bull, bullock or buffalo did not remain useful after 15 years, and whatever little use it may have then was greatly offset by the economic disadvantages of feeding and maintaining unserviceable cattle. The additional condition that the animal must, apart from being above 20 or 25 years of age, also be unfit was a further unreasonable restriction. Section 3 of the Bihar Act, section 3 of the U. P. Act and section 4(2)(a) of the M. P. Act were invalid. (ii) Rule 3 of the Bihar Rules was bad as it imposed dis proportionate restrictions on the rights of the petitioners. The procedure involved such expenditure of money and time as made the obtaining of the certificate not worthwhile. (iii) The provisions in the Uttar Pradesh and Madhya Pradesh Acts providing that the animal shall not be slaughtered within 20 and10 days respectively of the issue of the certificate and that any person aggrieved by the order of the competent authority, may appeal against it, were likely to hold up the slaughter of the animal for a long time and practically put a total ban on slaughter of bulls, bullocks and buffaloes even after they had ceased to be useful. These provisions imposed unreasonable restrictions on the fundamental rights of the petitioners and were void. Mohd. Hanif Quareshi vs The State of Bihar, [1959] S.C.R. 629, State of Madras vs V. G. Row, ; and The State of Bihar vs Maharajadhiraja Sir Kameshwar Singh of Darbhanga, , referred to.

Appeal No.232 of 1960. Appeal from the Judgment and Order dated October 6, 1958, of the Bombay High Court in Income Tax Reference No. 10 of 1958. R. J. Kolah, Dwaraka Das, section N. Andley, Rameshwar Nath, J. B. Dadachanji and P. L. Vohra for the Appellants. Hardyal Hardy and D. Gupta for the Respondent. November 29. The Judgment of J. L. Kapur and J. C. Shah, JJ., was delivered by Kapur, J. M. Hidayatullah, J., delivered a separate Judgment. KAPUR, J. This is an appeal pursuant to a certificate of the High Court of Bombay against the judgment and order of that Court in Income tax Reference No. 10 of 1958, answering the question referred to it against the assesses whose legal representatives are 744 the appellants before, us, the respondent being the Commissioner of Income tax. The facts which have given rise to the appeal are that the late Mr. Annantrai P. Pattani, hereinafter called the assessee was, by Hazur Order dated December 10, 1937, appointed the Chief Dewan of Bhavnagar State. On January 15, 1948, the Maharaja of Bhavnagar introduced responsible Government in his State and appointed the assessee as the Chairman of the Bhavnagar Durbar Bank but he received no salary for that post. On the same date by another Hazur Order the Maharaja granted a monthly pension of Rs. 2,000 to the assessee. The order was in the following terms: "He looked after us well in our childhood and rendered valuable services sincerely and with single minded loyalty to us and our State during extremely difficult period of the last war and thereafter, which has enhanced the prestige and prosperity of the State and given the State and the people a place of pride in India. In appreciation of this, it is (hereby) decided to grant him a monthly pension of Rs. 2,000 two thousand which is the monthly salary he is drawing at present. Date 22 1 1948. " On May 31, 1950, the Maharaja directed Messrs. Premchand Roychand & Sons, Bombay, with whom he had an account "to pay by cheque to Mr. A.P. Pattani Rs. 5 lacs out of the amount lying to the credit of my account with you." This sum was paid to the assessee on June 12, 1950. It is stated that the accountant of the Maharaja asked for instructions as to how that amount of Rs. 5 lacs was to be adjusted in the accounts and on December 27, 1950, the Maharaja made the following order: "In consideration of Shri Annantrai P. Pattani the Ex Diwan of our Bhavnagar State having rendered loyal and meritorious services Rs. 5,00,000 (Rupees Five Lacs) are given to him as gift. Therefore, it is ordered that the said amount should be debited to our Personal Expense Account." On March 1, 1948, Bhavnagar State was merged in the United States of Saurashtra and the Maharaja ceased to be the ruler of the said State as from that 745 date. The assessability of this sum of Rs. 5 lacs was raised in the course of the assessment proceedings for the assessment year 1951 52 and at the request of the ' assessee which is stated to be oral the Maharaja wrote on March 10, 1953, the following: "I confirm that in June 1950, 1 gave you a sum of rupees five lacs (Rs. 5,00,000) which wag a gift as a token of my affection and regard for you and your family. This amount was paid to you by Premchand Roychand & Sons according to my letter of 31st May, 1950, from moneys in my account with them. " On these facts the Income tax Officer held that Rs. 5,00,000 received on June 12, 1950, was liable to income tax under section 7(1) read with explanation (2) of that section as it stood before the amendment by the Finance Act, 1955. The assessee took an appeal to the Appellate Assistant Commissioner which was dismissed. Against that order an appeal was taken to the Income tax Appellate Tribunal but the Tribunal also dismissed the appeal. The Tribunal held that looking to the circumstances they would attach more importance to the "contemporaneous document, i.e., the order of the 27th December, 1950"; which clearly mentioned why the sum of Rs. 5,00,000 was paid to the assessee. The Tribunal was not inclined to "believe in the contents of that letter and would leave the matter at that. " The reference is to the letter of the Maharaja dated March 10, 1953. The Tribunal further held that there was no distinction between the Maha raja and the State and "assuming for a moment that this view of ours is not found to be correct, still it is clear from the Huzur Order No. 13 dated 22 1 1948 (vide para 2 above) that the assessee rendered services not only to the State, if it is distinct from the Maharaja but to the Maharaja as well; for that Huzur Order clearly refers to assessee rendering "valuable services sincerely and conscientiously to us and our State". We would, therefore, hold that the amount of Rs. 5 lacs is a taxable receipt falling under Section 7(1) read with Explanation 2. " At the instance of the assessee the following question of law was referred to the High Court: 746 "Whether the sum of Rs. 5 lacs has been properly ,brought to tax in the hands of the assessee for the assessment year 1951 52?" and a further question as to the applicability of section 4(3) (vii) of the Income tax Act was not referred on the ground that it did not arise out of the order of the Tribunal. The High Court, on the findings given by the Tribunal came to the conclusion that section 7(1) explanation (2) of the Income tax Act applied. It held that it was not possible to regard the receipt of this sum of money by the assessee as a windfall nor as a personal gift of the nature of a testimonial; that the gift was not made in appreciation of the personality or character of the assessee nor was it symbolical of its appreciation of his personal qualities; that the consideration for the gift was in terms stated to be past services and therefore it could not be treated as a mere gift by an employer to an employee when the Court did not know what motivated the making of that gift. On the facts of the case the High Court reached the conclusion, though with some reluctance, that the case fell within the ambit of section 7(1), Explanation (2). The High Court also held that this sum could not be exempted from tax on the ground that it was merely a casual or nonrecurring receipt because once connection with the employment was established there was no question of considering the recurring or the casual nature of the receipt. During the pendency of the proceedings in the High Court the assessee died and his heirs and legal representatives were brought on the record and hence they are the appellants. It was argued on behalf of the appellants that the facts showed that the sum paid cannot fall within section 7(1), Explanation (2), of the Income tax Act. By Hazur Order dated January 22, 1948, the Maharaja had compensated the assessee for valuable services rendered and single minded loyalty to the Maharaja and to his State during the difficult period of the war and thereafter, which had added to the prestige and prosperity of the State and in appreciation of that the 747 Maharaja had granted to the assessee a monthly pension of Rs. 2,000, which was paid to the assessee even after the merger and of the establishment of the United States of Saurashtra from out of the public revenue. At the time when Rs. 5,00,000 were paid, the State of Bhavnagar as such had ceased to exist. The Maharaja was no longer a Ruling Chief but was the Governor of the State of Madras. The order by which Messrs. Premchand Roychand & Sons, Bombay, were directed to pay the sum of Rs. 5,00,000 out of the account of the Maharaja does not mention any reason for payment. When as is alleged an accountant of the Maharaja asked as to how that amount of Rs. 5,00,000 was to be adjusted in the accounts, the Maharaja wrote on December 27, 1950, what is described as an order and directed that the sum should be debited to his Personal Expense Account. It also stated, why it is not clear, that that sum was to be given to the assessee in consideration of the assessee 's loyal and meritorious services as a gift. When asked later to clarify the reasons for making this gift the Maharaja made it clear that the gift was as a token of affection and regard for the assessee and his family and that the amount was paid by Messrs. Premchand Roychand & Sons from out of the private monies of the Maharaja with that firm. The Income tax Appellate Tribunal took into account the two documents the first of which has been described as an order of December 27, 1950, which was treated as a "contemporaneous document" and the other the letter of March 10, 1953, which was about two years later. The Tribunal did not accept the correctness of what was stated in the letter but attached a great deal of importance to the document of December 27, 1950, which the Tribunal thought was a con temporaneous document. It appears to us that the Tribunal was in error in treating the document of December 27, 1950, as a contemporaneous document and because of this erroneous approach the finding that it has given cannot be treated as a finding of fact which should bind the court in its decision. It is obvious that the reason why the 748 Tribunal attached all this importance to the document of December 27, 1950, was that it was contemporaneous. It would be difficult to accept that a document written six months after the fact of payment could be termed as contemporaneous document particularly when the object of that document was only to instruct an accountant as to how he should make a particular entry. The letter which was written by the Maharaja on March 10, 1953, was rejected because of the circumstances of the case one of which was the contemporaneous document. It does not appear to us that the Tribunal gave sufficient or any consideration to the fact that the Maharaja had already passed an order of a liberal and almost generous grant of a pension of Rs. 2,000 per mensem which was in lieu of the services rendered by the assessee both to the State as well as to the Maharaja and his family and that pension was ordered before the merger of the State and when the employment of the assessee as the Dewan terminated. According to what was stated in the letter of the Maharaja dated March 10, 1953, the sum of Rs. 5,00,000 was given as a gift in token of Maharaja 's affection and regard for the assessee and the assessee 's family. There is no reason shown why the Maharaja should have aided and abetted the assessee in escaping income tax. The only reason stated by the Tribunal is based on a wrong assumption as to the nature of the document of December 27, 1950. The payment of Rs. 5,00,000 was sought to be brought within the purview of section 7(1) of the Act read with explanation (2). This section at the relevant time provided: section 7(1) "The tax shall be payable by an assessee under the head "Salaries" in respect of any salary or wages, any annuity, pension or gratuity and any fees, commissions, perquisites or profits in lieu of, or in addition to, any salary or wages, which are due to him from; whether paid or not or are paid by or on behalf of. . . any private employer. . . . . Explanation 2: A payment due to or received by 749 an assessee from an employer or former employer or from a provident or other fund, is to the extent to, which it does not consist of contributions by the ', assessee or interest on such contributions a profit received in lieu of salary for the purpose of this subsection, unless the payment is made solely as compensation for loss of employment and not by way of remuneration for past services;. . . . Counsel for the appellants contended that the payment did not fall within this section because it was a gift made on account of personal qualifications and was a testimonial unconnected with any service rendered. The submission was that the assessee had already been compensated for his services to the Maharaja personally and the State and this sum of Rs. 5 lacs was a gift in token of affection and regard and not as a payment in consideration of the services already rendered to the State or the Maharaja or both. It will not be inappropriate to mention that in the document dated December 27, 1950, it is stated that Rs. 5,00,000 was paid to the assessee as ex Dewan of Bhavnagar State in consideration of his having rendered loyal and meritorious services to Bhavnagar State. There is no mention in the document of December, 1950, of any services rendered to the Maharaja and it does not seem to have been considered by the Tribunal as to why the Maharaja should make out of his personal account the gift of such a large amount for something which was not done for the Maharaja specifically, particularly when the services to the State and to the Maharaja and his family had already been well compensated. This lends support to the submission of the appellants that the amount was paid merely as a gift in token of Maharaja 's affection and regard for the assessee. Mr. Kolah for the appellants relied on several cases in support of his contention that the amount was not liable to tax under section 7. In Beynon vs Thorpe (1) the assessee resigned his position as a Managing Director of the Company; did no work for the company; did (1) 95 750 not attend any Board meetings and received no remuneration as a Director of the Company. It was, however, a custom of the company to give to its retiring employees voluntary pension or allowance and the company voted a pension of pound 5,000 a year to the assessee but this resolution was rescinded and by another resolution pound 5,000 was voted to the assessee" not as or because he is a Director but as a personal gift". The assessee was assessed under Schedule 'E ' in respect of both the pension and the final payment but these assessments were discharged on appeal by the Special Commissioners who decided that the allowances were gifts of personal nature only. It was hold that the payments were not income assessable to income tax in the hands of the assessee. Rowlatt, J., said at p. 14: "Now the question is whether this ceases to be a mere gift because what has led to it is a past employment, an employment which has ceased. It has been made abundantly clear by the Court in Scotland in Duncan 's case(1) that this sort of sums received by a person cannot possibly be put as receipts from his office or in respect of his office or employment, and they said in terms of that kind in a case like this that these emoluments cannot be taxed under Schedule 'E ', and I am bound to say I think that goes a very long way to conclude this case. But it is said that nevertheless they are in respect of the employment. Well, it seems to me that is a complete fallacy. It is nothing but a gift moved by the remembrance of past services already efficiently remunerated as services in themselves; it is merely a gift moved by that sort of gratitude or that sort of moral obligation if you please: it is merely a gift of that kind. In this ease it happens to be very large; in many cases it is very small, but in all the cases it seems to me, whether it is large gift like this or whether it is a small gift to a humble servant they are exactly on the same footing as gifts which are made to a child or gifts which are made to any other person whom the giver thinks he ought to supply with funds for one reason or another; and as the (1) 751 Lord President in Scotland points out it is only a matter of history that the feeling between the parties which has generated the gift arises out of an employment." Mr. Kolah also relied on Reed vs Seymour (1). In that case a committee of a Cricket Club granted a benefit match to a professional cricketer in their service. Out of the profits of the benefit match the beneficiary, who was the assessee purchased a farm and assessment was made on him under Schedule 'E ' in respect of the proceeds of the benefit match but this was discharged by the General Commissioner on appeal. This sum was held to be in the nature of a personal gift and not assessable *to income tax. Viscount Cave in his speech posed the question which Rowlatt, J., put, i.e., "is it in the end a personal gift or is it remuneration"; if the latter it is subject to tax, if the former it is not. In that case the test applied by Viscount Cave was that the terms of the assessee 's employment did not en title him to a benefit; the purpose for which the amount was paid was to express gratitude of the employers and of the cricket loving public for what he had done and in their appreciation of his personal qualities. It was also stated that if the benefit had taken place after Seymour 's retirement no one would have sought to tax the proceeds as his income and the circumstance that it was given before but in contemplation of, retirement does not alter its quality and the whole sum was a testimonial and not a perquisite and therefore it was not a remuneration for services but a personal gift. Counsel also relied on Moorehouse vs Dooland (2). In that case a cricket professional was employed under a contract in which it was provided that collections shall be made for any meritorious performance by him in accordance with the rules for the time being of the employing Cricket League Club. The assessee played twenty matches and on eleven occasions collections were made on his behalf under the rules of the Club and a total sum of pound 48 15s was collected. This was sought to be taxed as fees, wages perquisites or profits (1) [1927] XI T.C. 625.(2) 752 arising from his employment. It was held that (1) the test of liability to tax on voluntary payments from the standpoint of the person who receives it was that it accrued to him by virtue of his office or employment, i.e., byway of remuneration of his services; (2) that if the assessee 's contract of employment entitled him to receive voluntary payments and (3) that the payment was of a periodic and recurring character. On the other hand if a voluntary payment was made in circumstances which showed that it was given by way of a present or a testimonial on grounds personal to the recipient, the proper conclusion was that the payment was not profit accruing to the recipient by virtue of his office or employment but a gift to him as an individual paid and received by reason of his personal needs or by reason of his personal qualities. Applying these principles the proceeds were by the terms of the contract of employment received by way of remuneration and were liable to tax. In that case the payment was treated as being subject to tax because it was substantially in respect of services and accrued to the assessee by reason of his office. It is quite clear that had the gift been as a testimonial or a contribution for specific performance peculiarly due to the personal qualities of the recipient, it would have been treated as a mere present. The next case relied upon was David Mitchell vs Commissioner of Income tax (1) where the test laid was whether the payment was made in appreciation of .the personality and character of the assessee or in appreciation of the professional services rendered by him in order to give him an extra profit over and above the share of profit he might get from the firm for the services rendered. Counsel for the respondent argued that the gift made by the Maharaja was not in respect of personal qualities of the recipient but was relatable to his office although made by an ex employer and was therefore taxable; that the gift was voluntary is clear but it is not quite clear how the amount can be said to be relatable to the office held by the recipient. Even (1) 753 according to the case of the respondent the amount was paid about two years after the assessee had ceased to be an employee of the Maharaja or the State and immediately on his ceasing to be the Dewan of Bhavnagar State, the Maharaja had granted him a pension from out of the public funds for his services to the State as Dewan and for services rendered to the Maharaja and his family a handsome and a generous monthly pension of Rs. 2,000 per mensem. Apart from the fact that the Tribunal relied upon a document which was not contemporaneous, it seems to have overlooked the fact that there was a gap of two years before the amount of Rs. 5,00,000 was paid by the Maharaja out of his personal funds. Counsel for the respondent relied upon a judgment of this Court in P. Krishna Xenon vs The Commissioner of Income tax, Mysore, Travancore Cochin and Coorg, Bangalore (1). In that case the assessee was a teacher who taught his disciples Vedanta philosophy without any motive or intention of making any profit. One of the disciples made gifts of money to him on several occasions and it was contended by the assessee that he was not liable to tax on the amounts received from his disciple as he was not carrying on any vocation. But it was held that in teaching Vedanta philosophy the assessee was carrying on a vocation and that the payments made by the disciple were received by the recipient from his vocation. It was also held that if the voluntary payments had been made for reasons purely personal to the donee and not connected with his office or vocation, they would not be taxable but if they were made because of the office they would be taxable. The question was not what the donor thought he was doing but why the donee received it. The first thing to notice about that case is that those gifts were not made by the disciple as a gift to mark his esteem and affection for his preceptor but as was stated by the disciple in his affidavit he had paid those amounts because he had obtained the benefit of the teachings by the preceptor on Vedanta. It was found in that case and the disciple admitted (1) [1959] Supp. 1 S.C.R. 133. 754 that he had received benefit from the teaching of his preceptor and that the gifts that he had made, even though as a mark of esteem and affection, were the result of teaching imparted by the preceptor and because the amounts were paid to the preceptor as preceptor and the imparting of the teaching was the causa causans of the making of the gift,; it was not merely causa sine qua non. The payments were repeated and came with some regularity as the disciple visited the preceptor for receiving instructions. It was in these circumstances that this court held the payments to the preceptor as payments because of the imparting of the teaching and therefore they were income arising from the vocation of the recipient as a teacher of Vedanta philosophy. In our opinion the sum of Rs. 5,00,000 was not paid to the assessee in token of appreciation for the services rendered as a Dewan of Bhavnagar State but as a personal gift for the personal qualities of the assessee and as a token of personal esteem. The appeal is therefore allowed and the order of the High Court set aside and the reference is answered against the Commissioner of Income tax. The appellants will have their costs throughout. HIDAYATULLAH, J. I have had the advantage of reading the judgment just delivered by my brother, Kapur, J. I regret very much my inability to agree that the appeal should be allowed and the order of the High Court set aside. In my opinion, the High Court had correctly answered the question referred to it. The facts of the case have been stated in detail in the judgment of my learned brother, and I need not repeat them but refer only to some of them briefly. On June 12, 1950, a sum of Rs. 5 lakhs was given by the Maharaja of Bhavnagar to the predecessor of the appellants, who was an ex Dewan of the State. This was paid by Messrs. Premchand Roychand & Sons, Bombay, with whom the Maharaja had an account. There is no contemporaneous record to show why this payment was made; but it appears that when the accountant of the Maharaja enquired how the amount 755 was to be entered in the books of account, the Maharaja issued an order on December 27, 1950, to the following effect: "In consideration of Shri Annantrai P. Pattani the Ex Diwan of our Bhavnagar State having rendered loyal and meritorious services Rs. 5,00,000 (Rupees Five lacs) are given to him as gift.Therefore, it is ordered that the said amount should be debited to our Personal Expense Account." After the assessment proceedings had commenced in this case, the original assessee produced a letter written by the Maharaja on March 10, 1953, as follows: "I confirm that in June, 1950, I gave you a sum of rupees five lacs (Rs. 5,00,000) which was a gift as a token of my affection and regard for you and your family.This amount was paid to you by Premchand Roychand & Sons according to my letter of 31st May, 1950, from moneys in my account with them." The question in this case was whether section 7(1) of the Income tax Act read with Explanation 2 to that section as it stood prior to the amendment in 1955, applied to this payment. That section, so far as it is material, is as follows: "7(1).The tax shall be payable by an assessee under the head 'Salaries ' in respect of any salary or wages, any annuity, pension or gratuity and any fees, commissions, perquisites or profits in lieu of, or in addition to, any salary or wages, which are allowed to him by or are due to him, whether paid or not, from, or are paid by or on behalf of any private employer;. . . . . Explanation 2. A payment due to or received by an assessee from an employer or former employer or from a provident or other fund, is to the extent to which it does not consist of contributions by the assessee or interest on such contributions a profit received in lieu of salary for the purpose of this subsection, unless the payment is made solely as compensation for loss of employment and not by way of remuneration for past services;. . .". To determine whether the second Explanation applies 756 to the facts in this case, it has to be found if this pay ment was received by the assessee from a former employer by way of remuneration for past services. The Tribunal did not accept the letter of the Maharaja, and observed as follows: "In support of the latter view Mr. Tricumdas strongly relied upon the letter dated 10 3 1953 addressed by the Maharaja to the assessee, vide para 2 above. We have already indicated the circumstances in which that letter came to be written and would merely observe that we find it difficult to bring ourselves to believe in (sic) the contents of that letter and would leave the matter at that. " This, in my opinion, is a finding upon the evidentiary value of the letter of the Maharaja, and though the order of the Tribunal is worded mellifluously, the Tribunal 's decision is quite clearly that it was not per suaded to accept it. Indeed, of the two documents, greater worth has to be attached to one which was issued before the controversy started and was written not to the assessee but to the Maharaja 's accountant who enquired how the account was to be adjusted. The use of the word 'contemporaneous ' to describe the order to the accountant meant no more than this that it was earlier in time and very soon after the amount was given. The Tribunal did not rely on any extra neous evidence in reaching its conclusion, but on something which had proceeded from the Maharaja himself. The motive of the Maharaja may be irrelevant, because what has to be seen is not why the payment was made but for what the assessee had received it. The Maharaja no doubt had been generous in fixing the pension at Rs. 2,000 per month. But the payment of such a large sum was not just bounty but to reward the past services, which judged from the scale of the pension had not adequately been paid for in the past. In this connection, the words of the Maharaja himself (and what better evidence can there be?) were that the amount was paid "in consideration of Shri Annantrai P. Pattani the Ex Dewan of our Bhavnagar State having rendered loyal and meritorious services Rs. 5,00,000 are given to him as gift". 757 The word gift ' does not alter the nature of the payment. The Maharaja indeed made a gift, as he had stated over again; but this order quite clearly disclosees that it was by way of remuneration for past services. The case, therefore, falls within the ruling of the a Supreme Court reported in P. Krishna Menon vs The Commissioner of Income tax, Mysore, Travancore Cochin and Coorg, Bangalore (1), and is indistinguishable from it. In the earlier case of this Court, the person who gave the money did not even mention any past services; but this Court found that because the recipient had taught him Vedanta philosophy, the payment was really in the nature of remuneration for past services. The facts in P. Krishna Menon 's case (1) were that the assessee was teaching his disciples Vedanta philosophy without any motive or intention of making a profit out of such activity. One J. H. Levy who used to go to Travancore from England at intervals attended his teachings. Levy had an account with Lloyd 's Bank at Bombay, and on December 31, 1944, Levy transferred the entire amount of Rs. 2,41,103 11 3 to the credit of an account which Levy got the assessee to open in his ' own name. Levy made further remittances and by August 19, 1951, had paid about Rs. 4,50,000. It was held by this Court that the assessee was carrying on a vocation. In deciding the question whether the amounts were assessable to tax, this Court observed as follows: ". it seems to us that the present case is too plain to require any authority. The only point is, whether the moneys were received by the appellant by virtue of his vocation. Mr. Sastri contended that the facts showed that the payments were purely personal gifts. He drew our attention to the affidavit of Levy where it is stated 'all sums of money paid into his account by me have been gifts to mark my esteem and affection for him and for no other reason '. But Levy also there said, 'I have had the benefit of his teachings on Vedanta '. It is important to remember however that the point is not what the donor (1) [1959] Supp.1 S.C.R. 133.96 758 thought he was doing but why the donee received it". Sarkar, J., then referred to the dictum of Collins, M. R., in Herbert vs Mc Quade (1), which may be quoted here: "Now that judgment, whether or not the particular facts justified it, is certainly an affirmation of a principle of law that a payment may be liable to income tax although it is voluntary on the part of the persons who made it, and that the test is whether, from the standpoint of the person who receives it, it accrues to him in virtue of his office; if it does, it does not matter whether it was voluntary or whether it was compulsory on the part of the persons who paid it. That seems to me to be the test; and if we once get to this that the money has come to or accrued to, a person by virtue of his office it seems to me that the liability to income tax is not negatived merely by reason of the fact that there was no legal obligation on the part of the persons who contributed the money to pay it." The learned Judge also referred to the observations of Rowlatt, J., in Reed vs Seymour (2) and of Viscount Cave, L. C., in Seymour vs Reed (3), and observed that the real question was, is the payment in the nature of a personal gift or is it a remuneration?, and quoted as the reply the words of the Lord Chancellor "If the latter, it is subject to the tax; if the former, it is not." Sarkar, J., also referred to the observations of Lord Ashbourne in Blakiston vs Cooper (4), which were: "It was suggested that the offerings were made as personal gifts to the Vicar as marks of esteem and respect. Such reasons no doubt played their part in obtaining and increasing the amount of the offerings, but I cannot doubt that they were given to the vicar as vicar and that they formed part of the profits accruing by reason of his office.", and concluded as follows: "We have no doubt in this case that the imparting (1) (3) (2) (4) [1909] A.C. 104. 759 of the teaching was the causa causans of the making of the gift; it was not merely a causa sine qua non. The payments were repeated and came with the same regularity as Levy 's visits to the appellant for receiving instructions in Vedanta. We do not feel impressed by Mr. Sastri 's contention that the first payment of Rs. 2,41,103 11 3 was too large a sum to be paid as consideration. In any case, we are not concerned in this case with that payment. We are concerned with payments which are of much smaller amounts and as to which it has not been said that they were too large to be a consideration for the teaching. And one must not forget that these are cases of voluntary payments and the question of the appraisement of the value of the teaching received in terms of money is not very material. If the first payment was too big to have been paid for the teaching received, it was too big to have been given purely by way of gift. " In my opinion, the case of this Court concludes the matter, and the Tribunal was within its rights in accepting one piece of evidence in preference to another, and the finding on the evidentiary value of the letter of the Maharaja was a matter essentially for the Tribunal to decide finally. I thus agree with the High Court in the answer which it gave, in agreement on facts with the Tribunal, and the reasons for which the answer was given. I would, therefore, dismiss the appeal with costs. BY COURT: In view of the majority judgment of the Court, the appeal is allowed with costs throughout. Appeal allowed.

IN-Abs

A who was the Dewan of the State of Bhavnagar before responsible government was introduced in the State, was granted a monthly pension of Rs. 2,000 by the Maharaja of the State by an order dated January 15, 1948. On March 1, 1948 the State of Bhavnagar was merged in the United States of Saurashtra and the Maharajah ceased to be the Ruler of the State. Subsequently on May 31, 1950, the Maharaja directed his banker in Bombay to pay A a sum of Rs. 5 lakhs out of the amount lying to his credit and when he was asked for instructions as to how that sum was to be entered in the books of account he passed an order on December 27, 1950, to the effect that in consideration of A having rendered loyal and meritorious services the said sum was given to him as a gift and that the amount should be debited to his personal expense account. The liability of the above sum for income tax was raised during the course of the assessment proceedings of A for the year 1951 52, and the assessee produced a letter dated March 10, 1953, written by the Maharajah at the request of the former, as follows: "I confirm that in June 1950, I gave you a sum of Rs. 5 lakhs which was a gift as a token of my affection and regard for you and your family. . The Income tax Officer held that the amount was liable to income tax under section 7(1), read with explanation (2), of the Indian Income tax Act, 1922. The Appellate Tribunal took into account the two documents dated December 27, 1950, and March 10, 1953, written by the Maharajah and considered that the first which clearly mentioned why the said sum was paid to the assessee, was more reliable for the reason that it was contemporaneous, than the second which was written more than 2 years later and the correctness of which they were not inclined to accept. The Tribunal agreed with the Income tax Officer that the amount was a taxable receipt. Held, (per Kapur and Shah, JJ.; Hidayatullah, J., dissenting), that on the facts of the case the sum of Rs. 5 lakhs was given to the assessee not as a payment in consideration of the services already rendered by him as the Dewan of the State, but merely as a gift in token of the Maharajah 's affection and regard for the assessee, and, therefore, was not liable to be assessed to tax 743 under section 7(1), explanation (2), of the Indian Income tax Act,1922. The Tribunal was in error in treating the document dated December 27, 1950, 'as a contemporaneous document while as a matter of fact it was written six months after the fact of payment, and because of this erroneous approach as a result of which the second letter had been rejected, the finding given by the Tribunal could not be treated as binding on the Court. P. Krishna Menon vs The Commissioner of Income tax, Mysore, Travancore Cochin and Coorg, Bangalore, [1959] Supp. 1 S.C.R. 133, distinguished. Per Hidayatullah, J. The use of the word "contemporaneous" to describe the order to the banker meant no more than this that it was earlier in time and very soon after the amount was given. The word "gift" did not alter the nature of pay ment; the Maharaja indeed made a gift, as he had stated over again, but the order disclosed that it was by way of remuneration for past services. The Tribunal was within its rights in accepting one piece of evidence in preference to another, and the finding on the evidentiary value of the letter of the Maharaja was a matter essentially for the Tribunal to decide finally. The decision in P. Krishna Menon vs The Commissioner of Income tax, Mysore, Travancore Cochin and Coorg, Bangalore, [1959] Supp. 11 S.C.R. 133, was applicable and concluded the present case.

Appeal No. 517 of 1958. Appeal from the judgment and order dated October 31, 1957, of the Kerala High Court in O. P. No. 215 of 1957. G. B. Pai and Sardar Bahadur, for the appellant. Hardyal Hardy and D. Gupta, for the respondents. November 29. The Judgment of the Court was delivered by SHAH, J. C. A. Abraham hereinafter referred to as the appellant and one M. P. Thomas carried on business in food grains in partnership in the name and style of M. P. Thomas & Company at Kottayam. M. P. Thomas died on October 11, 1949. For the account years 1123, 1124 and 1125 M.E. corresponding to August 1947 July 1948, August 1948 July 1949 and August 1949 July 1950, the appellant submitted as a partner returns of the income of the firm as an unregistered firm. In the course of the assessment proceedings, it was discovered that the firm had carried on transactions in different commodities in fictitious names and had failed to disclose substantial income earned therein. By order dated November 29, 1954, the Income Tax Officer assessed the suppressed income of the firm in respect of the assessment year 1124 M.E. under the Travancore Income Tax Act and in respect of assessment years 1949 50 and 1950 51 under the Indian Income Tax Act and on the same day issued notices under section 28 of the Indian Income Tax Act in respect of the years 1949 50 and 1950 51 and 767 under section 41 of the Travancore Income Tax Act for the year 1124 M.E., requiring the firm to show cause why penalty should not be imposed. These notices were served upon the appellant. The Income Tax Officer after considering the explanation of the appellant imposed penalty upon the firm, of Rs. 5,000 in respect of the year 1124 M. E., Rs. 2,O00 in respect of the year 1950 51 and Rs. 22,000 in respect of the year 1951 52. Appeals against the orders passed by the Income Tax Officer were dismissed by the Appellate Assistant Commissioner. The appellant then applied to the High Court of Judicature of Kerala praying for a writ of certiorari quashing the orders of assessment and imposition of penalty. It was claimed by the appellant inter alia that after the dissolution of the firm by the death of M. P. Thomas in October, 1949, no order imposing a penalty could be passed against the firm. The High Court rejected the application following the judgment of the Andhra Pradesh High Court in Mareddi Krishna Reddy vs Income Tax Officer, Tenali (1). Against the order dismissing the petition, this appeal is preferred with certificate of the High Court. In our view the petition filed by the appellant should not have been entertained. The Income Tax Act provides a complete machinery for assessment of tax and imposition of penalty and for obtaining relief in respect of any improper orders passed 'by the Income Tax authorities, and the appellant could not be permitted to abandon resort to that machinery and to invoke the jurisdiction of the High Court under article 226 of the Constitution when he had adequate remedy open to him by an appeal to the Tribunal. But the High Court did entertain the petition and has also granted leave to the appellant to appeal to this court. The petition having been entertained and leave having been granted, we do not think that we will be justified at this stage in dismissing the appeal in limine. On the merits, the appellant is not entitled to relief. The Income Tax Officer found that the appellant had, with a view to evade payment of tax, (1) 768 deliberately concealed material particulars of his income. Even though the firm was carrying on transactions in food grains in diverse names, no entries in respect of those transactions in the books of account were posted and false credit entries of loans alleged to have been borrowed from several persons were made. The conditions prescribed by section 28(1)(c) for imposing penalty were therefore fulfilled. But says the appellant, the assessee firm had ceased to exist on the death of M. P. Thomas, and in the absence of a provision in the Indian Income Tax Act whereby liability to pay penalty may be imposed after dissolution against the firm under section 28(1)(c) of the Act, the order was illegal. Section 44 of the Act at the material time stood as follows: "Where any business,. carried on by a firm. has been discontinued . every person who was at the time of such discontinuance . a partner of such firm,. shall in respect of the income, profits and gain of the firm be jointly and severally liable to assessment under Chapter IV for the amount of tax payable and all the provisions of Chapter IV shall, so far as may be, apply to any such assessment. " That the business of the firm was discontinued because of the dissolution of the partnership is not disputed. It is urged however that a proceeding for imposition of penalty and a proceeding for assessment of income tax are matters distinct, and section 44 may be resorted to for assessing tax due and payable by a firm business whereof has been discontinued, but an order imposing penalty under section 28 of the Act cannot by virtue of section 44 be passed. Section 44 sets up machinery for assessing the tax liability of firms which have discontinued their business and provides for three consequences, (1) that on the discontinuance of the business of a firm, every person who was at the time of its discontinuance a partner is liable in respect of income, profits and gains of the firm to be assessed jointly and severally, (2) each partner is liable to pay the amount of tax payable by the firm, and (3) that the provisions of Chapter, so far as may be, apply to such assessment. The liability declared by section 44 is 769 undoubtedly to assessment under Chapter IV, but the expression "assessment" used therein does not merely mean computation of income. The expression "assessment" as has often been said is used in the Income Tax Act with different connotations. In Commissioner of Income Tax, Bombay Presidency & Aden vs Khemchand Ramdas (1), the Judicial Committee of the Privy Council observed: "One of the peculiarities of most Income tax Acts is that the word "assessment" is used as meaning sometimes the computation of income, sometimes the determination of the amount of tax payable and sometimes the whole procedure laid down in the Act for imposing liability upon the tax payer. The Indian Income tax Act is no exception in this respect. . ". A review of the provisions of Chapter IV of the Act sufficiently discloses that the word "assessment" has been used in its widest connotation in that chapter. The title of the chapter is "Deductions and Assessment". The section which deals with assessment merely as computation of income is section 23; but several sections deal not with computation of income, but determination of liability, machinery for imposing liability and the procedure in that behalf. Section 18A deals with advance payment of tax and imposition of penalties for failure to carry out the provisions there in. Section 23A deals with power to assess individual members of certain companies on the income deemed to have been distributed as dividend, section 23B deals with assessment in case of departure from taxable territories, section 24B deals with collection of tax out of the estate of deceased persons; section 25 deals with assessment in case of discontinued business, section 25A with assessment after partition of Hindu Undivided families and sections 29, 31, 33 and 35 deal with the issue of demand notices and the filing of appeals and for reviewing assessment and section 34 deals with assessment of incomes which have escaped assessment. The expression "assessment" used in these sections is not used merely in the sense of computation of income and there is in our judgment no ground for holding (1) 770 that when by section 44, it is declared that the partners or members of the association shall be jointly and severally liable to assessment, it is only intended to declare the liability to computation of income under section 23 and not to the application of the procedure for declaration and imposition of tax liability and the machinery for enforcement thereof. Nor has the expression, "all the provisions of Chapter IV shall so far as may be apply to such assessment" a restricted content: in terms it says that all the provisions of Chapter IV shall apply so far as may be to assessment of firms which have discontinued their business. By section 28, the liability to pay additional tax which is designated penalty is imposed in view of the dishonest contumacious conduct of the assessee. It is true that this liability arises only if the Income tax Officer is satisfied about the existence of the conditions which give him jurisdiction and the quantum thereof depends upon the circumstances of the case. The penalty is not uniform and its imposition depends upon the exercise of discretion by the Taxing authorities; but it is imposed as a part of the machinery for assessment of tax liability. The use of the expression "so far as may be" in the last clause of section 44 also does not restrict the application of the provisions of Chapter IV only to those which provide for computation of income. By the use of the expression "so far as may be" it is merely intended to enact that the provisions in Ch. IV which from their nature have no application to firms will not apply thereto by virtue of section 44. In effect, the Legislature has enacted by section 44 that the assessment proceedings may be commenced and continued against a firm of which business is discontinued as if discontinuance has not taken place. It is enacted manifestly with a view to ensure continuity in the application of the machinery provided for assessment and imposition of tax liability notwithstanding discontinuance of the business of firms. By a fiction, the firm is deemed to continue after discontinuance for the purpose of assesment under Chapter IV. The Legislature has expressly enacted that the provisions of Chapter IV shall apply to the assessment of 771 a business carried on by a firm even after discontinuance of its business, and if the process of assessment includes taking steps for imposing penalties, the plea that the Legislature has inadvertently left a lacuna in the Act stands refuted. It is implicit in the contention of the appellant that it is open to the partners of a firm guilty of conduct exposing them to penalty under section 28 to evade penalty by the simple expedient of discontinuing the firm. This plea may be accepted only if the court is compelled, in view of unambiguous language, to hold that such was the intention of the Legislature. Here the language used does not even tend to such an interpretation. In interpreting a fiscal statute, the court cannot proceed to make good deficiencies if there be any: the court must interpret the statute as it stands and in case of doubt in a manner favourable to the tax payer. But where as in the present case, by the use of words capable of comprehensive import, provision is made for imposing liability for penalty upon tax payers guilty of fraud, gross negligence or contumacious conduct, an assumption that the words were used in a restricted sense so as to defeat the avowed object of the Legislature qua a certain class will not be lightly made. Counsel for the appellant relying upon Mahankali Subbarao vs Commissioner of Income Tax (1), in which it was held that an order imposing penalty under section 28(1)(c) of the Indian Income Tax Act upon a Hindu Joint Family after it had disrupted, and the disruption was accepted under section 25A(1) is invalid, because there is a lacuna in the Act, submitted that a similar lacuna exists in the Act in relation to dissolved firms. But whether on the dissolution of a Hindu Joint Family the liability for penalty under section 28 which may be incurred during the subsistence of the family cannot be imposed does not fall for decision in this case: it may be sufficient to observe that the provisions of section 25A and section 44 are not in pari materia. In the absence of any such phraseology in section 25A as is used in section 44, no real analogy between the content of that section and section 44 may be assumed. Undoubtedly, (1) 772 by section 44, the joint and several liability which is declared is liability to assessment in respect of income, profits or gains of a firm which has discontinued its business, but if in the process of assessment of income, profits or gains, any other liability such as payment of penalty or liability to pay penal interest as is provided under section 25, sub section (2) or under section 18A sub sections (4), (6), (7), (8) and (9) is incurred, it may also be imposed, discontinuation of the business notwithstanding. In our view, Chief Justice Subba Rao has correctly stated in Mareddi Krishna Reddy 's case (supra) that: "Section 28 is one of the sections in Chapter IV. It imposes a penalty for the concealment of income or the improper distribution of profits. The defaults made in furnishing a return of the total income, in complying with a notice under sub section (4) of section 22 or sub section (2) of section 23 and in concealing the particulars of income or deliberately furnishing inadequate particulars of such income are penalised under that section. The defaults enumerated therein relate to the process of assessment. Section 28, therefore, is a provision enacted for facilitating the proper assessment of taxable income and can properly be said to apply to an assessment made under Chapter IV. We cannot say that there is a lacuna in section 44 such as that found in section 25A of the Act. We are unable to agree with the view expressed by the Andhra Pradesh High Court in the later Full Bench decision in Commissioner of Income Tax vs Rayalaseema Oil Mills (1), which purported to overrule the judgment in Mareddi Krishna Reddy 's case (supra). We are also unable to agree with the view expressed by the Madras High Court in section V. Veerappan Chettiar vs Commissioner of Income Tax, Madras (2). In the view taken by us, the appeal fails and is dismissed with costs. (1) Appeal dismissed.

IN-Abs

The appellant who was carrying on business in food grains in partnership with another person submitted the returns of the income of the firm for the accounting years even after his partner 's death. It was found that certain income of the firm was concealed and the Income tax Officer not only assessed the firm to tax for the suppressed income but also imposed penalties for concealing the said income. Appeals to the higher income tax authorities failed and the appellant then applied to the High Court for a writ of certiorari quashing the orders of assessment and imposition of penalty on the ground inter alia that the firm was dissolved by his partner 's death and no penalty could be imposed after dissolution of the firm, The High Court rejected the petition. On appeal with the certificate of the High Court, Held, that by virtue of section 44 and other provisions of the Income Tax Act a partner of a dissolved partnership firm may not only be made liable to assessment for income tax for the accounting years but despite dissolution of the firm he may be made liable to pay penalty for concealing the income of the firm under section 28(1)(c) of the Act. The analogy of dissolution of a Hindu joint Family does not apply to dissolution of a partnership. Mareddi Krishna Reddy vs Income tax Officer, Tenali, , approved. Commissioner of Income tax vs Ravalaseema Oil Mills, and section V. Veerappan Chettiar vs Commissioner of Income tax, Madras, , disapproved. Mahankali Subbarao vs Commissioner of Income tax, , distinguished. The Legislature intended that the provisions of Ch. IV of the Act shall apply to a firm even after discontinuance of its business. In interpreting a fiscal statute the Court cannot proceed to make good deficiencies if there be any. In case of doubt it should be interpreted in favour of the tax payer. The expression "assessment" has different connotations an has been used in its widest connotation in Ch. IV and section 44 97 766 he Act. It is not restricted only to computation of tax but includes imposition of penalty on tax payers found in the process of assessment guilty of concealing income. Commissioner of Income tax, Bombay Presidency and Aden vs Khemchand Ramdas, , referred to. The Income tax Act provided a complete machinery for obtaining relief against improper orders passed by the Income tax Authorities and the appellant could not be permitted to abandon that machinery, and invoke the jurisdiction of the High Court under article 226 of the Constitution against the orders of the taxing authorities.

Appeals Nos. 490 and 491 of 1958. Appeals from the judgment and decree dated February 18, 1955, of the Madras High Court in Second Appeals Nos. 2038 and 2039 of 1950. N. R. Raghavachariar, M. R. Krishnaswami and T. V. R. Tatachari, for the appellant. R. Ganapathi Iyer and D. Gupta, for the respondent. November 29. The Judgment of the Court was delivered by KAPUR, J. Two suits were brought by the appellants for a declaration against the levy of sales tax by the State of Madras and an injunction was also prayed for. Both the suits were decreed by the Subordinate Judge of Salem and the decrees were confirmed on appeal by the District Judge of Salem. Two appeals were taken to the High Court by the State of Madras against those decrees and by a judgment dated February 18, 1955, the decrees were set aside by a common judgment. Against these decrees the appellants have brought these appeals by a certificate of that Court. The appellants are merchants dealing in cotton yarn. They obtained a license under section 5 of the Madras General Sales Tax Act (Act IX of 1939), hereinafter referred to as the 'Act '. This license exempted 738 them from assessment to sales tax under section 3 of the Act on the sale of cotton yarn and on handloom cloth "subject to such restrictions and conditions as may be prescribed including conditions as to license and license fees". The license was issued on March 31,1941, and was renewed for the following years. On September 20, 1944, the Commercial Tax Authorities made a surprise inspection of the premises of the appellants and discovered that they were maintaining two separate sets of account on the basis of one of which the appellants submitted their returns to the Department. Because the other set of account books showed black market activities of the firm Balakrishna Chetty was prosecuted and sentenced to six months ' imprisonment for an offence connected with the breach of Cot. ton Yarn Control Order. During the pendency of those proceedings the Deputy Commercial Tax Officer made assessments for the years. 1943 44 and 1944 45, the tax for the former was Rs. 37,039 and for the latter Rs. 3,140. The appellants unsuccessfully appealed against these assessments and their revisions also failed. On August 24, 1945, the appellants brought a suit for a declaration and injunction in regard to the first assessment alleging that the assessment was against the Act. On September 2, 1946, a similar suit was brought in regard to the second assessment. It is out of these suits that the present appeal has arisen. The controversy between the parties centres round the interpretation of the words "subject to" in section 5 of the Act. The High Court has held that on a true interpretation of the provisions of the Act and the rules made thereunder, the observance of conditions of the license was necessary for the availability of exemption under section 5; that as the appellants had contravened those conditions they were liable to pay tax for both the years notwithstanding the license which had been issued to them under section 5 of the Act. it will be convenient at this stage to refer to the provisions of the Act which are relevant for the purpose of this appeal. section 2(b) " dealer" means any person who carries on the business of buying or selling goods;" 739 section 2(f) " "prescribed" means prescribed by rules made under this Act;". section 3(1) "Subject to the provisions of this Act, every dealer shall pay in each year a tax in accordance with the scale specified below: (a). . . . . . (b) if his turnover ex One half of I per ceeds twenty cent of such turn thousand rupees. over". section 5 "Subject to such restrictions and conditions as may be prescribed, including the conditions as to licenses and license fees, the sale of bullion and specie, of cotton, of cotton yarn and of any cloth woven on handlooms and sold by persons dealing exclusively in such cloth shall be exempt from taxation under Section 3". section 13 "Every dealer and every person licensed under section 8 shall keep and maintain a true and correct account showing the value of the goods sold and paid by them; and in case the accounts maintained in the ordinary course, do not show the same in an intelligible form, he shall maintain a true and correct account in such form as may be prescribed in this behalf.". The following rules are relevant for the purpose of this appeal and we quote the relevant portions: R. 5 "(1) Every person who (a). . . . . (b) deals with cotton and/or cotton yarn, (c). . . . . . (d). . . . . . (e) shall if he desires to avail himself of the exemption provided in sections 5 and 8 or of the concession of single point taxation provided in section 6, submit an application in Form I for a licence and the relevant portion of Form III is as follows: "Form III Cotton Licence to a dealer in Cotton yarn cloth woven on handlooms 740 See rule 6(5). Licence No. dated having paid a licence fee of Rs. (in words) hereby licensed as a dealer in Cotton/Cotton yarn Cotton woven on handlooms for the year ending at (place of business) subject to the provisions of the Madras General Sales Tax Act, 1939, and the rules made thereunder and to the following conditions:". R. 8 "Every licence granted or renewed under these rules shall be liable to cancellation by the Deputy Commercial Tax Officer in the event of a breach of any of the provisions of the Act, or of the Rules made thereunder or of the conditions of the licence. " The contention raised on behalf of the appellants was that as long as they held the licence it was immaterial if they were guilty of any infraction of the law and that they were not liable to any assessment of sales tax under the provisions of the Act and the only penalty they incurred was to have their licence cancelled and/or be liable to the penalty which under the criminal law they had already suffered. The contention comes to this that in spite of the breaches of the terms and conditions of the licence, having a licence was sufficient for the purpose of exemption under the Act. This contention, in our opinion, is wholly untenable. Section 3 is the charging section and section 5 gives exemption from taxation but that section clearly makes the holding of a licence subject to restrictions and conditions prescribed under the provisions of the Act and the rules made thereunder because the opening words of that section are "subject to such restrictions and conditions as may be prescribed." Under B. 13 an important condition imposed under the Act is the keeping by the dealer and every person licensed of true and correct accounts showing the value of the goods sold and paid by him. Next there is r. 5 of the General Sales Tax Rules which provided 741 that if any person desired to avail himself of the exemption provided in section 5, he had to submit an application in Form I for a licence and the Form of the licence shows that the licence was subject to the provisions of the Act and the rules made thereunder which required the licensee to submit returns as required and also to keep true accounts under section 13. This shows that the giving of the licence was subject to certain conditions being observed by the licensee and the licence itself was issued subject to the Act and the rules. But it was contended that the words "subject to" do not mean "conditional upon" but "liable to the rules and the provisions" of the Act. So construed section 5 will become not only inelegant but wholly meaningless. On a proper interpretation of the section it only means that the exemption under the licence is conditional upon the observance of the conditions prescribed and upon the restrictions which are imposed by and under the Act whether in the rules or in the licence itself ; that is, a licensee is exempt from assessment as long as he conforms to the conditions of the licence and not that he is entitled to exemption whether the conditions upon which the licence is given are fulfilled or not. The use of the words "subject to" has reference to effectuating the intention of the law and the correct meaning, in our opinion, is "conditional upon". The appellants have been found to have contravened the provisions of the Act as well as the rules and therefore it cannot be said that they have observed the conditions upon which the exemption under the licence is available. In that view of the matter, it was rightly held that they were not exempt from assessment under the Act. The appeals are therefore dismissed with costs. Appeals dismissed.

IN-Abs

The appellants, who were dealers in Cotton yarn, obtained a license under the Madras General Sales Tax Act, 1939 (IX of 1939). Section 5 of that Act exempted such dealers from pay ment of sales tax under section 3 of the Act subject to such restrictions and conditions as might be prescribed, including the conditions as to licenses and license fees. Section 13 required a licensee to keep and maintain true and correct accounts of the value of the goods sold and paid by him. Rule 5 of the General Sales Tax Rules provided that any person seeking exemption under section 5 of the Act must apply for license in Form 1 which made the license subject to the provisions of the Act and the rules made thereunder. The appellants on surprise inspection were found to maintain two separate sets of accounts, on the basis of one of which they submitted their returns and the other 737 showed black market activities. The question for determination in the appeal was whether the appellants who had been refused exemption and were assessed to tax, could claim exemption under the Act. Held, that the question must be answered in the negative. Section 5 of the Madras General Sales Tax Act, 1939, pro perly construed, leaves no manner of doubt that an exemption from assessment thereunder is clearly conditional upon the observance by the assessee of the conditions and restrictions imposed by the Act, either in the rules or in the license itself, and the words 'subject to ' used by the section means "conditional upon". It was not correct to say that licensee was exempt from assessment so long as he held the license notwithstanding any breach of the provision of the law and that the only penalty he could be subjected to was the cancellation of his license or criminal prosecution.

Appeal No. 395 of 1959. Appeal by special leave from the Award dated November 25, 1957 of the Industrial Tribunal, Bombay, in Reference (I. T.) No. 24 of 1956. N. C. Chatterjee, D. H. Buch and K. L. Hathi, for the appellants. M. C. Setalvad, Attorney General for India, J. B. Dadachanji and section N. Andley, for the respondent Nos. 1 and 2. M. C. Setalvad, Attorney General for India, Dewan Chaman Lal Pandhi and I. N. Shroff, for the respondent No. 3. 1960. November 30. The Judgment of the Court was delivered by WANCHOO, J. This is an appeal by special leave in an industrial matter. It appears that the appellants were originally in the service of the Scindia Steam Navigation Co. Ltd. (hereinafter called the Scindias). Their services were transferred by way of loan to the Air Services of India Limited (hereinafter referred to as the ASI). The ASI was formed in 1937 and was 813 purchased by the Scindias in 1943 and by 1946 was a full subsidiary of the Scindias. Therefore from 1946 to about 1951, a large number of employees of the, Scindias were transferred to the ASI for indefinite periods. The Scindias had a number of subsidiaries and it was usual for the Scindias to transfer their employees to their subsidiary companies and take them back whenever they found necessary to do so. The ' appellants who were thus transferred to the ASI were to get the same scale of pay as the employees of the Scindias and the same terms and conditions of service (including bonus whenever the Scindias paid it) were to apply. The Scindias retained the right to recall these loaned employees and it is the case of the appellants that they were entitled to go back to the Scindias if they so desired. Thus the terms and conditions of service of these loaned employees of the ASI were different from those employees of the ASI who were recruited by the ASI itself. This state of affairs continued till 1952 when the Government of India contemplated nationalisation of the existing air lines operating in India with effect from June 1953 or thereabouts. When legislation for this purpose was on the anvil the appellants felt perturbed about their status in the ASI which was going to be taken over by the Indian Air Lines Corporation (hereinafter called the Corporation), which was expected to be established after the , No. XXVII of 1953, (hereinafter called the Act) came into force. They therefore addressed a letter to the Scindias on April 6, 1953, requesting that as the Government of India intended to nationalise all the air lines in India with effect from 1 June, 1953, or subsequent thereto, they wanted to be taken back by the Scindias. On April 24, the Scindias sent a reply to this letter in which they pointed out that all persons working in the ASI would be governed by cl. 20 of the Air Corporation Bill of 1953, when the Bill was enacted into law. It was also pointed out that this clause would apply to all those actually working with the ASI on 103 814 the appointed day irrespective of whether they were recruited by the ASI directly or transferred to the ASI from the Scindias or other associated concerns. It was further pointed out that if the loaned employees or others, employed under the 'ASI, did not want to join ,the proposed Corporation they would have the option not to do so under the proviso to cl. 20(1) of the 'Bill; but in case any employee of the ASI whether loaned or otherwise made the option not to join the proposed Corporation, the Scindias would treat them as having resigned from service, as the Scindias could not absorb them. In that case such employees would be entitled only to the usual retirement benefits and would not be entitled to retrenchment compensation. Finally, it was hoped that all those in the employ of the ASI, whether loaned or otherwise, having been guaranteed continuity of employment in the new set up would see that the Scindias would not be burdened with surplus staff, requiring consequential retrenchment of the same or more junior personnel by the Scindias. On April 29, 1953, a reply was sent by the union on behalf of the appellants to the Scindias. It was pointed out that the loaned staff should not be forced to go to the proposed Corporation without any consideration of their claim for re absorption into the Scindias. It was suggested that the matter might be taken up with the Government of India and the persons directly recruited by the ASI who were with other subsidiary companies might be taken by the proposed Corporation in place of the appellants. It seems that this suggestion was taken up with the Government of India but nothing came out of it, particularly because the persons directly recruited by the ASI. who were employed in other subsidiary companies did not want to go back to the ASI. In the meantime, the Scindias issued a circular on May 6,1953, to all the employees under the ASI including the loaned employees, in which they pointed out that all the persons working with the ASI would be governed by cl. 20(1) when the Bill became law and would be absorbed in the proposed Corporation, unless 815 they took advantage of the proviso to cl. 20(1). It was also pointed out that such employees as took advantage of the proviso to el. 20(1) would be treated as having resigned from service and would be entitled to usual retirement benefits as on voluntary retirement, and to nothing more. It was also said that their conditions of service would be the same until duly altered or amended by the proposed Corporation. The circular then dealt with certain matters relating to provident fund with which we are however not concerned. It appears that the Act was passed on May 28, 1953. 20(1) of the Act, with which we are concerned, is in these terms: "(1) Every officer or other employee of an existing air company (except a director, managing agent, manager or any other person entitled to manage the whole or a substantial part of the business and affairs of the company under a special agreement) employed by that company prior to the first day of July, 1952, and still in its employment immediately before the appointed day shall, in so far as such officer or other employee is employed in connection with the undertaking which has vested in either of the Corporations by virtue of this Act, become as from the appointed date an officer or other employee, as the case may be, of the Corporation in which the undertaking has vested and shall hold his office or service therein by the same tenure, at the same remuneration and upon the same terms and conditions and with the same rights and privileges as to pension and gratuity and other matters as he would have held the same under the existing air company if its undertaking had not vested in the Corporation and shall continue to do so unless and until his employment in the Corporation is terminated or until his remuneration, terms or conditions are duly altered by the Corporation : Provided nothing contained in this section shall apply to any officer or other employee who has, by notice in writing given to the Corporation concerned prior to such date as may be fixed by the Central Government by notification in the official gazette 816 intimated his intention of not becoming an officer or other employee of the Corporation." After the Act was passed, notice was sent on June 17, 1953, to each employee of all the air companies which were being taken over by the proposed Corporation m and he was asked to inform the officer on special duty by July 10, 1953, if he desired to give the notice contemplated by the proviso to section 20(1). A form was sent in which the notice was to be given and it was ordered that it should reach the Chairman of the Corporation by registered post by July 10. The appellants admittedly did not give this notice as required by the proviso to section 20(1). In the meantime on June 8, 1953, a demand was made on behalf of the appellants in which the Scindias were asked to give an assurance to them that in the event of retrenchment of any loaned staff by the proposed Corporation within the first five years without any fault, the said staff would be taken back by the Scindias. Certain other demands were also made. The Scindias replied to this letter on July 3 and pointed out that they could not agree to give an assurance to take back the loaned staff in case it was retrenched by the proposed Corporation within the next five years. We are not concerned with the other demands and the replies thereto. On July 8, a letter was written on behalf of the appellants to the Scindias in which it was said that the appellants could not accept the contention contained in the circular of May 6, 1953. Though the appellants were carrying on this correspondence with the Scindias, they did not exercise the option which was given to them under the proviso to section 20(1) of the Act,. by July 10, 1953. First of August, 1953, was notified the appointed day under section 16 of the Act and from that date the undertakings of the "existing air companies" vested in the Corporation established under the Act (except the Air India International). So on August:1, 1953, the ASI vested in the Corporation and section 20(1) of the Act came into force. Hence as none of the appellants had exercised the option given to them under the proviso, they would also be governed by the said provision, 817 unless the contention. raised on their behalf that they could in no case be governed by section 20(1), is accepted. The tribunal came to the conclusion that, whatever the position of the appellants as loaned staff from the Scindias to the ASI, as they were informed on May 6, 1953, of the exact position by the Scindias and they did not ask for a reference of an industrial dispute immediately thereafter with the Scindias and as they" ' did not exercise the option given to them by the proviso to section 20(1) before July 10, 1953, they would be governed by section 20(1) of the Act. In consequence, they became the employees. of the Corporation as from August 1, 1953 and would thus have no right there after to claim that they were still the employees of the Scindias and had a right to revert to them. The consequence of all this was that they were held not to be entitled to any of the benefits which they claimed in the alternative according to the order of reference. It is this order of the tribunal rejecting the reference which has been impugned before us in the present appeal. The main contention of Mr. Chatterjee on behalf of the appellants is that they are not governed by section 20 (1) of the Act and in any case the contract of service between the appellants and the Scindias was not assignable and transferable even by law and finally that even if section 20(1) applied, the Scindias were bound to take back the appellants. We are of opinion that there is no force in any of these contentions. 20(1) lays down that every officer or employee of the "existing air companies" employed by them prior to the first day of July, 1952, and still in their employment immediately before the appointed day shall become as I from the appointed day an officer or employee, as the case may be, of the Corporation in which the undertakings are vested. The object of this provision was to ensure continuity of service to the employees of the "existing air companies" which were being taken over by the Corporation and was thus for the benefit of the officers and employees concerned. It is further provided in section 20(1) that the terms of service etc. would be the same until they are duly altered by the Corporation. One should have thought that the employees of the air 818 companies would welcome this provision as it ensured them continuity of service on the same terms till they were duly altered. Further there was no compulsion on the employees or the officers of the "existing air companies" to serve the Corporation if they did not want to do so. The proviso laid down that any officer or other employee who did not want to go into the service of the Corporation could get out of service by notice in writing given to the Corporation before the date fixed, which was in this case July 10, 1953. Therefore, even if the argument of Mr. Chatterjee that the contract of service between the appellants and their employers had been transferred or assigned by this section and that this could not be done,, be correct, it loses all its force, for the proviso made it clear that any one who did not want to join the Corporation, was free not to do so, after giving notice upto a certain date. Mr. Chatterjee in this connection relied on Nokes vs Doncaster Amalgamated Collieries Ltd. where it was observed at p. 1018 "It is, of course, indisputable that (apart from statutory provision to the contrary) the benefit of a contract entered into by A to render personal service to X cannot be transferred by X to Y without A 's consent, which is the same thing as saying that, in order to produce the desired result,, the old contract between A and X would have to be terminated by notice or by mutual consent and a new contract of service entered into by agreement between A and Y." This observation itself shows that a contract of service may be transferred by a statutory provision; but in the present case, as we have already said, there was no compulsory transfer of the contract of service between the "existing air companies", and their officers and employees to the Corporation for each of them was given the option not to join the Corporation, if he gave notice to that effect. The provision of section 20(1) read with the proviso is a perfectly reasonable provision and, as a matter of fact, in the interest of employees themselves. But, Mr. Chatterjee argues that section 20(1) will only apply to those who were in the employ of the "existing air companies"; it would not (1) , 819 apply to those who might be working for the "existing air companies" on being loaned from some other company. In other words, the argument is that the, appellants were in the employ not of the ASI but of the Scinaias and therefore section 20(1) would not apply to them and they would not become the employees of the Corporation by virtue of that provision when they failed to exercise the option given to them by the proviso. According to him, only those employees of the ASI who were directly recruited by it, would be covered by section 20(1). We are of opinion that this argument is fallacious. It is true that the appellants were not originally recruited by the ASI. They were recruited by the Scindias and were transferred on loan to the ASI on various dates from 1946 to 1951. But for the purposes of section 20(1) we have to see two things: namely, (i) whether the officer or employee was employed by the existing air company on July 1, 1952, and (ii) whether he was still in its employment on the appointed day, (namely, August 1,1953). Now it is not disputed that the appellants were working in fact for the ASI on July 1, 1952, and were also working for it on August 1, 1953. But it is contended that though they were working for the ASI they were still not in its employment in law and were in the employment of the Scindias because at one time they had been loaned by the Scindias to the ASI. Let us examine the exact position of the appellants in order to determine whether they were in the employ of the ASI or not. It is not disputed that they were working for the ASI and were being paid by it; their hours of work as well as control over their work was all by the ASI. From this it would naturally follow that they were the employees of the ASI, even though they might not have been directly recruited by it. It is true that there were certain special features of their employment with the ASI. These special features were that they were on the same terms and conditions of service as were enjoyed by the employees of the Scindias in the matter of remuneration, leave, bonus, etc. It may also be that they could not be, dismissed by the ASI and the Scindias may have had to take action in case it was 820 desired to dismiss them. Further it may be that they could be recalled by the Scindias and it may even be that they might have the option to go back to the Scindias. But these are only three special terms of their employment with the ASI. Subject to these special terms, they would for all purposes be the employees of the ASI and thus would in law be in the employment of the ASI both on July 1, 1952 and on August 1, 1953. The existence of these special terms in the case of these appellants would not in law make them any the less employees of the ASI, for whom they were working and who were paying them, who had power of control and direction over them; who would grant them leave, fix their hours of work and so on. There can in our opinion be no doubt that subject to these special terms the appellants were in the employ of the ASI in law. They would therefore be in the employ of the ASI prior to July 1, 1952 and would still be in its employ immediately before August 1, 1953. Consequently, they would clearly be governed by section 20(1). As they did not exercise the option given to them by the proviso to section 20(1), they became the employees of the Corporation from August 1, 1953, by the terms of the statute. The last point that has been urged is that even if section 20(1) applies, the Scindias are bound to take back the appellants. Suffice it to say that there is no force in this contention either. As soon as the appellants became by force of law the employees of the Corporation, as they did so become on August 1, 1953, in the circumstances of this case, they had no further right against the Scindias and could not; claim to be taken back in their employment on the ground that they were still their employees, in spite of the operation of section 20(1) of the Act. Nor could they claim any of the alternative benefits specified in the order of reference, as from August 1, 1953, they are by operation of law only the employees of the Corporation and can have no rights whatsoever against the Scindias. We are therefore of opinion that the tribunal 's decision is correct. The appeal fails and is thereby dismissed. There will be no order as to costs. Appeal dismissed.

IN-Abs

Section 20(1) of the (XXVII of 1953), read with the proviso, is a perfectly reasonable provision and in the interest of the employees and it is not correct to say that it can apply only to the direct recruits of the existing air 812 companies and not at all to loaned employees working under them. The two conditions of its applications are (i) that the officer or employee was employed by the existing air company on July 1, 1952, and (ii) that he was still in its employment on August 1, 1953, the appointed day. In the instant case where the appellants who had been recruited by the Scindia Steam Navigation Co., Ltd., and on purchase by it of the Air Services of India Ltd., loaned to the latter, and were working under its direction and control on and between the said dates and being paid by it, Held, that in law they were the employees of the Air Ser vices of India from the appointed day, notwithstanding the existence of certain special features of their employment, and as such governed by section 20(1) of the Act and since they did not exercise the option given to them under the proviso, they became employees of the Corporation established under the Act and ceased to have any rights against the original employers. Nokes vs Doncaster Amalgamated Collieries Ltd., [1940] A.C. 1014, considered.

Appeals Nos. 12 and 13 of 1951. Appeals from the Judgment and Decree dated the 17th/21st February, 1947, of the High Court of Judicature at Calcutta (Mukherjea and Biswas JJ.) in Appeal from Original Order No. 62 of 1946 with cross objectiou and Civil Revision Case No. 657 of 1946 arising out of Judgment and Order dated the 13th March, 1946, of the Court of the Subordinate Judge, Howrah, in Title Execution Case No. 68 of 1936. M. C. Setalvad (Attorney General for India) and Purushottam Chatterjee (section N. Mukherjee, with them) for the appellant in Civil Appeal No. 12 of 1951 and respondent in Civil Appeal No. 13 of 1951. C. K. Daphtary (Solicitor General for India) and N. C. Chatterjee (C. N. Laik and A. C. Mukherjea, with them) for the respondents in Civil Appeal No. 12 of 1951 and appellants in Civil Appeal No. 13 of 1951. October 30. The judgment of the Court was delivered by MAHAJAN J. These are two cross appeals from the decision of the High Court at Calcutta in its appellate jurisdiction dated 17th February, 1947, modifying the order of the Subordinate Judge of Howrah in Title Execution Case No. 68 of 1936. The litigation culminating in these appeals comnmenced about thirty years ago. In the year 1923, one Durga Prasad Chamria instituted a suit against the respondents, Radha Kissen Chamria, Motilal Chamria and their mother Anardevi Sethan (since deceased) for specific performance of an agreement, 139 for sale of an immoveable property in Howrah claiming a sum of Rs. 11,03,063 8 3 and other reliefs. The suit, was eventually decreed compromise the 19th April, 1926. Under the compromise decree the plaintiff became entitled to a sum of Rs. 8,61,000 from the respondents with interest at 61 per cent. with yearly rests from the date fixed for payment till realization. Part of the decretal sum was payable the execution of the solenama and the rest by instalments within eighteen months of that date. Within fifteen months from the date of the decree a sum of Rs. 10,00,987 15 6 is said to have been paid towards satisfaction of it. No steps were taken either by the judgment debtors or the decre holder regarding certification of most of those payments within the time prescribed by law. The judgment debtors after the expiry of a long time made an application for certification but the decree holder vehemently resisted it and declined to 'admit the payments. The result was that the court only recorded the payment of the last three instalments which had been made within ninety days before the application and the judgmentdebtors had to commence a regular suit against the decree holder for recovery of the amounts paid, and not admitted in the execution proceedings. In the year 1929 a decree was passed in favour of the judgment debtors for the amount paid by them and not ,certified in the execution. In the meantime the decree holder had realized further amounts in execution of the decree by taking out execution proceedings two or three occasions. The amount for which a decree had been passed against the decree holder was also thereafter adjusted towards the amount duo under ' the consent decree. On the 17th March, 1933, the decree was assigned by Durga Prasad to the appellant Keshardeo Chamria. The execution proceedings out of which these appeals arise were started by the assignee the 10th October, 1936, for the realization of Rs. 4,20,693 8 9 and interest and costs. This execution had a chequered career. To begin with, the judgment debtors raised 140 an objection that the assignee being a mere benamidar of Durga Prasad Chamria had no locus standi to take out execution. This dispute eventually ended in favour of the assignee after about five years ' fight and it was held that the assignment was bonafide and Keshardeo was not a benamidar of the decree holder. On the 17th July, 1942, Keshardeo made an application for attachment of various new properties of the judgment debtors and for their arrest. Another set of objections was filed against this application by Radha Kissen Chamria. He disputed the correctness of the decretal amount, and contended that a certain payment of Rs. 1,60,000 should be recorded and certified as made the 28th May, 1934, and not the date the sum was actually paid to the decreeholer. This objection was decided by the Subordinate Judge the 11th September, 1942, and it was held that the judgment debtors were liable to pay interest the sum of Rs. 1,60,000 up to the 12th October, 1936, and not up to the 4th July, 1941, 'as claimed by the assignee. appeal the High Court by its judgment dated the 22nd June, 1943, upheld the decree holder 's contention, and ruled that the judgment debtors were liable to pay interest up to the 4th July, 1941, this sum of Rs. 1,60,000. The judgment debtors then applied for leave to appeal to the Privy Council against this decision and leave was granted. the 13th February, 1945, an application wag made to withdraw the appeals, and with ' drawal was allowed by an order of the court dated the 20th February, 1945. Thus the resistance offered by the judgment debtors to the decree holder 's application of the 17th July, 1942, ended the 20th February, 1945. The records of the execution case were then sent back by the High Court and reached the Howrah Court the 28th February, 1945. The decreeholder 's counsel was informed of the arrival of the records by an order dated the 2nd March, 1945. The hearing of the case was fixed for the 5th March 1945. the 5th March, 1945 the court made the following order; 141 Decree holder prays for time to take necessary steps. The case is adjourned to 10th March, 1945, for order. Decree holder to take necessary steps by, that date positively. " The decree holder applied for further adjournment, of the case and the 10th the court passed an order in these terms: "Decree holder prays for time ' again to give necessary instructions to his pleader for taking necessary steps. The 'petition for time is rejected. The execution case is dismissed part satisfaction. " When the decree holder was apprised of this order, he, the 19th March, 1945, made an application under section 151, Civil Procedure Code, for restoration of the execution and for getting aside the order of dismissal. this application notice was issued to the judgment debtors who raised a number of objections against the decree holder 's petition to revive the execution. By an order dated the 25th April, 1945, the Subordinate Judge granted the decree holder 's prayer and ordered restoration of the execution. The operative part of the order is in these terms: " 10th March, 1945, the decree holder again prayed for time for the purpose of giving necessary instructions to his pleader for taking steps. That petition was rejected by me. 10th March,, 1945, by the same order I mean the order rejecting the petition for adjournment I dismissed the 'execution case part satisfaction. The learned counsel behalf of the present petitioner wants me to vacate the order by which I have dismissed the execution case part satisfaction. He has invoked the aid of section 151, Civil Procedure Code,: for cancellation of this order and the consequent restoration of the execution case. I would discuss at the very outset as to whether I was justified in dismissing the,execution case in the same order,after rejecting the petition of the decree holder for an 142 adjournment without giving him an opportunity to his pleader to make any submission he might have to make after the rejection of the petition for time. It is clear from the order that the fact that the petition for time 'filed by the decree holder 10th March, 1945, was rejected by me was not brought to the notice of the pleader for the decree holder. It seems to me that there was denial of justice to the decree holder in the present execution proceeding inasmuch as it was a sad omission my part not to communicate to his pleader the result of this petition he made praying for an adjournment of this execution proceeding and at the same time, to dismiss the execution case part satisfaction which has brought about consequences highly prejudicial to the interest of the decree holder. I think section 151, Civil Procedure Code, is the only section which. empowers me to rectify the said omission I have made in not com municating to the pleader for the decree holder as to the fate of his application for an adjournment of the execution case and as such I would vacate the order passed by me dismissing the execution case part satisfaction. The ends of justice for which the court exists demand such rectification and I would do it. The learned Advocate General behalf of the judgment debtor Radha Kissen has argued before me that this court has no jurisdiction to vacate the order passed by me 10th March, 1945, dismissing the execution case part satisfaction. His argument is that section 48, Civil Procedure Code, stands in my way inasmuch as the law of limitation as provided in the above section debars the relief as sought for by the decree holder in the present application. I do not question the soundness of this argument advanced by the learned Advocate General. The facts of this case bring home the fact that in the present case I am rectifying a sad omission made by me which brought about practically a denial of justice to the decree holder and as such the operation of section 48, Civil Procedure Code, does not come to the assistance of the judgment debtor Radha Kissen," 143 It would have saved considerable expense and trouble to the parties had the dismissal for default chapter been closed for ever by this order of the Judge; the proceedings, however, took a different course. A serious controversy raged between the parties about the correctness of this obviously just order and after seven years it is now before us. An appeal and a revision were preferred to the High Court against this order. By its judgment dated 24th August, 1945, the High Court held that no appeal lay against it as the question involved did not fall within the ambit of section 47, Civil Procedure Code. It, however, entertained the revision application and allowed it, and remanded the case to the Subordinate Judge for reconsideration and disposal in accordance with the observations made in the order. The High Court took the view that the Subordinate Judge was in error in restoring the execution without taking into consideration the point whether the decree holder 's pleader could really take any step in aid of the execution if he had been apprised of the order of the court dismissing the adjournment application. This is what the High Court said: "The ground put forward by the Subordinate Judge in support of his order for restoration is that the order rejecting the adjournment petition should have been communicated to the pleader for the decree holder but this was not done. We will assume that this was an omission the part of the court. The question now is whether it was possible for the decree holder to take any further steps in connection with the execution of the decree and thereby prevent the execution case from being dismissed for default. No evidence was taken by the learned Subordienate Judge this point and even the pleader who was in charge of the execution case behalf of the decree holder was not examined. . If really the decree holder was not in a position to state that day as to what was the amount due under the decree for which he wanted the execution to be levied and if according to him it required elaborate accounting for the purpose 144 of arriving at the proper figure, it was not possible for him to ask the court to issue any process by way of attachment of the property that date. It seems to us that the learned Judge should have considered this matter properly and he should have found proper material as to whether the decree holder could really take any steps after the application for adjournment was disallowed." In sharp contrast to the opinion contained in the order of remand is the view now expressed by the High Court this point in its final judgment under appeal "One important circumstance which, in our opinion ; tells 'in favour of the decreeholder is the fact we have noticed before, namely, that after the ' petition for time was rejected the court did not call the execution case and otherwise intimate its decision to go with it. In one sense this,might be regarded as a mere error of procedure the part of the court which it would be wrong to allow the decreeholder to take advantage of, but an, error it was, as was admitted by the learned judge himself who had dealt with the matter, and we do not think his opinion, can be lightly brushed aside. There can be no doubt that the learned judge was in the best position to speak as regards the actual proceedings in his court % the 10th March, 1945, and if he thought that it amounted to a 'denial of justice ' to have rejected the petition for time and by the same order to dismiss the ,execution case, it is not for us to say that he was not right. It may well be that even if the case was called the decree holder 's pleader would even then have been absent, but having regard to all the facts and circumstances of the case, we think the court might yet give the decree holder the benefit of doubtin this matter, and assume in his favour that his pleader would have appeared before the learned, judge and tried to avert a peremptory dismissal of the execution case, even though he or his client might not have been fully ready with all necessary materials for continuing the execution proceeding. 145 As we have pointed out before and as the court below has also found, it was possible,for the decreeholder or his pleader to have submitted to the court, some sort,of an account of the decretal dues that date after refusal of the adjournment but even if this could not be done, we still believe that the pleader, if he appeared, could have done something, either by drawing the court 's attention to some of its previous orders or otherwise, by which a dismissal of the case might be prevented. " It was not difficult to envisage what the counsel would have done when faced with such a dilemma. He, would. have straightaway stated that the execution should issue, for an amount,which was roughly known to ' him, and that the court should,issue a process, for the arrest of the judgment debtors. BY such a statement he would have saved the dismissal without any,detriment to his client: who could later make another application stating the precise amount due and praying for additional reliefs. After remand the 13th March, 1946, the learned Subordinate Judge restored the execution case in respect of a sum of Rs.92,OOO only and maintained the order of dismissal in other respects. He held that the decree holder was grossly negligent on the 5th and the 10th March, 1945, and that due to his negligence the execution case was dismissed in default that even if his pleader had been informed of the order rejecting the application for adjournment he could not have taken any steps to prevent the dismissal of the execu tion; that the execution being now barred by limitation the judgment debtors should not be deprived of the valuable rights acquired by them but at the same time they should not be allowed to retain the advantage of an acknowledgment of a debt of Rs, 92,000 made by the decree holder. Both the decree holder and the judgment debtors were dissatisfied with this order. The decree holder preferred an appeal to the High Court and also filed an application under section 115, Civil Procedure 146 Code. The judgment debtors filed cross objections in the appeal and also preferred an alternative application in revision. The appeal, the cross objections and the two revision 'applications were disposed of together by the High Court by its judgment dated 17th February, 1947. The order dismissing the execution in default was set aside and the case was restored terms. The decreeholder was held disentitled to interest the decretal amount from 10th March, 1945, to the date of final ascertainment of the amount of such interest by the executing court and was ordered to pay to the judgment debtors a consolidated sum of Rs. 20,000 by way of compensatory costs. He was to pay this amount to the judgment debtora within two weeks of the arrival of the records in the executing court or have it certified in the execution. In default the appeal was to stand dismissed with costs and the cross objections decreed with costs. An application for leave to appeal to His Majesty in Council against this order was made by the judgment debtors and leave was granted to them 30th May, 1947. The decree holder also applied for leave and he was granted leave 27th June, 1946. Both the appeals were consolidated by an order of the court dated 4th December, 1947, and thereafter the appeals were transferred to this court. On behalf of the decree holder it was contended that the High Court was wrong in allowing the judgment debtors Rs. 20,000 by way of compensation for costs, and that having regard to the terms of the compromise decree it had no jurisdiction to deprive the decree holder of the interest allowed to him by the decree, and that it had neither power nor jurisdiction under section 115, Civil Procedure Code, to set aside the order dated 25th April, 1945, passed by Mr. Chakravarti, Subordinate Judge, under section 151 of the said Code and that the interlocutory remand order of the High Court being without jurisdiction. , all subsequent proceedings taken thereafter were null and void. 147 The earned counsel for the judgment debtors not only supported the judgment of the High Court to the extent it went in their favour but contended that the High Court should have refused to restore the execution altogether and that the assumption made by it that the decree holder 's pleader could do something to prevent the dismissal of the case or could present some sort of statement to the court was wholly unwarranted and unjustifiable. It was urged that it ought to have been held that the decree holder was guilty of gross negligence and he was himself responsible for the dismissal of the case, and that it was not necessary to formally call the case after the rejection of the petition for adjournment and that a valuable right having accrued to the judgment debtors by efflux of time, they should not have been deprived of it in the exercise of the inherent powers of the court. It is unnecessary to consider all the points taken in these appeals because, in our opinions the point canvassed behalf of the decree holder that the order of remand was without jurisdiction and that all the proceedings taken subsequent to the order of the executing court reviving the execution were void, has force. The sole ground which the Subordinate Judge had ordered restoration of the execution was that he had himself made a sad mistake in dismissing it at the same time that he dismissed the adjournment application without informing the decree holder 's counsel that the request for adjournment had been refused and without calling upon him to state what he wanted done in the matter in those circumstances. As the Subordinate Judge was correcting his own error in the exercise of his inherent powers, it was not necessary for him to investigate into the correctness of the various allegations and counter allegations made by the parties. He was the best judge of the procedure that was usually adopted in his court in such cases and there is no reason whatsoever for the supposition that when the Subordinate Judge said that he had not given any opportunity to 148 the decree holder 's pleader to take any steps in execution of the decree after the dismissal of the adjournment application he was not right. It could not be seriously suggested that such an opportunity was given to the decree holder, the dismissal order of the execution having been made at the same moment of time as the order dismissing the application for adjournment It is quite clear that the interest of justice demanded that the decree holder 's pleader should have been informed that his request for adjournment had been refused, and further given opportunity to state what he wanted done in that situation. It was wholly unnecessary in such circumstances to speculate what the pleader would have done when faced with that situation. I The solid fact remains that he was not given that opportunity and that being so, the order dismissing the execution was bad and was rightly corrected by the court its own initiative in the exercise of its inherent powers. The point for determination then is whether such an order could be set aside by the High Court either in the exercise of its appellate or revisional powers. It is plain that the High Court bad no jurisdiction in the exercise of its appellate jurisdiction to reverse this decision. In the remand order itself it was held that it was difficult to say that the order by itself amounted to a final determination of any question relating to execution, discharge or satisfaction of a decree and that being so, it did not fall within the ambit of section 47 Civil Procedure Code. We are in entire agreement with this observation. The proceedings that commenced with the decree holder 's application for restoration of the execution and terminated with the order of revival can in no sense be said to relate to the determination of any question concerning the ,execution, discharge or satisfaction of the decree. Such proceedings are in their nature collateral to the execution and are independent of it. It was not contended and could not he seriously urged that an order under section 151 simpliciter is 149 appealable. Under the Code of Civil Procedure certain specific orders mentioned in section 104 and Order XLIII, rule 1, only are appealable and no appeal lies from any other orders. (Vide section 105, Civil Procedure Code). An order made under action 151 is not included in the category of appealable orders. In support of his contention that an order made under section 151 may in certain circumstances be appealable, Mr. Daphtary placed reliance two single Judge judgments of the Madras High Court and a Bench decision of Oudh. [Vide Akshia Pillai vs Govindarajulu Chetty(1); Govinda Padayachi vs Velu Murugiah Chettiar(2); Noor Mohammad vs Sulaiman Khan(1)]. In all these cases execution sale had been set aside by the court in exercise of inherent powers and it was held that such orders were appealable. The ratio of the decision in the first Madras case is by no means very clear and the reasoning is somewhat dubious. In the other two cases the orders were held appealable the ground that they fell within the ambit of section 47, Civil Procedure Code, read with section 151. It is unnecessary to examine the correctness of these decisions as they have no bearing the point before us, ' there being no analogy between an order setting aside an execution sale and an order setting aside the dismissal of an application. The High Court was thus right in upholding the preliminary objection that no appeal lay from the order of the Subordinate Judge dated 25th April, 1945. We now proceed to consider whether a revision was competent against the order of the 25th April, 1945, when no appeal lay. It seems to us that in this matter really the High Court entertained an appeal in ' the guise of a revision. The revisional ' jurisdiction of the High Court is set out in the 115th section of the Code of Civil Procedure in these terms: (I) A.I.R. 31924 Mad. 778. (3) A.I.R. 1943 Oudh 35. (2) A.I.R. 1933 Mad. 399 20 150 "The High Court may call for the record of any case which has been decided by any court subordinate to such High Court and in which appeallies thereto, and if such subordinate court appears: (a) to have exercised a jurisdiction not vested in it by law, or (b) to have failed to exercise a jurisdiction so vested, or (e) to have acted in the exercise of its jurisdiction illegally or with material irregularity, the High Court may make 'such order in the case as it thinks fit.,, A large number of cases have been collected in the fourth edition of Chitaley & Rao 's Code of Civil Procedure (Vol. I), which only serve to show that the High Courts have not always appreciated the limits of the jurisdiction conferred by this section. In Mohunt Bhagwan Ramanuj Das vs Khetter Moni Dassi(1), the High Court of Calcutta expressed the opinion that sub clause (c.) of section 115, Civil Pro cedure Code, was intended to authorize the High Courts to interfere. and correct gross and palpable errors of subordinate courts, so as to prevent grave injustice in non appealable cases. This decision was, however, dissented from by the same High Court in Enat Mondul vs Baloram Dey(2), but was cited with approval by Lort Williams J., in Gulabohand Bangur vs Kabiruddin Ahmed(1). In these circumstances it is worthwhile recalling again to mind the decisions ,of the Privy Council this subject and the limits stated therein for the exercise of jurisdiction conferred by this section the High Courts. As long ago as 1894, in Hajah Amir Has8an Khan 'vs Sheo Baksh Singh(1), the Privy Council made the following observations section 622 of the former Code of Civil Procedure, which was replaced by section 115 of the Code of 1908: "The question then is, did the Judges of the lower courts in this case, in the exercise of their (I) (1897) I C.W.N. 617. (3) Cal. (a) (4) (1883 84) L.R. xi I.A. 237. 151 jurisdiction, act illegally or with material irregularity. It appears that they had perfect jurisdiction to decide the case, and even if they decided wrongly, they did not exercise their jurisdiction illegally or with material irregularity." In 1917 again in Balakrishna Udayar vs Vasudeva Aiyar(1), the Board observed: "It will be observed that the section applies to jurisdiction alone, the irregular exercise or nonexercise of it, or the illegal assumption of it. The section is not directed against conclusions of law or fact in which the question of jurisdiction is not involved. " In 1949 in Venkatagiri Ayyangar vs Hindu Religious Endowments Board, Madras(1), the Privy Council again examined the scope of section 115 and observed that they could see no justification for the view that the section was intended to authorize the High Court to interfere and correct gross and palpable errors of subordinate courts so as to prevent grave injustice in non appealable cases and that it would be difficult to formulate any standard by which the degree of err or of subordinate courts could be measured. It was said " Section 115 applies only to cases in which no appeal lies, and, where the legislature has provided no right of appeal, the manifest intention is that the order of the trial Court, right or wrong, shall be final. The section empowers the High Court to satisfy itself three matters, (a) that the order of the subordinate court is within its jurisdiction ; (b) that the case is one in which the court ought to exercise jurisdiction; and (c) that in exercising jurisdiction the court has not acted illegally, that is, in breach of some provision of law, or with material irregularity, that is, by committing some error of procedure in the course of the trial which is material in that it may have affected the ultimate decision. If the High Court is satisfied those three matters,, it has no (1) (1917) L.R. 44 I,A. 26i. (2) (1949) L.R. 76 I.A. 67. power to interfere because it differs, however profoundly, from the conclusions of the subordinate court questions of fact or law. " Later in the same year in Joy Chand Lal Babu vs Kamalaksha Choudhury(1), their Lordships had again adverted to this matter and reiterated what they had said in their earlier decision. They pointed out "There have been a very large number of decisions of Indian High Courts section 115 to many of which their Lordships have been referred. Some of such decisions prompt the observation that High Courts have not always appreciated that although error in a decision of a subordinate court does not by itself involve that the subordinate court has acted illegally or with material irregularity so as to justify interference in revision under sub section (c), nevertheless, if the erroneous decision results in the sub ordinate court exercising a jurisdiction not vested in it by law, or failing to exercise a jurisdiction so, vested, a case for revision arises under subsection (a) or subsection (b) and sub section (c) can be ignored. " Reference may also be made to the observations of Bose J. in his order of reference in Narayan Sonaji vs Sheshrao Vithoba(2) wherein it was said that the words "illegally" and "material irregularity" do not cover either errors of fact or law. They do not refer to the decision arrived at but to the manner in which it is reached. The errors contemplated relate to material defects of procedure and not to errors of either law or fact after the formalities which the law prescribes have been complied with. We are therefore of the opinion that in reversing the order of the executing court dated the 25th April, 1945, reviving the execution, the High Court exercised jurisdiction not conferred it by section 116 of the Code. It is plain that the order of the Subordinate Judge dated the 25th April, . 1945, was one that he had jurisdiction to make, that in making that order he neither acted in excess, of his jurisdiction (I) (I949) T .R . 76 J. A. 131. (2) A.I.R. 1948 Nag. 153 nor did he assume jurisdiction which he did not possess. It could not be said that in the exercise of it he acted with material irregularity or committed any breach of the procedure laid down for reaching the result. All that happened was that he felt that be had committed an error, in dismissing the main execution while he was merely dealing with an adjournment application. It cannot be said that his omission in not taking into consideration what the decree holder 's pleader would have done had he been given the opportunity to make his submission amounts to material irregularity in the exercise of jurisdiction. This speculation was hardly relevant in the view of the case that he took. The Judge had jurisdiction to correct his own error without entering into 'a discussion of the grounds taken by the decree holder or the objections raised by the judgment debtors. We are satisfied therefore that the High Court acted in excess of its jurisdiction when it entertained an application in revision against the order of the Subordinate Judge dated the 25th April, 1945, and set it aside in exercise of that jurisdiction and remanded the case for further enquiry. The result therefore is that Appeal No. 12 of 1951 is allowed, as the interlocutory remand order of the High Court was one without jurisdiction and that being so, the subsequent proceedings taken in consequence of it, viz., the order of the Subordinate Judge restoring the application for execution to the extent of Rs. 92,000, and the further order of the High Court appeal restoring the execution case terms, are null and void and have to be set aside and the order of the executing court dated the 25th April, 1945, restored. We order accordingly. Appeal No. 13 of 1951 is dismissed. In the peculiar circumstances of this case we direct that the parties be left to bear their own costs throughout, that is, those incurred by them in the High Court in the proceedings which terminated with the remand order, the costs incurred in the subordinate court after the remand order, and the costs there after 154 incurred in the High Court and those incurred in this court i n these appeals. Appeal No. 12 allowed. Appeal No. 13 dismissed. I Agent for the appellant in C. A. No. 12 and respondent in C.A. No. 12: P. K. Chatterjee. Agent for the respondents in C. A. No. 12 and appellants in C. A. No. 13: Sukumar Ghose.

IN-Abs

A Subordinate Judge dismissed an application by a decree holder for adjournment of an execution case and by the same order dismissed the execution case itself without informing the decree. holder 's pleader that the application for adjournment had been dismissed and asking him whether be had to make any submission in 137 the matter of the execution case, and an application for restoration of the execution case setting aside the order of dismissal, the Subordinate Judge, finding that he had committed an error which had resulted in denial of justice restored the execution case in the exercise of the inherent powers of the court under section 151, Civil Procedure Code. The judgment debtor preferred an appeal and an application, for revision to the High Court against this order. The High Court held that the appeal was not maintainable but set aside the order of the Subordinate Judge in the exercise of its revisional powers and remanded the case to the Subordinate Judge for fresh disposal after considering whether it would have been possible for the decree holder to take any further steps in connection with the execution application after the dismissal of the application for adjournment: Held, (i) that the order of the Subordinate Judge dismissing the execution case without giving an opportunity to the decree holder 's pleader to state what he had to say the case itself was bad and was rightly set aside by the court its own initiative in exercise of its inherent powers. (ii)The High Court had no jurisdiction in the exercise of its appellate powers to reverse the order of restoration as that order by itself did not amount to a final determination of any question relating to execution, discharge or satisfaction of a decree within the meaning of section 47, Criminal Procedure Code, and an order made under section 151, Criminal Procedure Code, simpliciter is not an appealable order. Akshia Pillai vs Govindarajulu Chetty (A.I.R. 1924 Mad. 778), Govinda Padayachi vs Velu Murugiah Chettiar (A.I.R. and Noor Mohammad vs Sulaiman Khan (A.I.R. 1943 Oudh 35) distinguished. (iii)As the order of the Subordinate Judge was one that he had jurisdiction to make, and as he had, in making that order, neither acted in excess of his jurisdiction or with material irregularity nor committed any breach of procedure, the High Court acted in excess of its revisional jurisdiction under section 115, Civil Procedure Code, and the order of remand and all proceedings taken subsequent to that order were illegal. Section 115, Civil Procedure Code, applies to matters of jurisdiction alone, the irregular exercise or non exercise of it or the illegal assumption of it, and if a subordinate court had jurisdiction to make the order it has made and has not acted in breach of any provision of law or committed any error of procedure which is material and may have affected the ultimate decision, the High Court has no power to interfere, however profoundly it may differ from the conclusions of that court questions of fact or law. Rajah Amir Hassan Khan vs Sheo Baksh Singh (1883 83) 11 I.A. 237, Bala Krishna Udayar vs Vasudeva Aiyar (1917) 44 IA. 261, Venkatagiri Ayyangar vs Hindu Religious Endowments Board 138 1949) 76 I.A. 67, Joy Chand Lal Babu vs Kamalaksha Chowdhury 1949)76 I.A.131 and Narayan Sonaji vs Sheshrao Vithoba (I.L.R. referred to. Mohunt Bhagwan Ramanuj Das vs Khettar Moni Dassi and Gulab Chand Bargur vs Kabiruddin Ahmed , dissented from.

Appeal No. 327 of 1959. Appeal from the order dated June 28, 1956, of the Bombay High Court at Nagpur in Misc. First Appeal No. 15 of 1954. 98 774 A. V. Viswanatha Sastri, Shankar Anand and A. G. Batnaparkhi, for the appellant. K. N. Rajagopal Sastri, as amicus curiae. November 29. The Judgment of the Court was delivered by SHAH, J. Ramachandra Dhondo Datar hereinafter referred to as the respondent was employed by the appellant company in its publications branch. By agreement dated March 23, 1943, the appellant company agreed to pay to the respondent as from April 1, 1943, remuneration per annum equal to 3 1/2% of the gross sales or Rs. 12,000 whichever was greater. The agreement was to remain in operation for ten years from April 1, 1943, in the first instance and was renewable at the option of the respondent for such period as he desired. By notice dated April 19, 1948, served on the respondent on April 22, 1948, the appellant company terminated the employment of the respondent. The respondent then filed a civil suit in the court of the Fifth Additional District Judge, Nagpur, for a decree for Rs. 1,30,000 being the amount of compensation for wrongful termination of employment, arrears of salary and interest. On July 17, 1953, the court after giving credit for the amount received by the respondent passed a decree for Rs. 42,359 (which was inclusive of Rs. 36,000 as compensation for termination of employment and Rs. 6,000 as salary in lieu of six months notice and interest) and costs and interest on judgment. The respondent then applied for execution of the decree and claimed Rs. 54,893 12 0 less Rs. 18,501 10 0 decreed against him in a cross suit filed by the appellant company. The Income Tax Officer, Nagpur, served a notice under section 46 of the Indian Income Tax Act upon the respondent and also gave intimation to the District Judge, Nagpur, that the appellant company be permitted to deduct at source and to pay into the Government Treasury Rs. 15,95613 0 as income tax, surcharge and super tax due on the sum of Rs. 50,972 2 0 awarded to the respondent. The appellant company also applied that the 775 executing Court do declare that the appellant company was entitled and in law bound to deduct the tax due on the amount. The learned Judge directed the appellant company to pay to the Income Tax Department Rs. 15,956 13 0 on account of income tax and super tax on the amount due to the respondent and directed it to pay the balance in court after filing a receipt for payment of tax from the Income Tax department. In appeal to the High Court of Judicature at Nagpur, the order passed by the District Judge was reversed and execution as claimed by the respondent was directed. The appellant company contends that under section 18(2) of the Income Tax Act, it was bound to deduct the tax computed at the appropriate rate on the salary payable to the respondent as the amount due under the decree represented salary. Section 18 sub section (2) of the Income Tax Act in so far as it is material provides that any person paying any amount chargeable under the head "salaries" shall at the time of payment deduct income tax and super tax at the rate representing the average of the rates applicable to the estimated total income of the assessee under the head "salary". Sub section (7) declares that a person failing to deduct the taxes required by the section shall be deemed to be an assessee in default in respect of such tax. The Legislature has, it is manifest, imposed upon the employer the duty to deduct tax at the appropriate rate on salary payable to the employee and if he fails to do so, the tax not deducted may be recovered from him. But the liability to deduct arises in law, if the amount is due and payable as salary. In this case, there has been no assessment of tax due by the Income Tax Officer on the amount payable to the respondent. Under section 46(5), any person paying salary to an assessee may be required by the Income Tax Officer to deduct arrears of tax due from the latter and the employer is bound to comply with such a requisition and to pay the amount deducted to the credit of the Government. But this order can only be passed if income tax has been assessed and has remained unpaid. It is undisputed that at the, material 776 time, no tax was assessed against the respondent; the Income Tax Officer had accordingly no authority to issue a notice under section 46(5). Nor could the Income Tax Officer claim to recover tax due by a proceeding in the nature of a garnishee proceeding by applying to the civil court to attach the Judgment debt payable by the company. The application submitted by the Income Tax Officer must therefore be ignored. Undoubtedly, the employer is by section 18 of the Act liable to deduct from the salary payable by him to his employee the amount of tax at the average rate appli cable to the estimated total income; but can it be said that as between the appellant company and the respondent the decretal amount represented salary? The respondent had filed a suit for a decree for arrears of salary, compensation for wrongful termination of employment and interest. The court having passed a decree on that claim, it became a judgment debt. It may have been open to the appellant company in the suit to apply to the court for making a provision in the decree for payment of income tax due by the respondent, but no such provision was made. We are not concerned to decide in this appeal whether in the hands of the respondent the amount due to him under the decree, when paid, will be liable to tax; that question does not fall to be determined in this appeal. The question to be determined is whether as between the appellant company and the respondent the amount decreed is due as salary payment of which attracts the statutory liability imposed by section 18. The claim decreed by the civil court was for compen sation, for wrongful termination of employment, arrears of salary, salary due for the period of notice and interest and costs, less withdrawals on salary account. The amount for which execution was sought to be levied was the amount decreed against which was set off the claim under the cross decree. A substantial part of the claim decreed represented compensation fir wrongful termination of employment and it would be difficult to predicate of the claim sought to be enforced what part thereof if any represented salary due. Granting that compensation payable to an 777 employee by an employer for wrongful termination of employment be regarded as in the nature of salary, when the claim is merged in the decree of the court, ' the claim assumes the character of a judgment debt and to judgment debts section 18 has not been made applicable. The decree passed by the civil court must be executed subject to the deductions and adjustments permissible under the Code of Civil Procedure. The judgment debtor may, if he has a cross decree for money, claim to set off the amount due thereunder. If there be any adjustment of the decree, the decree may be executed for the amount due as a result of the adjustment. A third person who has obtained a decree against the judgment creditor may apply for attachment of the decree and such decree may be executed subject to the claim of the third person: but the judgment debtor cannot claim to satisfy, in the absence of a direction in the decree to that effect the claim of a third person against the judgment creditor, and pay only the balance. The rule that the decree must be executed according to its tenor may be modified by a statutory provision. But there is nothing in the Income Tax Act which supports the plea that in respect of the amount payable under a judgment debt of the nature sought to be enforced, the debtor is entitled to deduct income tax which may become due and payable by the judgment creditor on the plea that the cause of action on which the decree was passed was the contract of employment and a part of the claim decreed represented amount due to the employee as salary or damages in lieu of salary. Counsel for the appellant company strongly relied upon the decision of the House of Lords in Westminster Bank Ltd. vs Riches (1). That was a case in which in an action brought by one R against the Westminster Bank trustee of the estate of one X R was awarded a decree for pound 36,255 principal and pound 10,028 as interest. The Bank thereafter brought an action for a declaration that it had satisfied the judg ment in the action by R by paying him the amount (1) 18 Tax Cases 159. 778 due less pound 5,014, the latter sum representing income tax on the interest awarded by the judgment. It was held by the House of Lords that pound 10,028 was "interest of money" within Schedule D and General Rule 21 of the Income Tax Act, 1918, and that income tax was deductible therefrom. In that case, the only argument advanced on behalf of the Bank is set out in the speech of Viscount Simon, L. C. at p. 187: "The appellant contends that the additional sum of pound 10,028 though awarded under a power to add interest to the amount of the debt, and though called interest in the judgment, is not really interest such as attracts Income Tax, but is damages. The short answer to this is that there is no essential incompatibility between the two conceptions. The real question, for the purposes of deciding whether the Income Tax Acts apply, is whether the added sum is capital or income, not whether the sum is damages or interest." The House of Lords in that case by a majority held that pound 10,028 awarded under the judgment represented not capital but interest and was liable to tax. In our view, ' this case has no application to the facts of the present case. In the case before us, there is a decree passed in favour of the respondent: under the scheme of the Civil Procedure Code, that decree has to be executed as it stands, subject to such deductions or adjustments as are permissible under the Code. There was no tax liability which the respondent was assessed to pay in respect of this amount till the date on which the appellant company sought to satisfy the alleged tax liability of the respondent. As between the appellant company and the respondent, the amount did not represent salary; it represented a judgment debt and for payment of income tax thereon, no provision was made in the decree. The Civil Procedure Code bars an action of the nature which was filed in Westminster Bank 's case (supra). The defence to the execution if any must be raised in the execution proceeding and not by a separate action. The amount payable by the appellant company to the respondent was not salary but a judgment debt, and before paying that debt the appellant company could not claim 779 to deduct at source tax payable by the respondent. Nor could the appellant company seek to justify its plea on the ground that the judgment creditor was indebted to a third person. The principle of the case in Manickam Chettiar vs Income Tax Officer, Madura (1), on which reliance was also sought to be placed by the appellant company has no application to this case. In Manickam Chettiar 's case (1), in execution of a money decree certain properties belonging to a judgment debtor were attached and sold and the sale proceeds were received by the court. The Income Tax Officer who had assessed the decree holder to tax payable by him on his other income applied to the court for an order directing payment to him out of the sale proceeds the amount of income tax due by the decree holder. It was held that the claim for income tax was entitled to priority in payment and the court had inherent power to make an order on the application for payment of money due as income tax. Tax had admittedly been assessed, and proceedings substantially for recovery of the tax so assessed were adopted by the Income Tax Officer. It was held in the circumstances that the court had jurisdiction to direct recovery of tax out of the amount standing to the credit of the decree holder. The principle of that case can have no application to the facts of the present case. The respondent had not appeared before us, but we have been assisted by Mr. Rajagopala Sastri and we are indebted to him for placing the evidence and the various aspects of the case on a true appreciation of which the question in issue fell to be determined. The appeal fails and is dismissed. As there was no appearance for the respondent, there will be no order for costs. Appeal dismissed. (1) VI I.T. R. 180.

IN-Abs

In a civil suit the respondent obtained a decree against his employer the appellant company for a sum which included com pensation for wrongful termination of his service, arrears of salary, interest and costs of the suit, and then applied for execution of the decree. The Income tax Officer served a notice upon the respondent under section 46 of the Indian Income tax Act and applied to the District Judge that the appellant be permitted to deduct at source the income tax, surcharge and super tax on the sum awarded to the respondent and pay the same in the Government Treasury. The appellant company also moved the executing court for a declaration that they were entitled and bound to deduct the tax due on the amount. The District judge directed the appellant company to pay the income tax and super tax to the Income Tax Department and pay the balance in Court together with a receipt for the income tax paid. In appeal the High Court reversed the order of the District judge and directed the execution of the decree as claimed by the respondent. On appeal by the appellant company, Held, that as no tax was assessed against the respondent the Income Tax Officer could not issue a notice under section 46(5) requiring the appellant company to deduct tax from the decretal amount. A substantial part of the decretal amount did not represent salary" of the respondent: it consisted of compensation for wrongful termination of the respondent 's service, salary in lieu of six months ' notice, interest and costs of the suit. It was a judgment debt and no provision for payment of income tax was made in the decree which was liable to be executed as prayed by the respondent. The appellant company was not therefore entitled or bound to deduct income tax under section 18 sub section (2) of the Act.

Appeals Nos. 776 and 777 of 1957. Appeals by special leave from the judgment and order dated September 25, 1956, of the Bombay High Court in Income tax Application No. 48 of 1956; and from the judgment and order dated March 17,1954, of the Income tax Appellate Tribunal, Bombay, in E.P.T.A. Nos. 757, 903 and 944 of 1948 49, respectively. A. V. Viswanatha Sastri and G. Gopalakrishnan, for the appellants. A. N. Kripal and D. Gupta. for the respondent. November 30. The Judgment of the Court was delivered by HIDAYATULLAH, J. These are two appeals, with special leave, against an order of the High Court of Bombay rejecting a petition under section 66(2) of the Indian Income tax Act and the order of the Income tax Appellate Tribunal, Bombay, in respect of which the petition to the High Court was made. Messrs. section C. Cambatta & Co. (Private) Ltd., Bombay, have filed these appeals, and the Commissioner of Excess Profits Tax, Bombay, is the respondent. We are concerned in these appeals with three chargeable accounting periods, each ending respectively on December 31, beginning with the year, 1943 and ending with the year, 1945. 807 The appellants carry on various businesses, and one such business was the running of a theatre and restaurant, called the Eros Theatre and Restaurant. In October, 1943, a subsidiary Company called the Eros Theatre and Restaurant, Ltd. was formed. The paid up capital of the subsidiary Company was Rs. 7,91,100 divided into 7,911 shares of Rs. 100 each. 7,901 shares were allotted to the appellant Company as consideration for assets, goodwill, stock in trade and book debts which were taken over by the subsidiary Company, and the remaining 10 shares were held by the Cam batta family. The assets which were transferred were as follows: Assets: Assets transferred. Rs.1,28,968 Stock in trade. Rs.40,000 Book debts. . Rs.100 Rs.1,69,068 They together with the capital reserve of Rs. 6,21,032 made up the amount of Rs. 7,90,100. In the books of the subsidiary Company, the share capital account was shown separately as follows: Rs. 2,50,000 debited to the various assets account. Rs. 5,00,000 debited to the goodwill account. Rs. 40,000 debited to the stock in trade account. Rs. 100 debited to the book debts account. It will thus appear that goodwill was not shown separately in the appellants ' account books, but only in the accounts of the subsidiary Company. In working out the capital of the two Companies for excess profits tax, a sum of Rs. 5,00,000 was claimed as goodwill as part of the capital of the subsidiary Company. Both the Department as well as the Tribunal held that section 8(3) of the Excess Profits Tax Act applied; and the goodwill was not taken into account in working out the capital. The Tribunal declined to state a case, but the High Court directed that a reference be made on two questions, which were framed as follows: 808 "(1) Whether on the facts of the case, the Appellate Tribunal was right in applying section 8(3) of the Excess Profits Tax Act? (2). Whether in the computation of the capital employed. in the business of the assessee, the Tribunal erred in. not including the value of the goodwill or any "portion thereof?" The High Court by its judgment and order answered the first question in the negative and the second, in the affirmative. It held that sub section (5) and not sub section (3) of section 8 of the Excess Profits Tax Act was applicable. It, therefore, held that "the Tribunal should have allowed for the value of the goodwill whatever it thought was reasonable at the date of the transfer. " When the matter went before the Tribunal again, three affidavits and a valuation report by a firm of architects were filed. The goodwill, according to the report of the architects, amounted to Rs. 25 lakhs. It may be mentioned here that the subsidiary Company was using the premises under a lease granted on November 20, 1944, for three years beginning from April 1, 1944, on a rental of Rs. 9,500 per month. The Tribunal came to the conclusion that no goodwill had been acquired by the business of the Theatre as such, and that whatever goodwill there was, related to the site and building itself. They then proceeded to consider what value should be set upon the goodwill on the date of the transfer of the subsidiary Company as directed by the High Court. They took into account certain factors in reaching their conclusions. They first considered the earning capacity of the business, and held that prior to 1942 the business had not made profits, and that the name of Eros Theatre and Restaurant thus by itself had no goodwill at all. They, therefore, considered that the only goodwill which had been acquired attached to the lease, which the trustees had given to the Eros ;Theatre and Restaurant Ltd., and computing the goodwill as the value of the lease to the subsidiary Company, they felt that Rs. 2 lakhs was a liberal estimate of the value of the goodwill in the hands of Eros Theatre and Restaurant, Ltd. at the material time. 809 Petitions under sections 66(1) and 66(2) read with a. 21 of the Excess Profits Tax Act were respectively rejected by the Tribunal and the High Court; but the appellants obtained special leave from this Court, and filed these appeals. In our opinion, a question of law did arise in the case whether the goodwill of the Eros Theatre and ' Restaurant, Ltd., was calculated in accordance with law. The Tribunal seems to have taken into account only the value of the leasehold of the site to the subsidiary Company, and rejected other considerations which go to make up the goodwill of a business. No doubt, in Cruttwell vs Lye(1), Lord Eldon, L. C. observed that goodwill was "nothing more than the probability that the old customers would resort to the old place". The description given by Lord Eldon has been considered always to be exceedingly narrow. The matter has to be considered from the nature of the business, because the goodwill of a public inn and the goodwill of a huge departmental stores cannot be calculated on identical principles. The matter has been considered in two cases by the House of Lords. The first case is Trego vs Hunt (2), where all the definitions previously given were considered, and Lord Macnaghten observed that goodwill is "the whole advantage, whatever it may be of the reputation and connection of the firm, which may have been built up by years of honest work or gained by lavish expenditure of money". In a subsequent case reported in Inland Revenue Commissioners vs Muller & Co.s. Margarin, Ltd. (3), Lord Macnaghten at pp. 223 and 224 made the following observations:. "What is goodwill? It is a thing very easy to describe, very difficult to define. It is the benefit and advantage of the good name, reputation, and connection of a business. It is the attractive force which brings in custom. It is the one thing which distinguishes an old established business from a new business at its first start. . . If there is one attribute common to all cases of goodwill in it is the attribute (1) 346. (2) (3) 810 of locality. For goodwill has no independent existence. It cannot subsist by itself. 'It must be attached to a business. Destroy the business, and the goodwill perishes with it, though elements remain which may perhaps be gathered up and be revived again". These two cases and others were considered in two 'Australian cases. The first is Daniell vs Federal Com missioner of Taxation (1), where, Knox, C. J. observed: "My opinion is that while it cannot be said to be absolutely and necessarily inseparable from the premises or to have no separate value, prima facie at any rate it may be treated as attached to the premises and whatever its value may be, should be treated as an enhancement of the value of the premises". In the second case reported in Federal Commissioner of Taxation vs Williamson (2), Rich, J., observed at p. 564 as follows: "Hence to determine the nature of the goodwill in any given case, it is necessary to consider the type of business and the type of customer which such a business is inherently likely to attract as well as the surrounding circumstances. . The goodwill of a business is a composite thing referable in part to its locality, in part to the way in which it is conducted and the personality of those who conduct it, and in part to the likelihood of competition, many customers being no doubt actuated by mixed motives in conferring their custom". In Earl Jowitt 's Dictionary of English Law, 1959 Edn., "goodwill" is defined thus: "The goodwill of a business is the benefit which arises from its having been carried on for some time in a particular house, or by a particular person or firm, or from the use of a particular trade mark or trade name" It will thus be seen that the goowill of a business depends upon a variety of circumstances or a combination of them. The location, the service, the standing of the business, the honesty of those who run it, and the lack of competition and many other factors go individually or together to make up the goodwill, (1) ; (2) ; 811 though locality always plays a considerable part. Shift the locality, and the goodwill may be lost. At the same time, locality is not everything. The power to attract custom depends on one or more of the other factors as well. In the case of a theatre or restaurant, what is catered, how the service is run and what the competition is, contribute also to the goodwill. From the above, it is manifest that the matter of goodwill needs to be considered in a much broader way than what the Tribunal has done. A question of law did arise in the case, and, in our opinion, the High Court should have directed the Tribunal to state a case upon it. Civil Appeal No. 776 of 1957 is allowed. The High Court will frame a suitable question, and ask for a statement of the case from the Tribunal, and decide the question in accordance with law. The costs of this appeal shall be borne by the respondent; but the costs in the High Court shall abide the result. There will be no order in Civil Appeal No. 777 of 1957. C. A. No. 776 of 1957 allowed.

IN-Abs

The appellant carried on various businesses and one such was the running of a Theatre and Restaurant. In October, 1943, a subsidiary company was formed which was using the premises of the Theatre under a lease granted to it from April, 1944. In working out the capital of the two companies for excess profits tax, a claim of rupees five lakhs for goodwill as part of the capital of the subsidiary company was not taken into account. On reference to the High Court it held that the Tribunal should have allowed the value of the goodwill whatever it thought was reasonable at the date of transfer. Thereafter the Tribunal took into account only the value lease hold of the site to the subsidiary company and came to the conclusion that no goodwill had been acquired by the business of the Theatre as such and whatever goodwill there was related to the site of building itself, and estimated the value of goodwill at rupees two lakhs. Petition under sections 66(1) and 66(2) read with section 21 of the Excess Profits Tax Act being rejected by the Tribunal and the High Court, the appellants came appeal by special leave. Held, that the goodwill of a business needed to be considered in a broader way. It depended upon a variety of circumstances or a combination of them. The nature, the location, the (1) 102 806 service, the standing of the business, the honesty of those who run it, and the lack of competition and many other factors went individually or together to make up the goodwill, though the locality always played a considerable part. Shift the locality, and the goodwill may be lost but it was not everything. The power to attract custom depended on one or more of the other factors as well. In the instant case a question of law did arise, whether the goodwill of the Eros Theatre and Restaurant Ltd. was calculated in accordance with law. Cruttwell vs Lye, (1810) 17 ves. 335, Trego vs Hunt, L.), Inland Revenue Commissioners vs Muller & Co. 's Margarin, Ltd., 9101 A. C. 217 (H. L.), Daniell vs Federal Commissioner of Taxation; , and Federal Commissioner of Taxation vs Williamson, ; , discussed.

Appeals Nos. 187 and 190 of 1960. Appeals from the judgment dated 22nd January, 1957, of the Punjab High Court (Circuit Bench), Delhi, in Civil Reference No. 6 of 1953. Veda Vyasa, section K. Kapur and K. K. Jain, for the appellant. B. Ganapathi Iyer and D. Gupta, for the respondent. November 30. The Judgment of the Court was delivered by KAPUR, J. These appeals are brought by the assessee company against a common judgment and order of the Punjab High Court by which four appeals were decided in Civil Reference No. 6 of 1953. The appeals relate to four assessment years, 1947 48, 1948 49, 1949 50 and 1950 51. Two of these assessments, i.e., for the years 1947 48 and 1948 49 were made on the 800 appellant as successor to the two limited companies hereinafter mentioned. Briefly stated the facts of the case are that the appellant company was incorporated in the year 1947. Its objects inter alia were to acquire as a going concern activities, functions and business of the Delhi Stock & Share Exchange Limited and the Delhi Stock and Share Brokers Association Limited and to promote and regulate the business of exchange of stocks and shares, debentures and debenture stocks, Government securities, bonds and equities of any description and with a view thereto, to establish and conduct Stock Exchange in Delhi and/or elsewhere. Its capital is Rs. 5,00,000 divided into 250 shares of Rs. 2,000 each on which dividend could be earned. The appellant company provided a building and a hall wherein the business was to be transacted under the supervision and control of the appellant. The appellant company also made rules for the conduct of business of sale and purchase of shares in the Exchange premises. The total income for the year 1947 48 was Rs. 29,363 out of which a sum of Rs. 15,975 shown as admission fees was deducted and the income returned was Rs. 13,388. In the profit and loss account of that year Members ' admission fees were shown as Rs. 9,000 and on account of Authorised Assistants admission fees Rs. 6,875. The Income tax Officer who made the assessment for the year 1947 48 disallowed this deduction. The return for the following year also was made on a similar basis but the return for the years 1949 50 and 1950 51 did not take into account the admission fees received but in the Director 's report the amounts so received were shown as having been taken directly into the balance sheet. The Income tax Officer, however, disallowed and added back the amount so received to the income returned by the appellant. Against these orders appeals were taken to the Appellate Assistant Commissioner who set aside the additional assessments made under section 34 in regard to the assessment years 1947 48, 1948 49 and 1949 50 and the 4th appeal in regard to the year 1950 51 was decided against the appellant. Both sides appealed 801 to the Income tax Appellate Tribunal against the respective orders of the Appellate Assistant Commissioner and the Tribunal decided all the appeals in favour of the appellant. It was held by one of the members of the Tribunal that the amounts received as entrance fees were intended to be and were in fact treated as capital receipts and were therefore excluded from assessment and by the other that as there was no requisite periodicity, those amounts were not taxable. At the instance of the respondent a case was stated to the High Court on the following question: "Whether the admission fees of Members or Authorised Assistants received by the assessee is taxable income in its hands?" The High Court answered the question in favour of the respondent. The High Court held that the appellant was not a mutual society and therefore was not exempt from the payment of income tax; that it had a share capital on which dividend could be earned and any person could become a shareholder of the company by purchasing a share but every shareholder could not become a member unless he was enrolled, admitted or elected as a member and paid a sum of Rs. 250 as admission fee. On becoming a member he was entitled to exercise all rights and privileges of membership. It also found that the real object of the company was to carry on business as a Stock Exchange and the earning of profits. It was held therefore that the admission fees fell within the ambit of the expression "profits and gains of business, profession or vocation". The further alternative argument which was raised, i.e., that the income fell under section 10(6) of the Act, was therefore not decided. Mr. Veda Vyasa contended on behalf of the appellant that there were only 250 members of the appellant company; that the amount received as membership fees was shown as capital in the books of the company and there was no periodicity and therefore the amounts which had been treated as income should have been treated as capital receipts and therefore exempt from assessment. It was firstly contended that the question did not arise out of the order of the 802 Tribunal and that a new question had been raised but the objection is futile not only because of the absence of any such objection at the stage of the drawing up the statement of the case but also because of failure to object in the High Court; nor do we see any validity in the objection raised. That was the only matter in controversy requiring the decision of the court and was properly referred by the Tribunal. It was then contended that the question had to be answered in the light of facts admitted or found by the Tribunal and that the nature of the appellant 's business or the rules in regard to membership could not be taken into consideration in answering the question. That again is an unsustainable argument. The statement of the case itself shows that all these matters were taken into consideration by one of the members of the Tribunal and the learned judges of the High Court also decided the matter on that material which had been placed before the Income tax authorities and which was expressly referred to in their orders and which again was placed before the High Court in the argument presented there on behalf of the appellant company. It is wholly immaterial in the circumstances of the present case to take into consideration as to how the appellant treated the amounts in question. It is not how an assessee treats any monies received but what is the nature of the receipts which is decisive of its being taxable. These amounts were received by the appellant as membership admission fees and as admission fees paid by the members on account of Authorised Assistants. As far as the latter payment is concerned that would fall within the decision of this Court in Commissioner of Income tax. vs Calcutta Stock Exchange Association Ltd. (1) and therefore is taxable income. The former, i.e., members admission fees has to be decided in accordance with the nature of the business of the appellant company, its Memorandum and Articles of Association and the Rules made for the conduct of business. The appellant company was an association which carried on a trade and its profits were divisible as dividend amongst the shareholders. (1) 803 The object with which the company was formed was to promote and regulate the business in shares, stocks and securities etc., and to establish and conduct the business of a Stock Exchange in Delhi and to facilitate the transaction of such business. The business was more like that in Liverpool Corn Trade Association vs Monks (1). In that case an association was formed with the object of promoting the interest of corn trade with a share capital upon which the association was empowered to declare a dividend. The Association provided a Corn Exchange market, newsroom and facilities for carrying on business and membership was confined to persons engaged in the corn trade and every member was required to be a shareholder and had to pay an entrance fee. The Association also charged the members and every person making use of facilities a subscription which varied according to the use made by them. The bulk of the receipts of the Association was derived from entrance fees and subscriptions. It was therefore contended that the Association did not carry on a trade and that it was a mutual association and entrance fees and subscriptions should be disregarded in computing assessment of the assessable profits. It was held that it was not a mutual association whose transactions were inca pable of producing a profit; that it carried on a trade and the entrance fee paid by members ought to be included in the associations receipts for purposes of computing the profit. Rowlatt, J. said at p. 121: "I do not see why that amount is not a profit. The company has a capital upon which dividends may be earned, and the company has assets which can be used for the purpose of obtaining payments from its 'members for the advantages of such use, and one is tempted to ask why a profit is not so made exactly on the same footing as a profit is made by a railway company who issues a traveling ticket at a price to one of its own shareholders, or at any rate as much a profit as a profit made by a company from a dealing with its own shareholders in a line of business which is restricted to the shareholders." (1) 804 In Commissioner of Income tax, Bombay City vs Royal Western India Turf Club Ltd. (1) this Court rejected the applicability of the principle of mutuality because there was no mutual dealing between members inter se. There was no putting up a common fund for discharging a common obligation undertaken by the contributors for their mutual benefit and for this reason the case decided by the House of Lords in Styles V. New York Life Insurance Company (2) was held not applicable. In the present case the Memorandum of Association shows that the object with which the company was formed was to promote and regulate the business of exchange of stocks, shares, debentures, debenture stocks etc. The income, if any, which accrued from the business of the appellant company was distributable amongst the shareholders like in every joint stock company. According to the Articles of Association the members included shareholders and members of the Exchange and according to the rules and bye laws of the appellant company 'member ' means an individual, body of individuals, firms, companies, corporations or any corporate body as may be on the list of working members of the Stock Exchange for the time being. In the Articles of Association cls. 7 & 8, provision was made for the election of members by the Board of Directors and Rules 9 & 10 laid down the procedure for the election of these members. The entrance fees were payable by the trading members elected under the Rules and Bylaws of the Association, who alone with their Associates, could transact business in stocks and shares in the Association. Therefore, the body of trading members who paid the entrance fees, and the shareholders among whom the profits were distributed were not identical and thus the element of mutuality was lacking. It is the nature of the business of the company and the profits and the distribution thereof which are the determining factors and in this case it has not been shown that the appellants business was in any way different from that which was carried on in the (1) ; , 308. (2) ; 805 case reported as Liverpool Corn Trade Association vs Monks (1). In our opinion the judgment of the High Court is right and the appeals are therefore dismissed with costs. One hearing fee. Appeals dismissed.

IN-Abs

The object with which the appellant company was formed was to promote and regulate the business in shares, stocks and securities etc., and to establish and conduct a Stock Exchange in order to facilitate the transaction of such business. Its capital was divided into shares on which dividend could be earned. it provided a building wherein business was to be transacted under its supervision and control. It made rules for the conduct of business of sale and purchase of shares in the Exchange premises. During the assessment year in question the company 's receipts consisted of certain amounts received as admission fee from Members and Authorised Assistants and the question stated to the High Court for its opinion was whether these fees in the hands of the appellant were taxable income. The High Court answered the question in the affirmative. It held that the appellant was not a mutual society, that dividends could be earned on its share capital, that any person could become a share holder but every share holder was not a member unless he paid the admission fee and the real object of the company was to carry on business of exchange of stocks and earn profits. The case of the appellant, inter alia, was that as the amount received as membership fee was shown as capital in the books of the company and there was no periodicity, it should be treated as capital receipt exempt from assessment. 799 Held, that the High Court was right in its decision and the appeals must be dismissed. It was wholly immaterial how the appellant treated the amounts in question. It is the nature of the receipt and not how the assessee treated it that must determine its taxability. AS: Since the fee received on account of Authorised Assisstants fall within the decision of this Court in Commissioner of Income tax vs Calcutta Stock Exchange Association Ltd., , it must be held to be taxable income. The question as to whether the Members ' admission fee was taxable income was to be determined by the nature of the business of the company, its profits and the distribution thereof as disclosed by its Memorandum and Articles of Association and the rules made for the conduct of business. They showed that the income of the company was distributable amongst its shareholders ;is in any other joint stock company, and the body of trading members who paid the entrance fees and share holders were not identical. The element of mutuality was, therefore, lacking. Liverpool Corn Trade Association vs Monks, (1926) 2 K. B. 110, applied. Commissioner of Income tax, Bombay City vs Royal Western India Turf Club Ltd., ; and Styles vs New York Life Insurance Co., ; , referred to.

Appeals Nos. 776 and 777 of 1957. Appeals by special leave from the judgment and order dated September 25, 1956, of the Bombay High Court in Income tax Application No. 48 of 1956; and from the judgment and order dated March 17,1954, of the Income tax Appellate Tribunal, Bombay, in E.P.T.A. Nos. 757, 903 and 944 of 1948 49, respectively. A. V. Viswanatha Sastri and G. Gopalakrishnan, for the appellants. A. N. Kripal and D. Gupta. for the respondent. November 30. The Judgment of the Court was delivered by HIDAYATULLAH, J. These are two appeals, with special leave, against an order of the High Court of Bombay rejecting a petition under section 66(2) of the Indian Income tax Act and the order of the Income tax Appellate Tribunal, Bombay, in respect of which the petition to the High Court was made. Messrs. section C. Cambatta & Co. (Private) Ltd., Bombay, have filed these appeals, and the Commissioner of Excess Profits Tax, Bombay, is the respondent. We are concerned in these appeals with three chargeable accounting periods, each ending respectively on December 31, beginning with the year, 1943 and ending with the year, 1945. 807 The appellants carry on various businesses, and one such business was the running of a theatre and restaurant, called the Eros Theatre and Restaurant. In October, 1943, a subsidiary Company called the Eros Theatre and Restaurant, Ltd. was formed. The paid up capital of the subsidiary Company was Rs. 7,91,100 divided into 7,911 shares of Rs. 100 each. 7,901 shares were allotted to the appellant Company as consideration for assets, goodwill, stock in trade and book debts which were taken over by the subsidiary Company, and the remaining 10 shares were held by the Cam batta family. The assets which were transferred were as follows: Assets: Assets transferred. Rs.1,28,968 Stock in trade. Rs.40,000 Book debts. . Rs.100 Rs.1,69,068 They together with the capital reserve of Rs. 6,21,032 made up the amount of Rs. 7,90,100. In the books of the subsidiary Company, the share capital account was shown separately as follows: Rs. 2,50,000 debited to the various assets account. Rs. 5,00,000 debited to the goodwill account. Rs. 40,000 debited to the stock in trade account. Rs. 100 debited to the book debts account. It will thus appear that goodwill was not shown separately in the appellants ' account books, but only in the accounts of the subsidiary Company. In working out the capital of the two Companies for excess profits tax, a sum of Rs. 5,00,000 was claimed as goodwill as part of the capital of the subsidiary Company. Both the Department as well as the Tribunal held that section 8(3) of the Excess Profits Tax Act applied; and the goodwill was not taken into account in working out the capital. The Tribunal declined to state a case, but the High Court directed that a reference be made on two questions, which were framed as follows: 808 "(1) Whether on the facts of the case, the Appellate Tribunal was right in applying section 8(3) of the Excess Profits Tax Act? (2). Whether in the computation of the capital employed. in the business of the assessee, the Tribunal erred in. not including the value of the goodwill or any "portion thereof?" The High Court by its judgment and order answered the first question in the negative and the second, in the affirmative. It held that sub section (5) and not sub section (3) of section 8 of the Excess Profits Tax Act was applicable. It, therefore, held that "the Tribunal should have allowed for the value of the goodwill whatever it thought was reasonable at the date of the transfer. " When the matter went before the Tribunal again, three affidavits and a valuation report by a firm of architects were filed. The goodwill, according to the report of the architects, amounted to Rs. 25 lakhs. It may be mentioned here that the subsidiary Company was using the premises under a lease granted on November 20, 1944, for three years beginning from April 1, 1944, on a rental of Rs. 9,500 per month. The Tribunal came to the conclusion that no goodwill had been acquired by the business of the Theatre as such, and that whatever goodwill there was, related to the site and building itself. They then proceeded to consider what value should be set upon the goodwill on the date of the transfer of the subsidiary Company as directed by the High Court. They took into account certain factors in reaching their conclusions. They first considered the earning capacity of the business, and held that prior to 1942 the business had not made profits, and that the name of Eros Theatre and Restaurant thus by itself had no goodwill at all. They, therefore, considered that the only goodwill which had been acquired attached to the lease, which the trustees had given to the Eros ;Theatre and Restaurant Ltd., and computing the goodwill as the value of the lease to the subsidiary Company, they felt that Rs. 2 lakhs was a liberal estimate of the value of the goodwill in the hands of Eros Theatre and Restaurant, Ltd. at the material time. 809 Petitions under sections 66(1) and 66(2) read with a. 21 of the Excess Profits Tax Act were respectively rejected by the Tribunal and the High Court; but the appellants obtained special leave from this Court, and filed these appeals. In our opinion, a question of law did arise in the case whether the goodwill of the Eros Theatre and ' Restaurant, Ltd., was calculated in accordance with law. The Tribunal seems to have taken into account only the value of the leasehold of the site to the subsidiary Company, and rejected other considerations which go to make up the goodwill of a business. No doubt, in Cruttwell vs Lye(1), Lord Eldon, L. C. observed that goodwill was "nothing more than the probability that the old customers would resort to the old place". The description given by Lord Eldon has been considered always to be exceedingly narrow. The matter has to be considered from the nature of the business, because the goodwill of a public inn and the goodwill of a huge departmental stores cannot be calculated on identical principles. The matter has been considered in two cases by the House of Lords. The first case is Trego vs Hunt (2), where all the definitions previously given were considered, and Lord Macnaghten observed that goodwill is "the whole advantage, whatever it may be of the reputation and connection of the firm, which may have been built up by years of honest work or gained by lavish expenditure of money". In a subsequent case reported in Inland Revenue Commissioners vs Muller & Co.s. Margarin, Ltd. (3), Lord Macnaghten at pp. 223 and 224 made the following observations:. "What is goodwill? It is a thing very easy to describe, very difficult to define. It is the benefit and advantage of the good name, reputation, and connection of a business. It is the attractive force which brings in custom. It is the one thing which distinguishes an old established business from a new business at its first start. . . If there is one attribute common to all cases of goodwill in it is the attribute (1) 346. (2) (3) 810 of locality. For goodwill has no independent existence. It cannot subsist by itself. 'It must be attached to a business. Destroy the business, and the goodwill perishes with it, though elements remain which may perhaps be gathered up and be revived again". These two cases and others were considered in two 'Australian cases. The first is Daniell vs Federal Com missioner of Taxation (1), where, Knox, C. J. observed: "My opinion is that while it cannot be said to be absolutely and necessarily inseparable from the premises or to have no separate value, prima facie at any rate it may be treated as attached to the premises and whatever its value may be, should be treated as an enhancement of the value of the premises". In the second case reported in Federal Commissioner of Taxation vs Williamson (2), Rich, J., observed at p. 564 as follows: "Hence to determine the nature of the goodwill in any given case, it is necessary to consider the type of business and the type of customer which such a business is inherently likely to attract as well as the surrounding circumstances. . The goodwill of a business is a composite thing referable in part to its locality, in part to the way in which it is conducted and the personality of those who conduct it, and in part to the likelihood of competition, many customers being no doubt actuated by mixed motives in conferring their custom". In Earl Jowitt 's Dictionary of English Law, 1959 Edn., "goodwill" is defined thus: "The goodwill of a business is the benefit which arises from its having been carried on for some time in a particular house, or by a particular person or firm, or from the use of a particular trade mark or trade name" It will thus be seen that the goowill of a business depends upon a variety of circumstances or a combination of them. The location, the service, the standing of the business, the honesty of those who run it, and the lack of competition and many other factors go individually or together to make up the goodwill, (1) ; (2) ; 811 though locality always plays a considerable part. Shift the locality, and the goodwill may be lost. At the same time, locality is not everything. The power to attract custom depends on one or more of the other factors as well. In the case of a theatre or restaurant, what is catered, how the service is run and what the competition is, contribute also to the goodwill. From the above, it is manifest that the matter of goodwill needs to be considered in a much broader way than what the Tribunal has done. A question of law did arise in the case, and, in our opinion, the High Court should have directed the Tribunal to state a case upon it. Civil Appeal No. 776 of 1957 is allowed. The High Court will frame a suitable question, and ask for a statement of the case from the Tribunal, and decide the question in accordance with law. The costs of this appeal shall be borne by the respondent; but the costs in the High Court shall abide the result. There will be no order in Civil Appeal No. 777 of 1957. C. A. No. 776 of 1957 allowed.

IN-Abs

The appellant carried on various businesses and one such was the running of a Theatre and Restaurant. In October, 1943, a subsidiary company was formed which was using the premises of the Theatre under a lease granted to it from April, 1944. In working out the capital of the two companies for excess profits tax, a claim of rupees five lakhs for goodwill as part of the capital of the subsidiary company was not taken into account. On reference to the High Court it held that the Tribunal should have allowed the value of the goodwill whatever it thought was reasonable at the date of transfer. Thereafter the Tribunal took into account only the value lease hold of the site to the subsidiary company and came to the conclusion that no goodwill had been acquired by the business of the Theatre as such and whatever goodwill there was related to the site of building itself, and estimated the value of goodwill at rupees two lakhs. Petition under sections 66(1) and 66(2) read with section 21 of the Excess Profits Tax Act being rejected by the Tribunal and the High Court, the appellants came appeal by special leave. Held, that the goodwill of a business needed to be considered in a broader way. It depended upon a variety of circumstances or a combination of them. The nature, the location, the (1) 102 806 service, the standing of the business, the honesty of those who run it, and the lack of competition and many other factors went individually or together to make up the goodwill, though the locality always played a considerable part. Shift the locality, and the goodwill may be lost but it was not everything. The power to attract custom depended on one or more of the other factors as well. In the instant case a question of law did arise, whether the goodwill of the Eros Theatre and Restaurant Ltd. was calculated in accordance with law. Cruttwell vs Lye, (1810) 17 ves. 335, Trego vs Hunt, L.), Inland Revenue Commissioners vs Muller & Co. 's Margarin, Ltd., 9101 A. C. 217 (H. L.), Daniell vs Federal Commissioner of Taxation; , and Federal Commissioner of Taxation vs Williamson, ; , discussed.

Appeal No.424 of 1957. Appeal by special leave from the judgment and order dated January 25, 1955, of the Patna High Court in Misc. Judicial Case No. 621 of 1953. N. C. Chatterjee and R. C. Prasad, for the appellant. K. N. Rajagopal Sastri and D. Gupta, for the respondent. 791 1960. November 30. The Judgment of the Court was delivered by KAPUR, J. This is an appeal by special leave ' against the judgment and order of the High Court at Patna answering the question referred to it by the Income tax Appellate Tribunal against the assessee who is the appellant before us. The appeal relates to three assessments made on the appellant for the respective assessment years 1945 46, 1946 47 and 1947 48. The appellant is a Zamindar and owns considerable properties. In the accounting years he granted licences to different parties to prospect for Bauxite. The particulars of the licences are: Received from Date of the Period of Assess Amount Licence Licence ment year Received. Rs. 1.Aluminium Corporation ofIndia Ltd. 20 1 1945 6 months 1945/46 15,290/ . 2.Indian Aluminium Co.Ltd. 26 5 945 1 year 1946/47 1,24,789/ . 3.Dayanand Modi. 7 5 1945 6 months 1947/48 1,500/ . 4.Indian Aluminium Co.Ltd. 14 8 1945 1 year 1947/48 70,146/ . The Income tax Officer held that these amounts were received as revenue payments and were therefore taxable. On appeal to the Appellate Assistant Commissioner the amounts were held to be capital receipts but this order was set aside by the Income tax Appellate Tribunal which held the amounts to be revenue receipts and taxable as such. At the instance of the appellant the case was referred to the High Court under section 66(1) of the Income tax Act and the following question was stated for the opinion of the Court: "Whether in the facts and circumstances of these cases the sums of Rs. 15,209, Rs. 1,24,789, Rs. 1,500 and Rs. 70,146 received by the assessee are income assessable to tax under the Indian Income tax Act?" 792 The question was answered in the affirmative and the High Court held that there was material to support the finding of the Tribunal, and it was a finding of fact; that the amounts received by the appellant were revenue receipts and not capital receipts. Against this judgment the appellant has come in appeal to this court by special leave. The question that falls for decision is whether the amounts received by the assessee are capital or revenue receipts and for that purpose it is necessary to investigate the nature of the grants made by the appellant. Under the licence the licensee was granted the sole and exclusive right and liberty to (a) to enter into and upon, to prospect, search for, mine quarry, bore, dig and prove all Bauxite lying and being in, under or within the said lands. (b) For the purposes aforesaid and all other purposes incidental thereto dig, drive, make and maintain such pits, shafts, borings, inclines, admits levels, drifts, air courses drains, water courses, roads and ways and to set up, erect and construct such temporary engines, machinery sheds and things as may be reasonably necessary for effectually carrying on the prospecting operations hereby licenced. (c) To remove, take away and appropriate samples and specimens of Bauxite of every quality, kind and description and in reasonable quantities not exceeding one hundred tons in all during the terms of this grant. (d) For the purposes aforesaid to clear undergrowth brushwood and to make use of any drains or water courses on the lands or for clearing sites of working from any water which may flow or accumulate thereon or therein. The periods of the licences were comparatively short 6 months in two cases and a year each in the other two. Under the covenants the licensees were to cause as little damage as possible to the surface of the land. They were to give full information regarding the progress of the operations and true copies of all borings to the licensor. The licensees were also 793 required to plug all holes made by them. The licensor convenanted to give a reasonable right of passage through and over the adjoining lands and properties and in consideration of the premium paid, the licensees could, at their option, after giving necessary notice and on payment of a further sum, get a mining The lease for a term of thirty years on the terms and conditions set out in the indenture attached as schedule 2 to the licence. The Income tax Appellate Tribunal found that the licensees were not granted any interest in land and the amounts received were revenue receipts and therefore, assessable to income tax A reference to some of the cases would assist in determining the nature of the transaction which was evidenced by the documents placed on the record. In Raja Bahadur Kamakshya Narain Singh of Ramgarh vs Commissioner of Income tax, Bihar & Orissa (1) the payments by way of premium were held to be capital receipts. In that case large payments by way of royalty for granting various mining leases were received by the assessee. The leases were for a period of 999 years for mining coal with liberty to search for, work, make merchantable and carry away the coal there found and with power to dig and sink pits. In consideration of these rights the lessees paid a sum by way of salami (premium) and an annual sum as royalty on the amount of coal raised subject to minimum annual royalty. The lessor had the right to reenter in case of failure to pay the royalty. It was contended by the assessee there that the sums received as salami and royalty were capital receipts representing the price of the minerals removed. It was held that salami was a single payment paid for the acquisition of the right to enjoy the benefits granted by the lease and was a capital asset and that the two other forms of royalty both minimum and per ton flowing from the covenants in the lease were not on capital account and fell within the meaning of other income under s.12 of the Act. Lord Wright said at p. 190: "The salami, has been, rightly in their Lordships ' opinion, treated as a capital receipt. It is a single (1) (1943), L.R. 70 I.A. 186. 794 payment made for the acquisition of the right of the lessees to enjoy the benefits granted to them by the lease. That general right may properly be regarded as a capital asset, and the money paid to purchase it may properly be held to be a payment on capital account. But the royalties are on a different footing. " This case was sought to be distinguished by counsel for the respondent on the ground that the lease was for a long period of 999 years but the observations above quoted were not based on this consideration but on the nature of the right which was conveyed. In Commissioner of Income tax, Bihar & Orissa vs Raja Bahadur Kamakshya Narain Singh (1) a coal company had been given by the Court of Wards a prospecting licence in respect of certain coal bearing lands with the option of renewal and also to take a mining lease on certain terms and conditions. The prospecting licence was subsequently extended on four occasions. When the assessee attained majority he claimed that the giving of the licence was ultra vires the Court of Wards but there was a settlement between the licencee and the assessee by which the latter agreed to accept the various prospecting licences, their extensions and leases in consideration of which he received by way of salami Rs. 5,25,000 and capital lump sum of Rs. 40,000 and some other payments in lieu of cesses. The question arose whether the amounts were capital or revenue and it was held that the amount of Rs. 5,25,000 received as salami and the amounts received as cesses were capital receipts and therefore not taxable. Manohar Lal, A. C. J., held that the amount was received by way of settlement and not by way of salami but section K. Das, J. (as he then was) held that salami was a lump sum payment for rights which were being given to the licensee, namely, the right to prospect for a certain number of years and also the right to get mining leases and therefore salami in question was undoubtedly a capital receipt. In The Province of Bihar vs Maharaja Pratap Udai Nath Sahi Deo of Ratugarh (2) it was contended that payments in the nature of premium or salami were (1) [1946) (2) 795 not part of the income of the assessee and were therefore not taxable and it was held that salami may, in certain cases, be regarded as a payment of rent in advance and it would in those cases be regarded as income but where it could not be so regarded it would not be income and therefore not taxable. It was also held that prima facie salami is not income. In The Member for the Board of Agricultural Income Tax, Assam vs Smt. Sindurani Chaudhurani (1) this Court defined as salami as follows: The indicia of salami are (1) its single non recurring character and (2) payment prior to the creation of the tenancy. It is the consideration paid by the tenant for being let into possession and can be neither rent nor revenue but is a capital receipt in the hands of the landlord. Thus if it is a consideration paid by the tenant or the licensee for being let into possession with the object of obtaining a tenancy or as in this case with the object of obtaining a right to remove minerals, it cannot be termed rent or revenue but is a capital receipt. In Sindurani 's case (1) salami was a lump sum payment as consideration for what the landlord was transferring to the tenant, i.e., parting with his right, under the lease, of a holding. In the instant case the terms of the covenant quoted above show that the payment has a close analogy to the payment in Sindhurani 's case(1). That case was sought to be distinguished by the respondent on the ground that there was a transfer of a tenancy which was capable of ripening into an occupancy holding but that was not the ground on which this court decided the case of salami. The definition of salami was agener alone, in that it was a consideration paid by a tenant for being let into possession for the purpose of creating a new tenancy. In Raja Bahadur Kamakshya Narain Singh 's case (2) also the Privy Council laid the definition of salami in general terms and described the characteristics of a payment by way of salami without any reference to the nature of the lease. In reply to the argument of counsel for the appellant, Mr. Rajagopal Sastri for the respondent argued (1) ; (2) (1943) L.R. 70 I.A. 180. 796 that the question was whether the licensor had allowed the licensee to take his capital or he had allowed him to use the capital. If it was the former, the receipts were in the nature of capital receipts and if latter they were in the nature of revenue. His contention was that it wag really the latter because all that the licensee was allowed to do was to enter on the lands and make use of the assets belonging to the appellant. This, in our opinion, is not a correct approach to the question. What the licence gave to the licensee was the right to enter upon the land to pros pect, search and mine quarry, bore, dig and prove all Bauxite lying in or within the land and for that purpose the licensee had the right to dig pits, shafts, borings and to remove, take away and appropriate samples and specimens of Bauxite in reasonable quantities not exceeding 100 tons in the aggregate. It cannot be said that this amounts merely to a grant of the use of the capital of the licensor but it was really a grant of a right to a portion of the capital in the shape of a general right to the capital asset. In support of this distinction between the use of capital and the taking away of capital, counsel relied upon the following observation of Lawrence, J., in Greyhound 's case(3): "The question as to what receipts are revenue and what are capital has given rise to much difference of opinion; but it is clear, in my opinion, that, if the sum in question is received for what is in truth the user of capital assets and not for their realisation, it is a revenue receipt, not capital. " That may be so but the question has to be decided on the nature of the grant. The terms of the covenant in the present case which have been quoted above show that the transaction was not one merely of the user of capital assets but of their realisation, By this test therefore the receipts were on capital account and not revenue. Counsel then referred to a judgment of the Patna High Court in R. B. H. P. Bannerji vs Commissioner of Income tax, Bihar & Orissa (2) where it was held that compensation received by the assessee (1) (2) 797 for use by the military of his lands for a short period was a revenue receipt. In that case the assessee purchased 13 bighas of land for purposes of setting up a market. That plot was requisitioned by the military A authorities under the Defence of India Rules and the assessee received compensation for the use of the The land. It was held to be a revenue receipt because it was really profit derived from the land for the use of a capital asset. Another case upon which counsel for the respondent placed reliance is Smethurst vs Davy (1). That was a case which was decided on the wording of section 31(1)(d) of the Finance Act of 1948, and therefore is not of much assistance. Reference was also made to Stow Bardolph Gravel Co., Ltd. vs Poole (2). There the assessee company, which carried on business in sand and gravel, purchased two un worked deposits. The company contended that the payments made to acquire the deposits were deductible being expenditure which was incurred in the acquisition of trading stock or otherwise of revenue character. It was held that the company had acquired a capital asset and not stock in trade. The case turned upon a finding by the Special Commissioners and is not helpful. Reliance was also placed on Rajah Nanyam Meenakshamma vs Commissioner of Income tax, Hyderabad (3). In that case certain fixed sums of money were paid as royalty for the whole period of the lease which were held to be revenue receipts as consolidated advance payments of the amount which would otherwise have been payable periodically. None of these cases is of any assistance to the respondent 's case. The question which has to be decided is what was the nature of the transaction. The covenants in the licence show that the licensee had a right to enter upon the land and take away and appropriate samples of all Bauxite of every kind up to 100 tons and therefore there was a transfer of the right the consideration for which would be a capital payment. (1) (2) (3) 101 798 In our opinion the High Court was in error and the question referred should have been decided in favour of the appellant. We therefore allow the appeal, set aside the judgment and order of the High Court and answer the question in favour of the appellant who will have his costs in this Court and the High Court. Appeal allowed.

IN-Abs

In 1945 the appellant who was a Zamindar granted licences to different parties to prospect bauxite. Under the licence the licensee had the right to enter upon the land to prospect, dig and prove all bauxite lying in or within the land and to take away and appropriate samples of bauxite in reasonable quantities not exceeding 100 tons in the aggregate. In consideration of the premium paid, the licensees could, at their option, after giving necessary notice and on payment of a further sum, get a mining lease for a term of thirty years. The income tax authorities were of the view that the licensees were not granted any interest in land and that the amounts received by the appellant from the licensees were revenue receipts and, therefore, assess able to income tax. Held, that on its true construction the transaction of 1945 did not amount merely to a grant of the use of the capital of the licensor but was really a grant of a right to a portion of the capital. Accordingly, the amounts received by the appellant were capital receipts and, therefore, not liable to income tax. Raja Bahadur Kamakshya Narain Singh of Ramgarh vs Com missioner of Income tax, Bihar and Orissa, (1943) L.R. 70 I.A. 180,The Member for the Board of Agricultural Income tax, Assam vs Smt. Sindurani Chaudhurani, [1957] S C.R. 1019 and Commissioner of Income tax, Bihar and Orissa vs Raja Bahadur Kamakshya Narain Singh, , considered.

Appeal No. 264 of 1956. Appeal by special leave from the Judgment and Order dated June 29, 1954, of the Bombay High Court in Appeal No. 127 of 1953. A. V. Viswanatha Sastri, Hemendra Shah, section N. Andley, J. B. Dadachanji, Rameshwar Nath and P. L. Vohra, for,the Appellant. J. C. Bhatt, C. J. Shah and Naunit Lal, for the Respondent. 1960. November 30. The Judgment of the Court was delivered by SARKAR, J. The appellant is a commission agent and pucca aratiya and has been acting as such for the respondent since November 7, 1951, in the course of which various contracts were made between them in Greater Bombay. On February 26, 1952, two of such contracts were outstanding, one of which was in respect of groundnuts and was a forward contract. In March 1952, disputes arose between the parties as to whether these contracts had been closed, each side making a claim on the other on the basis of its own contention. Eventually, on March 18, 1952, the appellant referred the disputes to arbitration under the arbitration clause contained in the contracts. On October 7, 1952, the arbitrators made one composite award for Rs. 22,529 15 9 against the respondent in respect of the said disputes. It is not very clear whether this award covered other disputes also. This award was duly filed in the Bombay City Civil 99 782 Court under the , for a judgment being passed on it. Thereafter, on July 17, 1953, the respondent made an application to the Bombay City Civil Court for setting aside the award contending that forward contracts in groundnuts were illegal as the making of such contracts was prohibited by the Oilseeds (Forward Contract Prohibition) Order, 1943, issued under the Essential Supplies (Temporary Powers) Act, 1946, and hence the arbitration clause con tained in the forward contract in groundnuts between the parties was null and void. It was said that the award based on that arbitration clause was therefore a nullity. The appellant 's answer to this contention was that the Essential Supplies (Temporary Powers) Act did not apply to Greater Bombay where forward contracts were governed by the Bombay Forward Contracts Control Act, 1947, hereafter called the Bombay Act, and as the contract in groundnuts had been made in terms of that Act, it was legal, and, therefore, the award in terms of the arbitration clause contained in it was a valid and enforceable award. The learned Principal Judge of the Bombay City Civil Court accepted the respondent 's contention and set aside the award. An appeal by the appellant to the High Court at Bombay against the judgment of the City Civil Court failed. The appellant has now come to this Court in further appeal. The only question in this appeal is whether the Essential Supplies (Temporary Powers) Act, which was passed by the Central Legislature in 1946, applied to Bombay? If it did, then the Oilseeds (Forward Contract Prohibition) Order, 1943, hereafter called, the Oilseeds Order, issued under it would make the contract in groundnuts illegal and no award could be made under the arbitration clause contained in it. This is not in dispute. Now, the Oilseeds Order was first passed in 1943 under r. 83 of the Defence of India Rules. The Defence of India Rules ceased to be in force on September 30, 1946. In the meantime however, as the situation had not quite returned to normal in spite of the termination of the war, the British Parliament passed 783 an Act on March 26, 1946, called the India (Central Government and Legislature) Act, 1946 (9 & 10 Geo. VI, Ch. 39), hereafter called the British Act. Section 2 of this Act provided that the Central Legislature of India would have power to make laws with respect to various matters therein mentioned notwithstanding anything in the Government of India Act, 1935, and that that power could be exercised during the period mentioned in section 4 and further that the laws so made to IV he extent they could not have been otherwise made, would cease to have effect at the expiration of that period. The Governor General under the powers reserved in section 4 and subsequently, the Constituent Assembly of India, under the powers conferred on it under the Indian Independence Act, 1947, extended the period mentioned in section 4 of the British Act from time to time and eventually up to March 31, 1951. It would be unprofitable for our purposes to refer to the various statutory provisions and orders under which this was done for, the extension is not in dispute. Under the powers conferred by the British Act, the Governor General promulgated the Essential Supplies (Temporary Powers) Ordinance, 1946, which came into force on October 1, 1946. On November 19, 1946, the Central Legislature under the same powers, passe the Essential Supplies (Temporary Powers) Act, 1946, hereafter called the Central Act, repealing the Ordinance and substantially incorporating its terms. The Central Act originally provided that it would cease to have effect on the expiration of the period mentioned is section 4 of the British Act. As the life of the British Act was extended from time to time, suitable amend ments were made in the Central Act extending its life also. Our Constitution came into force on January 26, 1950 and by virtue of article 372 the Central Act was continued as one of the existing laws. On August 16, 1950, under powers conferred by article 369 of the Constitution, Parliament passed the Essential Supplies (Temporary Powers) Amendment Act, 1950, Act LII of 1950, amending the Central Act in various respects and extending its life up to December 31, 1952. By another amendment made by Act LXV of 1952, the 784 life of the Central Act was extended till January 26, 1955. Section 3(1) of the Central Act is in these terms: "The Central Government, so far as it appears to it to be necessary or expedient for maintaining or increasing supplies of any essential commodity, or for securing their equitable distribution and availability at fair prices, may by notified order provide for regulating or prohibiting the production, supply and distribution thereof, and trade and commerce therein. " Section 2 of the Act provides that foodstuffs would be an essential commodity within the meaning of the Act and would include edible oilseeds. We have earlier stated that the Oilseeds Order was originally passed under the Defence of India Rules, which expired on September 30,1946. The Ordinance of 1946 continued in force, orders issued under the Defence of India Rules in so far as they were consistent with it and provided that such orders would be deemed to be orders made under it. Section 17(2) of the Central Act provided that an order deemed to be made under the Ordinance and in force immediately before its commencement would continue in force and be deemed to be an order made under it. As a result of the Ordinance and the Central Act replacing it and the extension of the life of the latter from time to time, the Oilseeds Order so far as it related to edible oilseeds including groundnuts, continued in force after the expiry of the Defence of India Rules till January 26, 1955. That Order, as so continued, prohibited the making of forward contracts, that is to say, contracts providing for delivery at a future date, in respect of certain specified oilseeds including groundnuts. It is the respondent 's contention that it is because of this order, read with the Central Act, that the contract in groundnuts between the parties was illegal and therefore the award made under the arbitration clause contained in it was void. Now the British Act under which the Central Act was passed, provided in sub sec. (4) of section 2 that, "Sub section (2) of section 107 of the Government of India Act, 1935, and sub section (2) of section 126 785 of that Act shall apply in relation to a law enacted by virtue of this section with respect to any matter being a matter with respect to which a Province has power to make laws as if that matter were a matter specified in Part 11 of the Concurrent Legislative List. " Section 107(2) of the Government of India Act, 1935, laid down that, "Where a Provincial law with respect to one of the matters enumerated in the Concurrent Legislative List contains any provision repugnantto the provisions of an earlier Federal lawthen if the Provincial law, having been reserved for the consideration of the Governor Generalhas received the assent of the Governor Generalthe Provincial law shall in that Province prevail It would follow from these provisions that if a Provincial Act which had received the assent of the Governor General, contained anything repugnant to a Central Act passed under the powers conferred by the British Act, then in the Province concerned, the Provincial Act would apply and not the Central Act. Now, the Bombay Act which had been passed by the Provincial Legislature of Bombay in 1947, came into operation in 1948. That Legislature had power to pass the Act and the Act had received the assent of the Governor General. At that time the Central Act deriving its force from the British Act, was in, operation. If, therefore, the Bombay Act was repugnant to the Central Act, in Bombay, the Bombay Act would apply and not the Central Act. This is not in dispute. The appellant contends that the Bombay Act is so repugnant and therefore the Central Act cannot render the forward contract in groundnuts made in, Greater Bombay, illegal and void. The question, therefore, is whether the Bombay Act, contains any provision repugnant to the Central Act. The preamble of the Bombay Act states that it was enacted as it was thought expedient to regulate and control forward contracts and for certain other matters. Section 1 of this Act came into force at once and gave power to the Government to bring into force by notification the remaining sections of the Act in the 786 whole of the Province of Bombay or parts thereof on such date and in respect of such goods as might be specified. The Government of Bombay issued notifications under this section on December 19, 1950, applying the remaining provisions of the Act to the area called Greater Bombay in respect of all varieties of oilseeds as from the said date. Section 8 of the Bombay Act provides as follows: section 8. (1) Every forward contract for the sale or purchase of, or relating to, any goods specified in the notification under sub section (3) of section I which is entered into, made or to be performed in any notified area shall be illegal if it is not entered into, made or to be performed (a)In accordance with such bye laws, made under section 6 or 7 relating to the entering into, making or performance of such contracts, as may be specified in the bye laws, or (b) (i) between members of a recognised association, (ii) through a member of a recognised association, or (iii) with a member of a recognised association, provided that such member has previously secured the written authority or consent, which shall be in writing if the bye laws so provide, of the person entering into or making the contract, and no claim of any description in respect of such contract shall be entertained in any civil court. (2) Any person entering into or making such illegal contract shall, on conviction, be punishable with imprisonment for a term which may extend to six months or with fine or with both. "Recognised association" is defined in the Bombay Act as an association recognised by the Provincial Government and on December 19, 1950, the Bombay Oilseeds Exchange Limited was recognised as such an association by the Government of Bombay. The appellant is a member of this association. The contracts between the parties were all expressly made subject to the rules and regulations of this Association. The case before us has proceeded on the basis that the impugned contract in groundnut had been made in compliance 787 with the requirements of section 8 and there is no finding to the contrary by the Courts below. We have hence to proceed on the same basis. The appellant contends that section 8 of the Bombay Act and section 3 of the Central Act are repugnant to each other. Now section 8 of the Bombay Act, it will, be noticed, does not purport to make any contract legal. Its only effect is to render forward contracts in all varieties of oilseeds illegal if not made in compliance with its terms. The learned Advocate for the appellant says that the effect of section 8 was to render a forward contract in all oilseeds made in terms of it, legal and, therefore, a repugnancy arose between its terms and the terms of the Oilseeds Order issued under the Central Act which made forward contracts in edible oilseeds illegal. The learned Advocate referred to various other provisions of the Bombay Act and the bye laws of the Association made in terms of the Act to show that the Bombay Act was intended to cover the entire field of forward contracts with respect to all varieties of oilseeds and was therefore intended to oust the operation of the Central Act in Greater Bombay with regard to the forward contracts covered by the former. It does not seem to us that a reference to the other provisions in the Bombay Act or to the bye laws, is relevant in deciding the question. If the effect of section 8 of the Bombay Act was not to render forward contracts made in terms of it legal, then no question of repugnancy with the Central Act can arise whatever may be the scope of the Bombay Act and the provisions in the bye laws. Therefore, it seems to us that the question is whether section 8 of the Bombay Act by its terms makes any forward contract legal. Section 3 of the Central Act, as already seen, gives power to the Central Government to prohibit trade and commerce in oilseeds. That Act, therefore, enable& the Central Government to make forward contracts in essential commodities as defined in it, illegal. That is what the Central Government did by the Oilseeds Order in so far as edible oilseeds are concerned. We find nothing in section 8 from which it can be said 788 that it rendered any contract legal. Its only intent and effect is to declare certain forward contracts illegal. We think that the matter was very correctly put by Chagla, C. J., who delivered the judgment of the High Court. He said, "All that Sec. 8 does is to declare that forward contracts will be illegal unless they comply with the procedure laid down in Sec. 8. But it is one thing to declare a certain contract illegal. It is entirely another thing to declare an illegal contract legal. Sec. 8 does not even make an attempt to declare that forward contracts declared illegal by the Central legislation shall be legal if they comply with the technicalities laid down in Sec. 8. The assumption underlying Sec. 8, it seems to us, is that forward contracts which the Legislature is dealing with are legal contracts, but even if they are legal they are declared to be illegal unless they are performed or made or entered into in the manner laid down in Sec. 8". With these observations we fully agree. In regard to the contention that section 8 of the Bombay Act necessarily implies that contracts made in terms of it would be legal, it seems to us that there is no such necessity indicated in the Act. The Act clearly intends only to create an illegality, that is to say, as Chagla, C. J. said, it takes a legal contract and imposes on it certain conditions and makes it illegal if those conditions are not fulfilled. If a contract is already illegal, there is no scope for applying the Bombay Act. Furthermore, the Bombay Act deals with all kinds of goods. Sub section (4) of section 2 of this Act defines goods as any kind of movable property including securities but not including money or actionable claims. Now the Central Act only applies to essential commodities as defined in it. Therefore, there would be many contracts to which the Central Act would not apply and such contracts may be rendered illegal by the Bombay Act if they come within its scope and are made in disregard of the conditions laid down in section 8. We, therefore, come to the conclusion that there is no repugnancy between the Bombay Act and the Central Act. It follows that there is no scope for 789 applying the provisions of section 107(2) of the Government of India Act, 1935. That would be the position in 1948, when the Bombay Act came into force and the Central Act was already in existence. Both the Acts would then be applying to Greater Bombay as there is no inconsistency between them. Article 372 of the Constitution continued both these Acts after the Constitution came into force and there is nothing in the Constitution which provides that any one of two existing laws, both of which had applied up to the coming into force of the Constitution, would apply to the exclusion of the other. It follows that in 1951 or 1952, when the contract in groundnuts which it is not disputed, was a forward contract within the meaning of both the Acts was made, both the Acts applied to it. The Constitution had not affected such application. That being the position, the contract in groundnuts must be held to be illegal under the Central Act which clearly prohibited the making of it. The Bombay Act could not make it legal for, as we have said, it was not intended to make any contract legal. It would follow that the arbitration clause contained in that contract was of no effect. It has therefore to be held that the award made under that arbitration clause is a nullity and has been rightly set aside. The award, it will have been noticed, was however in respect of disputes under several contracts, one of which we have found to be void. But as the award was one and is not severable in respect of the different disputes covered by it, some of which may have been legally and validly referred, the whole award was rightly set aside. The appeal, therefore, fails and is dismissed with costs. Appeal dismissed. 100 619 of the Act. These rules are called the Bihar Preservation and Improvement of Animals Rules, 1960. The provisions of r. 3 have also been impugned by the. petitioners by an amendment petition filed by them. Rule 3 so far as it is material. for our purpose is in these terms: "3(1). For the purpose of section 3 of the Act, the Veterinary Officer and the Chairman or Chief Officer, as the case may be, shall be the prescribed authority: Provided that where there is no Chairman or Chief Officer in respect of any area, the Veterinary Officer shall be the sole prescribed authority. (2) Where the authority prescribed under subrule (1) or sub rule (5) refuses to issue a certificate under the proviso to section 3, it shall record the reasons for the refusal and no such refusal shall be made unless the person 'applying for the certificate has been given a reasonable opportunity of being heard. (3). . . . . . . . . . (4)A bull, bullock or she buffalo in respect of which a certificate has been issued under section 3 shall not be slaughtered at any place other than the place indicated in the certificate and it shall be slaughtered within 20 days of the date of the receipt of the certificate by the person in whose favour it is issued. (5) In case of difference of opinion between the Veterinary Officer and the Chairman or Chief Officer, the matter shall be referred to the Sub divisional Animal Husbandry Officer or the District Animal Husbandry Officer, as the case may be, and the certificate shall be issued or refused according to the decision of the Sub divisional Animal Husbandry Officer or the District Animal Husbandry Officer, as the case may be.

IN-Abs

Various contracts for sale of goods had been made between the parties in Bombay each of which contained an arbitration clause. Disputes having arisen in March, 1952, in respect of these contracts, they were referred to arbitration and a composite award was made on October 7, 1952, against the respondent. One of these disputes had arisen out of a forward contract in groundnuts. The respondent applied to have the award set aside on the ground that the forward contract in groundnuts was illegal as such a contract was prohibited by the Oilseeds (Forward Contract Prohibition) Order, 1943, issued under the Essential Supplies (Temporary Powers) Act, 1946, passed by the Central Legislature. The appellant contended that the Essential Supplies (Temporary Powers) Act, 1946, was repugnant to the Bombay Forward Contracts Control Act, 1947, passed by the Provincial Legislature of Bombay which had received the assent of the Governor General of India and therefore under section 107(2) of the Government of India Act, 1935, which applied, the Bombay Act prevailed in Bombay in preference to the Central Act and under the Bombay Act Forward Contract in groundnut was valid. The High Court accepted the contention of the respondent and set aside the award. Section 8 of the Bombay Act provided: "Every forward con tract for the sale or purchase of, or relating to, any goods specified in the notification under sub section (3) of section 1 which is entered into, made or to be performed in any notified area shall be illegal if it is not entered into, made or to be performed" and thereafter, set out the manner in which and the persons between whom such contracts could be made and also made punishable a person making a contract declared illegal. Section 3 of the Central Act provided, "The Central Govern ment may by notified order provide for prohibiting trade and commerce" in any essential commodity. Under this section the Oilseeds (Forward Contract Prohibition) Order was passed prohibiting forward contracts in groundnuts, which was one of the essential commodities specified in the Central Act. Held, The Bombay Act did not make any contract legal. Its only effect was to render certain forward contracts illegal if not 781 made in compliance with its terms while the Central Act made the contracts to which it applied, illegal. There was, therefore, no repugnancy between the Bombay Act and the Central Act and both of them applied to Bombay. Article 372 of the Constitution continued both these Acts, and so there is no provision in the Constitution under which any one of them may be said to apply to the exclusion of the other. A composite award in respect of more than one dispute which is not severable, must be set aside as a whole if any of the disputes had been illegally referred.

Appeals Nos. 187 and 190 of 1960. Appeals from the judgment dated 22nd January, 1957, of the Punjab High Court (Circuit Bench), Delhi, in Civil Reference No. 6 of 1953. Veda Vyasa, section K. Kapur and K. K. Jain, for the appellant. B. Ganapathi Iyer and D. Gupta, for the respondent. November 30. The Judgment of the Court was delivered by KAPUR, J. These appeals are brought by the assessee company against a common judgment and order of the Punjab High Court by which four appeals were decided in Civil Reference No. 6 of 1953. The appeals relate to four assessment years, 1947 48, 1948 49, 1949 50 and 1950 51. Two of these assessments, i.e., for the years 1947 48 and 1948 49 were made on the 800 appellant as successor to the two limited companies hereinafter mentioned. Briefly stated the facts of the case are that the appellant company was incorporated in the year 1947. Its objects inter alia were to acquire as a going concern activities, functions and business of the Delhi Stock & Share Exchange Limited and the Delhi Stock and Share Brokers Association Limited and to promote and regulate the business of exchange of stocks and shares, debentures and debenture stocks, Government securities, bonds and equities of any description and with a view thereto, to establish and conduct Stock Exchange in Delhi and/or elsewhere. Its capital is Rs. 5,00,000 divided into 250 shares of Rs. 2,000 each on which dividend could be earned. The appellant company provided a building and a hall wherein the business was to be transacted under the supervision and control of the appellant. The appellant company also made rules for the conduct of business of sale and purchase of shares in the Exchange premises. The total income for the year 1947 48 was Rs. 29,363 out of which a sum of Rs. 15,975 shown as admission fees was deducted and the income returned was Rs. 13,388. In the profit and loss account of that year Members ' admission fees were shown as Rs. 9,000 and on account of Authorised Assistants admission fees Rs. 6,875. The Income tax Officer who made the assessment for the year 1947 48 disallowed this deduction. The return for the following year also was made on a similar basis but the return for the years 1949 50 and 1950 51 did not take into account the admission fees received but in the Director 's report the amounts so received were shown as having been taken directly into the balance sheet. The Income tax Officer, however, disallowed and added back the amount so received to the income returned by the appellant. Against these orders appeals were taken to the Appellate Assistant Commissioner who set aside the additional assessments made under section 34 in regard to the assessment years 1947 48, 1948 49 and 1949 50 and the 4th appeal in regard to the year 1950 51 was decided against the appellant. Both sides appealed 801 to the Income tax Appellate Tribunal against the respective orders of the Appellate Assistant Commissioner and the Tribunal decided all the appeals in favour of the appellant. It was held by one of the members of the Tribunal that the amounts received as entrance fees were intended to be and were in fact treated as capital receipts and were therefore excluded from assessment and by the other that as there was no requisite periodicity, those amounts were not taxable. At the instance of the respondent a case was stated to the High Court on the following question: "Whether the admission fees of Members or Authorised Assistants received by the assessee is taxable income in its hands?" The High Court answered the question in favour of the respondent. The High Court held that the appellant was not a mutual society and therefore was not exempt from the payment of income tax; that it had a share capital on which dividend could be earned and any person could become a shareholder of the company by purchasing a share but every shareholder could not become a member unless he was enrolled, admitted or elected as a member and paid a sum of Rs. 250 as admission fee. On becoming a member he was entitled to exercise all rights and privileges of membership. It also found that the real object of the company was to carry on business as a Stock Exchange and the earning of profits. It was held therefore that the admission fees fell within the ambit of the expression "profits and gains of business, profession or vocation". The further alternative argument which was raised, i.e., that the income fell under section 10(6) of the Act, was therefore not decided. Mr. Veda Vyasa contended on behalf of the appellant that there were only 250 members of the appellant company; that the amount received as membership fees was shown as capital in the books of the company and there was no periodicity and therefore the amounts which had been treated as income should have been treated as capital receipts and therefore exempt from assessment. It was firstly contended that the question did not arise out of the order of the 802 Tribunal and that a new question had been raised but the objection is futile not only because of the absence of any such objection at the stage of the drawing up the statement of the case but also because of failure to object in the High Court; nor do we see any validity in the objection raised. That was the only matter in controversy requiring the decision of the court and was properly referred by the Tribunal. It was then contended that the question had to be answered in the light of facts admitted or found by the Tribunal and that the nature of the appellant 's business or the rules in regard to membership could not be taken into consideration in answering the question. That again is an unsustainable argument. The statement of the case itself shows that all these matters were taken into consideration by one of the members of the Tribunal and the learned judges of the High Court also decided the matter on that material which had been placed before the Income tax authorities and which was expressly referred to in their orders and which again was placed before the High Court in the argument presented there on behalf of the appellant company. It is wholly immaterial in the circumstances of the present case to take into consideration as to how the appellant treated the amounts in question. It is not how an assessee treats any monies received but what is the nature of the receipts which is decisive of its being taxable. These amounts were received by the appellant as membership admission fees and as admission fees paid by the members on account of Authorised Assistants. As far as the latter payment is concerned that would fall within the decision of this Court in Commissioner of Income tax. vs Calcutta Stock Exchange Association Ltd. (1) and therefore is taxable income. The former, i.e., members admission fees has to be decided in accordance with the nature of the business of the appellant company, its Memorandum and Articles of Association and the Rules made for the conduct of business. The appellant company was an association which carried on a trade and its profits were divisible as dividend amongst the shareholders. (1) 803 The object with which the company was formed was to promote and regulate the business in shares, stocks and securities etc., and to establish and conduct the business of a Stock Exchange in Delhi and to facilitate the transaction of such business. The business was more like that in Liverpool Corn Trade Association vs Monks (1). In that case an association was formed with the object of promoting the interest of corn trade with a share capital upon which the association was empowered to declare a dividend. The Association provided a Corn Exchange market, newsroom and facilities for carrying on business and membership was confined to persons engaged in the corn trade and every member was required to be a shareholder and had to pay an entrance fee. The Association also charged the members and every person making use of facilities a subscription which varied according to the use made by them. The bulk of the receipts of the Association was derived from entrance fees and subscriptions. It was therefore contended that the Association did not carry on a trade and that it was a mutual association and entrance fees and subscriptions should be disregarded in computing assessment of the assessable profits. It was held that it was not a mutual association whose transactions were inca pable of producing a profit; that it carried on a trade and the entrance fee paid by members ought to be included in the associations receipts for purposes of computing the profit. Rowlatt, J. said at p. 121: "I do not see why that amount is not a profit. The company has a capital upon which dividends may be earned, and the company has assets which can be used for the purpose of obtaining payments from its 'members for the advantages of such use, and one is tempted to ask why a profit is not so made exactly on the same footing as a profit is made by a railway company who issues a traveling ticket at a price to one of its own shareholders, or at any rate as much a profit as a profit made by a company from a dealing with its own shareholders in a line of business which is restricted to the shareholders." (1) 804 In Commissioner of Income tax, Bombay City vs Royal Western India Turf Club Ltd. (1) this Court rejected the applicability of the principle of mutuality because there was no mutual dealing between members inter se. There was no putting up a common fund for discharging a common obligation undertaken by the contributors for their mutual benefit and for this reason the case decided by the House of Lords in Styles V. New York Life Insurance Company (2) was held not applicable. In the present case the Memorandum of Association shows that the object with which the company was formed was to promote and regulate the business of exchange of stocks, shares, debentures, debenture stocks etc. The income, if any, which accrued from the business of the appellant company was distributable amongst the shareholders like in every joint stock company. According to the Articles of Association the members included shareholders and members of the Exchange and according to the rules and bye laws of the appellant company 'member ' means an individual, body of individuals, firms, companies, corporations or any corporate body as may be on the list of working members of the Stock Exchange for the time being. In the Articles of Association cls. 7 & 8, provision was made for the election of members by the Board of Directors and Rules 9 & 10 laid down the procedure for the election of these members. The entrance fees were payable by the trading members elected under the Rules and Bylaws of the Association, who alone with their Associates, could transact business in stocks and shares in the Association. Therefore, the body of trading members who paid the entrance fees, and the shareholders among whom the profits were distributed were not identical and thus the element of mutuality was lacking. It is the nature of the business of the company and the profits and the distribution thereof which are the determining factors and in this case it has not been shown that the appellants business was in any way different from that which was carried on in the (1) ; , 308. (2) ; 805 case reported as Liverpool Corn Trade Association vs Monks (1). In our opinion the judgment of the High Court is right and the appeals are therefore dismissed with costs. One hearing fee. Appeals dismissed.

IN-Abs

The object with which the appellant company was formed was to promote and regulate the business in shares, stocks and securities etc., and to establish and conduct a Stock Exchange in order to facilitate the transaction of such business. Its capital was divided into shares on which dividend could be earned. it provided a building wherein business was to be transacted under its supervision and control. It made rules for the conduct of business of sale and purchase of shares in the Exchange premises. During the assessment year in question the company 's receipts consisted of certain amounts received as admission fee from Members and Authorised Assistants and the question stated to the High Court for its opinion was whether these fees in the hands of the appellant were taxable income. The High Court answered the question in the affirmative. It held that the appellant was not a mutual society, that dividends could be earned on its share capital, that any person could become a share holder but every share holder was not a member unless he paid the admission fee and the real object of the company was to carry on business of exchange of stocks and earn profits. The case of the appellant, inter alia, was that as the amount received as membership fee was shown as capital in the books of the company and there was no periodicity, it should be treated as capital receipt exempt from assessment. 799 Held, that the High Court was right in its decision and the appeals must be dismissed. It was wholly immaterial how the appellant treated the amounts in question. It is the nature of the receipt and not how the assessee treated it that must determine its taxability. AS: Since the fee received on account of Authorised Assisstants fall within the decision of this Court in Commissioner of Income tax vs Calcutta Stock Exchange Association Ltd., , it must be held to be taxable income. The question as to whether the Members ' admission fee was taxable income was to be determined by the nature of the business of the company, its profits and the distribution thereof as disclosed by its Memorandum and Articles of Association and the rules made for the conduct of business. They showed that the income of the company was distributable amongst its shareholders ;is in any other joint stock company, and the body of trading members who paid the entrance fees and share holders were not identical. The element of mutuality was, therefore, lacking. Liverpool Corn Trade Association vs Monks, (1926) 2 K. B. 110, applied. Commissioner of Income tax, Bombay City vs Royal Western India Turf Club Ltd., ; and Styles vs New York Life Insurance Co., ; , referred to.

Appeal No. 264 of 1956. Appeal by special leave from the Judgment and Order dated June 29, 1954, of the Bombay High Court in Appeal No. 127 of 1953. A. V. Viswanatha Sastri, Hemendra Shah, section N. Andley, J. B. Dadachanji, Rameshwar Nath and P. L. Vohra, for,the Appellant. J. C. Bhatt, C. J. Shah and Naunit Lal, for the Respondent. 1960. November 30. The Judgment of the Court was delivered by SARKAR, J. The appellant is a commission agent and pucca aratiya and has been acting as such for the respondent since November 7, 1951, in the course of which various contracts were made between them in Greater Bombay. On February 26, 1952, two of such contracts were outstanding, one of which was in respect of groundnuts and was a forward contract. In March 1952, disputes arose between the parties as to whether these contracts had been closed, each side making a claim on the other on the basis of its own contention. Eventually, on March 18, 1952, the appellant referred the disputes to arbitration under the arbitration clause contained in the contracts. On October 7, 1952, the arbitrators made one composite award for Rs. 22,529 15 9 against the respondent in respect of the said disputes. It is not very clear whether this award covered other disputes also. This award was duly filed in the Bombay City Civil 99 782 Court under the , for a judgment being passed on it. Thereafter, on July 17, 1953, the respondent made an application to the Bombay City Civil Court for setting aside the award contending that forward contracts in groundnuts were illegal as the making of such contracts was prohibited by the Oilseeds (Forward Contract Prohibition) Order, 1943, issued under the Essential Supplies (Temporary Powers) Act, 1946, and hence the arbitration clause con tained in the forward contract in groundnuts between the parties was null and void. It was said that the award based on that arbitration clause was therefore a nullity. The appellant 's answer to this contention was that the Essential Supplies (Temporary Powers) Act did not apply to Greater Bombay where forward contracts were governed by the Bombay Forward Contracts Control Act, 1947, hereafter called the Bombay Act, and as the contract in groundnuts had been made in terms of that Act, it was legal, and, therefore, the award in terms of the arbitration clause contained in it was a valid and enforceable award. The learned Principal Judge of the Bombay City Civil Court accepted the respondent 's contention and set aside the award. An appeal by the appellant to the High Court at Bombay against the judgment of the City Civil Court failed. The appellant has now come to this Court in further appeal. The only question in this appeal is whether the Essential Supplies (Temporary Powers) Act, which was passed by the Central Legislature in 1946, applied to Bombay? If it did, then the Oilseeds (Forward Contract Prohibition) Order, 1943, hereafter called, the Oilseeds Order, issued under it would make the contract in groundnuts illegal and no award could be made under the arbitration clause contained in it. This is not in dispute. Now, the Oilseeds Order was first passed in 1943 under r. 83 of the Defence of India Rules. The Defence of India Rules ceased to be in force on September 30, 1946. In the meantime however, as the situation had not quite returned to normal in spite of the termination of the war, the British Parliament passed 783 an Act on March 26, 1946, called the India (Central Government and Legislature) Act, 1946 (9 & 10 Geo. VI, Ch. 39), hereafter called the British Act. Section 2 of this Act provided that the Central Legislature of India would have power to make laws with respect to various matters therein mentioned notwithstanding anything in the Government of India Act, 1935, and that that power could be exercised during the period mentioned in section 4 and further that the laws so made to IV he extent they could not have been otherwise made, would cease to have effect at the expiration of that period. The Governor General under the powers reserved in section 4 and subsequently, the Constituent Assembly of India, under the powers conferred on it under the Indian Independence Act, 1947, extended the period mentioned in section 4 of the British Act from time to time and eventually up to March 31, 1951. It would be unprofitable for our purposes to refer to the various statutory provisions and orders under which this was done for, the extension is not in dispute. Under the powers conferred by the British Act, the Governor General promulgated the Essential Supplies (Temporary Powers) Ordinance, 1946, which came into force on October 1, 1946. On November 19, 1946, the Central Legislature under the same powers, passe the Essential Supplies (Temporary Powers) Act, 1946, hereafter called the Central Act, repealing the Ordinance and substantially incorporating its terms. The Central Act originally provided that it would cease to have effect on the expiration of the period mentioned is section 4 of the British Act. As the life of the British Act was extended from time to time, suitable amend ments were made in the Central Act extending its life also. Our Constitution came into force on January 26, 1950 and by virtue of article 372 the Central Act was continued as one of the existing laws. On August 16, 1950, under powers conferred by article 369 of the Constitution, Parliament passed the Essential Supplies (Temporary Powers) Amendment Act, 1950, Act LII of 1950, amending the Central Act in various respects and extending its life up to December 31, 1952. By another amendment made by Act LXV of 1952, the 784 life of the Central Act was extended till January 26, 1955. Section 3(1) of the Central Act is in these terms: "The Central Government, so far as it appears to it to be necessary or expedient for maintaining or increasing supplies of any essential commodity, or for securing their equitable distribution and availability at fair prices, may by notified order provide for regulating or prohibiting the production, supply and distribution thereof, and trade and commerce therein. " Section 2 of the Act provides that foodstuffs would be an essential commodity within the meaning of the Act and would include edible oilseeds. We have earlier stated that the Oilseeds Order was originally passed under the Defence of India Rules, which expired on September 30,1946. The Ordinance of 1946 continued in force, orders issued under the Defence of India Rules in so far as they were consistent with it and provided that such orders would be deemed to be orders made under it. Section 17(2) of the Central Act provided that an order deemed to be made under the Ordinance and in force immediately before its commencement would continue in force and be deemed to be an order made under it. As a result of the Ordinance and the Central Act replacing it and the extension of the life of the latter from time to time, the Oilseeds Order so far as it related to edible oilseeds including groundnuts, continued in force after the expiry of the Defence of India Rules till January 26, 1955. That Order, as so continued, prohibited the making of forward contracts, that is to say, contracts providing for delivery at a future date, in respect of certain specified oilseeds including groundnuts. It is the respondent 's contention that it is because of this order, read with the Central Act, that the contract in groundnuts between the parties was illegal and therefore the award made under the arbitration clause contained in it was void. Now the British Act under which the Central Act was passed, provided in sub sec. (4) of section 2 that, "Sub section (2) of section 107 of the Government of India Act, 1935, and sub section (2) of section 126 785 of that Act shall apply in relation to a law enacted by virtue of this section with respect to any matter being a matter with respect to which a Province has power to make laws as if that matter were a matter specified in Part 11 of the Concurrent Legislative List. " Section 107(2) of the Government of India Act, 1935, laid down that, "Where a Provincial law with respect to one of the matters enumerated in the Concurrent Legislative List contains any provision repugnantto the provisions of an earlier Federal lawthen if the Provincial law, having been reserved for the consideration of the Governor Generalhas received the assent of the Governor Generalthe Provincial law shall in that Province prevail It would follow from these provisions that if a Provincial Act which had received the assent of the Governor General, contained anything repugnant to a Central Act passed under the powers conferred by the British Act, then in the Province concerned, the Provincial Act would apply and not the Central Act. Now, the Bombay Act which had been passed by the Provincial Legislature of Bombay in 1947, came into operation in 1948. That Legislature had power to pass the Act and the Act had received the assent of the Governor General. At that time the Central Act deriving its force from the British Act, was in, operation. If, therefore, the Bombay Act was repugnant to the Central Act, in Bombay, the Bombay Act would apply and not the Central Act. This is not in dispute. The appellant contends that the Bombay Act is so repugnant and therefore the Central Act cannot render the forward contract in groundnuts made in, Greater Bombay, illegal and void. The question, therefore, is whether the Bombay Act, contains any provision repugnant to the Central Act. The preamble of the Bombay Act states that it was enacted as it was thought expedient to regulate and control forward contracts and for certain other matters. Section 1 of this Act came into force at once and gave power to the Government to bring into force by notification the remaining sections of the Act in the 786 whole of the Province of Bombay or parts thereof on such date and in respect of such goods as might be specified. The Government of Bombay issued notifications under this section on December 19, 1950, applying the remaining provisions of the Act to the area called Greater Bombay in respect of all varieties of oilseeds as from the said date. Section 8 of the Bombay Act provides as follows: section 8. (1) Every forward contract for the sale or purchase of, or relating to, any goods specified in the notification under sub section (3) of section I which is entered into, made or to be performed in any notified area shall be illegal if it is not entered into, made or to be performed (a)In accordance with such bye laws, made under section 6 or 7 relating to the entering into, making or performance of such contracts, as may be specified in the bye laws, or (b) (i) between members of a recognised association, (ii) through a member of a recognised association, or (iii) with a member of a recognised association, provided that such member has previously secured the written authority or consent, which shall be in writing if the bye laws so provide, of the person entering into or making the contract, and no claim of any description in respect of such contract shall be entertained in any civil court. (2) Any person entering into or making such illegal contract shall, on conviction, be punishable with imprisonment for a term which may extend to six months or with fine or with both. "Recognised association" is defined in the Bombay Act as an association recognised by the Provincial Government and on December 19, 1950, the Bombay Oilseeds Exchange Limited was recognised as such an association by the Government of Bombay. The appellant is a member of this association. The contracts between the parties were all expressly made subject to the rules and regulations of this Association. The case before us has proceeded on the basis that the impugned contract in groundnut had been made in compliance 787 with the requirements of section 8 and there is no finding to the contrary by the Courts below. We have hence to proceed on the same basis. The appellant contends that section 8 of the Bombay Act and section 3 of the Central Act are repugnant to each other. Now section 8 of the Bombay Act, it will, be noticed, does not purport to make any contract legal. Its only effect is to render forward contracts in all varieties of oilseeds illegal if not made in compliance with its terms. The learned Advocate for the appellant says that the effect of section 8 was to render a forward contract in all oilseeds made in terms of it, legal and, therefore, a repugnancy arose between its terms and the terms of the Oilseeds Order issued under the Central Act which made forward contracts in edible oilseeds illegal. The learned Advocate referred to various other provisions of the Bombay Act and the bye laws of the Association made in terms of the Act to show that the Bombay Act was intended to cover the entire field of forward contracts with respect to all varieties of oilseeds and was therefore intended to oust the operation of the Central Act in Greater Bombay with regard to the forward contracts covered by the former. It does not seem to us that a reference to the other provisions in the Bombay Act or to the bye laws, is relevant in deciding the question. If the effect of section 8 of the Bombay Act was not to render forward contracts made in terms of it legal, then no question of repugnancy with the Central Act can arise whatever may be the scope of the Bombay Act and the provisions in the bye laws. Therefore, it seems to us that the question is whether section 8 of the Bombay Act by its terms makes any forward contract legal. Section 3 of the Central Act, as already seen, gives power to the Central Government to prohibit trade and commerce in oilseeds. That Act, therefore, enable& the Central Government to make forward contracts in essential commodities as defined in it, illegal. That is what the Central Government did by the Oilseeds Order in so far as edible oilseeds are concerned. We find nothing in section 8 from which it can be said 788 that it rendered any contract legal. Its only intent and effect is to declare certain forward contracts illegal. We think that the matter was very correctly put by Chagla, C. J., who delivered the judgment of the High Court. He said, "All that Sec. 8 does is to declare that forward contracts will be illegal unless they comply with the procedure laid down in Sec. 8. But it is one thing to declare a certain contract illegal. It is entirely another thing to declare an illegal contract legal. Sec. 8 does not even make an attempt to declare that forward contracts declared illegal by the Central legislation shall be legal if they comply with the technicalities laid down in Sec. 8. The assumption underlying Sec. 8, it seems to us, is that forward contracts which the Legislature is dealing with are legal contracts, but even if they are legal they are declared to be illegal unless they are performed or made or entered into in the manner laid down in Sec. 8". With these observations we fully agree. In regard to the contention that section 8 of the Bombay Act necessarily implies that contracts made in terms of it would be legal, it seems to us that there is no such necessity indicated in the Act. The Act clearly intends only to create an illegality, that is to say, as Chagla, C. J. said, it takes a legal contract and imposes on it certain conditions and makes it illegal if those conditions are not fulfilled. If a contract is already illegal, there is no scope for applying the Bombay Act. Furthermore, the Bombay Act deals with all kinds of goods. Sub section (4) of section 2 of this Act defines goods as any kind of movable property including securities but not including money or actionable claims. Now the Central Act only applies to essential commodities as defined in it. Therefore, there would be many contracts to which the Central Act would not apply and such contracts may be rendered illegal by the Bombay Act if they come within its scope and are made in disregard of the conditions laid down in section 8. We, therefore, come to the conclusion that there is no repugnancy between the Bombay Act and the Central Act. It follows that there is no scope for 789 applying the provisions of section 107(2) of the Government of India Act, 1935. That would be the position in 1948, when the Bombay Act came into force and the Central Act was already in existence. Both the Acts would then be applying to Greater Bombay as there is no inconsistency between them. Article 372 of the Constitution continued both these Acts after the Constitution came into force and there is nothing in the Constitution which provides that any one of two existing laws, both of which had applied up to the coming into force of the Constitution, would apply to the exclusion of the other. It follows that in 1951 or 1952, when the contract in groundnuts which it is not disputed, was a forward contract within the meaning of both the Acts was made, both the Acts applied to it. The Constitution had not affected such application. That being the position, the contract in groundnuts must be held to be illegal under the Central Act which clearly prohibited the making of it. The Bombay Act could not make it legal for, as we have said, it was not intended to make any contract legal. It would follow that the arbitration clause contained in that contract was of no effect. It has therefore to be held that the award made under that arbitration clause is a nullity and has been rightly set aside. The award, it will have been noticed, was however in respect of disputes under several contracts, one of which we have found to be void. But as the award was one and is not severable in respect of the different disputes covered by it, some of which may have been legally and validly referred, the whole award was rightly set aside. The appeal, therefore, fails and is dismissed with costs. Appeal dismissed. 100 619 of the Act. These rules are called the Bihar Preservation and Improvement of Animals Rules, 1960. The provisions of r. 3 have also been impugned by the. petitioners by an amendment petition filed by them. Rule 3 so far as it is material. for our purpose is in these terms: "3(1). For the purpose of section 3 of the Act, the Veterinary Officer and the Chairman or Chief Officer, as the case may be, shall be the prescribed authority: Provided that where there is no Chairman or Chief Officer in respect of any area, the Veterinary Officer shall be the sole prescribed authority. (2) Where the authority prescribed under subrule (1) or sub rule (5) refuses to issue a certificate under the proviso to section 3, it shall record the reasons for the refusal and no such refusal shall be made unless the person 'applying for the certificate has been given a reasonable opportunity of being heard. (3). . . . . . . . . . (4)A bull, bullock or she buffalo in respect of which a certificate has been issued under section 3 shall not be slaughtered at any place other than the place indicated in the certificate and it shall be slaughtered within 20 days of the date of the receipt of the certificate by the person in whose favour it is issued. (5) In case of difference of opinion between the Veterinary Officer and the Chairman or Chief Officer, the matter shall be referred to the Sub divisional Animal Husbandry Officer or the District Animal Husbandry Officer, as the case may be, and the certificate shall be issued or refused according to the decision of the Sub divisional Animal Husbandry Officer or the District Animal Husbandry Officer, as the case may be.

IN-Abs

Various contracts for sale of goods had been made between the parties in Bombay each of which contained an arbitration clause. Disputes having arisen in March, 1952, in respect of these contracts, they were referred to arbitration and a composite award was made on October 7, 1952, against the respondent. One of these disputes had arisen out of a forward contract in groundnuts. The respondent applied to have the award set aside on the ground that the forward contract in groundnuts was illegal as such a contract was prohibited by the Oilseeds (Forward Contract Prohibition) Order, 1943, issued under the Essential Supplies (Temporary Powers) Act, 1946, passed by the Central Legislature. The appellant contended that the Essential Supplies (Temporary Powers) Act, 1946, was repugnant to the Bombay Forward Contracts Control Act, 1947, passed by the Provincial Legislature of Bombay which had received the assent of the Governor General of India and therefore under section 107(2) of the Government of India Act, 1935, which applied, the Bombay Act prevailed in Bombay in preference to the Central Act and under the Bombay Act Forward Contract in groundnut was valid. The High Court accepted the contention of the respondent and set aside the award. Section 8 of the Bombay Act provided: "Every forward con tract for the sale or purchase of, or relating to, any goods specified in the notification under sub section (3) of section 1 which is entered into, made or to be performed in any notified area shall be illegal if it is not entered into, made or to be performed" and thereafter, set out the manner in which and the persons between whom such contracts could be made and also made punishable a person making a contract declared illegal. Section 3 of the Central Act provided, "The Central Govern ment may by notified order provide for prohibiting trade and commerce" in any essential commodity. Under this section the Oilseeds (Forward Contract Prohibition) Order was passed prohibiting forward contracts in groundnuts, which was one of the essential commodities specified in the Central Act. Held, The Bombay Act did not make any contract legal. Its only effect was to render certain forward contracts illegal if not 781 made in compliance with its terms while the Central Act made the contracts to which it applied, illegal. There was, therefore, no repugnancy between the Bombay Act and the Central Act and both of them applied to Bombay. Article 372 of the Constitution continued both these Acts, and so there is no provision in the Constitution under which any one of them may be said to apply to the exclusion of the other. A composite award in respect of more than one dispute which is not severable, must be set aside as a whole if any of the disputes had been illegally referred.

Appeal No. 30 of 1958. Appeal by special leave from the judgment and order dated March 24, 1955, of the Punjab High Court in Civil Reference No. 3 of 1953. Gopal Singh, for the appellants. K. N. Rajagopala Sastri and D. Gupta, for the respondent. 212 1960. August 17. The Judgment of the Court was delivered by HIDAYATULLAH J. This appeal, by special leave of this Court, is against the judgment 'and order dated March 24, 1955, of the Punjab High Court by which the High Court, purporting to act under section 66(4) of the Indian Income tax Act, called for a supplemental statement of the case from the Income tax Appellate Tribunal. The special leave granted by this Court is limited to the question whether the High Court had jurisdiction in this case to call for the supplemental statement. The assessee, Messrs. section Zoraster & Co., Jaipur, consists of three partners. Two of them are coparceners of a joint Hindu family, and the third is a stranger. They had formed this partnership in June, 1940, for the manufacture and sale of blankets, felts and other woollen articles. A deed of partnership was also executed on March 16, 1944. The assessee entered into contracts with Government for the sup ply of goods, and in the assessment year 1942 43, Rs. 10,80,658 0 0 and in the assessment year 1943 44, Rs. 17,45,336 0 0 were assessed as its income by the Income tax Officer, Contractor 's Circle, New Delhi. The supplies to Government were made for. Jaipur by the assessee, and payment was by cheques which were received at Jaipur and were endorsed in favour of the joint Hindu family, which acted as the assessee 's bankers. The contention of the assessee was that this income was received at Jaipur outside the then taxable territories. This contention was not accepted by the Income tax Appellate Tribunal, Delhi. The assessee then applied for a reference to the High Court under section 66(1) of the Indian Income tax Act, and by its order dated December 10, 1952, the Income tax Appellate Tribunal referred the following question for the decision of the High Court: " Whether on the facts and circumstances of the case the profits and gains in respect of the sales made to the Government of India were received by the assessee in the taxable territories ? " 213 The Tribunal had stated in the statement of the case as follows: "The payment was made by the Government of India by cheques drawn on the Reserve Bank of India, Bombay Branch. These cheques were received in Jaipur. " It may be pointed out that in the contract of sale between the assessee and the Government of India, the following clause was included to determine the system of payment: " 21. System of payment: Unless otherwise agreed between the Purchaser and the Contractor payment for the delivery of the stores will be made by the Chief Auditor, Indian Stores Department, New Delhi, by cheque on a Government treasury in India or on a branch of the Imperial Bank of India or the Reserve Bank of India transacting Government business. " In dealing with the Reference, the High Court passed an order under section 66(4) of the Income tax Act observing, ". . it would be necessary for the Appellate Tribunal to find, inter alia, whether the cheques were sent to the assessee firm by post or by hand and what directions, if any, had the assessee firm given to the Department in the matter ". The High Court thereafter remanded the case to the Tribunal for a supplemental statement of the case on the lines indicated. This order is questioned on the authority of the decision of this Court in The New Jehangir Vakil Mills Ltd. vs The Commissioner of Income tax(1) which, it is claimed, completely covers this case. In that case also, the High Court of Bombay had called for a supplemental statement of the case, and it was ruled by this Court that the High Court had exceeded its jurisdiction. Before dealing with this question, it is necessary to go back a little, and refer briefly to some cases decided earlier than The New Jehangir Vakil Mills case (1) and Jagdish Mills Ltd. vs Commissioner of Income tax (2), on which reliance has been placed in this case. ID (1) ; (2) ; 214 Keshav Mills Co., Ltd. vs Commissioner of Income tax (1), the High Court of Bombay called for a supplemental statement of the case, but it expressed the view that if a cheque was received by a creditor on a British Indian Bank and he gave the cheque to his bank for collection, the bank must be treated as his agent and that, on the realisation of the amount of the cheque in the taxable territory, the creditor must be regarded as having received it in the taxable territory, even if he was outside it. In Sir Sobha Singh vs Commissioner of Income tax (2), it was held by the Punjab High Court that where cheques were given to a bank for purposes of collection, the receipt of the money was at the place where the bank on which the cheques were drawn was situated. These views found further amplification, and were applied in two other cases by the Bombay If high Court. They are Kirloskar Bros. Ltd. vs Commissioner of Income tax (3 ) and Ogale Glass Works Ltd. vs Commissioner of Income tax (4). In both these cases, it was held that unless the payee expressly constituted the post office as his agent, the mere posting of the cheque did not constitute the post office the agent of the payee, and that the amount of the cheque was also received at the place where the cheque was received. In Kirloskar Bros. Ltd. vs Commissioner of Income tax(3), it was held that the mere posting of the cheque in Delhi was not tantamount to the receipt of the cheque in Delhi, because the payee had not requested the Government to send the cheque by post. In Ogale Glass Works case (4), the Bombay High Court asked for a supplementary statement of the case from the Tribunal as to whether there was any express request by the assessee that the cheque should be sent by post, and held that as there was no such express request, the receipt of the money was not where the cheque was posted but at the place where the money was received. (1) (2) (3) (4) I. Tax Reference No. 10 of 1949 of the Bombay H. C. decided on September 17, 1951. 215 The last two decisions of the Bombay High Court were reversed by this Court, and it was held that an intimation to the payer " to remit " the amount by cheque was sufficient nomination of the post office as the agent of the payee: vide Commissioner of Income tax vs Ogale Glass Works Ltd. (1) and Commissioner of Income tax vs Kirloskar Bros. Ltd. (2). Later, the principle was extended still further by this Court in Jagdish Mills case(3). It was held that where the bills had an endorsement Government should pay the amount due by cheque and the cheques were received in full satisfaction unconditionally, this constituted a sufficient implied request for the purpose of the application of the rule in Ogale Glass Works case of this Court. Jagdish Mills case (3) and the New Jehangir Vakil Mills case (4) were decided by this Court on the same day. In the latter case, the Department had to deal with a non resident Company which, at all material times, was situate at Bhavnagar, one of the Indian States. Cheques in payment for supplies to Government were sent from British India to Bhavnagar. The Department contended in the case that though the cheques were received at Bhavnagar, they were, in fact, cashed in British India and until such encashment, income could not be said to have been received but that on encashment in British India, the receipt of income was also in British India. The Tribunal held that the cheques having been received at Bhavnagar the income was also received there. In doing so, the Tribunal followed the Bombay decision in Kirloskar Brothers case (5). The Tribunal, however, observed that if the Bombay view which was then under appeal to this Court were not upheld, then an enquiry would have to be made as to whether the Mills ' bankers at Ahmedabad acted as the Mills ' agents for collecting the amount due on the cheques. The question whether the posting of the cheques from British India to Bhavnagar at the request, express or (1) (3) ; (2) (4) ; (5) 216 implied, of the Mills or otherwise, made any difference was not considered at any stage before the case reached the High Court of Bombay. This was expressly found to be so by this Court in these words: " The only ground urged by the Revenue at all material stages was that because the amounts which were received, from the merchants or the Government were received by cheques drawn on banks in British India which were ultimately encashed in British India, the monies could not be said to have been received in Bhavnagar though the cheques were in fact received at Bhavnagar. " The reference was held back by the Tribunal till the decision of this Court in Ogale Glass Works case (1) and Kirloskar Brothers ' case (2). Even after seeing that in those two cases the request for payment by cheques to be sent by post made all the difference, the Tribunal did not frame its statement of the case or the question to include this aspect, because that aspect of the matter was never considered before. ' The question referred was thus limited to the legal effect of the receipt of the cheques at Bhavnagar without advertence to the fact whether the cheques were so sent by post at the request, express or implied, of the Mills. The question framed was: " Whether the receipt of the cheques in Bhavnagar amounted to receipt of the sale proceeds in Bhavnagar ? " The question as framed and the statement which accompanied it brought into controversy the only point till then considered by the Tribunal and the taxing authorities. When the case *as heard by it, the High Court desired to consider it from the angle of the Kirloskar Brothers(2) and Ogale Glass Works (1) cases. It called for a supplemental statement of the case. In doing so, the High Court went beyond the ambit of the controversy as it had existed till then and also the statement of the case and the question. The High Court directed the Tribunal as follows: "On the finding of the Tribunal that all the cheques were received in Bhavnagar, the Tribunal to find (1) (2) 217 what portion of these cheques were received by post, whether there was any request by the assessee, express or implied, that the amounts which are the subject matter of these cheques should be remitted to Bhavnagar by post." In repelling the objection that such an enquiry was alien to the point decided by the Tribunal and might require fresh evidence, the High Court justified itself by saying: " But we cannot shut out the necessary inquiry which even from our own point of view is necessary to be made in order that we should satisfactorily answer the question raised in the Reference. It must not be forgotten that under section 66(4) of the Income tax Act we have a right independently of the conduct of the parties to direct the Tribunal to state further facts so that we may properly exercise our own advisory jurisdiction. " This Court pointed out that the High Court exceeded its jurisdiction under section 66(4) of the Indian Income tax Act. It was observed: " If the question actually referred does not bring out clearly the real issue between the parties, the High Court may reframe the question so that the matter actually agitated before the Tribunal may be raised before the High Court. But section 66(4) does not enable the High Court to raise a new question of law which does not arise out of the Tribunal 's order and direct the Tribunal to investigate new or further facts necessary to determine this new question which had not been referred to it under section 66(1) or section 66(2) and direct the Tribunal to submit a supplementary statement of the case. " It was also pointed out that the facts admitted and/ or found by the Tribunal could alone be the foundation of the question of law which might be said to arise out of the Tribunal 's order. The case thus set two limits to the jurisdiction of the High Court under section 66(4), and they were that the advisory jurisdiction was confined (a) to the facts on the record and/or found by the Tribunal and (b) the question which 28 218 would arise from the Tribunal 's order. It was pointed out by this Court that it was not open to the High Court to order a fresh enquiry into new facts with a view to amplifying the record and further that it was equally not open to the High Court to decide a question of law, which did not arise out of the Tribunal 's order. This was illustrated by comparing the question as framed by the Tribunal with the question which the High Court desired to decide. Whereas the Tribunal had only referred the question: " Whether the receipt of the cheques at Bhavnagar amounted to receipt of sale proceeds in Bhavnagar ?", what the High Court intended deciding was: " Whether the posting of the cheques in British India at the request express or implied of the appellant, amounted to receipt of sale proceeds in British India ?" These were two totally different questions, and it was held that the High Court could not decide a matter which was different from that decided by the Tribunal, nor call for a statement of the case bearing on this new matter. The proposition laid down in the Jehangir Vakil Mills case (1), finds support from yet another case of this Court decided very recently. In Kusumben D. Mahadevia vs Commissioner of Income tax Bombay (2), it was observed: " In our opinion, the objection of the assessee is well founded. The Tribunal did not address itself to the question whether the Concessions Order applied to the assessee. It decided the question of assessability on the short ground that the income had not arisen in Baroda but in British India. That aspect of the matter has not been touched by the Bombay High Court. The latter has, on the other hand, considered whether the Concessions Order applies to the assessee, a matter not touched by the Tribunal. Thus, though the result is the same so far as the assessment is concerned, the grounds of decision are entirely different. (1) ; (2) ; ,421. 219 Section 66 of the Income tax Act which confers jurisdiction upon the High Court only permits a reference of a question of law arising out of the order of the Tribunal. It does not confer jurisdiction on the High Court to decide a different question of law not arising out of such order. It is possible that the same question of law may involve different approaches for its solution, and the High Court may amplify the question to take in all the approaches. But the question must still be the one which was before the Tribunal and was decided by it. It must not be an entirely different question which the Tribunal never considered. " It follows from this that the enquiry in such cases must be to see whether the question decided by the Tribunal admits the consideration of the new point as an integral or even an incidental part thereof. Even so, the supplemental statement which the Tribunal is directed to submit must arise from the facts admitted and/or found by the Tribunal, and should not open the door to fresh evidence. The fact that in Ogale Glass Works case (1), the Bombay High Court had asked for a supplemental statement in the same way as in the Jehangir Vakil Mills case (2 ), and this Court did not rule out the new matter, cannot help the assessee in the present case, because the jurisdiction of the High Court was not questioned, as it had been done in the Jehangir Vakil Mills case, or has been done here. We have thus to see whether in this case the question which was decided and which has been referred to the High Court admits the return of the case for a supplemental statement on the lines indicated by the High Court in the order under appeal. At the very start, one notices a difference in the question of law in this case and the Ogale Glass Works case (3), on the one hand, and the question of law in the Jehangir Vakil Mills case (2), on the other. In the former two cases, the question is very wide, while in the latter it is extremely narrow. This can be Been by placing the three questions side by side as below : (1) I. Tax Reference No. 19 of 1949 of the Bombay H. C. decided on September 17, 1951. (2) ; (3) 220 Jehangir Vakil Mills case " Whether the receipt of the cheques in Bhav nagar amounted to receipt of the sale proceeds in Bhavnagar ?" Ogale Glass Works case " Whether on the facts of the case, income, profits and gains in respect of sales made to the Government of India was received in British India within the meaning of Section 4(1)(a) of the Act ?" This case "Whether on the facts and circumstances of the case the profits and gains in respect of the sales made to the Government of India were received by the assessee in taxable territories ?" It is thus quite plain that the question as framed in this case can include an enquiry into whether there was any request, express or implied, that the amount of the bills be paid by cheques so as to bring the matter within the dicta of this Court in the Ogale Glass Works case (2) or Jagdish Mills case (3). The first limit to the jurisdiction of the High Court as laid down by this Court is thus not exceeded by the High Court in exercising its powers under section 66(4) of the Income tax Act. The question is wide enough to include the alternative line of approach that if there was a request, express or implied, to send the amount due under the bills by cheque, the post office would be the agent of the assessee, and the income was received in the taxable territory when the cheques were posted. (1) ; (2) (3) ; 221 The next question is whether the High Court has transgressed the second limitation implicit is section 66(4), that is to say, that the question must arise out of the facts admitted and/or found by the Tribunal. The High Court has observed that, ". . it would be necessary for the Appellate Tribunal to find inter alia whether the cheques were sent to the assessee firm by post or by hand and what directions, if any, bad the assessee firm given to the Department in that matter. " If the Tribunal has to make a fresh enquiry leading to the admission of fresh evidence on the record, then this direction offends against the ruling of this Court in the Jehangir Vakil Mills case (1). If, however, the direction be interpreted to mean that the Tribunal in giving the finding must confine itself to the facts admitted and/or found by it, the direction cannot be described as in excess of the jurisdiction of the High Court. It would have been better if the High Court had given directions confined to the record of the case before the Tribunal; but, in the absence of anything expressly to the contrary, we cannot bold that the direction would lead inevitably to the admit ting of fresh evidence. This, at least, now cannot be done, since the Jehangir Vakil Mills case (1), has prohibited the admission of fresh evidence. In our opinion, the present case does not fall within the rule in the Jehangir Vakil Mills case (1), and is distinguishable. In the result, the appeal fails, and is dismissed with costs. Appeal dismissed.

IN-Abs

The appellant entered into contract with Government for the supply of goods, and in the assessment year 1942 43 Rs. 10,80,653 and in the assessment year 1943 44, Rs. 7,45,336 were assessed as its income by the Income tax Officer. The supplies to Government were made for. Jaipur by the appellant, and payment was by cheques which were received at Jaipur. The contention of the appellant was that this income was received at Jaipur outside the then taxable territories. This contention was not accepted by the Income tax Appellate Tribunal, Delhi. The appellant then applied for a reference to the High Court under section 66(1) of the Indian Income tax Act, and by its order dated December 10, 1952, the Tribunal referred the following question for the decision of the High Court. " Whether on the facts and circumstances of the case the profits and gains in respect of the sales made to the Government 211 of India were received by the assessee in the taxable terri tories ?" The High Court remanded the case to the Tribunal for a supplemental statement of case calling for a finding on the question " whether the cheques were sent to the assessee firm by post or by hand and what directions, if any, had the assessee firm given to the department in the matter ". The appellant questioned the order of the High Court relying on the decision in New Jehangir Vakil Mill 's case; , Held, that the enquiry in such cases must be to see whether the question decided by the Tribunal admits of the consideration of the new point as an integral or an incidental part thereof. The supplemental statement which the Tribunal is directed to submit must arise from the facts admitted and/or found by the Tribunal and should not open the door to fresh evidence. Held, further, that the question as framed in this case was wide enough to include an enquiry into whether there was any request, express or implied, that the amount of the bills be paid by cheques so as to bring the matter within the dicta of this Court in the Ogale Glass Works case, [1955] 1 S.C.R. 185 or Jagdish Mills case; , In the absence of anything expressly said in the Order of the High Court to the contrary, it cannot be held that the direction given would lead inevitably to the admitting of fresh evidence as that has been prohibited by the New Jehangir Vakil Mills case. The New Jehangir Vakil Mills Ltd. vs The Commissioner of Income tax, ; , distinguished. Jagdish Mills Ltd. vs Commissioner of Income tax, ; , Keshav Mills Co. Ltd., vs Commissioner of Income tax, , Sir Sobha Singh vs Commissioner of Income tax, , Kirloskar Bros. Ltd.v. Commissioner of Income tax, [1952] 21 I.T.R. 82, Commissioner of Income tax vs Ogale Glass Works Ltd. , Commissioner of Income tax vs Kirloskar Bros. Ltd., and Mrs. Kusumben D. Mahadevia, Bombay vs Commissioner of Income tax, Bombay, ; , referred to.

y of the view that the almost unanimous opinion of experts is that after the age of 15, bulls. bullocks and buffaloes are no longer useful for breeding, draught and other purposes and whatever little use they may have then is greatly offset by the economic disadvantages of feeding and maintaining unserviceable cattle disadvantages to which we had referred in much greater detail in Md. Hanif Quareshi 's case (1). Section 3 of the Bihar Act in so far as it has increased the age limit to 25 in respect of bulls, bullocks and she buffaloes, imposes an unreasonable restriction on the fundamental right of the petitioners, a restriction moreover which cannot be said to be in (1) ; 623 the interests of the general public, and to that extent it is void. We may here repeat what we said in Chintaman Rao vs The State of Madhya Pradesh (1): "The phrase 'reasonable restriction ' connotes that the limitation imposed on a person in enjoyment of the right should not be arbitrary or of an excessive nature, beyond what is required in the interests of the public. The word 'reasonable ' implies intelligent care and deliberation, that is, the choice of a course which reason dictates. Legislation which arbitrarily or excessively invades the right cannot be said to contain the quality of reasonableness and unless it strikes a proper balance between the freedom guaranteed in article 19(1)(g) and the social control permitted by clause (6) of article 19, it must be held to be wanting in that quality. " As to r. 3 the grievances of the petitioners are these. Under the rule the prescribed authority for the purpose of section 3 of the Act consists of the Veterinary Officer and the Chairman or Chief Officer of a District Board, Municipality etc. Unless both of them concur, no certificate for slaughter can be granted. It is pointed out that the Chairman or Chief Officer would be a layman not in a position to judge the age or usefulness of cattle. The result would be that the animal in respect of which a certificate is required may have to be shown to the Veterinary Officer as also the Chairman or Chief Officer, who may not be staying at the same place as the Veterinary Officer. If the two differ, the matter has to be referred to the Sub divisional Animal Husbandry Officer. This procedure, it is contended, will involve the expenditure of so much money and time that it will not be worthwhile for the petitioners to ask for a certificate, or having got a certificate, to slaughter the animal. An animal which is above 15 or which has become useless generally costs much less than a young, serviceable animal. If the petitioners have to incur all the expenditure which the procedure laid down by r. 3 must necessarily cost them, then they must close down their trade. As to the right of appeal from an order refusing to grant a (1) ; ,763. 624 certificate, it is contended that that right is also illusory for all practical purposes. To take the animal to the Deputy Director of Animal Husbandry or the District Animal Husbandry Officer or the Sub divi sional Animal Husbandry Officer, as the case may be, and to keep and feed the animal for the period of the appeal and its hearing will cost more than the price of the animal itself. We consider that these grievances of the petitioners have substance, and judged from the practical point of view, the provisions of r. 3 impose disproportionate restrictions on their right. It is difficult to understand why the Veterinary Officer, who has the necessary technical knowledge, cannot be trusted to give the certificate and why it should be necessary to resort to a complicated procedure to resolve a possible difference of opinion between two officers, later followed by a still more expensive appeal. We, therefore, hold r. 3 also to be bad in so far as it imposes disproportionate restrictions indicated above, on the right of the petitioners. (2) We now proceed to consider the Uttar Pradesh Prevention of Cow Slaughter (Amendment) Act, 1958. After the decision of this Court in Md. Hanif Quareshi vs The State of Bihar (1) an Ordinance was passed called the Uttar Pradesh Prevention of Cow Slaughter (Amendment) Ordinance, 1958. This Ordinance was later repealed and replaced by the Act. The petitioners say that in the Bill as originally drafted the age limit below which slaughter was not permissible was put at 15 years; but the Select Committee increased it to 20 years. It will probably be best, for clearness sake, to set forth not the whole provisions of the Act, for that would be too lengthy, but those which form most directly the subject matter on which the controversy turns. Section 3 of the Act reads (omitting portions not relevant for our purpose) "section 3(1) Except as hereinafter provided, no person shall slaughter or cause to be slaughtered or offer or cause to be offered for slaughter (a). . . . . . . (1) ; 625 (b) a bull or bullock, unless he has obtained in respect thereof a certificate in writing, from the competent authority of the area in which the bull or bullock is to be slaughtered, certifying that it is fit for slaughter. (2) No bull or bullock, in respect of which a certificate has been issued under sub section (1)(b) shall be ' slaughtered at any place other than the place indicated in the certificate or within twenty days of the date of issue of the certificate. (3) A certificate under sub section (1)(b) shall be issued by the competent authority, only after it has, for reasons to be recorded in writing, certified that(a) the bull or bullock is over the age of twenty years; and (b) in the case of a bull, it has become permanently unfit and unserviceable for the purpose of breeding and, in the case of a bullock, it has become permanently unfit and unserviceable for the purposes of draught and any kind of agricultural operation: Provided that the permanent unfitness or unserviceability has not been caused deliberately. (4) The competent authority shall, before issuing the certificate under sub section (3) or refusing to issue the same, record its order in writing. Any person aggrieved by the order of the competent authority, under this section, may, within twenty days of the date of the order, appeal against it to the State Government, which may pass such orders thereon as it may deem fit. (5) The State Government may, at any time, for the purposes of satisfying itself as to the legality or propriety of the action taken under this section, call for and examine the record of any case and may pass such orders thereon as it may deem fit. (6) Subject to the provisions herein contained any action taken under this section, shall be final and conclusive and shall not be called in question. " On behalf of the petitioners it has been argued that section 3 imposes a number of unreasonable restrictions. Firstly, it is urged that the age limit with regard to bulls or bullocks is put too high, viz. at 20 years. This is an 626 aspect which we have already considered in relation to the Bihar Act. What we have said about the age s limit in that connexion applies equally to the Uttar Pradesh Act. The 8th Live stock Census, 1956 shows that in Uttar Pradesh bulls and bullocks over 3 years of age, not in use for breeding or work, numbered as many as 126,201 in 1956 as compared to 162,746 in 1951. The Municipal Manual, Uttar Pradesh, Vol. 1, contains a direction that for slaughter of animals, bullocks and male buffaloes in good state of health below ten years of age should be included. Secondly, it is pointed out that not being content with fixing an unreasonably high age limit, the impugned provision imposes a double restriction. It says that the animal must be over twenty years in age and must also be permanently unfit and unserviceable; and in the case of a bullock, the unfitness must be for "any kind of agricultural operation" and not merely for draught purposes. The result of this double restriction, it is stated, is that even if the animal is permanently unserviceable and unfit at an earlier age, it cannot be slaughtered unless it is over twenty years in age. Before a certificate can be given, the animal must fulfil two conditions as to (1) age and (2) permanent unfitness. We consider this to be a demonstrably unreasonable restriction. In Md. Hanif Quareshi 's case (1) this Court had said that a total ban on the slaughter of bulls and bullocks after they had ceased to be capable of breeding or working as draught animals was not in the interests of the general public. Yet this is exactly what the impugned provision does by imposing a double restriction. It lays down that even if the animal is permanently unserviceable, no certificate can be given unless it is more than 20 years in age. The restriction will in effect put an end to the trade of the petitioners. Thirdly, the impugned provision provides (1) that the animal shall not be slaughtered within 20 days of the date of the issue of the certificate and (2) that any person aggrieved by the order of the competent authority may appeal to the State Government within 20 days. It is to be noted that the right of appeal is not (1) 627 confined to a refusal to grant a certificate as in the Bihar Act, but the right is given to any person aggrieved by the order of the competent authority. In other words, even when a certificate is given, any person, even a member of the public, who feels aggrieved by it may prefer an appeal and hold up the slaughter of the animal for a long time. From the practical point of view these restrictions really put a total ban on the slaughter of bulls and bullocks even after they have ceased to be useful, and we must hold, following our decision in Md. Hanif Quareshi 's case (1) that section 3 of the Uttar Pradesh Act in so far as it imposes unreasonable restrictions on the right of the petitioners as to slaughter of bulls and bullocks infringes the fundamental right of the petitioners and is to that extent void. (3) Now, we come to the Madhya Pradesh Act. Several provisions of this Act have been challenged before us as imposing unreasonable restrictions on the fundamental right of the petitioners. Section 4 deals with prohibition of slaughter of agricultural cattle. The expression 'agricultural cattle ' means an animal specified in the schedule: it means cows of all ages; calves of cows and of she buffaloes; bulls; bullocks; and male and female buffaloes. As we have stated earlier, we are concerned in these cases with the validity of the restrictions placed on the slaughter of bulls, bullocks and buffaloes. Now, section 4 is in these terms: "section 4(1) Notwithstanding anything contained in any other law for the time being in force or in any usage or custom to the contrary, no person shall slaughter or cause to be slaughtered or offer or cause to be offered, for slaughter (a) cows, calves of cows, or calves of she buffaloes, or (b) any other agricultural cattle unless he has obtained in respect of such cattle a certificate in writing issued by the Competent Authority for the area in which the cattle is to be slaughtered that the cattle is fit for slaughter. (1) [1959] S.C.R.29. 628 (2) No certificate under clause (b) of sub section (1) shall be issued by the Competent Authority .unless the Veterinary Officer after examining the cattle certifies that (a) the cattle is over twenty years of age and is unfit for work or breeding or has become permanently incapacitated from work or breeding due to age, injury, deformity or an incurable disease; and (b) the cattle is not suffering from any disease which makes its meat unwholesome for human consumption. (3) The Competent Authority shall, before issuing or refusing to issue a certificate under this section, record its order in writing. Any person aggrieved by the order of the Competent Authority under this section, may, within ten days of the date of the order, prefer an appeal against such order to the Collector of the district or such other officer as may, by notification, be authorised in this behalf by the State Government, and the Collector or such other officer may pass such orders thereon as he thinks fit. (4) Subject to the orders passed in appeal, if any, under sub section (3), the order of the Competent Authority shall be final and shall not be called in question in any Court. " Section 5 places a restriction as to the place and time for slaughter and the objection taken before us relates to the time rather than to the place of slaughter. It says in effect that no cattle in respect of which a certificate has been issued under section 4 shall be slaughtered within ten days of the date of issue of the certificate and where an appeal is preferred against the grant of such certificate, till the time such appeal is disposed of. The provision of appeal is contained in sub section (3) of section 4 of the Act which we have quoted earlier. That sub section lays down that any person aggrieved by the order of the Competent Authority, may, within ten days of the date of the order, prefer an appeal against the order to the Collector of the district or such other officer as may, by notification, be authorised in this behalf by the State Government. 629 Section 6 imposes a restriction on the transport of agricultural cattle for slaughter and reads: "section 6. No person shall transport or offer for transport or cause to be transported any agricultural cattle from any place within the State to any place outside the State, for the purpose of its slaughter in contravention of the provisions of this Act or with the knowledge that it will be or is likely to be, so slaughtered. " Section 7 prohibits the sale, purchase or disposal otherwise of certain kinds of animals. It reads . "section 7. No person shall purchase, sell or otherwise dispose of or offer to purchase, sell or otherwise dispose of or cause to be purchased, sold or otherwise disposed of cows, calves of cows or calves of shebuffaloes for slaughter or knowing or having reason to believe that such cattle shall be slaughtered. " Section 8 relates to possession of flesh of agricultural cattle and is in these terms: "section 8. Notwithstanding anything contained in any other law for the time being in force, no person shall have in his possession flesh of any agricultural cattle slaughtered in contravention of the provisions of this Act. " Section 10 imposes a penalty for a contravention of section 4(1)(a) and section 11 imposes penalty for a contravention of any of the other provisions of the Act. On behalf of the petitioners it has been pointed out, and rightly in our opinion, that cl. (a) of sub section (2) of section 4 of the Act imposes an unreasonable restriction on the right of the petitioners. That clause in its first part lays down that the cattle (other than cows and calves) must be over 20 years of age and must also be unfit for work or breeding; and in the second part it says, "or has become permanently incapacitated from work or breeding due to age, injury, deformity or an incurable disease. " It is a little difficult to understand why the two parts are juxtaposed in the section. In any view the restriction that the animal must be over 20 years of age and also unfit for work or breeding is an excessive or unreasonable restriction as we have 80 630 pointed out with regard to a similar provision in the Uttar Pradesh Act. The second part of the clause would not be open to any objection, if it stood by itself. If, however, it has to be combined with the agelimit mentioned in the first part of the clause, it will again be open to the same objection; if the animal is to be over 20 years of age and also permanently incapacitated from work or breeding etc. ,then the agelimit is really meaningless. Then, the expression 'due to age ' in the second part of the clause also loses its meaning. It seems to us that cl. (a) of sub section (2) of section 4 of the Act as drafted is bad because it imposes a disproportionate restriction on the slaughter of bulls, bullocks and buffaloes it is a restriction excessive in nature and not in the interests of the general public. The test laid down is not merely permanent incapacity or unfitness for work or breeding but the test is something more than that, a combination of age and unfitness ' Learned Counsel for the petitioners has placed before us an observation contained in a reply made by the Deputy Minister in the course of the debate on the Bill in the Madhya Pradesh Assembly (see Madhya Pradesh Assembly Proceedings, Vol. 5 Serial No. 34 dated April 14, 1959, page 3201). He said that the age fixed was very much higher than the one to which any animal survived. This observation has been placed before us not with a view to an interpretation of the section, but to show what opinion was held by the Deputy Minister as to the proper agelimit. On behalf of the respondent State our attention has been drawn to a book called The Miracle of Life (Home Library Club) in which there is a statement that oxen, given good conditions, live about 40 years. Our attention has also been drawn to certain extracts from a Hindi book called Godhan by Girish Chandra Chakravarti in which there are statements to the effect that cows and bullocks may live up to 20 or 25 years. This is an aspect of the case with which we have already dealt. The question before us is not the maximum age upto which bulls, bullocks and buffaloes may live in rare cases. The question before us is what is their average longevity and at what age 631 they become useless. On this question we think that the opinion is almost unanimous, and the opinion which the Deputy Minister expressed was not wrong. Section 5 in so far as it imposes a restriction as to the time for slaughter is again open to the same objection as has been discussed by us with regard to a similar provision in the Uttar Pradesh Act. A right of appeal is given to any person aggrieved by the order. In other words, a member of the public, if he feels aggrieved by the order granting a certificate for slaughter, may prefer an appeal and hold up for a long time the slaughter of the animal. We have pointed out that for all practical purposes such a restriction will really put an end to the trade of the petitioners and we are unable to accept a restriction of this kind as a reasonable restriction within the meaning of cl. (6) of article 19 of the Constitution. Section 6 standing by itself, we think, is not open to any serious objection. It is ancillary in nature and tries to give effect to the provision of the Act prohibiting slaughter of cattle in contravention of the Act. Section 7 relates to the prohibition of sale, purchase etc., of cows and calves and inasmuch as a total ban on the slaughter of cows and calves is valid, no objection can be taken to section 7 of the Act. It merely seeks to effectuate the total ban on the slaughter of cows and calves (both of cows and she buffaloes). Section 8 is also ancillary in character and if the other provisions are valid no objection can be taken to the provisions of section 8. Sections 10 and 11 impose penalties and their validity cannot be seriously disputed. However, we must say a few words about section 12 of the Act which has also been challenged before us. Section 12 is in these terms: "section 12. In any trial for an offence punishable under section 11 for contravention of the provision of sections 5, 6 or 7 of this Act the burden of proving that the slaughter, transport or sale of agricultural cattle was not in contravention of the provisions of this Act shall be on the accused. " The argument is that section 12 infringes the fundamental 632 right of the petitioners inasmuch as it puts the burden of proof on an accused person not only for his own knowledge or intention but for the knowledge or intention of other persons. We do not think that this contention is correct. The accused person, so far as sections 5 and 7 are concerned, must be the person who has slaughtered the animal or who has purchased, sold or otherwise disposed of the animal etc. Therefore, the only question will be his knowledge and the legislature was competent to place the burden of proof on him. So far as section 6 is concerned, it specifically refers to the knowledge of the person who has transported or offered for transport or caused to be transported any agricultural cattles from any place within the State to any place outside the State. Therefore, when the section talks of knowledge, it talks of the knowledge of that person who has transported or offered for transport etc. The knowledge of no other person comes into the purview of section 6. We are, therefore, ' of the view that section 12 is not invalid on the ground sug gested by the petitioners. Therefore, the result of our examination of the various provisions of the Act is that the impugned provisions in cl. (a) of sub section (2) of section 4, in sub section (3) of section 4 relating to the right of appeal by any person aggrieved by the order, and in section 5 relating to the time of slaughter, impose unreasonable and disproportionate restrictions which must be held to be unconstitutional. As to the Madhya Pradesh Agricultural Cattle Preservation Rules, r. 3 says "that an application for a certificate under section 4 shall be made to the competent authority," and r. 4 says that on receipt of the application, the competent authority shall by an order direct the person keeping the animal to submit it for examination by the Veterinary Officer Rule 5 reproduces the provisions of cls. (a) and (b) of sub section (2) of section 4 and in so far as we have held that the provision in el. (a) of sub section (2) of section 4 is unconstitutional, the rule must also fall with it. There is one other aspect of these cases which has been emphasized before us, to which a reference must 633 now be made. It is open to the legislature to enact ancillary provisions to give effect to the main object of the Act, namely, the prevention of slaughter of animals like bulls, bullocks or buffaloes which are still useful for the purposes for which they are generally used. It is pointed out that acts innocent in themselves may be prohibited and the restrictions in that regard would be reasonable, if the same were necessary to secure efficient enforcement of valid provisions. For example, it is open to the legislature, if it feels it necessary, in order to reduce the possibilities of evasion to a minimum, to enact provisions which would give effect to the main object of the legislation. We have not ignored this aspect and have kept in mind the undisputed right of the legislature to decide what provisions are necessary to give effect to the main object of the legislation. In these cases the petitioners have complained that the main object of the impugned provisions is not the prohibition of slaughter of animals which are still useful; the impugned provisions as they are worded really put a total ban on the slaughter of bulls, bullocks and buffaloes and for all practical purposes they put a stop to the profession and trade of the petitioners. We have held that this complaint is justified in respect of the main provisions in the three Acts. We, therefore, allow the three writ petitions and direct, as we directed in Md. Hanif Quareshi 's case (1) the respondent States not to enforce the Acts or the rules made thereunder in so far as they have been declared void by us. The petitioners will be entitled to their costs of the hearing in this Court. Petitions allowed.

IN-Abs

In order to put the sugar industry on a stable footing, for which it was necessary to develop the cane area, the Ruler of the erstwhile Gwalior State by an order dated 27 7 1946 sanctioned the levy of cess of one anna per maund on all sugar cane purchased by the respondent company. When the Government of Madhya Bharat, which was the successor state of the former Gwalior State, made a demand for payment of the cess, the respondent filed a petition before the High Court of Madhya ,Bharat challenging the legality of the levy on the grounds (1) that the order dated 27 7 1946 was only an executive order and not a law under article 265 of the Constitution of India and that, therefore, there was no authority for the imposition of the cess after January 26, 1950, and (2) that the levy was discriminatory and violated article 14 inasmuch as while the respondent was made liable to pay the cess the other sugar factories in the State were exempt. It was found that at the time when cess was first levied there was no sugar factory in existence in the Gwalior State other than that of the respondent. Held, that (i) the Ruler of an Indian State was an absolute monarch in which there was no constitutional limitation to act in any manner he liked, he being the supreme legislature, the supreme judiciary and the supreme head of the executive. I Consequently, the order dated 27 7 1946 issued by the Ruler of Gwalior State amounted to a law enacted by him and became an existing law under article 372 of the Constitution of India. The levy of cess was therefore by authority of law within the meaning of article 265; Madhaorao Phalke vs The State of Madhya Bharat, ; , followed. (2) the levy of cess did not contravene article 14 because (a) the object was cane development in the particular area and a geographical classification based upon historical factors was a permissible mode of classification, and (b) a tax could not be struck down as discriminatory unless it was found that it was imposed with a deliberate intention of differentiating between 620 (ii) where the order is passed by the Sub divisional Animal Husbandry Officer, under sub rule (5), to the District Animal Husbandry Officer and (iii) where the order is passed by the authority prescribed under sub rule (1) to the Sub divisional Animal Husbandry Officer, if there is one; if not, to the District Animal Husbandry Officer; (b) The appeal shall not be decided against the appellant unless he has been given a reasonable opportunity of being heard. " The argument on behalf of the petitioners is that they are "Kassais" by profession and they earn their living by slaughtering cattle only (not goats or sheep which are slaughtered by "Chiks"); that they have the fundamental right to carry on their profession and trade; and that section 3 of the Act read with r. 3 imposes unreasonable restrictions restrictions not in the interests of the general public on their fundamental right and therefore they are not saved by cl. (6) of article 19 of the Constitution. Some of these arguments were considered by this Court in Md. Hanif Quareshi vs The State of Bihar (1) and it was pointed out that the test of reasonableness should be applied to each individual statute impugned and no abstract standard, or general pattern, of reasonableness can be laid down as applicable to all cases. It referred to the decision in State of Madras vs V. G. Row (2) and repeated what was said therein that "the nature of the right alleged to have been infringed, the underlying purpose of the restrictions imposed, the extent and urgency of the evil sought to be remedied thereby, the disproportion of the imposition, the prevailing conditions at the time, should all enter into the judicial verdict." 'Another consideration which has to be kept in mind is that "the legislature is the best judge of what is good for the community,. by whose suffrage it comes into existence. . . . (See The State of Bihar vs Maharajadhiraja Sir Kameshwar Singh of Darbhanga (3)). But the ultimate responsibility for determining the validity of the law must rest with the (1) (2) ; (3) 621 Court and the Court must not shirk that solemn duty cast on it by the Constitution. We must, therefore, approach the problem before us in the light of the principles laid down by this Court. The most pertinent question is having regard to all the relevant circumstances, is the age of 25 years laid down in section 3 a reasonable restriction on the right of the petitioners in the interests of the general public ? We are unable to say that it is. Apart from the affidavits made on behalf of the petitioners and the respondent State, a large volume of authoritative and expert opinion has been placed before us which shows beyond any doubt that a bull, bullock or she buffalo does not remain useful after 14 or 15 years and only a few of them live up to the age of 25. In the Report of the Cattle Preservation and Development Committee, published by the Ministry of Agriculture, it is recommended by the Committee that the slaughter of animals over 14 years of age and unfit for work as also animals of any age permanently unable to work owing to injury or deformity, should be allowed. In the Report on the Marketing of Meat in India (published by the Ministry of Food and Agriculture) there is a reference to a draft Bill circulated by the Ministry of Agriculture (page 112 of the Report) which contains a clause that animals over 14 years of age and unfit for work may be slaughtered on a certificate from a Veterinary Officer. In the Report on the Marketing of Cattle in India, again published by the Ministry of Food and Agriculture, occurs the following passage as to the price of animals with reference to their age: "Young draught animals up to the age of 4 years being raw and untrained fetch comparatively low prices. Between 4 and 8 years of age, the animals are in the prime of their youth and tender best service, and fetch maximum prices. From the 8th year onwards old age sets in, and a graded decline is observed in their capacity to work and consequently prices depreciate considerably." . In a Food and Agricultural Organisation study of cattle in India and Pakistan (Zebu Cattle of India and 79 622 Pakistan, page 94) it is stated that the active breeding life of a bull is estimated to be about 10 years. In Black 's Veterinary Dictionary (edited by W. C. Miller and G. P. West, fifth edition) it is stated that pedigree ,bulls may reach 12 or 14 years of age before being discarded; and cattle seldom live longer than 15 or 16 years, and when they do, their age is usually of no immediate importance. In another publication of the Ministry of Agriculture called 'Problems of Cattle Insurance ' under Indian conditions, it is stated that the life of cattle is comparatively much shorter, the maximum age being only about 15 years. There is an interesting chart relating to the determination of age in cattle in a publication called 'Cattle Development in Uttar Pradesh ' by R. L. Kaura, Director of Animal Husbandry; that chart shows that at II years incisors appear smaller due to wearing out; at 12 years space appears between the teeth, and after 12 teeth wear out constantly and roots remain far apart from one another. As against all this expert opinion the respondent State has relied on the chart embodying some useful data about domestic animals, prepared by Major A. C. Aggarwala, Director of Veterinary Services, Punjab, and R. R. Gulati, Superintendent, Veterinary Department, Jullandur, which shows the sterility age of a buffalo at 15 and average age at 25, and of a cow sterility at 15 and 16 years and average life 22 years.

Appeal No. 51 of 1951. Appeal from the Judgment and Decree dated the 11h September, 1945, of the High Court of Judicature at Allaha bad (Brand and Waliullah JJ.) in First Appeal No. 212 of 1942 arising out of the Judgment and Decree dated the 28th February, 1942, of the Court of the Civil Judge of Azamgarh in Original Suit No. 4 of 1941. S.P. Sinha (Shaukat Hussain, with him) for the appel lants. C.K. Daphtary (Nuruddin Ahmed, with him) for the re spondents. Oct. 22. The judgment of the Court was delivered by BHAGWATI J. This is an appeal from the judgment and decree of the High Court of judicature at Allahabad which set aside a decree passed by the Civil Judge of Azamgarh decreeing the plaintiff 's claim. One Haji Abdur Rahman, hereinafter referred to as Haji" a Sunni Mohammedan, died on the 26th January, 1940, leaving behind him a large estate. He left him surviving the plain tiffs 1 to 3, his sons, plaintiff 4 his daughter and plain tiff 5 his wife, defendant 6 his sister, defendant 7 his daughter, by a predeceased wife Batul Bibi and defendants 1 to 4 his nephews and defendant 5 his grand nephew. Plain tiffs case is that immediately after his death the defendant 1 who was the Chairman, Town Area qasba Mubarakpur and a member of the District Board, Azamgarh and defendant 5 who was an old associate of his started propaganda against them, that they set afloat a rumour to the effect that the plain tiffs 1 to 4 1135 were not the legitimate children of Haji and that the plain tiff 5 was not his lawfully wedded wife, that the defendants 1 to 4 set up an oral gift of one third of the estate in their favour and defendant 5 set up an oral will bequeathing one third share of the estate to him and sought to interfere with the possession of the plaintiffs over the estate and nearly stopped all sources of income. It was alleged that under these circumstances a so called deed of family settle ment was executed by and between the parties on the 5th April, 1940, embodying an agreement in regard to the distri bution of the properties belonging to the estate, that plaintiff 3 was a minor of the age of about 9 years and he was represented by the plaintiff 1 who acted as his guardian and executed the deed of settlement for and on his behalf. On these allegations the plaintiffs filed on the 25th Novem ber, 1940, in the Court of Civil Judge of Azamgarh the suit out of which the present appeal arises against the defend ants 1 to 5 and defendants 6 and 7 for a declaration that the deed of settLement dated 5th April, 1940, be held to be invalid and to establish their claim to their legitimate shares in the estate of Haji under Mohammedan Law. The defendant 8 a daughter of the plaintiff 5 whose paternity was in dispute was added as a party defendant to the suit, the plaintiffs claiming that she was the daughter of the plaintiff 5 by Haji and the defendants 1 to 5 alleging that she was a daughter of the plaintiff 5 by her former husband Alimullah. The only defendants who contested the claim of the plaintiffs were the defendants 1 to 5. They denied that the plaintiff 5 was the lawfully wedded wife and the plaintiffs 1 to 4 were the legitimate children of Hail. They also contended that the deed of settlement embodied the terms of a family settlement which had been bona fide arrived at between the parties in regard to the disputed claims to the estate of Haji and was binding on the plaintiffs. It is significant to observe that the defendants 6 and 7 who were the admitted heirs of Haji did not contest the plaintiffs ' claim at all. 1136 The two issues which were mainly contested before the trial Court were, (I) Whether the plaintiffs 1 to 4 are the legitimate issue of and the plaintiff 5 is the wedded wife of Abdul Rahman deceased; (2) Whether the agreement dated 5th April, 1940, was executed by the plaintiffs after understanding its contents fully or was obtained from them by fraud or undue influence ? Was the said deed insufficiently stamped? Was it benefi cial to the minor plaintiffs ? As regards the first issue there was no document evi dencing the marriage between the plaintiff 5 and Haji. The plaintiff 5 and Haji had however lived together as man and wife for 23 to 24 years and the plaintiffs 1 to 4 were born of that union. There was thus a strong presumption of the marriage of Haji with plaintiff 5 having taken place and of the legitimacy of plaintiffs 1 to 4. The trial Court did not attach any importance to the question of onus or pre sumption, examined the evidence which was led by both the parties with a view to come to a finding in regard to this issue, and found as follows: "So far as Musammat Rahima 's marriage with Alimullah or another Abdul Rahman is concerned the evidence of both the parties stands on the same level and is not worthy of much credit. I have however, not the least hesitation to observe that so far as the oral evidence and the circumstances of the case are concerned, they all favour the plaintiffs. I, however, find it difficult to ignore the testimony of the defendants ' witnesses Shah Allaul Haq and Molvi Iqbal Ahmad . . . . Owing to the voluminous oral evidence adduced by the plaintiffs and the circumstances that apparently favour them, I gave my best attention to this case, but upon a careful consideration of the whole evidence on the record, I am not prepared to hold that the plaintiffs 1 to 4 are the legitimate issues of the plaintiff No. 5, the lawfully wedded wife of the deceased, Haji Abdul Rahman. I frankly admit that the matter iS not free from difficulty and 1137 doubt but to my mind the scale leans away from the plain tiffs and I am not satisfied that their version is correct. " On the second issue the learned trial Judge came to the conclusion that the disputed compromise amounted to a family settlement; that it was beneficial to the interests of the minor plaintiff and that it was made by the parties willing ly and without any fraud or undue influence. On these find ings the suit was dismissed with costs. The plaintiffs filed an appeal to the High Court of Judicature at Allahabad. After considering the several authorities on the binding nature of family settlements cited before it came to the conclusion that it did not bind the plaintiffs. As regards defendants 1 to 5 it was held that there was no consideration whatsoever which could in any way support the arrangement. Plaintiffs 4 and 5 being Purdanashin ladies, it was found that they had no chance at any stage of the transaction of getting independent advice in regard to the contents or the effect of the document which they were executing and that even if the deed were valid otherwise it would not be binding on them. It was further held that the plaintiff 3 who would be about 9 years of age at the time of the execution of the deed was repre sented in the transaction by his brother who could not be the legal guardian of his property and that the deed in so far as it adversely affected the interest of plaintiff 3 would not be binding on him. On the question of marriage and legitimacy the High Court came to the conclusion that ii the trial Court had considered the question of onus in its proper light and given the plaintiffs the benefit of the initial presumption in favour of legitimacy and lawful wedlock under the Mahomedan law, he would have recorded a finding in their favour. The defendants to 5 had alleged that at the time of the commencement of sexual relations between the plaintiff 5 and Haji, plaintiff 5 was the wife of one Alimullah who was alive and that therefore the con nection between the 1138 plaintiff 5 and Haji was in its origin illicit and continued as such, with the result that the presumption in favour of a marriage between the plaintiff 5 and Haji and in favour of the legitimacy of plaintiffs 1 to 4 would not arise. The learned trial Judge disbelieved the evidence led by the defendants 1 to 5 in regard to this marriage between the plaintiff 5 and Alimullah. The High Court upheld the finding and said: "All these circumstances, to my mind, strongly militate against the theory of a first marriage of Musammat Rahima Bibi with the man called Alimullah. In this state of the evidence one cannot but hold that this story of the marriage with Alimullah was purely an after thought on the part of the defendants 1 to 5 and it was invented only to get rid of the strong presumption under the Mahomedan law in favour of the paternity of plaintiffs 1 to 4 and the lawful wedlock of the plaintiff 5. " Having thus discredited the theory of the first mar riage of the plaintiff 5 with Alimullah the High Court came to the conclusion that it was fully established that Musam mat Rahima Bibi was the lawfully wedded wife and that the plaintiffs 1 to 4 are the legitimate children of Haji. The defendants 1 to 5 obtained leave to appeal to His Majesty in Council and the appeal was admitted on the 10th January, 1947 Shri S.P. Sinha who appeared for the defendants 1 to 5 before us has urged the self same two questions, namely, (1) Whether the deed of settlement is binding on the plaintiffs and (2) Whether the plaintiff 5 was the lawfully wedded wife and the plaintiffs 1 to 4 are the legitimate children of Haji. In regard to the first question, it is unnecessary to discuss the evidence in regard to fraud, undue influence, want of independent advice etc., as the question in our opinion is capable of being disposed of on a short point. It is admitted that the plaintiff 3 Ishtiaq Husan was a minor of the age of about 9 years at the date of the deed, and he was not represented as 1139 already stated by any legal guardian in this arrangement. The minor 's brother had no power to transfer any right or interest in the immovable property of the minor and such a transfer if made was void. (See Mulla 's Mahomedan Law, 13th Edition, page 303,section 364). Reference may be made to the decision of their Lord ships of the Privy Council in Imambandi vs Mut saddi(1). In that case the mother who was neither the legal guardian of her minor children nor had been appointed their guardian under the Guardian and Wards Act had purported to transfer the shares of her minor children in the property inherited by them from their deceased father. Mr. Ameer Ali who deliv ered the judgment of the Board observed at page 82 as follows : The question how far, or under what circumstances according to Mahomedan law,a mother 's dealings with her minor child 's property are binding on the infant has been frequently before the courts in India. The decisions, howev er, are by no means uniform, and betray two varying tenden cies: one set of decisions purports to give such dealings a qualified force; the other declares them wholly void and ineffective. In the former class of cases the main test for determining the validity of the particular transaction has been the benefit resulting from it to the minor; in the latter the admitted absence of authority or power on the part of the mother to alienate or incumber the minor 's property. " The test of benefit resulting from the transaction to the minor was negatived by the Privy Council and it was laid down that under the Mahomedan law a person who has charge of the person or property of a minor without being his legal guardian, and who may, there fore, be conveniently called a "defacto guardian," has no power to convey to another any right or interest in immovable property which the transferee can enforce against the infant. (1) (1918) 45 1. A. 73. 1140 Shri S.P. Sinha relied upon a decision of the Calcutta High Court reported in Mahomed Keramutullah Miah vs Keramutulla (1) where it was held that there was nothing in the doctrine of family arrangements opposed to the general principle that when it was sought to bind a minor by an agreement entered into on his behalf, it must be shown that the agreement was for the benefit of the minor;that if improper advantage had been taken of the minor 's position, a family arrangement could be set aside on the ground of undue influence or inequality of position or one or other of the grounds which would vitiate such arrangement in the case of adults; but where there was no defect of this nature, the settlement of a doubtful claim was of as much advantage to a minor as to an adult, and where a genuine dispute had been fairly settled the dispute could not be reopened solely on the ground that one of the parties to the family arrangement was a minor. This decision was reached on the 19th July, 1918, i.e., almost 5 months after the decision of their Lordships of the Privy Council, but it does not appear that the ruling was brought to the notice of the learned Judges of the Calcutta High Court. The test of the benefit resulting from the transaction to the minor which was negatived by their Lord ships of the Privy Council was applied by the learned Judges of the Calcutta High Court in order to determine whether the family arrangement which was the subject matter of the suit before them was binding on the minor. Shri S.P. Sinha next relied upon a decision of the Chief Court of Oudh, Ameer Hasan vs Md. Ejaz Husain(2). In that case an agreement to refer to arbitration was entered into by the mother for her minor children and an award was made by the arbitrators. The scheme of distribu tion of properties promulgated in the award was followed without any objection whatever for a long period extending over 14 years and proceedings were taken at the instance of the minors for recovery of possession by actual partition of their shares in the properties. The Court held (1) A.I.R. 1919 Cal. 218. (2) A.I.R. 1929 Oudh 134. 1141 that the reference to arbitration could not be held binding on the minors and the award could not be held to be an operative document, but if the scheme of distribution pro mulgated in the award was in no way perverse or unfair or influenced by any corruption or misconduct of the arbitra tors and had been followed without any objection whatever for a long period extending over 14 years, it would as well be recognised as a family settlement and the court would be extremely reluctant to disturb the arrangement arrived at so many years ago. This line of reasoning was deprecated by their Lordships of the Privy Council in Indian Law Reports 19 Lahore 313 at page 317 where their Lordships observed "it is, however, argued that the transaction should be upheld, because it was a family settlement. Their Lordships cannot assent to the proposition that a party can, by describing a contract as a family settlement, claim for it an exemption from the law governing the capacity of a person to make a valid contract. " We are therefore unable to accept this case as an authority for the proposition that a deed of settlement which is void by reason of the minor not having been properly represented in the transaction can be rehabil itated by the adoption of any such line of reasoning. If the deed of settlement was thus void it could not be void only qua the minor plaintiff 3 but would be void altogether qua all the parties including those who were sui juris. This position could not be and was not as a matter of fact contested before us. The contention of the defendants 1 to 5 in regard to the lawful wedlock between plaintiff 5 and Haji and the legitimacy of the plaintiffs 1 to 4 is equally untenable. The plaintiffs had no doubt to prove that the plaintiff 5 was the lawfully wedded wife and the plaintiffs 1 to 4 were the legitimate children of Haji. Both the Courts found that the factum of the marriage was not proved and the plaintiffs had therefore of necessity to fall back upon the presump tion of marriage arising in Mahomedan law. If that presump tion of marriage arose, there would be no difficulty in 1142 establishing the status of the plaintiffs 1 to 4 as the legitimate children of Haji because they were admittedly born by the plaintiff 5 to Haji. The presumption of marriage arises in Mahomedan law in the absence of direct proof from a prolonged and continual cohabitation as husband and wife. It will be apposite in this connection to refer to a passage from the judgment of their Lordships of the Privy Council in Khajah Hidayut Oollah vs Rai Jan Khanurn(1). Their Lord ships there quoted a passage from Macnaghten 's Principles of Mahomedan Law: "The Mahomedan lawyers carry this disinclination (that is against bastardizing) much further; they consider it legitimate of reasoning to infer the existence of marriage from the proof of cohabitation . . None but children who are in the strictest sense of the word spurious are considered incapable of inheriting the estate of their putative father. The evidence of persons who would, in other cases, be considered incompetent witnesses is admitted to prove wedlock, and, in short, where by any possibility a marriage may be presumed, the law will rather do so than bastardize the issue, and whether a marriage be simply voidable or void ab initio the offspring of it will be deemed legitimate . . . . . This I apprehend, with all due deference, is carrying the doctrine to an extent unwarranted by law; for where children are not born of women proved to be married to their father, or of female slaves to their fathers, some kind of evidence (however slight) is requisite to form a presumption of matrimony. . . . . . . The mere fact of casual concubinage is not sufficient to establish legiti macy ;and if there be proved to have existed any insurmount able obstacle to the marriage of their putative father with their mother, the children, though not born of common women, will be considered bastards to all intents and purposes. " Their Lordships deduced from this passage the principle that where a child had been both to a father, of a mother where there had been not a mere casual (1) (1844) 3 Moore 's indian Appeals 295 at p. 317. 1143 concubinage, but a more permanent connection, and where there was no insurmountable obstacle to such a marriage, then according to the Mahomedan law, the presumption was in favour of such marriage having taken place. The presumption in favour of a lawful marriage would thus arise where there was prolonged and continued cohabita tion as husband and wife and where there was no insurmount able obstacle to such a marriage, eg., prohibited relation ship between the parties, the woman being an undivorced wife of a husband who was alive and the like. Further illustra tions are to be found in the decisions of their Lordships of the Privy Council in 21 Indian Appeals 56 and 37 Indian Appeals 105 where it was laid down that the presumption does not apply if the conduct of the parties was incompatible with the existence of the relation of husband and wife nor did it apply if the woman was admittedly a prostitute before she was brought to the man 's house (see Mulla 's Mahomedan Law, p. 238, section 268). If therefore there was no insur mountable obstacle to such a marriage and the man and woman had cohabited with each other continuously and for a pro longed period the presumption of lawful marriage would arise and it would be sufficient to establish that there was a lawful marriage between them. The plaintiff 5 and Haji had been living as man and wife for 23 to 24 years openly and to the knowledge of all their relations and friends. The plaintiffs 1 to 4 were the children born to them. The plaintiff 5, Haji, and the children were all staying in the family house and all the relations including the defendant I himself treated the plaintiff 5 as a wife of Haji and the plaintiffs 1 to 4 as his children. There was thus sufficient evidence of habit and repute. Haji moreover purchased a house and got the sale deed executed in the names of the plaintiffs 1 and 2 who were described therein as his sons. The evidence which was led by the defendants 1 to 5 to the contrary was dis carded by the High Court as of a negative character 1144 and of no value. Even when the deed of settlement was exe cuted between the parties the plaintiff 5 was described as the widow and plaintiffs 1 to 4 were described as the chil dren of Haji. All these circumstances raised the presumption that the plaintiff 5 was the lawfully wedded wife and the plaintiffs 1 to 4 were the legitimate children of Haji. The result therefore is that both the contentions urged by the defendants 1 to 5 against the plaintiffs ' claim in suit fail and the decree passed in favour of the plaintiffs by the High Court must be affirmed. It was however pointed out by Shri S.P. Sinha that the High Court erred in awarding to the plaintiffs mesne profits even though there was no demand for the same in the plaint. The learned Solicitor General appearing for the plaintiffs conceded that there was no demand for mesne profits as such but urged that the claim for mesne profits would be included within the expression "awarding possession and occupation of the property aforesaid together with all the rights appertaining thereto. " We are afraid that the claim for mesne profits cannot be included within this expression and the High Court was in error in awarding to the plaintiffs mesne profits though they had not been claimed in the plaint. The provision in regard to the mesne profits will therefore have to be deleted from the decree. We dismiss the appeal of the defendants 1 to 5 and affirm the decree passed by the High Court in favour of the plain tiffs, deleting therefrom ' the provision in regard to mesne profits. The plaintiffs will of course be entitled to their costs throughout from the defendants 1 to 5. Appear dismissed. Agent for the appellants ': V.P.K. Nambiyar.

IN-Abs

Under Mahomedan law a person who has charge of the person or property of a minor without being his legal guardian, i.e., a de facto guardian, has no power to convey to another any right or interest in immoveable property which the transferee can enforce against the minor. The question whether the transaction has resulted in a benefit to the minor is immaterial in such cases. Where disputes arose relating to succession to the estate of a deceased Mahomedan between his 3 sons, one of whom was a minor, and other relations, and a deed of settle ment embodying an agreement in regard to the distribution of the properties belonging to the estate was executed by and between the parties, the eldest son acting as guardian for and on behalf of the minor son: Held, that the deed was not binding on the minor son as his brother was not his legal guardian; as the deed was void it cannot be held as valid merely because it embodied a family arrangement; and the deed was void not only qua the minor, but with regard to all the parties including those who were sui juris. Imambandi vs Mutsaddi [1918] 45 I.A.73 relied on Mohemed Keramatullah Miah vs Keramatulla (A.I.R. Ameer Hassan vs Md. Ejay Hussain (A.I.R. 1929 Oudh 134) commented upon. 1134 Under Mahomedan law if there was no insurmountable obstacle to a marriage and the man and woman had cohabited with each other continously and for a prolonged period/he presumption of lawful marriage would arise and it would be sufficient to establish a lawful marriage between them. Khaja Hidayut Oollah vs Rat Jan Khanam (1844, 3 Moo I.A. 295) referred to.

Appeal No. 328 of 1959. Appeal by special leave from the judgment and order dated 23rd February, 1956, of the Bombay High Court in Income tax Reference No. 34 of 1955. K. N. Rajagopala Ayyangar and D. Gupta, for the appellant. Rameshwar Nath, section N. Andley, J. B. Dadachanji and P. L. Vohra, for the respondent. December 1. The Judgment of the Court was delivered by HIDAYATULLAH, J. The Commissioner of Incometax has filed this appeal, with special leave, against the judgment and order of the High Court of Bombay, by which the High Court answered two questions referred to it in favour of the respondents, Messrs. Dwarkadas Khetan & Co., Bombay. These questions were: "(1) Whether the instrument of partnership dated 27 3 1946 created a deed of partnership? (2). If the answer to question No. 1 is in the affirmative, whether the fact that on 1 1 1946 there was no firm in existence would be fatal to the application for registration of the firm under Section 26A of the Indian Income tax Act or whether the firm could be registered with effect from 26 3 1946 if it is held that the firm was genuine?" Prior to January 1, 1945, there was a firm called Dwarkadas Khetan & Co. On that date, the firm ceased to exist, because the other partners had previously withdrawn, and it came to be the sole proprietary concern of Dwarkadas Khetan. On February 12, 1946, Dwarkadas Khetan obtained the selling agency of Seksaria Cotton Mills, Ltd. On March 27, 1946, he entered into a partnership, with three others 823 by an instrument of partnership executed that day. Those three others were Viswanath Purumul, Govindram Khetan and Kantilal Kasherdeo. Dwarkadas Khetan 's share in the partnership was 7 annas in the rupee, while the remaining 9 annas ' share was divided equally among the three others. Though Kantilal Kasherdeo was a minor, he was admitted as a full partner and not merely to the benefits of the partner ship, as required by section 30 of the Indian Partnership Act. To the instrument of partnership, Kantilal Kasherdeo was also a signatory, though immediately after his signature there was the signature of one Kasherdeo Rungta, the natural guardian of the minor. In the instrument, Kantilal Kasherdeo was described as a full partner entitled not only to a share in the profits but also liable to bear all the losses including loss of capital. It was also provided that all the four partners were to attend to the business, and if consent was needed, all the partners including the minor had to give their consent in writing. The minor was also entitled to manage the affairs of the firm, including inspection of the account books, and was given the right to vote, if a decision on votes had to be taken. In short, no distinction was made between the adult partners and the minor, and to all intents and purposes, the minor was a full partner, even though under the partnership law he could only be admitted to the benefits of the partnership and not as a partner. The deed of partnership was produced before the Registrar of Firms showing the names of the four partner,%. The Registrar of Firms granted a registration certificate, and in the certificate, Kantilal Kasherdeo was shown as a full partner and not as one entitled merely to the benefits of the,, partnership. Banks were also informed about the four partners, and. it does not appear that to them intimation was sent that one of the named partners was a minor. Though the partnership came into existence on March 27, 1946, the firm was stated to have started retrospectively from January 1, 1946. It may be pointed out that the firm has the calendar year as its account year, and the matter before us refers to the account year, 1946 corresponding to the assessment year, 1947 48. 824 For purposes of that year, registration of the firm was sought under section 26A of the Indian Income tax Act. The Income tax Officer refused to accord registration on the ground that a minor had been admitted as a partner contrary to law, and that the deed could not, therefore, be registered. The appeal to the Appellate Assistant Commissioner also failed, the Commissioner holding that registration could only be of a legal or valid document and not of a document which was invalid in law. An appeal was then taken to the Tribunal, and it was contended that the document must be construed as showing only that the minor was admitted not as a full partner but to the benefits of the partnership. The Accountant Member hold that the order of the Appellate Assistant Commissioner was correct, giving two reasons. The first was that the construction sought to be placed upon the document was not open, and the second, that since retrospective operation was given to the firm even though no firm existed from January 1, 1946, registration could not be granted. The Judicial Member differed from the Accountant Member, holding, as was contended, that the document must be construed as showing merely that the minor had been admitted to the benefits of the partnership. The appeal was then placed before the President, who agreed with the conclusion of the Accountant Member, with the result that the refusal to register the firm under section 26A by the authorities was upheld. Two questions were then posed for the decision of the High Court. The High Court differed from the Tribunal, and answered both the questions in favour of the assessee. In so far as the second question is concerned, the matter is now settled by the decision of this Court in B. C. Mitter & Sons vs Commissioner of Income tax (1). But, in our opinion, the decision of the High Court on the first question was not correct, and the correct answer does not leave the second quest ion open at all. There is a distinct cleavage of opinion among the High Courts on this point. The Bombay, Madras and (1) 825 Patna High Courts have held that where a minor is admitted as a full partner by adult partners, the document can be registered after interpreting it to mean that the minor has been admitted to the benefits of partnership and not as a full partner. The Calcutta, Allahabad and Punjab High Courts have taken a contrary view. The Bombay case is the one which is under appeal, and the Patna High Court followed that decision and the two earlier decisions of the Madras High Court. The Madras High Court decisions are of the same Divisional Bench, and were pronounced on the same day. The leading case in support of the respondents is the Madras decision reported in Jakka Devayya and Sons vs Commissioner of Income tax (1), and that case alone needs to be considered, because all the reasons on which the cases on this side have proceeded are given there. In that case, there were three partners, one of whom was a minor. They formed a Hindu undivided family; later, a deed of partnership was executed in which the minor was represented by his father in law. It was held that the fact that the minor was included as a partner did not make the partnership as between the two adult partners invalid, and that the minor must be deemed to have been admitted to the benefits of the partnership by the two adults. The learned Judges referred to the provision of section 2 (6 B) of the Income tax Act, where it is provided: " "Partner" includes any person who being a minor has been admitted to the benefits of partnership;", and observed that in view of this definition and the fact that a minor could be admitted to the benefits of partnership under section 30, the document was not invalid, but must be read as giving to the minor the rights laid down by the Partnership Act. They also observed that too rigid a construction need not be put upon the deed, and referred to Lindley on Partnership, 11th Edn., p. 87 and A. Khorasany vs C. Acha and Others (2). The other cases which we need not examine are Vincent and Others vs Commissioner of (1) (2) Ran. 826 Income tax and Sahai Brothers vs Commissioner of Income tax On the other hand, there is a decision of the Calcutta High Court reported in Hoosen Kassam Dada vs Commissioner of Income tax, Bengal (3), in which Costello and Panckridge, JJ. have held that under section 26A of the Income tax Act and the Rules, the Income tax Officer is only. empowered to register a partnership which is specified in the instrument of partnership and of which registration is asked for. The learned Judges, therefore, hold that it is not open to the Department to 'register partnership different from that which is formed by the instrument. In Hardutt Ray Gajadhar Ram vs Commissioner of Income tax(4) Malik, C. J. and Seth, J. hold that where a minor is admitted as a full partner with equal rights and obligations with adults, the deed is invalid. It is pointed out that the English law on the subject is different. In that case, however, there was one other ground for invalidating the deed, because the minor had been adopted into another family and his natural father who had signed as his guardian in the deed could not do so, as he had ceased to be the natural guardian. The decision, however, supports the case of the Commissioner. In Banka Mal Lajja Ram & Co. vs Commissioner of Income tax (5), it is held that a minor cannot be a partner, and that the partnership which admits a minor as full partner cannot be registered. It is true that in that case the High Court did not consider the question whether the partnership should have. been taken to be a valid partnership consisting of the adult partners, because no such question was referred. The decision, however, is against a claim for registration of such a document. In our opinion, the Calcutta vie ' is preferable to the view taken by the Madras High Court. The error in the Madras view is in using the definition to show that a deed including a minor as a competent partner (1)[1952] (3)[1937] (2)[1950] (4)[1950] (5)[1953] 827 is valid. What the definition does is to apply to a minor admitted to the benefits of partnership all the 2 provisions of the Income tax Act applicable to partners. The definition cannot be read to mean that in every case where a minor has, contrary to law, been admitted as a full partner, the deed is to be regarded as valid, because, under the law, a minor can be admitted to the benefits of partnership. The Rules which have been framed under section 26A quite clearly show that a minor who is admitted to the benefits of partnership need not sign the application for registration. The law requires all partners to sign the application, and if the definition were to be carried to the extreme, even a minor who is admitted to the benefits of partnership would be competent to sign such an application. The definition is designed to confer equal benefits upon the minor by treating him as a partner; but it does not render a minor a competent and full partner. For that purpose, the law of Partnership must be considered, apart from the definition in the Income tax Act. Section 30 of the Indian Partnership Act clearly lays down that a minor cannot become a partner, though with the consent of the adult partners, he may be admitted to the benefits of partnership. Any document which goes beyond this section cannot be regarded as valid for the purpose of registration. Registration can only be granted of a document between persons who are parties to it and on the covenants set out in it. If the Income tax Authorities register the partnership as between the adults only contrary to the terms of the document, in substance a new contract is made out. It is not open to the Income tax authorities to register a document which is different from the one actually executed and asked to be registered. In our opinion, the Madras view cannot be accepted. The judgment under appeal has followed the Madras view, and, in our opinion, it falls into the same error in which the Madras High Court had fallen earlier. The answer to the first question should, therefore, have been in favour ;of the Department. The answer given by the High Court is vacated, and 828 the question will now be answered in the negative. As already stated, there is no need to answer the second question, which does not arise. The appeal is allowed with costs here and in the High Court. Appeal allowed.

IN-Abs

One of the persons who entered into a partnership was a minor and in the instrument of partnership he was described as a full partner with equal rights and obligations with the other adult partners. The deed of partnership which was signed by the minor was produced before th e Registrar of Firms f or registration and he granted a certificate showing the minor as a full partner and not as one entitled merely to the benefits of the partnership. The Income tax Officer, however, refused to register the firm under section 26A of the Indian Income tax Act and his decision was upheld by the Income tax Authorities and the Income tax Appellate Tribunal. The High Court differed from the Tribunal and held that the firm should be registered. On appeal by the Commissioner of Income tax, Held, that the Rules framed under section 26A quite clearly show that a minor who is admitted to the benefits of partnership need not sign the application for registration. The law requires all partners to sign the application, and if the definition were to be carried to the extreme, even a minor who is admitted to the benefits of partnership would be competent to sign such an application. The definition is designed to confer equal benefits upon the minor by treating him as a partner; but it does not render a minor a competent and full partner. For that purpose, the law of Partnership must be considered, apart from the definition in the Income tax Act. Section 30 of the Indian Partnershi Act clearly lays down that a minor. cannot become a partner, I tough with the consent of the adult. .partners, he may be admitted to the benefits of partnership. . .Any document which goes beyond this section cannot be regarded as valid for the purpose of registration. Registration can only be granted of a document between persons who are parties to it and on the covenants set out in it. If the Income tax Authorities register the:partnership as between the adults only contrary to the terms of the document, in substance a new contract is made out. It is tot open to the Incometax Authorities to register a document which is different from the one actually executed and asked to be registered. Hoosen Kassam Dada vs Commissioner of Income tax, Bengal, [1937]5 I.T.R. 182, Hardutt Ray Gajadhar Ram vs Commissioner of 104 822 Income tax, , Banka Mal Lajja Ram and Co. vs Commissioner of Income tax, , approved. Jakka Devayya and Sons vs Commissioner of Income tax, [1952) , disapproved.

Appeal No. 328 of 1959. Appeal by special leave from the judgment and order dated 23rd February, 1956, of the Bombay High Court in Income tax Reference No. 34 of 1955. K. N. Rajagopala Ayyangar and D. Gupta, for the appellant. Rameshwar Nath, section N. Andley, J. B. Dadachanji and P. L. Vohra, for the respondent. December 1. The Judgment of the Court was delivered by HIDAYATULLAH, J. The Commissioner of Incometax has filed this appeal, with special leave, against the judgment and order of the High Court of Bombay, by which the High Court answered two questions referred to it in favour of the respondents, Messrs. Dwarkadas Khetan & Co., Bombay. These questions were: "(1) Whether the instrument of partnership dated 27 3 1946 created a deed of partnership? (2). If the answer to question No. 1 is in the affirmative, whether the fact that on 1 1 1946 there was no firm in existence would be fatal to the application for registration of the firm under Section 26A of the Indian Income tax Act or whether the firm could be registered with effect from 26 3 1946 if it is held that the firm was genuine?" Prior to January 1, 1945, there was a firm called Dwarkadas Khetan & Co. On that date, the firm ceased to exist, because the other partners had previously withdrawn, and it came to be the sole proprietary concern of Dwarkadas Khetan. On February 12, 1946, Dwarkadas Khetan obtained the selling agency of Seksaria Cotton Mills, Ltd. On March 27, 1946, he entered into a partnership, with three others 823 by an instrument of partnership executed that day. Those three others were Viswanath Purumul, Govindram Khetan and Kantilal Kasherdeo. Dwarkadas Khetan 's share in the partnership was 7 annas in the rupee, while the remaining 9 annas ' share was divided equally among the three others. Though Kantilal Kasherdeo was a minor, he was admitted as a full partner and not merely to the benefits of the partner ship, as required by section 30 of the Indian Partnership Act. To the instrument of partnership, Kantilal Kasherdeo was also a signatory, though immediately after his signature there was the signature of one Kasherdeo Rungta, the natural guardian of the minor. In the instrument, Kantilal Kasherdeo was described as a full partner entitled not only to a share in the profits but also liable to bear all the losses including loss of capital. It was also provided that all the four partners were to attend to the business, and if consent was needed, all the partners including the minor had to give their consent in writing. The minor was also entitled to manage the affairs of the firm, including inspection of the account books, and was given the right to vote, if a decision on votes had to be taken. In short, no distinction was made between the adult partners and the minor, and to all intents and purposes, the minor was a full partner, even though under the partnership law he could only be admitted to the benefits of the partnership and not as a partner. The deed of partnership was produced before the Registrar of Firms showing the names of the four partner,%. The Registrar of Firms granted a registration certificate, and in the certificate, Kantilal Kasherdeo was shown as a full partner and not as one entitled merely to the benefits of the,, partnership. Banks were also informed about the four partners, and. it does not appear that to them intimation was sent that one of the named partners was a minor. Though the partnership came into existence on March 27, 1946, the firm was stated to have started retrospectively from January 1, 1946. It may be pointed out that the firm has the calendar year as its account year, and the matter before us refers to the account year, 1946 corresponding to the assessment year, 1947 48. 824 For purposes of that year, registration of the firm was sought under section 26A of the Indian Income tax Act. The Income tax Officer refused to accord registration on the ground that a minor had been admitted as a partner contrary to law, and that the deed could not, therefore, be registered. The appeal to the Appellate Assistant Commissioner also failed, the Commissioner holding that registration could only be of a legal or valid document and not of a document which was invalid in law. An appeal was then taken to the Tribunal, and it was contended that the document must be construed as showing only that the minor was admitted not as a full partner but to the benefits of the partnership. The Accountant Member hold that the order of the Appellate Assistant Commissioner was correct, giving two reasons. The first was that the construction sought to be placed upon the document was not open, and the second, that since retrospective operation was given to the firm even though no firm existed from January 1, 1946, registration could not be granted. The Judicial Member differed from the Accountant Member, holding, as was contended, that the document must be construed as showing merely that the minor had been admitted to the benefits of the partnership. The appeal was then placed before the President, who agreed with the conclusion of the Accountant Member, with the result that the refusal to register the firm under section 26A by the authorities was upheld. Two questions were then posed for the decision of the High Court. The High Court differed from the Tribunal, and answered both the questions in favour of the assessee. In so far as the second question is concerned, the matter is now settled by the decision of this Court in B. C. Mitter & Sons vs Commissioner of Income tax (1). But, in our opinion, the decision of the High Court on the first question was not correct, and the correct answer does not leave the second quest ion open at all. There is a distinct cleavage of opinion among the High Courts on this point. The Bombay, Madras and (1) 825 Patna High Courts have held that where a minor is admitted as a full partner by adult partners, the document can be registered after interpreting it to mean that the minor has been admitted to the benefits of partnership and not as a full partner. The Calcutta, Allahabad and Punjab High Courts have taken a contrary view. The Bombay case is the one which is under appeal, and the Patna High Court followed that decision and the two earlier decisions of the Madras High Court. The Madras High Court decisions are of the same Divisional Bench, and were pronounced on the same day. The leading case in support of the respondents is the Madras decision reported in Jakka Devayya and Sons vs Commissioner of Income tax (1), and that case alone needs to be considered, because all the reasons on which the cases on this side have proceeded are given there. In that case, there were three partners, one of whom was a minor. They formed a Hindu undivided family; later, a deed of partnership was executed in which the minor was represented by his father in law. It was held that the fact that the minor was included as a partner did not make the partnership as between the two adult partners invalid, and that the minor must be deemed to have been admitted to the benefits of the partnership by the two adults. The learned Judges referred to the provision of section 2 (6 B) of the Income tax Act, where it is provided: " "Partner" includes any person who being a minor has been admitted to the benefits of partnership;", and observed that in view of this definition and the fact that a minor could be admitted to the benefits of partnership under section 30, the document was not invalid, but must be read as giving to the minor the rights laid down by the Partnership Act. They also observed that too rigid a construction need not be put upon the deed, and referred to Lindley on Partnership, 11th Edn., p. 87 and A. Khorasany vs C. Acha and Others (2). The other cases which we need not examine are Vincent and Others vs Commissioner of (1) (2) Ran. 826 Income tax and Sahai Brothers vs Commissioner of Income tax On the other hand, there is a decision of the Calcutta High Court reported in Hoosen Kassam Dada vs Commissioner of Income tax, Bengal (3), in which Costello and Panckridge, JJ. have held that under section 26A of the Income tax Act and the Rules, the Income tax Officer is only. empowered to register a partnership which is specified in the instrument of partnership and of which registration is asked for. The learned Judges, therefore, hold that it is not open to the Department to 'register partnership different from that which is formed by the instrument. In Hardutt Ray Gajadhar Ram vs Commissioner of Income tax(4) Malik, C. J. and Seth, J. hold that where a minor is admitted as a full partner with equal rights and obligations with adults, the deed is invalid. It is pointed out that the English law on the subject is different. In that case, however, there was one other ground for invalidating the deed, because the minor had been adopted into another family and his natural father who had signed as his guardian in the deed could not do so, as he had ceased to be the natural guardian. The decision, however, supports the case of the Commissioner. In Banka Mal Lajja Ram & Co. vs Commissioner of Income tax (5), it is held that a minor cannot be a partner, and that the partnership which admits a minor as full partner cannot be registered. It is true that in that case the High Court did not consider the question whether the partnership should have. been taken to be a valid partnership consisting of the adult partners, because no such question was referred. The decision, however, is against a claim for registration of such a document. In our opinion, the Calcutta vie ' is preferable to the view taken by the Madras High Court. The error in the Madras view is in using the definition to show that a deed including a minor as a competent partner (1)[1952] (3)[1937] (2)[1950] (4)[1950] (5)[1953] 827 is valid. What the definition does is to apply to a minor admitted to the benefits of partnership all the 2 provisions of the Income tax Act applicable to partners. The definition cannot be read to mean that in every case where a minor has, contrary to law, been admitted as a full partner, the deed is to be regarded as valid, because, under the law, a minor can be admitted to the benefits of partnership. The Rules which have been framed under section 26A quite clearly show that a minor who is admitted to the benefits of partnership need not sign the application for registration. The law requires all partners to sign the application, and if the definition were to be carried to the extreme, even a minor who is admitted to the benefits of partnership would be competent to sign such an application. The definition is designed to confer equal benefits upon the minor by treating him as a partner; but it does not render a minor a competent and full partner. For that purpose, the law of Partnership must be considered, apart from the definition in the Income tax Act. Section 30 of the Indian Partnership Act clearly lays down that a minor cannot become a partner, though with the consent of the adult partners, he may be admitted to the benefits of partnership. Any document which goes beyond this section cannot be regarded as valid for the purpose of registration. Registration can only be granted of a document between persons who are parties to it and on the covenants set out in it. If the Income tax Authorities register the partnership as between the adults only contrary to the terms of the document, in substance a new contract is made out. It is not open to the Income tax authorities to register a document which is different from the one actually executed and asked to be registered. In our opinion, the Madras view cannot be accepted. The judgment under appeal has followed the Madras view, and, in our opinion, it falls into the same error in which the Madras High Court had fallen earlier. The answer to the first question should, therefore, have been in favour ;of the Department. The answer given by the High Court is vacated, and 828 the question will now be answered in the negative. As already stated, there is no need to answer the second question, which does not arise. The appeal is allowed with costs here and in the High Court. Appeal allowed.

IN-Abs

One of the persons who entered into a partnership was a minor and in the instrument of partnership he was described as a full partner with equal rights and obligations with the other adult partners. The deed of partnership which was signed by the minor was produced before th e Registrar of Firms f or registration and he granted a certificate showing the minor as a full partner and not as one entitled merely to the benefits of the partnership. The Income tax Officer, however, refused to register the firm under section 26A of the Indian Income tax Act and his decision was upheld by the Income tax Authorities and the Income tax Appellate Tribunal. The High Court differed from the Tribunal and held that the firm should be registered. On appeal by the Commissioner of Income tax, Held, that the Rules framed under section 26A quite clearly show that a minor who is admitted to the benefits of partnership need not sign the application for registration. The law requires all partners to sign the application, and if the definition were to be carried to the extreme, even a minor who is admitted to the benefits of partnership would be competent to sign such an application. The definition is designed to confer equal benefits upon the minor by treating him as a partner; but it does not render a minor a competent and full partner. For that purpose, the law of Partnership must be considered, apart from the definition in the Income tax Act. Section 30 of the Indian Partnershi Act clearly lays down that a minor. cannot become a partner, I tough with the consent of the adult. .partners, he may be admitted to the benefits of partnership. . .Any document which goes beyond this section cannot be regarded as valid for the purpose of registration. Registration can only be granted of a document between persons who are parties to it and on the covenants set out in it. If the Income tax Authorities register the:partnership as between the adults only contrary to the terms of the document, in substance a new contract is made out. It is tot open to the Incometax Authorities to register a document which is different from the one actually executed and asked to be registered. Hoosen Kassam Dada vs Commissioner of Income tax, Bengal, [1937]5 I.T.R. 182, Hardutt Ray Gajadhar Ram vs Commissioner of 104 822 Income tax, , Banka Mal Lajja Ram and Co. vs Commissioner of Income tax, , approved. Jakka Devayya and Sons vs Commissioner of Income tax, [1952) , disapproved.

Appeal No. 222 of 1960. Appeal from the judgment and order dated December 15, 1959, of the Punjab High Court (Circuit Bench), Delhi, in R. F. Appeal No. 77 D of 1954. G. section Pathak and B. C. Misra, for the appellant. Mukat Behari Lal Bhargava and J. P. Goyal, for respondents Nos. 1 to 7. 1960. December 5. The Judgment of the Court was delivered by GAJENDRAGADKAR, J. The short question of law( which arises for decision in, the present appeal by special leave is whether the appeal preferred against the appellant and respondents 8 and 9 in the High Court of Punjab by respondents 2 to 7 'was competent in law or not. This question arises unDer somewhat unusual circumstances. It appears that an agreement of sale of one third of the one fourth share in the property covered by the document was entered into between Gokal Dhish Bhargava and the appellant Jagat Dhish Bhargava. Gokal Dhish Bhargava sued the appel lant and pro forms respondents 8 and 9 for specific performance of the said agreement of sale in the Court of the Senior Civil Judge, New Delhi (Civil Suit No. 684/128 of 1949/50). This suit was dismissed on 920 March 12, 1954. , Pending decision in the trial court Gokal Dhish Bhargava (fled and his son Jawahar Lal Bhargava, respondent 1 and Chunni Lal Bhargava were brought on the record as legal representatives. After the suit was dismissed and before the appeal in question was preferred in the High Court Chunni Lal Bhargava died; thereupon respondents 2 to 7, as his legal representatives, joined respondent 1 in preferring an appeal against the said decree in the High Court of Punjab. The memo of appeal along with the judgment dismissing the suit and the taxed bill of costs endorsed on the back of the last page of the judgment was filed in the High Court on July 29, 1954. It is the competence of this appeal that was questioned before the High Court and is in dispute before us in the present appeal. The record shows that on March 24,1954, an application was made by respondents 2 to 7 (who will be called the respondents hereafter) for a certified copy of the judgment and decree passed in the said suit for specific performance. A certified copy of the judgment and the bill of costs was supplied to them but the decree had not been drawn up and no copy of the decree was therefore supplied to them. In the result the appeal was filed without the certified copy of the decree and only with the certified copy of the judgment and the bill of costs. On August 2, 1954, the Assistant Registrar of the High Court returned the memo of appeal filed by the respondents to their counsel and pointed out to him that ' since no copy of the decree had been filed the presentation of the appeal was defective and the defect needed to be rectified. Thereafter, on August 16, 1954, the respondents ' counsel refiled the appeal with an endorsement that a memo of costs alone had been prepared by the trial court and no decree had been drawn up, and so the appeal should be held to be properly filed. Apparently this explanation was treated ' as satisfactory by the office of the High Court and the appeal was registered as No. 77 D of 1954. In due course the appeal was placed for preliminary hearing under 0. 41, r. 11 of the Code of Civil 921 Procedure before Dulat, J. who admitted it on August 30, 1954. Notice of the appeal was accordingly served on the appellant and the pro forma respondents. Ultimately when the appeal became ready for hearing it was put up on the Board of the Circuit Bench of the High Court to be heard on December 26, 1958. Meanwhile on December 23., 1958, the appellant served a notice on the respondents ' counsel intimating to him that he proposed to raise a preliminary objection against the competence of the appeal on the ground that the decree under appeal had not been filed as required under 0. 41, r. 1 along with the memo of appeal and the certified copy of the judgment. Next day, that is to say on December 24, 1958, the respondents moved the trial Court for drawing up of the decree, but since the record had in the meantime been sent by the trial Court to the High Court no decree could be drawn up by the trial Court, and so the motion became infructuous. The appeal, however, did not reach hearing on December 26, 1958. On December 29, 1958, the respondents moved the Court that the appeal should be declared to be maintainable as the memo of costs which alone had been prepared by the trial Court read along with the concluding paragraph of the judgment may be held to satisfy the requirements of the decree; in the alternative they prayed that the record of the suit in the trial Court should be sent for to enable them to get a decree prepared with a view to file the same in the High Court along with their appeal. Bishan Narain, J., before whom this application was taken out for orders, directed that it may be heard by the Bench which would hear the appeal. Eventually the appeal came on for hearing before Falshaw and Chopra, JJ. on De ember 8, 1959. At the said hearing the appellant raised a preliminary objection that the appeal was not competent having regard to the mandatory provisions of 0. 41, r. 1, and urged that the appeal should be dismissed as incompetent. This preliminary objection was, however, not upheld by the High Court, and it was held that "the proper course to follow was to allow the respondents a 922 month 's time for the purpose of getting a decree drawn up in the proper form by the lower Court and obtaining a copy thereof ". Accordingly the record which had in the meanwhile been received by the High Court after the appeal was admitted under 0. 41, r. 11 was ordered to be sent back to the lower Court without delay. It is against this order which was passed by the High Court on December 15, 1959, that the present appeal by special leave has been filed. On behalf of the appellant Mr. Pathak contends that the appeal filed before the High Court was plainly and manifestly incompetent, and so the High Court was in error in not dismissing it on that ground. The position of law under 0. 41, r. 1 is absolutely clear. Under the said rule every appeal has to be preferred in the form of a memorandum signed by the appellant or his pleader and presented to the Court or to such officer as it appoints in that behalf, and has to be accompanied by a copy of the decree appealed from, and of the judgment on which it is founded. Rule 1 empowers the appellate Court to dispense with the filing of the judgment but there is no jurisdiction in the appellate Court to dispense with the filing of the decree. Where the decree consists of different distinct and severable directions enforceable against the same or several defendants the Court may permit the filing of such portions of the decree as are the subject matter of the appeal but that is a problem with which we are not concerned in the present case. In law the appeal is not so much against the judgment as against the decree; that is why Article 156 of the Limitation Act prescribes a period of 90 days for such appeals and provides that the period commences to run from the date of the decree under appeal. Therefore there is no doubt that the requirements that the decree should be filed along with the memorandum of appeal is mandatory, and in the absence of the decree the filing of the appeal would be incomplete, defective and incompetent. That, however, cannot finally dispose of the point raised by the appellant before us. In the present case the respondents had applied for a certified copy of 923 the judgment as well as the decree in the trial Court on March 24, 1954, and they were not given a copy of the decree for the simple reason that no decree was drawn up; what they were given was a copy of the judgment and taxed bill of costs endorsed on the back of the last page of the judgment. These documents they filed along with their memo of appeal; but that would not affect the mandatory requirement of 0. 41, r. 1. In considering the effect of this defect in the presentation of the appeal we must bear in mind the rules of procedure in regard to the drawing up of the decree. The position in that behalf is absolutely clear. Section 33 of the Code of Civil Procedure requires that the Court, after the case has been heard, shall pronounce judgment, and on such judgment a decree shall follow. Order 20, r. 3 provides, inter alia, that the judgment shall be dated and signed by the judge in the open Court at the time of pronouncing it, and under r. 4, sub r. (2) a judgment has to contain a concise statement of the case, the points for determination, the decision thereon and the reasons for such decision. Rule 6 of the same Order prescribes the con. tents of the decree. It provides that the decree shall agree with the judgment and shall contain the particulars therein specified. Under r. 7 it is provided that the decree shall bear the date, the day on which the judgment was pronounced, and it directs that when the judge has satisfied himself that the decree has been drawn up in accordance with the judgment he shall sign the decree. It is, therefore, clear that the drawing up of the decree in the present case was the function and the duty of the office, and it was obligatory on the judge to examine the decree when drawn up, and if satisfied that it has been properly drawn up to sign it. Except in places where the dual system prevails the litigant or his lawyer ' does not play any material or important part in the drawing up of the decree. In fact the process of drawing up of the ' decree is beyond the litigant 's control. Therefore, there is no doubt whatever that in failing to draw up a decree in the present suit the office of the trial Court was negligent in the discharge of its duties, and 924 the said negligence was not even noticed by the learned trial judge himself. Unfortunately, when the appeal was presented in the High Court, even the office of the High Court was not as careful in examining the appeal as it should ,,have been, and as we have already indicated the appeal passed through the stage of admission under 0. 41, r. 11 without the defect in the appeal being brought to the notice of the learned judge who admitted it. Thus it is quite clear on the record that the respondents had applied for a certified copy of the judgment and the decree, and when they were given only a certified copy of the judgment and the bill of costs they filed the same along with the memo of appeal in the bona fide belief that the said documents would meet the requirements of 0. 41, r. 1. It is true that before the appeal came on for actual hearing before the High Court the appellant gave notice to the respondents about his intention to raise a preliminary objection that the appeal had not been properly filed; but, as we have already pointed out, the attempt made by the respondents to move the trial Court to draw up the decree proved infructuous and ultimately the High Court thought that in.fairness to the respondents they ought to be allowed time to obtain the certified copy of the decree and file it before it; and so the High Court passed the order under appeal. The appellant contends that this order is manifestly erroneous in law; according to him the only order which could and should have been passed was to dismiss the appeal as incompetent under 0. 41, r.1. The problem thus posed by the appellant for our decision has now become academic because subsequent to the decision of the High Court under appeal the respondents have in fact obtained Po certified copy of the decree on December 23, 1959, and have filed it in the High Court on the same day. This fact immediately raises the question as to whether the appeal which has admittedly been completely and properly filed on December 23, 1959, was in time or not. If it appears that on the date when the decree was thus filed the 925 presentation of the appeal was in time then the objection raised by the appellant against the propriety or the correctness of the High Court 's order under appeal would be purely technical and academic. The answer to the question as to whether the presentation of the appeal on December 23, 1959, is in time or not would depend upon the construction of section 12, sub section (2) of the Limitation Act. We have already noticed that the period prescribed for filing the present appeal is 90 days from the date of the decree. Section 12, sub section (2) provides, inter alia, that in computing the period of limitation "the time requisite for obtaining a copy of the decree shall be excluded". What then is the time which can be legitimately deemed to have been taken for obtaining the copy of the decree in the present case? Where a decree is not drawn up immediately or soon after a judgment is pronounced, two types of cases may arise. A litigant feeling aggrieved by the decision may apply for the certified copy of the judgment and decree before the decree is drawn up, or he may apply for the said decree after it is drawn up. In the former case, where the litigant has done all that he could and has made a proper application for obtaining the necessary copies, the time requisite for obtaining the copies must necessarily include not only the time taken for the actual supply of the certified copy of the decree but also for the drawing up of the decree itself. In other words, the time taken by the office or the Court in drawing up a decree after a litigant has applied for its certified copy on judgment being pronounced, would be treated as a part of the time taken for obtaining the certified copy of the said decree. Mr. Pathak has fairly conceded that on this point there is a consensus of judicial opinion, and in view of the formidable and imposing array of authorities against him he did not raise any contention about the validity of the view take in all those cases. (Vide: Tarabati Koer vs Lala Jagdeo Narain (1); Bani Madhub Mitter vs Mathungini Dassi & Ors. (Full Bench) (2);Gabriel Christian vs (1) (2) Cal 104. 926 Chandra Mohan Missir (Full Bench) (1); Jayashankar Mulshankar Mehta vs Mayabhai Lalbhai Shah (Full Bench) (2); Gokul Prasad vs Kunwar Bahadur & Ors.(3); and Umda vs Rupchand & Ors. (Nagpur Full Bench) (1)). There is, however, a sharp difference of opinion in regard to cases where an application for a certified copy of the decree is made after the said decree is drawn up. In dealing with such cases Courts have differed as to what would be the period requisite for obtaining the certified copy of the decree. The Bombay, Calcutta and Patna High Courts, appear to have held that the period taken in drawing up of the decree would be part of the requisite period, while other High Courts have taken a contrary view. It is significant that though the High Courts have thus differed on this point, in every case an attempt is judicially made to do justice between the parties. With that aspect of the problem, however, we are not concerned in the present appeal. The position, therefore, is that when the certified copy of the decree was filed by the respondents in the High Court on December 23, 1969, the whole of the period between the date of the application for the certified copy and the date when the decree was actually signed would have to be excluded under section 12, sub section Inevitably the presentation of the appeal on December 23, 1959 would be in time. It is true that more than five years have thus elapsed after the pronouncement of the judgment but for this long delay and lapse of time the respondents are not much to blame. The failure of the trial Court to draw up the decree as well as the failure of the relevant department in the High Court to examine the defect in the presentation of the appeal at the initial stage have contributed substantially to the present unfortunate position. In such a case there can be no doubt that the litigant deserves to be protected against the default committed or negligence shown by the Court or its officers in the discharge of their duties. As observed by Cairnes, L. C. in Rodger vs Comptoir (1) Pat. (2) (1951) 54 B.L.R. II. (3) Lucknow 250. (4) 927 d 'Escompte de Paris (1) as early as 1871 "one of the first and highest duties of all Courts is to take care that the act of the Court does no injury to any of the suitors"; that is why we think that in view of the subsequent event which has happened in this case, namely, the filing of the certified copy of the decree in the, High Court, the question raised by the appellant has( become technical and academic. Faced with this position Mr. Pathak attempted to argue that the application made by the respondents on March 24, 1954, was not really an application for a certified copy of the decree; he contendea that it was an application for the certified copy of the judgment and the bill of costs. This argument is wholly untenable. The words used in the application clearly show that it was an application for a certified copy of the judgment as well as the decretal order, and as subsequent events have shown, a certified copy of the decree was ultimately supplied to the respondents in pursuance of this application. Then it was argued that the respondents should have moved the trial Court for the drawing up of a decree as soon as they found that no decree a been drawn up. It may be assumed that the respondents might have adopted this course; but where the dual system does not exist it would be idle to contend that it is a part of the duty of a litigant to remind the Court or its office about its obligation to draw up a decree after the judgment is pronounced in any suit. It may be that decrees when drawn up are shown to the lawyers of the parties; but essentially drawing up of the decree is the function of the Court and its office, and it would be unreasonable to penalise a party for the default of the office by suggesting that it was necessary that the party should have moved the Court for the drawing up of the decree. Therefore, we are not satisfied that tie appellant is justified in attributing to the respondents any default for which the penalty of dismissing their appeal can be legitimately imposed on them. The result is that the appeal preferred by the respondents on December 23, (1) (1871) L.R. 3 P.C. 465, 475. 928 1959, is proper and in time and it can now be dealt with in accordance with law. It is true that in the circumstances over which the respondents had no control the appeal in question has already been admitted under 0. 41, r. 11, and as a result of the decision under appeal it may not have to go through that process again. Dulat, J. who heard the appeal for admission was satisfied that it deserved to be admitted and we do not think it necessary to require that the present appeal should go through the formality of the procedure prescribed by 0. 41, r. 11 once again. This posi tion is no doubt, unusual, but in the circumstances of the case it is impossible to say that the order passed by the High Court is not fair and just. Let us then consider the technical point raised by the appellant challenging the validity or the propriety of the order under appeal. The argument is that 0. 41, r. 1 is mandatory, and as soon as it is shown that an appeal has been filed with a memorandum of appeal accompanied only with a certified copy of the judgment the appeal must be dismissed as being incompetent, the relevant provisions of 0. 41 with regard to the filing of the decree being of a mandatory character. It would be difficult to accede to the proposition thus advanced in a broad and general form. If at the time when the appeal is preferred a decree has already been drawn up by the trial Court and the appellant has not applied for it in time it would be a clear case where the appeal would be incompetent and a penalty of dismissal would be justified. The position would, however, be substantially different if at the time when the appeal is presented before the appellate Court a decree in fact had not been drawn up by the trial Court; in such a case if an application has been made by the appellant for, a certified copy of the decree, then all that can be said against the appeal preferred by him is that the appeal is premature since a decree has not been drawn up, and it is the decree against which an appeal lies. In such a case, if the office of the High Court examines the appeal carefully and discovery the defect the appeal may be returned to the appellant for presentation 929 with the certified copy of the decree after it is obtained. In the case like the present, if the appeal has passed through the stage of admission through oversight of the office, then the only fair and rational course to adopt would be to adjourn the hearing of the appeal with a direction that the appellant should produce the certified copy of the decree as soon as it is supplied to him. In such a case it would be open to the High Court, and we apprehend it would be its duty, to direct the subordinate Court to draw up the decree forthwith without any delay. On the other hand, if a decree has been drawn up and an application for its certified copy has been made by the appellant after the decree was drawn up, the office of the appellate Court should return the appeal to the appellant as defective, and when the decree is filed by him the question of limitation may be examined on the merits. It is obvious that the complications in the present case have arisen as a result of two factors; the failure of the trial Court to draw up the decree as required by the Code, and the failure of the office in the High Court to notice the defect and to take appropriate action at the initial stage before the appeal was placed for admission under 0. 41, r. 11. It would thus be clear that no hard and fast 'rule of general applicability can be laid down for dealing with appeals defectively filed under 0. 41, r. 1. Appropriate orders will have to be passed having regard to the circumstances of each case, but the most important step to take in cases of defective presentation of appeals is that they should be carefully scrutinized at the initial stage soon after they are filed and the appellant required to remedy the defects. Therefore, in our opinion, the appellant is not justified in challenging the propriety or the validity of the order passed by the High Court because in the circumstances to which we have already adverted the said order is obviously fair and just. The High Court realised that it would be very unfair to penalise the party for the mistake committed by the trial Court and its own office, and so it has given time to the respondents to 930 apply for a certified copy of the decree and then proceed with the appeal. In this connection our attention has been drawn to the fact that in the Punjab High Court two conflicting and inconsistent views appear to have been taken in its reported decisions. Dealing with appeals filed with out a certified copy of the decree some decisions have dismissed the appeals as defective, and have given effect to the mandatory words in 0. 41, r. 1, without presumably examining the question as to whether the failure of the trial Court to draw up the decree would have any bearing or relevance on the point or not. (Vide: Gela Ram vs Ganga Ram(1); Municipal Committee, Chiniot vs Bashi Ram (2); Mubarak Ali Shah vs Secretary of State (3); Nur Din vs Secretary of State (4) Hakam Beg vs Rahim Shah (5); Fazal Karim vs Des Raj (6); and Banwari Lal Varma vs Amrit Sagar Gupta (7). On the other hand it has in some cases been held that it would be fair and just that the hearing of the appeal should be adjourned to enable the appellant to obtain a certified copy of the decree and produce it before the appellate Court (Vide: Manoharlal vs Nanak Chand (8); Mt. Jeewani vs Mt. Misri (9); and, Sher Muhammad vs Muhammad Khan (10). It would obviously have been better if this conflict of judicial opinion in the reported decisions of the High Court had been resolved by a Full Bench of the said High Court but that does not appear to have been done so far. However, as we have indicated, the question about the competence of the appeal has to be judged in each case on its own facts and appropriate orders must be passed at the initial stage soon after the appeal is presented in the appellate Court. If any disputed question of limitation arises it may have to go before the Court for judicial decision. In the result the order passed by the High Court is right. Having regard to the fact that the decree (1) A.I.R. (1920) 1 Lah. 223 (3) A.I.R. (1925) Lah. 438. (5) A I.R. (7) A.I.R. (1940) East Punj. (9) A.I.R. (1919) Lah. (2) A.I.R (1922) Lah. (4) A. I.R. (6) (8) A.I.R. (1919) Lah. (10) A.I.R. (1924) Lah. 352. 931 under appeal has already been filed by the respondents before the High Court on December 23, 1959, the High Court should now proceed to hear the appeal on the merits and deal with it in accordance with law. In the circumstances of this case we make no order as to costs. Appeal dismissed.

IN-Abs

The respondents filed a suit for specific performance against the appellant which was dismissed on March 12, 1954. On March 24 the respondents made an application for a certified copy of the judgment and decree. The decree was not drawn up and the respondents were supplied a certified copy of the judgment and the memo of costs. The respondents filed an appeal before the High Court without the certified copy of the decree and only with the certified copy of the judgment and the memo of costs. The appeal was admitted under 0. 41, r. 11 Code of Civil Procedure on August 30, 1954. On December 23, 1958, the appellant served a notice on the respondents that he would raise a preliminary objection at the hearing that the appeal was incompetent as a certified copy of the decree was not filed as required by 0. 41, r. 1. On December 24, 1958, the respondents moved the trial Court for drawing up of the decree, but since the record was in the High Court this could not be done. At the hearing of the appeal, the appellant raised the preliminary objection, but the High Court passed an order on December 15, 1959, allowing the respondents one month 's time for getting a decree drawn up and obtaining. a copy and directed the record to be sent to the trial Court. Against this order the appellant preferred an appeal to the Supreme Court contending that the High Court was bound to dismiss the appeal as it was manifestly incompetent under 0. 41, r. 1. Subsequently, on December 23, 1959, the respondents obtained a certified copy of the decree and filed it before the High Court the same day. The appellant contended that the appeal was to be deemed to be filed on this date and was time barred. Held, that in the circumstances of this case the order passed by the High Court was right. ' There was no doubt that 0. 41, r. 1 was mandatory and in the absence of or the decree the filing of the appeal was incomplete, defective and incompetent. The office of the trial Court was negligent in not drawing up a decree and the office of the High Court was also not as careful as it should have been in examining the appeal and these have contributed substantially to the unfortunate position. In such a case, the respondents deserved to be protected. Besides the, 919 question had become academic and technical in view of subse quent events. The certified copy of the decree was filed on December 23, 1959, and even if the appeal was considered to have been filed on that date, it was within time. Under section 12(2) of the Limitation Act the respondents could treat the time taken in the drawing up of the decree after the application for a certified copy thereof had been made as part of the time taken in obtaining the certified copy of the decree. Tarabati Koer vs Lala jagdeo Narain, , Bani Madhub Mitter vs Matungini Desai, Cal. 104 (F.B.), Gabriel Christian vs 'Chandra Mohan Missir, Pat. 284(F.B.), Jayashankar Mulshankar Mehta vs Mayabhai Lalbhai Shah, , Gokul Prasad vs Kunwar Bahadur, Luck. 250 and Umda vs Rupchand, , referred to. Rodger vs Comptoir d 'Escompte de Paris, (1871) L.R. 3 P.C. 465, relied on.

Appeal No. 222 of 1960. Appeal from the judgment and order dated December 15, 1959, of the Punjab High Court (Circuit Bench), Delhi, in R. F. Appeal No. 77 D of 1954. G. section Pathak and B. C. Misra, for the appellant. Mukat Behari Lal Bhargava and J. P. Goyal, for respondents Nos. 1 to 7. 1960. December 5. The Judgment of the Court was delivered by GAJENDRAGADKAR, J. The short question of law( which arises for decision in, the present appeal by special leave is whether the appeal preferred against the appellant and respondents 8 and 9 in the High Court of Punjab by respondents 2 to 7 'was competent in law or not. This question arises unDer somewhat unusual circumstances. It appears that an agreement of sale of one third of the one fourth share in the property covered by the document was entered into between Gokal Dhish Bhargava and the appellant Jagat Dhish Bhargava. Gokal Dhish Bhargava sued the appel lant and pro forms respondents 8 and 9 for specific performance of the said agreement of sale in the Court of the Senior Civil Judge, New Delhi (Civil Suit No. 684/128 of 1949/50). This suit was dismissed on 920 March 12, 1954. , Pending decision in the trial court Gokal Dhish Bhargava (fled and his son Jawahar Lal Bhargava, respondent 1 and Chunni Lal Bhargava were brought on the record as legal representatives. After the suit was dismissed and before the appeal in question was preferred in the High Court Chunni Lal Bhargava died; thereupon respondents 2 to 7, as his legal representatives, joined respondent 1 in preferring an appeal against the said decree in the High Court of Punjab. The memo of appeal along with the judgment dismissing the suit and the taxed bill of costs endorsed on the back of the last page of the judgment was filed in the High Court on July 29, 1954. It is the competence of this appeal that was questioned before the High Court and is in dispute before us in the present appeal. The record shows that on March 24,1954, an application was made by respondents 2 to 7 (who will be called the respondents hereafter) for a certified copy of the judgment and decree passed in the said suit for specific performance. A certified copy of the judgment and the bill of costs was supplied to them but the decree had not been drawn up and no copy of the decree was therefore supplied to them. In the result the appeal was filed without the certified copy of the decree and only with the certified copy of the judgment and the bill of costs. On August 2, 1954, the Assistant Registrar of the High Court returned the memo of appeal filed by the respondents to their counsel and pointed out to him that ' since no copy of the decree had been filed the presentation of the appeal was defective and the defect needed to be rectified. Thereafter, on August 16, 1954, the respondents ' counsel refiled the appeal with an endorsement that a memo of costs alone had been prepared by the trial court and no decree had been drawn up, and so the appeal should be held to be properly filed. Apparently this explanation was treated ' as satisfactory by the office of the High Court and the appeal was registered as No. 77 D of 1954. In due course the appeal was placed for preliminary hearing under 0. 41, r. 11 of the Code of Civil 921 Procedure before Dulat, J. who admitted it on August 30, 1954. Notice of the appeal was accordingly served on the appellant and the pro forma respondents. Ultimately when the appeal became ready for hearing it was put up on the Board of the Circuit Bench of the High Court to be heard on December 26, 1958. Meanwhile on December 23., 1958, the appellant served a notice on the respondents ' counsel intimating to him that he proposed to raise a preliminary objection against the competence of the appeal on the ground that the decree under appeal had not been filed as required under 0. 41, r. 1 along with the memo of appeal and the certified copy of the judgment. Next day, that is to say on December 24, 1958, the respondents moved the trial Court for drawing up of the decree, but since the record had in the meantime been sent by the trial Court to the High Court no decree could be drawn up by the trial Court, and so the motion became infructuous. The appeal, however, did not reach hearing on December 26, 1958. On December 29, 1958, the respondents moved the Court that the appeal should be declared to be maintainable as the memo of costs which alone had been prepared by the trial Court read along with the concluding paragraph of the judgment may be held to satisfy the requirements of the decree; in the alternative they prayed that the record of the suit in the trial Court should be sent for to enable them to get a decree prepared with a view to file the same in the High Court along with their appeal. Bishan Narain, J., before whom this application was taken out for orders, directed that it may be heard by the Bench which would hear the appeal. Eventually the appeal came on for hearing before Falshaw and Chopra, JJ. on De ember 8, 1959. At the said hearing the appellant raised a preliminary objection that the appeal was not competent having regard to the mandatory provisions of 0. 41, r. 1, and urged that the appeal should be dismissed as incompetent. This preliminary objection was, however, not upheld by the High Court, and it was held that "the proper course to follow was to allow the respondents a 922 month 's time for the purpose of getting a decree drawn up in the proper form by the lower Court and obtaining a copy thereof ". Accordingly the record which had in the meanwhile been received by the High Court after the appeal was admitted under 0. 41, r. 11 was ordered to be sent back to the lower Court without delay. It is against this order which was passed by the High Court on December 15, 1959, that the present appeal by special leave has been filed. On behalf of the appellant Mr. Pathak contends that the appeal filed before the High Court was plainly and manifestly incompetent, and so the High Court was in error in not dismissing it on that ground. The position of law under 0. 41, r. 1 is absolutely clear. Under the said rule every appeal has to be preferred in the form of a memorandum signed by the appellant or his pleader and presented to the Court or to such officer as it appoints in that behalf, and has to be accompanied by a copy of the decree appealed from, and of the judgment on which it is founded. Rule 1 empowers the appellate Court to dispense with the filing of the judgment but there is no jurisdiction in the appellate Court to dispense with the filing of the decree. Where the decree consists of different distinct and severable directions enforceable against the same or several defendants the Court may permit the filing of such portions of the decree as are the subject matter of the appeal but that is a problem with which we are not concerned in the present case. In law the appeal is not so much against the judgment as against the decree; that is why Article 156 of the Limitation Act prescribes a period of 90 days for such appeals and provides that the period commences to run from the date of the decree under appeal. Therefore there is no doubt that the requirements that the decree should be filed along with the memorandum of appeal is mandatory, and in the absence of the decree the filing of the appeal would be incomplete, defective and incompetent. That, however, cannot finally dispose of the point raised by the appellant before us. In the present case the respondents had applied for a certified copy of 923 the judgment as well as the decree in the trial Court on March 24, 1954, and they were not given a copy of the decree for the simple reason that no decree was drawn up; what they were given was a copy of the judgment and taxed bill of costs endorsed on the back of the last page of the judgment. These documents they filed along with their memo of appeal; but that would not affect the mandatory requirement of 0. 41, r. 1. In considering the effect of this defect in the presentation of the appeal we must bear in mind the rules of procedure in regard to the drawing up of the decree. The position in that behalf is absolutely clear. Section 33 of the Code of Civil Procedure requires that the Court, after the case has been heard, shall pronounce judgment, and on such judgment a decree shall follow. Order 20, r. 3 provides, inter alia, that the judgment shall be dated and signed by the judge in the open Court at the time of pronouncing it, and under r. 4, sub r. (2) a judgment has to contain a concise statement of the case, the points for determination, the decision thereon and the reasons for such decision. Rule 6 of the same Order prescribes the con. tents of the decree. It provides that the decree shall agree with the judgment and shall contain the particulars therein specified. Under r. 7 it is provided that the decree shall bear the date, the day on which the judgment was pronounced, and it directs that when the judge has satisfied himself that the decree has been drawn up in accordance with the judgment he shall sign the decree. It is, therefore, clear that the drawing up of the decree in the present case was the function and the duty of the office, and it was obligatory on the judge to examine the decree when drawn up, and if satisfied that it has been properly drawn up to sign it. Except in places where the dual system prevails the litigant or his lawyer ' does not play any material or important part in the drawing up of the decree. In fact the process of drawing up of the ' decree is beyond the litigant 's control. Therefore, there is no doubt whatever that in failing to draw up a decree in the present suit the office of the trial Court was negligent in the discharge of its duties, and 924 the said negligence was not even noticed by the learned trial judge himself. Unfortunately, when the appeal was presented in the High Court, even the office of the High Court was not as careful in examining the appeal as it should ,,have been, and as we have already indicated the appeal passed through the stage of admission under 0. 41, r. 11 without the defect in the appeal being brought to the notice of the learned judge who admitted it. Thus it is quite clear on the record that the respondents had applied for a certified copy of the judgment and the decree, and when they were given only a certified copy of the judgment and the bill of costs they filed the same along with the memo of appeal in the bona fide belief that the said documents would meet the requirements of 0. 41, r. 1. It is true that before the appeal came on for actual hearing before the High Court the appellant gave notice to the respondents about his intention to raise a preliminary objection that the appeal had not been properly filed; but, as we have already pointed out, the attempt made by the respondents to move the trial Court to draw up the decree proved infructuous and ultimately the High Court thought that in.fairness to the respondents they ought to be allowed time to obtain the certified copy of the decree and file it before it; and so the High Court passed the order under appeal. The appellant contends that this order is manifestly erroneous in law; according to him the only order which could and should have been passed was to dismiss the appeal as incompetent under 0. 41, r.1. The problem thus posed by the appellant for our decision has now become academic because subsequent to the decision of the High Court under appeal the respondents have in fact obtained Po certified copy of the decree on December 23, 1959, and have filed it in the High Court on the same day. This fact immediately raises the question as to whether the appeal which has admittedly been completely and properly filed on December 23, 1959, was in time or not. If it appears that on the date when the decree was thus filed the 925 presentation of the appeal was in time then the objection raised by the appellant against the propriety or the correctness of the High Court 's order under appeal would be purely technical and academic. The answer to the question as to whether the presentation of the appeal on December 23, 1959, is in time or not would depend upon the construction of section 12, sub section (2) of the Limitation Act. We have already noticed that the period prescribed for filing the present appeal is 90 days from the date of the decree. Section 12, sub section (2) provides, inter alia, that in computing the period of limitation "the time requisite for obtaining a copy of the decree shall be excluded". What then is the time which can be legitimately deemed to have been taken for obtaining the copy of the decree in the present case? Where a decree is not drawn up immediately or soon after a judgment is pronounced, two types of cases may arise. A litigant feeling aggrieved by the decision may apply for the certified copy of the judgment and decree before the decree is drawn up, or he may apply for the said decree after it is drawn up. In the former case, where the litigant has done all that he could and has made a proper application for obtaining the necessary copies, the time requisite for obtaining the copies must necessarily include not only the time taken for the actual supply of the certified copy of the decree but also for the drawing up of the decree itself. In other words, the time taken by the office or the Court in drawing up a decree after a litigant has applied for its certified copy on judgment being pronounced, would be treated as a part of the time taken for obtaining the certified copy of the said decree. Mr. Pathak has fairly conceded that on this point there is a consensus of judicial opinion, and in view of the formidable and imposing array of authorities against him he did not raise any contention about the validity of the view take in all those cases. (Vide: Tarabati Koer vs Lala Jagdeo Narain (1); Bani Madhub Mitter vs Mathungini Dassi & Ors. (Full Bench) (2);Gabriel Christian vs (1) (2) Cal 104. 926 Chandra Mohan Missir (Full Bench) (1); Jayashankar Mulshankar Mehta vs Mayabhai Lalbhai Shah (Full Bench) (2); Gokul Prasad vs Kunwar Bahadur & Ors.(3); and Umda vs Rupchand & Ors. (Nagpur Full Bench) (1)). There is, however, a sharp difference of opinion in regard to cases where an application for a certified copy of the decree is made after the said decree is drawn up. In dealing with such cases Courts have differed as to what would be the period requisite for obtaining the certified copy of the decree. The Bombay, Calcutta and Patna High Courts, appear to have held that the period taken in drawing up of the decree would be part of the requisite period, while other High Courts have taken a contrary view. It is significant that though the High Courts have thus differed on this point, in every case an attempt is judicially made to do justice between the parties. With that aspect of the problem, however, we are not concerned in the present appeal. The position, therefore, is that when the certified copy of the decree was filed by the respondents in the High Court on December 23, 1969, the whole of the period between the date of the application for the certified copy and the date when the decree was actually signed would have to be excluded under section 12, sub section Inevitably the presentation of the appeal on December 23, 1959 would be in time. It is true that more than five years have thus elapsed after the pronouncement of the judgment but for this long delay and lapse of time the respondents are not much to blame. The failure of the trial Court to draw up the decree as well as the failure of the relevant department in the High Court to examine the defect in the presentation of the appeal at the initial stage have contributed substantially to the present unfortunate position. In such a case there can be no doubt that the litigant deserves to be protected against the default committed or negligence shown by the Court or its officers in the discharge of their duties. As observed by Cairnes, L. C. in Rodger vs Comptoir (1) Pat. (2) (1951) 54 B.L.R. II. (3) Lucknow 250. (4) 927 d 'Escompte de Paris (1) as early as 1871 "one of the first and highest duties of all Courts is to take care that the act of the Court does no injury to any of the suitors"; that is why we think that in view of the subsequent event which has happened in this case, namely, the filing of the certified copy of the decree in the, High Court, the question raised by the appellant has( become technical and academic. Faced with this position Mr. Pathak attempted to argue that the application made by the respondents on March 24, 1954, was not really an application for a certified copy of the decree; he contendea that it was an application for the certified copy of the judgment and the bill of costs. This argument is wholly untenable. The words used in the application clearly show that it was an application for a certified copy of the judgment as well as the decretal order, and as subsequent events have shown, a certified copy of the decree was ultimately supplied to the respondents in pursuance of this application. Then it was argued that the respondents should have moved the trial Court for the drawing up of a decree as soon as they found that no decree a been drawn up. It may be assumed that the respondents might have adopted this course; but where the dual system does not exist it would be idle to contend that it is a part of the duty of a litigant to remind the Court or its office about its obligation to draw up a decree after the judgment is pronounced in any suit. It may be that decrees when drawn up are shown to the lawyers of the parties; but essentially drawing up of the decree is the function of the Court and its office, and it would be unreasonable to penalise a party for the default of the office by suggesting that it was necessary that the party should have moved the Court for the drawing up of the decree. Therefore, we are not satisfied that tie appellant is justified in attributing to the respondents any default for which the penalty of dismissing their appeal can be legitimately imposed on them. The result is that the appeal preferred by the respondents on December 23, (1) (1871) L.R. 3 P.C. 465, 475. 928 1959, is proper and in time and it can now be dealt with in accordance with law. It is true that in the circumstances over which the respondents had no control the appeal in question has already been admitted under 0. 41, r. 11, and as a result of the decision under appeal it may not have to go through that process again. Dulat, J. who heard the appeal for admission was satisfied that it deserved to be admitted and we do not think it necessary to require that the present appeal should go through the formality of the procedure prescribed by 0. 41, r. 11 once again. This posi tion is no doubt, unusual, but in the circumstances of the case it is impossible to say that the order passed by the High Court is not fair and just. Let us then consider the technical point raised by the appellant challenging the validity or the propriety of the order under appeal. The argument is that 0. 41, r. 1 is mandatory, and as soon as it is shown that an appeal has been filed with a memorandum of appeal accompanied only with a certified copy of the judgment the appeal must be dismissed as being incompetent, the relevant provisions of 0. 41 with regard to the filing of the decree being of a mandatory character. It would be difficult to accede to the proposition thus advanced in a broad and general form. If at the time when the appeal is preferred a decree has already been drawn up by the trial Court and the appellant has not applied for it in time it would be a clear case where the appeal would be incompetent and a penalty of dismissal would be justified. The position would, however, be substantially different if at the time when the appeal is presented before the appellate Court a decree in fact had not been drawn up by the trial Court; in such a case if an application has been made by the appellant for, a certified copy of the decree, then all that can be said against the appeal preferred by him is that the appeal is premature since a decree has not been drawn up, and it is the decree against which an appeal lies. In such a case, if the office of the High Court examines the appeal carefully and discovery the defect the appeal may be returned to the appellant for presentation 929 with the certified copy of the decree after it is obtained. In the case like the present, if the appeal has passed through the stage of admission through oversight of the office, then the only fair and rational course to adopt would be to adjourn the hearing of the appeal with a direction that the appellant should produce the certified copy of the decree as soon as it is supplied to him. In such a case it would be open to the High Court, and we apprehend it would be its duty, to direct the subordinate Court to draw up the decree forthwith without any delay. On the other hand, if a decree has been drawn up and an application for its certified copy has been made by the appellant after the decree was drawn up, the office of the appellate Court should return the appeal to the appellant as defective, and when the decree is filed by him the question of limitation may be examined on the merits. It is obvious that the complications in the present case have arisen as a result of two factors; the failure of the trial Court to draw up the decree as required by the Code, and the failure of the office in the High Court to notice the defect and to take appropriate action at the initial stage before the appeal was placed for admission under 0. 41, r. 11. It would thus be clear that no hard and fast 'rule of general applicability can be laid down for dealing with appeals defectively filed under 0. 41, r. 1. Appropriate orders will have to be passed having regard to the circumstances of each case, but the most important step to take in cases of defective presentation of appeals is that they should be carefully scrutinized at the initial stage soon after they are filed and the appellant required to remedy the defects. Therefore, in our opinion, the appellant is not justified in challenging the propriety or the validity of the order passed by the High Court because in the circumstances to which we have already adverted the said order is obviously fair and just. The High Court realised that it would be very unfair to penalise the party for the mistake committed by the trial Court and its own office, and so it has given time to the respondents to 930 apply for a certified copy of the decree and then proceed with the appeal. In this connection our attention has been drawn to the fact that in the Punjab High Court two conflicting and inconsistent views appear to have been taken in its reported decisions. Dealing with appeals filed with out a certified copy of the decree some decisions have dismissed the appeals as defective, and have given effect to the mandatory words in 0. 41, r. 1, without presumably examining the question as to whether the failure of the trial Court to draw up the decree would have any bearing or relevance on the point or not. (Vide: Gela Ram vs Ganga Ram(1); Municipal Committee, Chiniot vs Bashi Ram (2); Mubarak Ali Shah vs Secretary of State (3); Nur Din vs Secretary of State (4) Hakam Beg vs Rahim Shah (5); Fazal Karim vs Des Raj (6); and Banwari Lal Varma vs Amrit Sagar Gupta (7). On the other hand it has in some cases been held that it would be fair and just that the hearing of the appeal should be adjourned to enable the appellant to obtain a certified copy of the decree and produce it before the appellate Court (Vide: Manoharlal vs Nanak Chand (8); Mt. Jeewani vs Mt. Misri (9); and, Sher Muhammad vs Muhammad Khan (10). It would obviously have been better if this conflict of judicial opinion in the reported decisions of the High Court had been resolved by a Full Bench of the said High Court but that does not appear to have been done so far. However, as we have indicated, the question about the competence of the appeal has to be judged in each case on its own facts and appropriate orders must be passed at the initial stage soon after the appeal is presented in the appellate Court. If any disputed question of limitation arises it may have to go before the Court for judicial decision. In the result the order passed by the High Court is right. Having regard to the fact that the decree (1) A.I.R. (1920) 1 Lah. 223 (3) A.I.R. (1925) Lah. 438. (5) A I.R. (7) A.I.R. (1940) East Punj. (9) A.I.R. (1919) Lah. (2) A.I.R (1922) Lah. (4) A. I.R. (6) (8) A.I.R. (1919) Lah. (10) A.I.R. (1924) Lah. 352. 931 under appeal has already been filed by the respondents before the High Court on December 23, 1959, the High Court should now proceed to hear the appeal on the merits and deal with it in accordance with law. In the circumstances of this case we make no order as to costs. Appeal dismissed.

IN-Abs

The respondents filed a suit for specific performance against the appellant which was dismissed on March 12, 1954. On March 24 the respondents made an application for a certified copy of the judgment and decree. The decree was not drawn up and the respondents were supplied a certified copy of the judgment and the memo of costs. The respondents filed an appeal before the High Court without the certified copy of the decree and only with the certified copy of the judgment and the memo of costs. The appeal was admitted under 0. 41, r. 11 Code of Civil Procedure on August 30, 1954. On December 23, 1958, the appellant served a notice on the respondents that he would raise a preliminary objection at the hearing that the appeal was incompetent as a certified copy of the decree was not filed as required by 0. 41, r. 1. On December 24, 1958, the respondents moved the trial Court for drawing up of the decree, but since the record was in the High Court this could not be done. At the hearing of the appeal, the appellant raised the preliminary objection, but the High Court passed an order on December 15, 1959, allowing the respondents one month 's time for getting a decree drawn up and obtaining. a copy and directed the record to be sent to the trial Court. Against this order the appellant preferred an appeal to the Supreme Court contending that the High Court was bound to dismiss the appeal as it was manifestly incompetent under 0. 41, r. 1. Subsequently, on December 23, 1959, the respondents obtained a certified copy of the decree and filed it before the High Court the same day. The appellant contended that the appeal was to be deemed to be filed on this date and was time barred. Held, that in the circumstances of this case the order passed by the High Court was right. ' There was no doubt that 0. 41, r. 1 was mandatory and in the absence of or the decree the filing of the appeal was incomplete, defective and incompetent. The office of the trial Court was negligent in not drawing up a decree and the office of the High Court was also not as careful as it should have been in examining the appeal and these have contributed substantially to the unfortunate position. In such a case, the respondents deserved to be protected. Besides the, 919 question had become academic and technical in view of subse quent events. The certified copy of the decree was filed on December 23, 1959, and even if the appeal was considered to have been filed on that date, it was within time. Under section 12(2) of the Limitation Act the respondents could treat the time taken in the drawing up of the decree after the application for a certified copy thereof had been made as part of the time taken in obtaining the certified copy of the decree. Tarabati Koer vs Lala jagdeo Narain, , Bani Madhub Mitter vs Matungini Desai, Cal. 104 (F.B.), Gabriel Christian vs 'Chandra Mohan Missir, Pat. 284(F.B.), Jayashankar Mulshankar Mehta vs Mayabhai Lalbhai Shah, , Gokul Prasad vs Kunwar Bahadur, Luck. 250 and Umda vs Rupchand, , referred to. Rodger vs Comptoir d 'Escompte de Paris, (1871) L.R. 3 P.C. 465, relied on.

Appeals Nos. 37 & 38 of 1957. Appeals from the judgment and order dated August 30, 1955, of the former Bombay High Court in Appeals Nos. 55 and 56 of 1955, arising out of the judgment and order dated June 23, 1955, of the said High Court in Misc. Application No. 80 of 1955. C. K. Daphtary, Solicitor General of India, B. Ganapathy Iyer and R. H. Dhebar, for the appellant (in C. A. No. 37 of 57) and respondent No. 6 (in C. A. No. 38/57). section D. Vimadalal and I. N. Shroff, for the appellant (in C. A. No. 38/57) and respondent No. 6 (in C. A. No. 37/57.) Rajni Patel, section N. Andley, J. B. Dadachanji, Rameshwar Nath and P. L. Vohra, for respondents Nos.1 and 3 to 5 (in both the appeals). section B. Naik and K. R. Chaudhuri, for respondent No. 2 (in both the appeals). August 18. The Judgment of the Court was delivered by GAJENDRAGADKAR J. These two appeals arise from an industrial dispute between the Firestone Tyre and Rubber Co. of India Ltd., (hereafter called the company) and its workmen (hereafter called the respondents), and they raise a short and interesting question about the construction of section 12(5) of the 14 of 1947 (hereafter called the Act). It appears that the respondents addressed four demands to the company; they were in respect of gratuity, holidays, classification of certain employees and for the payment of an unconditional bonus for the financial year ended October 31, 1953. The respondents ' union also addressed the Assistant Commissioner of Labour, Bombay, forwarding to him a 229 copy of the said demands, and intimating to him that since the company had not recognised the respondents ' union there was no hope of any direct negotiations between the union and the company. The Assistant Commissioner of Labour, who is also the conciliation officer, was therefore requested to commence the conciliation proceedings at an early date. Soon thereafter the company declared a bonus equivalent to 1/4 of the basic earnings for the year 195253. The respondents then informed the company that they were entitled to a much higher bonus having regard to the profits made by the company during the relevant year and that they had decided to accept the bonus offered by the company without prejudice to the demand already submitted by them in that behalf. After holding a preliminary discussion with the parties the conciliation officer examined the four demands made by the respondents and admitted into conciliation only two of them ; they were in respect of the classification of certain employees and the bonus for the year 1952 53; the two remaining demands were not admitted in conciliation. The conciliation proceedings initiated by the conciliator, however, proved infructuous with the result that on July 5, 1954, the conciliator made his failure report under section 12(4) of the Act. In his report the conciliator has set out the arguments urged by both the parties before him in respect of both the items of dispute. In regard to the respondents ' claim for bonus the conciliator made certain suggestions to the company but the company did not accept them, and so it became clear that there was no possibility of reaching a settlement on that issue. Incidentally the conciliator observed that it appeared to him that there was considerable substance in the case made out by the respondents for payment of additional bonus. The conciliator also dealt with the respondents ' demand for classification and expressed his opinion that having regard to the type and nature of the work which was done by the workmen in question it seemed clear that the said work was mainly of a clerical nature and the demand that the said workmen should be 230 taken on the monthly paid roll appeared to be in consonance with the practice prevailing in other comparable concerns. The management, however, told the conciliator that the said employees had received very liberal increments and had reached the maximum of their scales and so the management saw no reason to accede to the demand for classification. On receipt of this report the Government of Bombay (now the Government of Maharashtra) considered the matter and came to the conclusion that the dispute in question should not be referred to an industrial tribunal for its adjudication. Accordingly, as required by section 12(5) on December 11, 1954, the Government communicated to the respondents the said decision and stated that it does not propose to refer the said dispute to the tribunal under section 12(5) " for the reason that the workmen resorted to go slow during the year 195253 ". It is this decision of the Government refusing to refer the dispute for industrial adjudication that has given rise to the present proceedings. On February 18, 1955, the respondents filed in the Bombay High Court a petition under article 226 of the Constitution praying for the issue of a writ of mandamus or a writ in the nature of mandamus or other writ, direction or order against the State of Maharashtra (hereafter called the appellant) calling upon it to refer the said dispute for industrial adjudication under section 10(1) and section 12(5) of the Act. To this application the company was also impleaded as an opponent. This petition was heard by Tendolkar J. He held that section 12(5) in substance imposed an obligation on the appellant to refer the dispute provided it was satisfied that a case for reference had been made, and he came to the conclusion that the reason given by the appellant for refusing to make a reference was so extraneous that the respondents were entitled to a writ of mandamus against the appellant. Accordingly he directed that a mandamus shall issue against the appellant to reconsider the question of making or refusing to make a reference under section 12(5) ignoring the fact that there was a slow down and taking into account only such reasons as are germane to the 231 question of determining whether a reference should or should not be made. Against this decision the appellant as well as the company preferred appeals. Chagla, C. J., and Desai, J., who constituted the Court of Appeal, allowed the two appeals to be consolidated, heard them together and came to the conclusion that the view( taken by Tendolkar J. was right and that the writ of mandamus had been properly issued against the appellant. The appellant and the company then applied for and obtained a certificate from the High Court and with that certificate they have come to this Court by their two appeals Nos. 37 and 38 of 1957. These appeals have been ordered to be consolidated and have been heard together, and both of them raise the question about the construction of section 12(5) of the Act. Before dealing with the said question it would be convenient to state one more relevant fact. It is common ground that during a part of the relevant year the respondents had adopted go slow tactics. According to the company the period of go slow attitude was seven months whereas according to the respondents it was about five months. It is admitted that under cl.23(c) of the standing orders of the company willful slowing down in performance of work, or abatement, or instigation thereof, amounts to misconduct, and it is not denied that as a result of the go slow tactics adopted by the respondents disciplinary action was taken against 58 workmen employed by the company. The respon dents ' case is that despite the go slow strategy adopted by them for some months during the relevant year the total production for the said period compares very favorably with the production for previous years and that the profit made by the company during the relevant year fully justifies their claim for additional bonus. The appellant has taken the view that because the respondents adopted go slow strategy during the relevant year the industrial dispute raised by them in regard to bonus as well as classification was not to be referred for adjudication under section 12(5). It is in the light of these facts that we have to consider whether 232 the validity of the order passed by the appellant refusing to refer the dispute for adjudication under section 12(5) can be sustained. Let us first examine the scheme of the relevant provisions of the Act. Chapter III which consists of sections 10 and 10A deals with reference of dispute to Boards, Courts or Tribunals. Section 10(1) provides that where the appropriate Government is of opinion that any industrial dispute exists or is apprehended, it may at any time by order in writing refer the dispute to one or the other authority specified in cls.(a) to (d). This section is of basic importance in the scheme of the Act. It shows that the main object of the Act is to provide for cheap and expeditious machinery for the decision of all industrial disputes by referring them to adjudication, and thus avoid industrial conflict resulting from frequent lock outs and strikes. It is with that object that reference is con templated not only in regard to existing industrial disputes but also in respect of disputes which may be apprehended. This section confers wide and even absolute discretion on the Government either to refer or to refuse to refer an industrial dispute as therein provided. Naturally this wide discretion has to be exercised by the Government bona fide and on a consideration of relevant and material facts. The second proviso to section 10(1) deals with disputes relating to a public utility service, and it provides that where a notice under section 22 has been given in respect of such a dispute the appropriate Government shall, unless it considers that the notice has been frivolously or vexatiously given or that it would be inexpedient so to do, make a reference under this sub section notwithstanding that any other proceedings under this Act in respect of the dispute may have commenced. It is thus clear that in regard to cases falling under this proviso an obligation is imposed on the Government to refer the dispute unless of course it is satisfied that the notice is frivolous or vexatious or that considerations of expediency required that a reference should not be made. This proviso also makes it clear that reference can be made even if other proceedings under the Act 233 have already commenced in respect of the same dispute. Thus, so far as discretion of the Government to exercise its power of referring an industrial dispute is concerned it is very wide under section 10(1) but is limited under the second proviso to section 10(1). Section 10(2) deals with a case where the Government has to refer an industrial dispute and has no discretion in the matter. Where the parties to an industrial dispute apply in the prescribed manner either jointly or separately for a reference of the dispute between them the Government has to refer the said dispute if it is satisfied that the persons applying represent the majority of each party. Thus, in dealing with this class of cases the only point on which the Government has to be satisfied is that the persons applying represent the majority of each party ; once that test is satisfied the Government has no option but to make a reference as required by the parties. Similarly section 10A deals with cases where the employer and his workmen agree to refer the dispute to arbitration at any time before the dispute has been referred under section 10, and it provides that they may so refer it to such person or persons as may be specified in the arbitration agreement; and section 10A(3) requires that on receiving such an arbitration agreement the Government shall, within fourteen days, publish the same in the official Gazette. Section 10A(4) prescribes that the arbitrator or arbitrators shall investigate the dispute and submit the arbitration award to the appropriate Government; and section 10A(5) provides that such arbitrations are outside the Arbitration Act. Thus cases of voluntary reference of disputes to arbitration are outside the scope of any discretion in the Government. That in brief is the position of the discretionary power of the Government to refer industrial disputes to the appropriate authorities under the Act. The appropriate authorities under the Act are the conciliator, the Board, Court of Enquiry, Labour Court ') Tribunal and National Tribunal. Section 11(3) confers on the Board, Court of Enquiry, Labour Court, Tribunal and National Tribunal all, the powers 30 234 as are vested in a civil court when trying a suit in respect of the matters specified by cls.(a) to (d). A conciliation officer, however, stands on a different footing. Under section 11(4) he is given the power to call for and inspect any relevant document and has been given the same powers as are vested in civil courts in respect of Compelling the production of documents. Section 12 deals with the duties of conciliation officers. Under section 12(1) the conciliation officer may hold conciliation proceedings in the prescribed manner where an industrial dispute exists or is apprehended. In regard to an industrial dispute relating to a public utility service, where notice under section 22 has been given, the conciliation officer shall hold conciliation proceedings in respect of it. The effect of section 12(1) is that, whereas in regard to an industrial dispute not relating to a public utility service the conciliation officer is given the discretion either to hold conciliation proceedings or not, in regard to a dispute in respect of a public utility service, where notice has been given, he has no discretion but must hold conciliation proceedings in regard to it. Section 12(2) requires the conciliation officer to investigate the dispute without delay with the object of bringing about a settlement, and during the course of his investigation he may examine all matters affecting the merits and the right settlement of the dispute and do all such things as he thinks fit for the purpose of inducing the parties to come to a fair and amicable settlement. The duty and function of the conciliation officer is as his very name indicates, to mediate between the parties and make an effort at conciliation so as to persuade them to settle their disputes amicably between themselves. If the conciliation officer succeeds in his mediation section 12(3) requires him to make a report of such settlement together with the memorandum of the settlement signed by the parties to the dispute. Section 18(3) provides that a settlement arrived at in the course of conciliation proceedings shall be binding on the parties specified therein. It would thus be seen that if the attempts made by the conciliation officer to induce the parties to come to a settlement succeeds and a settlement is signed by them 235 it has in substance the same binding character as an award under section 18(3). Sometimes efforts at conciliation do not succeed either because one of the parties to the dispute refuses to co operate or they do not agree as to the terms of settlement. In such cases the conciliation officer has to send his report to the appropriate Government under section 12(4). This report must set forth the steps taken by the officer for ascertaining the facts and circumstances relating to the dispute and for bringing about a settlement thereof together with a full statement of such facts and circumstances and the reasons on account of which in his opinion a settlement could not be arrived at. The object of requiring the conciliation officer to make such a full and detailed report is to apprise the Government of all the relevant facts including the reasons for the failure of the conciliation officer so that the Government may be in possession of the relevant material on which it can decide what course to adopt under section 12(5). In construing section 12(5), therefore, it is necessary to bear in mind the background of the steps which the conciliation officer has taken under section 12(1) to (4). The conciliation officer has held conciliation proceedings, has investigated the matter, attempted to mediate, failed in his effort to bring about a settlement between the parties, and has made a full and detailed report in regard to his enquiry and his conclusions as to the reasons on account of which a settlement could not be arrived at. Section 12(5) with which we are concerned in the present appeals provides that if, on a consideration of the report referred to in subsection (4), the appropriate Government is satisfied that there is a case for reference to a Board, Labour Court, Tribunal or National Tribunal, it may make such reference. Where the appropriate Government does not make such a reference it shall record and communicate to the parties concerned its reasons therefore. This section requires the appropriate Government to consider the report and decide whether a case for reference has been made out. If the Government is satisfied that a case for reference has been made out it may make such 236 reference. If it is satisfied that a case for reference has not been made out it may not make such a reference; but in such a case it shall record and communicate to the parties concerned its reasons for not making the reference which in the context means its reasons for not being satisfied that there is a case for reference. The High Court has held that the word " may in the first part of section 12(5) must be construed to mean shall " having regard to the fact that the power conferred on the Government by the first part is coupled with a duty imposed upon it by the second part. The appellant and the company both contend that this view is erroneous. According to them the requirement that reasons shall be recorded and communicated to the parties for not making a reference does not convert " may " into " shall " and that the discretion vesting in the Government either to make a reference or not to make it is as wide as it is under section 10(1) of the Act. Indeed their contention is that, even after receiving the report, if the Government decides to make a reference it must act under section 10(1) for that is the only section which confers power on the appropriate Government to make a reference. It is true that section 12(5) provides that the appropriate Government may make such reference and in that sense it may be permissible to say that a power to make reference is conferred on the appropriate Government by section 12(5). The High Court was apparently inclined to take the view that in cases falling under section 12(5) reference can be made only under section 12(5) independently of section 10(1). In our opinion that is not the effect of the provisions of section 12(5). If it is held that in cases falling under section 12(5) reference can and should be made only under section 12(5) it would lead to very anomalous consequences. Section 10(3) empowers the appropriate Government by an order to prohibit the continuance of any strike or lock out in connection with an industrial dispute which may be in existence on the date of the reference, but this power is confined only to cases where industrial disputes are referred under section 10(1). It would thus be clear that if a reference is made only under section 12(5) independently of 237 s.10(1) the appropriate Government may have no power to prohibit the continuance of a strike in connection with a dispute referred by it to the tribunal for adjudication ; and that obviously could not be the intention of the Legislature. It is significant that sections 23 and 24 prohibit the commencement of strikes and lock outs during the pendency of proceedings there ' in specified, and so even in the case of a reference made under section 12(5) it would not be open to the employer to declare a lock out or for the workmen to go on strike after such a reference is made ; but if a strike has commenced or a lock out has been declared before such a reference is made, there would be no power in the appropriate Government to prohibit the continuance of such a strike or such a lock out. Section 24(2) makes it clear that the continuance of a lock out or strike is deemed to be illegal only if an order prohibiting it is passed under section 10(3). Thus the power to maintain industrial peace during adjudication proceedings which is so essential and which in fact can be said to be the basis of adjudication proceedings is exercisable only if a reference is made under section 10(1). What is true about this power is equally true about the power conferred on the appropriate Government by section 10(4), (5), (6) and (7). In other words, the material provisions contained in sub sections (3) to (7) of section 10(1) which are an integral Dart of the scheme of reference prescribed by Chapter III of the Act clearly indicate that even if the appropriate Government may be acting under section 12(5) the reference must ultimately be made under section 10(1). Incidentally it is not without significance that even in the petition made by the respondents in the present proceedings they have asked for a writ of mandamus calling upon the appellant to make a reference under sections 10(1) and 12(5). Besides, even as a matter of construction, when section 12(5) provides that the appropriate Government may make such reference it does not mean that this provision is intended to confer a power to make reference as such. That power has already been conferred by section 10(1); indeed section 12(5) occurs in a Chapter dealing with the procedure, powers and duties of the 238 authorities under the Act; and it would be legitimate to hold that section 12(5) which undoubtedly confers power on the appropriate Government to act in the manner specified by it, the power to make a reference which it will exercise if it comes to the conclusion that a case for reference has been made must be found in section 10(1). In other words, when section 12(5) says that the Government may make such reference it really means it may make such reference under section 10 (1). Therefore it would not be reasonable to hold that section 12(5) by itself and independently of section 10(1) confers power on the appropriate Government to make a reference. The next point to consider is whether, while the appropriate Government acts under section 12(5), it is bound to base its decision only and solely on a consideration of the report made by the conciliation officer under section 12(4). The tenor of the High Court 's judgment may seem to suggest that the only material on which the conclusion of the appropriate Government under section 12(5) should be based is the said report. There is no doubt that having regard to the back ground furnished by the earlier provisions of section 12 the appropriate Government would naturally consider the report very carefully and treat it as furnishing the relevant material which would enable it to decide whether a case for reference has been made or not; but the words of section 12(5) do not suggest that the report is the only material on which Government must base its conclusion. It would be open to the Government to consider other relevant facts which may come to its knowledge or which may be brought to its notice, and it is in the light of all these relevant facts that it has to come to its decision whether a reference should be made or not. The problem which the Government has to consider while acting under section 12(5)(a) is whether there is a case for reference. This expression means that Government must first consider whether a prima facie case for reference has been made on the merits. If the Government comes to the conclusion that a prima facie case for reference has been made then it would be open to the Government also to con sider whether there are any other relevant or material 239 facts which would justify its refusal to make a reference. The question as to whether a case for reference has been made out can be answered in the light of all the relevant circumstances which would have a bearing on the merits of the case as well as on the incidental question as to whether a reference should nevertheless be made or not. A discretion to consider all relevant facts which is conferred on the Government by section 10(1) could be exercised by the Government even in dealing with cases under section 12(5) provid ed of course the said discretion is exercised bona fide, its final decision is based on a consideration of relevant facts and circumstances, and the second part of section 12(5) is complied with. We have already noticed that section 12 deals with the conciliation proceedings in regard to all industrial dis putes, whether they relate to a public utility service or not. Section 12(1) imposes an obligation on the con ciliation officer to hold conciliation proceedings in regard to an industrial dispute in respect of public utility service provided a notice under section 22 has been given. If in such a dispute the efforts at conciliation fail and a failure report is submitted under section 12(4) Government may have to act under section 12(5) and decide whether there is a case for reference. Now, in dealing with such a question relating to a public utility service considerations prescribed by the second proviso to section 10(1) may be relevant, and Government may be justified in refusing to make a reference if it is satisfied that the notice given is frivolous or vexatious or that reference would be inexpedient. Just as discretion conferred on the Government under section 10(1) can be exercised by it in dealing with industrial disputes in regard to non public utility services even when Government is acting under section 12(5), so too the provisions of the second proviso can be pressed into service by the Government when it deals with an industrial dispute in regard to a public utility service under section 12(5). It would, therefore, follow that on receiving the failure report from the conciliation officer Government would consider the report and other relevant material 240 and decide whether there is & case for reference. If it is satisfied that there is such & case for reference it may make a reference. If it does not make a reference it shall record and communicate to the parties concerned its reasons therefore. The question which arises at this stage is whether the word " may " used in the context means " shall ", or whether it means nothing more than " may " which indicates that the discretion is in the Government either to refer or not to refer. It is urged for the respondent that where power is conferred on an authority and it is coupled with the performance of & duty the words conferring power though directory must be construed as mandatory. As Mr. Justice Coleridge has observed in Beg. vs Tithe Commissioners (1)." The words undoubtedly are only empowering; but it has been so often decided as to have become an axiom, that, in public statutes, words only directory, permissory or enabling may have & compulsory force where the thing to be done is for the public benefit or in advancement of public justice ". The argument is that section 12(5) makes it obligatory on the Government to record and communicate its reasons for not making the reference and this obligation shows that the power to make reference is intended to be exercised for the benefit of the party which raises an industrial dispute and wants it to be referred to the authority for decision. It may be that the Legislature intended that this requirement would avoid casual or capricious decisions in the matter because the recording and communication of reasons postulates that the reasons in question must stand public examination and scrutiny and would therefore be of such a character as would show that the question was carefully and properly considered by the Government; but that is not the only object in making this provision. The other object is to indicate that an obligation or duty is cast upon the Government, and since the power conferred by the first part is coupled with the duty prescribed by the second part " may " in the context must mean " shall ". There is considerable force in (1) ; , 474 : ; , 185.241 this argument. Indeed it has been accepted by the High Court and it has been held that if the Government is satisfied that there is a case for reference it is bound to make the reference. On the other hand, if the power to make reference is ultimately to be found in section 10(1) it would not be easy to read the relevant portion of section 12(5) as imposing an obligation on the Government to make a reference. Section 12(5) when read with section 10(1) would mean, according to the appellant, that, even after considering the question, the Government may refuse to make a reference in a proper case provided of course it records and communicates its reasons for its final decision. In this connection the appellant strongly relies on the relevant provisions of section 13. This section deals with the duties of Boards and is similar to section 12 which deals with conciliation officers. A dispute can be referred to a Board in the first instance under section 10(1) or under section 12(5) itself. Like the conciliation officer the Board also endeavours to bring about a settlement of the dispute. Its powers are wider than those of a conciliator but its function is substantially the same; and so if the efforts made by the Board to settle the dispute fail it has to make a report under section 13(3). Section 13(4) provides that if on receipt of the report made by the Board in respect of a dispute relating to a public utility service the appropriate Government does not make a reference to a Labour Court, Tribunal or National Tribunal under section 10, it shall record and communicate to the parties concerned its reasons therefore. The provisions of section 13 considered as a whole clearly indicate that the power to make a reference in regard to disputes referred to the Board are undoubtedly to be found in section 10(1). Indeed in regard to disputes relating to non public utility services there is no express provision made authorising the Government to make a reference, and even section 13(4) deals with a case where no reference is made in regard to a dispute relating to a public utility service which means that if a reference is intended to be made it would be under the second proviso to section 10(1). Incidentally this fortifies the conclusion that whenever 31 242 reference is made the power to make it is to be found under section 10(1). Now, in regard to cases falling under section 13(4) since the reference has to be made under section 10 there can be no doubt that the considerations relevant under the second proviso to section 10(1) would be relevant and Government may well justify their refusal to make a reference on one or the other of the grounds specified in the said proviso. Besides, in regard to disputes other than those falling under section 13(4) if a reference has to be made, it would clearly be under section 10(1). This position is implicit in the scheme of section 13. The result, therefore, would be that in regard to a dispute like the present it would be open to Government to refer the said dispute under section 12(5) to a Board,, and if the Board fails to bring about a settlement between the parties Government would be entitled either to refer or to refuse to refer the said dispute for industrial adjudication under section 10(1). There can be no doubt that if a reference has to be made in regard to a dispute referred to a Board under section 13 section 10(1) would apply, and there would be no question of importing any compulsion or obligation on the Government to make a reference. Now, if that be the true position under the relevant provisions of section 13 it would be difficult to accept the argument that a prior stage when Government is acting under section 12(5) it is obligatory on it to make a reference as contended by the respondent. The controversy between the parties as to the construction of section 12(5), is, however, only of academic importance. On the respondents ' argument, even if it is obligatory on Government to make a reference provided it is satisfied that there is a case for reference, in deciding whether or not a case for reference is made Government would be entitled to consider all relevant facts, and if on a consideration of all the relevant facts it is not satisfied that there is a case for reference it may well refuse to make a reference and record and communicate its reasons therefore. According to the appellant and the company also though the discretion is with Government its refusal to make a reference can be justified only if it records and communicates its reasons therefore and it appears that the 243 said reasons are not wholly extraneous or irrelevant. In other words, though there may be a difference of emphasis in the two methods of approach adopted by the parties in interpreting section 12(5) ultimately both of them are agreed that if in refusing to make a reference Government is influenced by reasons which are wholly extraneous or irrelevant or which are not germane then its decision may be open to challenge in a court of law. It would thus appear that even the appellant and the Company do not dispute that if a consideration of all the relevant and germane factors leads the Government to the conclusion that there is a case for reference the Government must refer though they emphasise that the scope and extent of relevant consideration is very wide; in substance the plea of the respondents that " may " must mean " shall " in section 12(5) leads to the same result. Therefore both the methods of approach ultimately lead to the same crucial enquiry : are the reasons recorded and communicated by the Government under section 12(5) germane and relevant or not ? It is common ground that a writ of mandamus would lie against the Government if the order passed by it under section 10(1) is for instance contrary to the provisions of section 10(1)(a) to (d) in the matter of selecting the appropriate authority ; it is also common ground that in refusing to make a reference under section 12(5) if Government does not record and communicate to the parties concerned its reasons therefore a writ of mandamus would lie. Similarly it is not disputed that if a party can show that the refusal to refer a dispute is not bona fide or is based on a consideration of wholly irrelevant facts and circumstances a writ of mandamus would lie. The order passed by the Government under section 12(5) may be an administrative order and the reasons recorded by it may not be justiciable in the sense that their propriety, adequacy or satisfactory character may not be open to judicial scrutiny ; in that sense it would be correct to say that the court hearing a petition for mandamus is not sitting in appeal over the decision of the Government : nevertheless if the court is satisfied that the reasons given 244 by the Government for refusing to make a reference are extraneous and not germane then the court can issue, and would be justified in issuing, a writ of mandamus even in respect of such an administrative order. After an elaborate argument on the construction of section 12(5) was addressed to us it became clear that on this part of the case there was no serious dispute between the parties. That is why we think the controversy as to the construction of section 12(5) is of no more than academic importance. That takes us to the real point of dispute between the parties, and that is whether the reason given by the appellant in the present case for refusing to make a reference is germane or not. The High Court has held that it is wholly extraneous and it has issued a writ of mandamus against the appellant. We have already seen that the only reason given by the appellant is that the workmen resorted to go slow during the year 1952 53. It would appear prima facie from the communication addressed by the appellant to the respondents that this was the only reason which weighed with the Government in declining to refer the dispute under section 12(5). It has been strenuously urged before us by the appellant and the company that it is competent for the Government to consider whether it would be expedient to refer a dispute of this kind for adjudication. The argument is that the object of the Act is not only to make provision for investigation and settlement of industrial disputes but also to secure industrial peace so that it may lead to more production and help national economy. Co operation between capital and labour as well as sympathetic understanding on the part of capital and discipline on the part of labour are essential for achieving the main object of the Act; and so it would not be right to assume that the Act requires that every dispute must necessarily be referred to industrial adjudication. It may be open to Government to take into account the facts that the respondents showed lack of discipline in adopting go slow tactics, and since their conduct during a substantial part of the relevant year offended against the standing orders that was a fact which 245 was relevant in Considering whether the present dispute should be referred to industrial adjudication or not. On the other hand, the High Court has held that the reason given by the Government is wholly extraneous and its refusal to refer the dispute is plainly punitive in character and as such is based on considerations which are not at all germane to section 12(5). This Court has always expressed its disapproval of breaches of law either by the employer or by the employees, and has emphasised that while the employees may be entitled to agitate for their legitimate claims it would be wholly wrong on their part to take recourse to any action which is prohibited by the standing orders or statutes or which shows wilful lack of discipline or a concerted spirit of non co operation with the employer. Even so the question still remains whether the bare and bald reason given in the order passed by the appellant can be sustained as being germane or relevant to the issue between the parties. Though considerations of expediency cannot be excluded when Government considers whether or not it should exercise its power to make a reference it would not be open to the Government to introduce and rely upon wholly irrelevant or extraneous considerations under the guise of expediency. It may for instance be open to the Government in considering the question of expediency to enquire whether the dispute raises a claim which is very stale, or which is opposed to the provisions of the Act, or is inconsistent with any agreement between the parties, and if the Govern ment comes to the conclusion that the dispute suffers from infirmities of this character, it may refuse to make the reference. But even in dealing with the question as to whether it would be expedient or not to make the reference Government must not act in a punitive spirit but must consider the question fairly and reasonably and take into account only relevant facts and circumstances. In exercising its power under section 10(1) it would not be legitimate for the Government for instance to say that it does not like the appearance, behaviour or manner of the secretary of the union, or even that it disapproves of the political 246 affiliation of the union, which has sponsored the dispute. Such considerations would be wholly extraneous and must be carefully excluded in exercising the wide discretion vested in the Government. In the present case it is significant that the company has voluntarily paid three months bonus for the relevant year not withstanding the fact that the workmen had adopted go slow tactics during the year, and the report of the conciliator would show prima facie that he thought that the respondents ' claim was not at all frivolous. The reasons communicated by the Government do not show that the Government was influenced by any other consideration in refusing to make the reference. It is further difficult to appreciate how the misconduct of the respondents on which the decision of the Government is based can have any relevance at all in the claim for the classification of the specified employees which was One of the items in dispute. If the work done by these employees prima facie justified the claim and if as the conciliator 's report shows the claim was in Consonance with the practice prevailing in other comparable concerns the misconduct, of the respondents cannot be used as a relevant circumstance in refusing to refer the dispute about classification to industrial adjudication. It was a claim which would have benefited the employees in future and the order passed by the appellant deprives them of that benefit in future. Any considerations of discipline cannot, in our opinion, be legitimately allowed to impose such a punishment on the employees. Similarly even in regard to the claim for bonus, if the respondents are able to show that the profits earned by the company during the relevant year compared to the profits earned during the preceding years justified their demand for additional bonus it would plainly be a punitive action to refuse to refer such a dispute solely on the ground of their misconduct. In this connection it may be relevant to remember that for the said misconduct the company did take disciplinary action as it thought fit and necessary, and yet it paid the respondents bonus to which it thought they were entitled. Besides, in considering the question 247 as to whether a dispute in regard to bonus should be referred for adjudication or not it is necessary to bear in mind the well established principles of industrial adjudication which govern claims for bonus. A claim for bonus is based on the consideration that by their contribution to the profits of the employer the employees are entitled to claim a share in the said profits, and so any punitive action taken by the Government by refusing to refer for adjudication an industrial dispute for bonus would, in our opinion, be wholly inconsistent with the object of the Act. If the Government had given some relevant reasons which were based on, or were the consequence of, the misconduct to which reference is made it might have been another matter. Under these circumstances we are unable to bold that the High Court was in error in coming to the conclusion that the impugned decision of the Government is wholly punitive in character and must in the circumstances be treated as based on a consideration which is not germane and is extraneous. It is clear that the Act has been passed in order to make provision for the investigation and settlement of industrial disputes, and if it appears that in cases falling under section 12(5) the investigation and settlement of any industrial dispute is prevented by the appropriate Government by refusing to make a reference on grounds which are wholly irrelevant and extraneous a case for the issue of a writ of mandamus is clearly established. In the result we confirm the order passed by the High Court though not exactly for the same reasons. The appeals accordingly fail and are dismissed with costs, one set of hearing fees. Appeals dismissed.

IN-Abs

Section 2(5) of the , properly construed, does not by itself confer the power on the appropriate Government to make a reference. That power is really contained in section 10(i) of the Act. In deciding whether it should or should not make a reference under section 12(5) of the Act the appropriate Government need not base its decision solely on the report of the conciliation officer, but is free to take into consideration all other relevant facts and circumstances under section 10(1), and where it refused to make a reference it must record and com municate its reasons therefore to the parties concerned. Such reasons, however, must be germane, and not extraneous or irrelevant, to the dispute. But in exercising such wide powers as are conferred by section 10(1), the appropriate Government must act fairly and reasonably and not in a punitive spirit, and although considerations of expediency may not be wholly excluded, it must not be swayed by any extraneous considerations. Consequently, in a case where the issues in dispute related to a claim of classification for specified employees and additional bonus and the sole ground on which the Government refused to refer the dispute for adjudication under section 12(5) was that the employees had adopted go slow tactics during the relevant year, although the company had nevertheless voluntarily paid three months ' bonus for that year and the report of the conciliation officer was in favour of the employees, Held, that the Government acted on irrelevant considerations and its decision being wholly punitive in character a clear case for the issue of a writ of mandamus was made out. Held, further, that since the work done by the employees prima facie justified the claim for classification and it was in consonance with the practice prevailing in other comparable concerns, the misconduct of the respondents could be no ground for refusing reference as the claim was in regard to the future benefit to the employees. 228 The claim of bonus being also prima facie justified by the profits earned during the relevant year in accordance with well settled principles of industrial adjudication, the order of refusal was in the nature of a punitive action that was wholly inconsistent with the object of the Act.

Appeal No. 200 of 1960. Appeal from the Judgment and Order dated the 19th March, 1959, of the Mysore High Court, Bangalore, in Writ Petition No. 263 of 1957. K.Srinivasan and R. Gopalakrishnan, for the appellant. A. N. Kirpal and D. Gupta, for the respondent. December 5. The Judgment of the Court was delivered by SHAH, J. This appeal with certificate of fitness granted by the High Court of Judicature of Mysore is from an order rejecting the petition of the appellant for a writ to quash a notice of reassessment under section 34 of the Indian Income Tax Act. The appellants are a Hindu Undivided Family carrying on business in groundnuts and other commodities at Goribidnur, Kolar District, in the territory which formed part of the former State of Mysore. The Mysore Income Tax Act was repealed and the Indian ' Income Tax Act was brought into force in the Part B State of Mysore as from April 1, 1950. The appellants had adopted as their year of; account July 1 to June 30 of the succeeding year and they were assessed under the Mysore Income Tax Act on that footing for the year of assessment 1949 50 corresponding to the year of account July 1, 1948,to June 30, 1949. After the Indian Income Tax Act was applied to the State of Mysore on December 26, 1950, notice under section 22(2) of the Indian Income Tax Act was served upon the appellants requiring them to submit their 913 return of income for the assessment year 1950 51. On September 8, 1952, the appellants submitted their return stating that for the year ending June 30, 1949, corresponding to the assessment year 1949 50, they were assessed under the Mysore Income Tax Act, that their income for the year ending June 30, 1950, was assessable under the Indian Income Tax Act in the assessment year 1951 52 and that they had no assessable income for the assessment year 1950 51. The Income Tax Officer passed on that return an order "no proceeding" and closed the assessment. For the assessment year 1951 52, the appellants submitted their return of income. In the books of account produced by the appellants an opening cash credit balance of Rs. 1,87,000 odd on July 1, 1949, was disclosed. The Income Tax Officer called upon the appellants to produce their books of account of previous years, but the books were not produced on the plea that the same were lost. In assessing the income of the appellants for the year of account 1949 50, the Income Tax Officer held that Rs. 1,37,000 out of the opening balance in the books of account dated July 1, 1949, represented income from an undisclosed source. In appeal, the Appellate Assistant Commissioner observed that the appellants not having exercised their option under section 2(ii) of the Indian Income Tax Act, and in the absence "of any system of accounting adopted" by them, the only course open to the Income Tax Officer was to take the financial year ending March 31, 1950, as the previous year for the income from an undisclosed source, and directed the Income Tax Officer to consider this credit in the assessment for the year 1950 51 after giving opportunity to the appellants to explain the nature and source thereof. Before the appeal was disposed of by the Appellate Assistant Commissioner, the appellants had submitted a fresh return for the assessment year 195051 purporting to do so under section 22(3) of the Indian Income Tax Act. Pursuant to the direction of the Appellate Assistant Commissioner, the Income Tax Officer issued a notice of reassessment under section 34 of the Income Tax Act and served it on October 15, 1957, 914 calling upon the appellants to submit a fresh return. The appellants thereupon submitted a petition under article 226 of the Constitution to the High Court of Mysore praying for an order declaring that the notice under section 34 was without jurisdiction and for quashing the notice and proceeding consequent thereon. This petition was dismissed by the High Court, but the High Court, on the application of the appellants, certified that the appeal was a fit one for appeal to this court. Section 34(1) of the Indian Income Tax Act at the relevant time in so far as it is material provided: "(1) If (a). the Income Tax Officer has reason to believe that by reason of the omission or failure on the part of the assessee to make a return of his income under section 22 for any year or to disclose fully and truly all material facts necessary for his assessment for that year, income, profits or gains chargeable to incometax have escaped assessment for that year, or (b). notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Income Tax Officer has in consequence of information in his possession reason to believe that income, profits or gains chargeable to income tax have escaped assessment for any year, he may in cases falling under el. (a) at any time within eight years and in cases falling cl. (b) within four years of the end of that year, serve on the assessee a notice containing all or any of the requirements which may be included in a notice under sub section (2) of section 22 and may proceed to assess or reassess such income, profits or gains; and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub section. " In the course of the assessment proceedings for 1951 52, the appellants produced their books of account containing an entry dated July 1, 1949, showing an opening cash balance of Rs. 1,87,000 odd which was not satisfactorily explained. Though called upon, they did not produce their books of account for the earlier year. The appellants had failed to disclose in their return for the assessment year 1950 51 any 915 income. In the circumstances, the Income Tax Officer had reason to believe that by reason of failure on the part of the appellants to disclose fully and truly all ' material facts necessary for assessment for that year, income chargeable to tax had escaped assessment. The Income Tax Officer had therefore jurisdiction to issue the notice for reassessment. The submission that the previous return submitted on September 8, 1952, "had not been disposed of" and until the assessment pursuant to that return was made, no notice under section 34(1) for reassessment could be issued, has in our judgment no substance. The Income Tax Officer had disposed of the assessment proceeding accepting the submission made by the appellants that they had no income for the assessment year 1950 51. Under section 23(1) of the Indian Income Tax Act, it is open to the Income Tax Officer, if he is satisfied that the return made by an assessee under section 22 is correct, to assess the income and to determine the sum payable by the assessee on the basis of the return without requiring the presence of the assessee or production by him of any evidence. The appellants had in their return dated September 8, 1952, submitted that they had no assessable income for the year in question and on this return, the Income Tax Officer had passed the order "no, proceeding". Such an order in the circumstances of the case meant that the Income Tax Officer accepted the return and assessed the income as "nil". If thereafter, the Income Tax Officer had reason to believe that the appellants had failed to disclose fully and truly all material facts necessary for assessment for that year, it was open to him to issue a notice for reassessment. Under section 22, sub section (3), an assessee may submit a revised return if after he has furnished the return under sub section (2) he discovers any omission or wrong statement therein. But such a revised return can only be filed "at any time before the assessment is made" and not thereafter. The return dated February 26, 1957, was submitted after the assessment was made pursuant to the earlier return and it could not be entertained. Nor could the lodging of such a return 916 debar the Income Tax Officer from commencing a proceeding for reassessment of the appellant under section 34(1) of the Indian Income Tax Act. There is also no substance in the contention that for the assessment year 1950 51 the assessee could be assessed under the Mysore Income Tax Act and not under the Indian Income Tax Act. By the Finance Act XXV of 1950 section 13, cl. (1), it was provided in so far as it is material that: "If immediately before the 1st day of April, 1950, there is in force in any Part B State. any law relating to income tax or super tax or tax on profits of business, that law shall cease to have effect except for the purposes of the levy, assessment and collection of income tax and super tax in respect of any period not included in the previous year for the purposes of assessment under the Indian Income Tax Act, 1922 (XI of 1922), for the year ending on the 31st day of March, 1951, or for any subsequent year. " By virtue of section 13(1), the Mysore Income Tax Act ceased to be in operation as from April 1, 1950, except for the purposes of levy, assessment and collection of income tax and super tax in respect of any period which was not included in the previous year for the purposes of assessment under the Indian Income Tax Act for the assessment year 1950 51. The appellants had been assessed for the period July 1, 1948, to June 30, 1949, under the Mysore Income Tax Act. It is manifest that for any account year which was the previous year in relation to the assessment year 195051, the appellants were liable to be assessed under the Indian Income Tax Act and not under the repealed Act. The year of account July 1, 1949, to June 30, 1950, was not a period prior to such previous year and therefore liability to pay tax in respect of that period could be assessed not under the Mysore Income Tax Act, but under the Indian Income Tax Act. It was urged that this interpretation of section 13 may, when the account year of an assessee does not coincide with the financial year lead to double taxation of the income for the account year ending between April 1, 1949, 917 and March 31, 1950. But in order to avoid the contingency envisaged by the appellants, the Central Government has, in exercise of its power under section 60A of the Indian Income Tax Act, issued the Part B States (Taxation Concessions) Order, 1950, which by cl. 5(1) provides amongst other things, that the income, profits and gains of any previous year ending after the 31st day of March, 1949, which is a previous year for the State assessment year 1949 50 shall be assessed under the Act (Indian Income Tax Act, 1922) for the year ending on the 31st March, 1951, if and only if such income, profits and gains have not, before the appointed day, been assessed under the State law. If, in respect of the previous year for the purposes of the assessment year ending 31st March, 1951, the appellants had been assessed by any State Government under a law relating to income tax in force in the State, the Indian Income Tax authorities would be in competent to assess income for that year; but in default of such assessment income of the appellants for that year was assessable under the Indian Income Tax Act. The notice under section 34 was also not issued after the expiry of the period prescribed in that behalf. The notice was issued by the Income Tax Officer because he had reason to believe that by reason of failure on the part of the appellants to disclose fully and truly all material facts necessary for the assessment for the the year 1950 51, income had escaped assessment. Such a notice fell manifestly within section 34(1)(a) and could be issued within eight years, from the end of the year of assessment. The impugned notice under section 34 for reassessment of the income of the appellants for the year 1950 51 was, in our judgment, properly issued and the High Court was right in dismissing the petition for a writ to quash the notice. The appeal fails and is dismissed with costs.

IN-Abs

The appellants, a Hindu undivided family, carrying on business in the former State of Mysore, were assessed under the Mysore Income tax Act for the year of assessment 1949 50 corresponding to the year of account July 1, 1948, to June 30, 1949. The Indian Income tax Act came into force in that area in April 1, 1950, and on December 26, 1950, notice under section 22(2) of that Act was served upon the appellants to submit their return for the assessment year 1950 51. On September 8, 1952, the appellants submitted their return stating that they had no assessable income for that year. The Income Tax Officer passed on that return an order, "no proceeding", and closed the assessment. When the appellants submitted their return for the next assessment year, their books of account disclosed an opening cash credit balance of Rs. 1,87,000 and odd on July 1. 1949. They failed to produce the books of account of the previous years, and the Income tax Officer held that Rs. 1,37,000 out of the said opening balance represented income from an undisclosed source. The appellants submitted a fresh return for the assessment year 1950 51 purporting to do so under section 22(3) of the Indian Incometax Act. Pursuant to the direction of the Appellate Assistant Commissioner, the Income Tax Officer on October 15, 1957, served on the appellants a notice under section 34 of the Act and thereupon the appellants moved the High Court under article 226 for an order quashing the said notice and the proceeding as without jurisdiction. The High Court dismissed the petition. Held, that it was not correct to say that the issue of the notice for reassessment was without jurisdiction as the assessment was yet pending. Under section 23(1) of the Indian Income tax Act, it is open to the Income tax Officer, if he is satisfied as to correctness of the return filed by the assessee, to assess the income and determine the sum payable on the basis of the return without requiring the assessee either to be present or to Produce evidence. The order 'no proceeding recorded on the. return must, therefore, mean that the Income Tax Officer bad accepted the previous return and assessed the income as nil. A revised return under section 22(3) filed by the assessee may be 912 entertained only before the order of assessment and not thereafter. Lodging of such a return after the assessment is no bar to reassessment under section 34(1) of the Act. It could not be said, having regard to the provisions of section 13(1) of the Finance Act (XXV of 1950) and cl. 5(1) of Part. B States (Taxation Concessions) Order 1950, issued by the Central Government under section 60A of the Indian Income tax Act, that for the assessment year 1950 51 the appellants were assessable under the Mysore Income tax Act and not under the Indian Income tax Act.

Appeal No. 200 of 1960. Appeal from the Judgment and Order dated the 19th March, 1959, of the Mysore High Court, Bangalore, in Writ Petition No. 263 of 1957. K.Srinivasan and R. Gopalakrishnan, for the appellant. A. N. Kirpal and D. Gupta, for the respondent. December 5. The Judgment of the Court was delivered by SHAH, J. This appeal with certificate of fitness granted by the High Court of Judicature of Mysore is from an order rejecting the petition of the appellant for a writ to quash a notice of reassessment under section 34 of the Indian Income Tax Act. The appellants are a Hindu Undivided Family carrying on business in groundnuts and other commodities at Goribidnur, Kolar District, in the territory which formed part of the former State of Mysore. The Mysore Income Tax Act was repealed and the Indian ' Income Tax Act was brought into force in the Part B State of Mysore as from April 1, 1950. The appellants had adopted as their year of; account July 1 to June 30 of the succeeding year and they were assessed under the Mysore Income Tax Act on that footing for the year of assessment 1949 50 corresponding to the year of account July 1, 1948,to June 30, 1949. After the Indian Income Tax Act was applied to the State of Mysore on December 26, 1950, notice under section 22(2) of the Indian Income Tax Act was served upon the appellants requiring them to submit their 913 return of income for the assessment year 1950 51. On September 8, 1952, the appellants submitted their return stating that for the year ending June 30, 1949, corresponding to the assessment year 1949 50, they were assessed under the Mysore Income Tax Act, that their income for the year ending June 30, 1950, was assessable under the Indian Income Tax Act in the assessment year 1951 52 and that they had no assessable income for the assessment year 1950 51. The Income Tax Officer passed on that return an order "no proceeding" and closed the assessment. For the assessment year 1951 52, the appellants submitted their return of income. In the books of account produced by the appellants an opening cash credit balance of Rs. 1,87,000 odd on July 1, 1949, was disclosed. The Income Tax Officer called upon the appellants to produce their books of account of previous years, but the books were not produced on the plea that the same were lost. In assessing the income of the appellants for the year of account 1949 50, the Income Tax Officer held that Rs. 1,37,000 out of the opening balance in the books of account dated July 1, 1949, represented income from an undisclosed source. In appeal, the Appellate Assistant Commissioner observed that the appellants not having exercised their option under section 2(ii) of the Indian Income Tax Act, and in the absence "of any system of accounting adopted" by them, the only course open to the Income Tax Officer was to take the financial year ending March 31, 1950, as the previous year for the income from an undisclosed source, and directed the Income Tax Officer to consider this credit in the assessment for the year 1950 51 after giving opportunity to the appellants to explain the nature and source thereof. Before the appeal was disposed of by the Appellate Assistant Commissioner, the appellants had submitted a fresh return for the assessment year 195051 purporting to do so under section 22(3) of the Indian Income Tax Act. Pursuant to the direction of the Appellate Assistant Commissioner, the Income Tax Officer issued a notice of reassessment under section 34 of the Income Tax Act and served it on October 15, 1957, 914 calling upon the appellants to submit a fresh return. The appellants thereupon submitted a petition under article 226 of the Constitution to the High Court of Mysore praying for an order declaring that the notice under section 34 was without jurisdiction and for quashing the notice and proceeding consequent thereon. This petition was dismissed by the High Court, but the High Court, on the application of the appellants, certified that the appeal was a fit one for appeal to this court. Section 34(1) of the Indian Income Tax Act at the relevant time in so far as it is material provided: "(1) If (a). the Income Tax Officer has reason to believe that by reason of the omission or failure on the part of the assessee to make a return of his income under section 22 for any year or to disclose fully and truly all material facts necessary for his assessment for that year, income, profits or gains chargeable to incometax have escaped assessment for that year, or (b). notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Income Tax Officer has in consequence of information in his possession reason to believe that income, profits or gains chargeable to income tax have escaped assessment for any year, he may in cases falling under el. (a) at any time within eight years and in cases falling cl. (b) within four years of the end of that year, serve on the assessee a notice containing all or any of the requirements which may be included in a notice under sub section (2) of section 22 and may proceed to assess or reassess such income, profits or gains; and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub section. " In the course of the assessment proceedings for 1951 52, the appellants produced their books of account containing an entry dated July 1, 1949, showing an opening cash balance of Rs. 1,87,000 odd which was not satisfactorily explained. Though called upon, they did not produce their books of account for the earlier year. The appellants had failed to disclose in their return for the assessment year 1950 51 any 915 income. In the circumstances, the Income Tax Officer had reason to believe that by reason of failure on the part of the appellants to disclose fully and truly all ' material facts necessary for assessment for that year, income chargeable to tax had escaped assessment. The Income Tax Officer had therefore jurisdiction to issue the notice for reassessment. The submission that the previous return submitted on September 8, 1952, "had not been disposed of" and until the assessment pursuant to that return was made, no notice under section 34(1) for reassessment could be issued, has in our judgment no substance. The Income Tax Officer had disposed of the assessment proceeding accepting the submission made by the appellants that they had no income for the assessment year 1950 51. Under section 23(1) of the Indian Income Tax Act, it is open to the Income Tax Officer, if he is satisfied that the return made by an assessee under section 22 is correct, to assess the income and to determine the sum payable by the assessee on the basis of the return without requiring the presence of the assessee or production by him of any evidence. The appellants had in their return dated September 8, 1952, submitted that they had no assessable income for the year in question and on this return, the Income Tax Officer had passed the order "no, proceeding". Such an order in the circumstances of the case meant that the Income Tax Officer accepted the return and assessed the income as "nil". If thereafter, the Income Tax Officer had reason to believe that the appellants had failed to disclose fully and truly all material facts necessary for assessment for that year, it was open to him to issue a notice for reassessment. Under section 22, sub section (3), an assessee may submit a revised return if after he has furnished the return under sub section (2) he discovers any omission or wrong statement therein. But such a revised return can only be filed "at any time before the assessment is made" and not thereafter. The return dated February 26, 1957, was submitted after the assessment was made pursuant to the earlier return and it could not be entertained. Nor could the lodging of such a return 916 debar the Income Tax Officer from commencing a proceeding for reassessment of the appellant under section 34(1) of the Indian Income Tax Act. There is also no substance in the contention that for the assessment year 1950 51 the assessee could be assessed under the Mysore Income Tax Act and not under the Indian Income Tax Act. By the Finance Act XXV of 1950 section 13, cl. (1), it was provided in so far as it is material that: "If immediately before the 1st day of April, 1950, there is in force in any Part B State. any law relating to income tax or super tax or tax on profits of business, that law shall cease to have effect except for the purposes of the levy, assessment and collection of income tax and super tax in respect of any period not included in the previous year for the purposes of assessment under the Indian Income Tax Act, 1922 (XI of 1922), for the year ending on the 31st day of March, 1951, or for any subsequent year. " By virtue of section 13(1), the Mysore Income Tax Act ceased to be in operation as from April 1, 1950, except for the purposes of levy, assessment and collection of income tax and super tax in respect of any period which was not included in the previous year for the purposes of assessment under the Indian Income Tax Act for the assessment year 1950 51. The appellants had been assessed for the period July 1, 1948, to June 30, 1949, under the Mysore Income Tax Act. It is manifest that for any account year which was the previous year in relation to the assessment year 195051, the appellants were liable to be assessed under the Indian Income Tax Act and not under the repealed Act. The year of account July 1, 1949, to June 30, 1950, was not a period prior to such previous year and therefore liability to pay tax in respect of that period could be assessed not under the Mysore Income Tax Act, but under the Indian Income Tax Act. It was urged that this interpretation of section 13 may, when the account year of an assessee does not coincide with the financial year lead to double taxation of the income for the account year ending between April 1, 1949, 917 and March 31, 1950. But in order to avoid the contingency envisaged by the appellants, the Central Government has, in exercise of its power under section 60A of the Indian Income Tax Act, issued the Part B States (Taxation Concessions) Order, 1950, which by cl. 5(1) provides amongst other things, that the income, profits and gains of any previous year ending after the 31st day of March, 1949, which is a previous year for the State assessment year 1949 50 shall be assessed under the Act (Indian Income Tax Act, 1922) for the year ending on the 31st March, 1951, if and only if such income, profits and gains have not, before the appointed day, been assessed under the State law. If, in respect of the previous year for the purposes of the assessment year ending 31st March, 1951, the appellants had been assessed by any State Government under a law relating to income tax in force in the State, the Indian Income Tax authorities would be in competent to assess income for that year; but in default of such assessment income of the appellants for that year was assessable under the Indian Income Tax Act. The notice under section 34 was also not issued after the expiry of the period prescribed in that behalf. The notice was issued by the Income Tax Officer because he had reason to believe that by reason of failure on the part of the appellants to disclose fully and truly all material facts necessary for the assessment for the the year 1950 51, income had escaped assessment. Such a notice fell manifestly within section 34(1)(a) and could be issued within eight years, from the end of the year of assessment. The impugned notice under section 34 for reassessment of the income of the appellants for the year 1950 51 was, in our judgment, properly issued and the High Court was right in dismissing the petition for a writ to quash the notice. The appeal fails and is dismissed with costs.

IN-Abs

The appellants, a Hindu undivided family, carrying on business in the former State of Mysore, were assessed under the Mysore Income tax Act for the year of assessment 1949 50 corresponding to the year of account July 1, 1948, to June 30, 1949. The Indian Income tax Act came into force in that area in April 1, 1950, and on December 26, 1950, notice under section 22(2) of that Act was served upon the appellants to submit their return for the assessment year 1950 51. On September 8, 1952, the appellants submitted their return stating that they had no assessable income for that year. The Income Tax Officer passed on that return an order, "no proceeding", and closed the assessment. When the appellants submitted their return for the next assessment year, their books of account disclosed an opening cash credit balance of Rs. 1,87,000 and odd on July 1. 1949. They failed to produce the books of account of the previous years, and the Income tax Officer held that Rs. 1,37,000 out of the said opening balance represented income from an undisclosed source. The appellants submitted a fresh return for the assessment year 1950 51 purporting to do so under section 22(3) of the Indian Incometax Act. Pursuant to the direction of the Appellate Assistant Commissioner, the Income Tax Officer on October 15, 1957, served on the appellants a notice under section 34 of the Act and thereupon the appellants moved the High Court under article 226 for an order quashing the said notice and the proceeding as without jurisdiction. The High Court dismissed the petition. Held, that it was not correct to say that the issue of the notice for reassessment was without jurisdiction as the assessment was yet pending. Under section 23(1) of the Indian Income tax Act, it is open to the Income tax Officer, if he is satisfied as to correctness of the return filed by the assessee, to assess the income and determine the sum payable on the basis of the return without requiring the assessee either to be present or to Produce evidence. The order 'no proceeding recorded on the. return must, therefore, mean that the Income Tax Officer bad accepted the previous return and assessed the income as nil. A revised return under section 22(3) filed by the assessee may be 912 entertained only before the order of assessment and not thereafter. Lodging of such a return after the assessment is no bar to reassessment under section 34(1) of the Act. It could not be said, having regard to the provisions of section 13(1) of the Finance Act (XXV of 1950) and cl. 5(1) of Part. B States (Taxation Concessions) Order 1950, issued by the Central Government under section 60A of the Indian Income tax Act, that for the assessment year 1950 51 the appellants were assessable under the Mysore Income tax Act and not under the Indian Income tax Act.

Appeal No. 328 of 1960. Appeal from the order dated March 4, 1958, of the Punjab High Court, Chandigarh, in Civil Reference No. 29 of 1952. A. V. Viswanatha Sastri, R. Ganapathy Iyer and G. Gopalakrishnan, for the appellant. Hardyal Hardy and D. Gupta, for the respondent. December 6. The Judgment of the Court was delivered by SHAH, J. The Income Tax Appellate Tribunal, Delhi Bench, stated under section 66(1) of the Indian Income Tax Act the following question for decision of the High Court of Judicature at Chandigarh: "Whether the assessee 's receipts from consumers for laying service lines, (that is, not distributing mains) were trading receipts and whether the profit element therein, viz., service connection receipts minus service connection cost was taxable income in the assessee 's hands?" The High Court answered the question as follows: ". the company 's receipts from the consumers for laying the service lines are trading receipts and 958 the profit element therein being the difference bet ween the service connection receipts and the service connection costs is taxable income in the hands of the company." With certificate granted under section 66A(2) of the Income Tax Act, this appeal is preferred by the Hoshiarpur Electric Supply Company hereinafter referred to as the assessee. The assessee is a licensee of an electricity undertaking. In the year of account, April 1, 1947March 31, 1948, the assessee received Rs. 12,530 for new service connections granted to its customers. Out of this amount, Rs. 5,929 were spent for laying the service lines, and Rs. 1,338 were spent for laying certain mains. The Income Tax Officer treated the entire amount of Rs. 12,530 as trading receipt. In appeal to the Appellate Assistant Commissioner, the cost incurred for laying service lines and mains was excluded and the balance was treated as taxable income. In appeal, the Appellate Tribunal agreed with the Appellate Assistant Commissioner and held that the service connection receipts were trading receipts and that the "profit element" therein was taxable income in the hands of the assessee. In a reference under section 66(1) of the Income Tax Act, the High Court substantially agreed with the view of the Tribunal. The assessee has installed machinery for producing electrical energy and has also laid mains and distributing lines for supplying it to its customers. The assessee makes no charge to the consumers for laying service lines not exceeding 100 ft. in length from its distributing main to the point of connection on the consumer 's property in accordance with cl. 6(1)(b) of the Schedule to the . But where the length of a service line to be installed exceeds 100 ft., the cost is charged at certain rates by the assessee. The charge consists usually of cost of wiring copper as well as galvanised iron, service and other brackets, insulators, meter wiring, poles and appropriate labour and supervision charges. In the year of account, the assessee gave 229 new connections 959 and received Rs. 12,530 out of which Rs. 5,929 have been regarded as taxable income. In the forms of account prescribed under the Indian Electricity Rules framed under section 37 read with section 11 of the , the assessee credited service connection receipts to the revenue account and debited the Inc, corresponding cost of laying service lines to the capital account. But the classification of the receipts in the form of accounts is not of any importance in considering whether the receipt is taxable as revenue. The assessee contended that the service lines when installed became the property of the assessee, because they were in the nature of an extension of the assessee 's distributing mains. On behalf of the Revenue, it was urged relying upon the judgment of the High Court that the service lines which are paid for by the consumers do not become the property of the assessee. We do not think that it is open to us in an appeal from an order under section 66 of the Indian Income Tax Act to enter upon this question. The Tribunal did not record a finding on the question whether the assessee was the owner of the service lines. Undoubtedly, contributions were made by the consumers towards the cost of the service lines installed by the assessee which exceeded 100 ft. in length. Normally, a person who pays for installation of property may be presumed to be the owner thereof; but such a presumption cannot necessarily be made in respect of a service line, which so long as it is used for supplying electrical energy remains an integral part of the distri buting mains of an electrical undertaking. The High Court was exercising advisory jurisdiction, and the question as to who was the owner of the service lines after they were installed could be adjudicated upon only by the Tribunal. It was for the Tribunal to record its conclusion on that question, but the Tribunal has recorded none. In our judgment, the High Court was in error in assuming to itself jurisdiction substantially appellate in character and in proceeding to decide the question as to ownership of the service lines which is a mixed question of law and fact, on which the Tribunal has given no finding. 960 The assessee contended that the amount paid by the consumers for new connections is capital receipt and not liable to tax, because the amount is paid by the consumers towards expenditure to be incurred by the assessee in laying new service lines an asset of a lasting character. This question falls to be determined in the light of the nature of the receipt irrespective of who remained owner of the materials of the service lines installed for granting electrical connections to new customers. The assessee only spends a part of the amount received by it from the consumers. It is not clear from the statement of the case whether amongst the 229 new connections given, there were any which were of a length less than 100 ft. Payments received by the assessee must of course be for service lines installed of length more than 100 ft., but it is not clear on the, record whether the expenditure of Rs. 5,929 incurred by the assessee is only in respect of service lines which exceeded 100 ft. in length or it is expenditure incurred in respect of all service lines. It is however not disputed that a part of the amount received from the consumers remains with the assessee after meeting the expenses incidental to the construction of the service lines. But an electric service line requires constant inspection and occasional repairs and replacement and expenses in this behalf have to be undertaken by the assessee. The amount contributed by the consumer for obtaining a new connection would of necessity cover all those services. The amount contributed by the consumer is in direct recoupment of the expenditure for bringing into existence an asset of a lasting character enabling the assessee to conduct its business of supplying electrical energy. By the installation of the service lines, a capital asset is brought into existence. The contribution made by the consumers is substantially as consideration for a joint adventure; the service line when installed becomes an appanage of the mains of the assessee, and by the provisions of the Electricity Act, the assessee is obliged to maintain it in proper repairs for ensuring efficient supply of energy. The assumption made by the 961 Department that the excess remaining in the hands of the assessee, after defraying the immediate cost of installation of a service line must be regarded as a trading profit of the company is not correct. The assessee is undoubtedly carrying on the business of distributing electrical energy to the consumers. Installation of service lines is not an isolated or casual act; it is an incident of the business of the assessee. But if the amount contributed by the consumers for installation of what is essentially reimbursement of capital expenditure, the excess remaining after expending the cost of installation out of the amount contributed is not converted into a trading receipt. This excess which is called by the Tribunal "profit element" was not received in the form of profit of the business; it was part of a capital receipt in the hands of the assessee, and it was not converted into a trading profit because the assessee was engaged in the business of distribution of electrical energy, with which the receipt was connected. In Commissioner of Income tax vs Poona Electric Supply Co. Ltd. (1), it was held by a Division Bench of the Bombay High Court that the amount received from the Government of Bombay by the Poona Electric Company in reimbursement of expenses incurred for constructing new supply lines for supplying energy to new areas not previously served, was a capital receipt and not a trade receipt. The question of the taxability of the "profit element" in the contribution received from the Government was not expressly determined; but the court in that case held that the entire amount received by the Poona Electric Company from the Government as contribution was a capital receipt. In Monghyr Electric Supply Co. Ltd. vs Commissioner of Income tax, Bihar and Orissa (2), it was held that the amount paid by consumers of electricity for meeting the cost of service connections was a capital receipt in the hands of the electricity undertaking and not revenue receipt and the difference between the amount received on account of service connection charges and (1) (2) 962 the amount immediately not expended was not taxable as revenue. The receipts though related to the business of the assessee as distributors of electricity were not inciden t nor in the course of the carrying on of the assessee 's business; they were receipts for bringing into existence capital of lasting value. Contributions were not made merely for services rendered and to be rendered, but for installation of capital equipment under an agreement for a joint venture. The total receipts being capital receipts, the fact that in the installation of capital, only a certain amount was immediately expended, the balance remaining in hand, could not be regarded as profit in the nature of a trading receipt. On that view of the case, in our judgment, the High Court was in error in holding that the excess of the, receipts over the amount expended for installation of service lines by the assessee was a trading receipt. The appeal is allowed and the question submitted to the High Court is answered in the negative. The assessee is entitled to its costs in this court as well as in the High Court. Appeal allowed.

IN-Abs

The assessee, an electricity supply undertaking, received certain sum of money for new service connections granted to its customers. Part of this amount was spent for laying mains and service lines. The Income tax Officer treated the entire amount as trading receipt. In appeal the Appellate Assistant Commissioners excluded the cost of laying service lines and the mains and treated the balance as taxable income. The Appellate Tribunal agreed with the Appellate Assistant Commissioner and held that the service connection receipts were trading receipts and the "profit element" therein was taxable income in the hands (1)[1929] A.C. 386; 957 of the assessee. In a reference under section 66(1) of the Income tax Act, the High Court substantially agreed with the view of the Tribunal. On appeal by the assessee, Held, that the High Court erred in holding that the excess of the receipts over the amount spent by the assessee for installation of service lines was a trading receipt. The receipts though related to the business of the assessee as distributors of electricity were not incidental to nor in the course of the carrying on of the assessee 's business. They were receipts for bringing into existence capital of lasting value. The total receipts being capital receipts the balance remaining after a part thereof was expended for laying service lines and mains, could not be regarded as 'profit ' in the nature of a trading receipt. Commissioner of Income tax vs Poona Electric Supply Co. Ltd., and Monghyr Electric Supply Co. Ltd. vs Commissioner of Income tax, Bihar and Orissa, , discussed and applied.

Appeal No. 37 of 1955. Appeal from the judgment and order dated December 7, 1954, of the Jammu and Kashmir High Court in Criminal Misc. No. 76 of 2011. Vir Sen Sawhney, for the appellant. C. K. Daphtary, Solicitor General of India, B. R. L. Iyengar, R. H. Dhebar and T. M. Sen, for the respondents. Sardar Bahadur, for the intervener. December 5. The Judgment of Sinha, C. J., Kapur, Gajendragadkar, Wanchoo and Shah, JJ., was delivered by Sinha, C. J. Subba Rao, J. and Das Gupta, J. delivered separate judgments. SINHA, C. J. This appeal on a certificate of fitness granted by the High Court of Judicature, Jammu and Kashmir, is directed against the judgment and order dated December 7, 1954, in an application under article 32(2A) of the Constitution for issue of. a writ, directions or. order against the Union of India, through the Secretary, Ministry of Defence,, New Delhi, a,% the first respondent and the State of Jammu and Kashmir through the Chief Secretary,, Jammu and Kashmir State, as the second respondent. The petition is based on the following allegations. The petitioner will be referred to as the appellant in the course of this judgment. He was aged 45 years 832 262 days on August 12, 1954. He was holding a regular commission in the Jammu and Kashmir State Forces, which were amalgamated with the Defence Forces of the Union with effect from September 1, 1949. The appellant holding the substantive rank of Lieut. Col. in the amalgamated forces had the right to continue in service until he attained the age of 53 years, which event will happen on November 20, 1961. The Government of India issued a letter dated July 31, 1954, retiring the appellant from the service with effect from August 12, 1954, This decision of the Government of India is not based on any allegations or charge of inefficiency, indiscipline or any other irregularity on the part of the appellant. The aforesaid decision of the Government of India prematurely retiring the appellant is impugned as illegal, unwarranted and discriminatory and as having been made in contravention of article 16(1) of the Constitution. The petition was opposed on behalf of the respondents aforesaid on a number of preliminary grounds of which it is only necessary to mention the first, namely, that the authority against whom the writ is sought, that is to say, respondent No. 1, being outside the territorial limits of the jurisdiction of the Jammu and Kashmir High Court, the same was not maintainable. This preliminary objection was heard by a Division Bench, (Janki Nath Wazir, C. J. and M. A. Shahmiri, J.) Jammu and Kashmir High Court. By its judgment. dated December 7, 1954, the High Court upheld the preliminary objection. The High Court, relying upon the decisions of this Court in Election Commission, India vs Saka Venkata Subba Rao (1) and K. section Rashid and Son vs The Income tax Investigation Commission etc. (2), held that it had no jurisdiction to issue a writ against the first respondent and, therefore, dismissed the petition, but the High Court granted the necessary certificate under article 132 of the Constitution; hence this appeal. The matter was first heard by a Bench of five judges. in the course of hearing it became clear to us that the appellant not only sought to distinguish (1) ; (2) ; 833 the two decisions aforesaid of this Court, but questioned the correctness of those decisions. Hence this larger Bench was constituted in order to examine the correctness of the decisions aforesaid of this Court on the strength of which the High Court had refused to entertain the appellant 's petition, on merits. It has been argued on behalf of the appellant, in the first instance, that the previous decisions of this Court were distinguishable on the ground that they did not, in terms, consider the question whether the Government of India wag amenable to the jurisdiction of the High Court under article 226 or of the Jammu and ' Kashmir High Court under article 32(2A) of the Constitution. that those provisions, on a true construction, would not stand in the way of the appellant, inasmuch as the Government of India has no location and its authority is present throughout the Union territory; that the correct test is whether or not the cause of action arose within the territorial limits of the High Court 's jurisdiction; that the High Court was in error in holding that the term "authority" included a Government. In answer to these contentions on behalf of the appellant, the learned Solicitor General contended that, on a proper construction of the relevant provisions of the Constitution, it is clear that Sastri C. J. 's observations relating to "authority" in the case of Election Commission, India vs Saka Venkata Subba Rao (1) applied with equal force to Government, inincluding the Union Government. The Government of India functions through its officers and, therefore, the location contemplated means the place at which the orders impugned are ordinarily passed. The considerations in a suit with reference to the cause of action for the suit do not stand on the same footing in a writ matter, because the writ has to reach the particular officers of the Government concerned. The expression "in appropriate cases" means that there may be cases where though the Union Government as such is not located within the territorial limits of a High Court yet a writ may be issued against it by the High (1) ; 834 Courts because an officer of the Union Government is functioning within such limits and it is his order which is the subject matter of the controversy. Therefore, it is not in every case that a High Court can issue a writ against the Union. A writ of mandamus, for example, is directed against a particular named person or authority. Similarly, a writ of certiorari is directed against a particular record. Therefore, the writ must issue to someone within the territorial limits of the High Court 's jurisdiction. The question that we have to determine in this case is of far reaching importance and is not a matter of first impression. The question was first raised in this Court in 1952 and was determined by a Constitution Bench in the case of Election Commission, India vs Saka Venkata Subba Rao (1). In that case a writ was applied for in the Madras High Court for restraining the Election Commission from, enquiring into the alleged disqualification of the respondent. A single Judge of the High Court of Judicature of Madras issued a writ of prohibition restraining the Election Commission, a statutory authority constituted by the President of India, with its office permanently located at New Delhi, when the matter was heard by the learned single Judge of the High Court. In the High Court the Election Commission demurred to the jurisdiction of the Court to issue any writ against it on the ground that the Commission was not within the territory in relation to which the High Court exercised jurisdiction, apart from other objections. The learned Judge of the High Court overruled the preliminary objection and decided the case on merits, and issued a writ prohibiting the Commission from ' proceeding with the enquiry. The learned Judge granted the certificate under article 132 that the case involved a substantial question of law as to the interpretation of the Constitution. The Election Commission accordingly came up in appeal to this Court and challenged the jurisdiction of the Madras High Court to issue the writ it had purported to do. This Court overruled the contention on behalf of the respondent which was (1) ; 835 based on the decision of the Privy Council in the Parlakimedi case (1) that the jurisdiction of the High Court to issue a writ is analogous to the jurisdiction of a court to grant a decree or order against persons outside the limits of its local jurisdiction, provided that the cause of action arose within those limits. This Court overruled that contention in these words: "The rule that cause of action attracts jurisdiction in suits is based on statutory enactment and cannot apply to writs issuable under article 226 which makes no reference to any cause of action or where it arises but insists on the presence of the person or authority 'within the territories ' in relation to which the High Court exercises jurisdiction". The Constitution Bench in that case considered that the language of article 226 of the Constitution was "reasoriably plain" and that the exercise of the power conferred by that Article was subject to a two fold limitation, namely, (1) that the power is to be exercised "throughout the territories in relation to which it exercises jurisdiction" and (2) that the person or authority to whom the High Court is empowered to issue the writs must be "within those territories". In other words, the writ of the Court could not run beyond the territories subject to its jurisdiction and that the person or authority affected by the writ must be amenable to the Court 's jurisdiction, either by residence or location within those territories. The second case of this Court, which dealt with this question is K. section Rashid and Son vs The Income Tax Investigation Commission (2). That was a case on appeal from the judgment and order dated August 10, 1950, of the High Court of Judicature, Punjab, at Simla, in a number of miscellaneous matters, in which the High Court had been moved under articles 226 and 227 of the Constitution praying for quashing proceedings started against the appellants under the Taxation on Income (Investigation Commission.) Act (XXX of 1947). It was prayed in the High Court that a writ of prohibition might issue against the Income Tax (1) (1943) L.R. 70 I.A. 129. (2) ; 836 Investigation Commission directing it not to proceed with the investigation of cases referred to it under the provisions of the Act. The writ petitions in the High Court were opposed on behalf of the Commission on a number of grounds, one of them being that the Pun. jab High Court had no jurisdiction to issue the writs prayed for under article 226 of the Constitution, simply because the Commission was located in Delhi. Reliance was placed on behalf of the Commission on the decision of the Privy Council in the Parliament case (1) that the substance of the matter was that the assessees against whom the investigation had been started belonged to U. P. and all the assessment pro ceedings, including reference to the High Court, would lie in Uttar Pradesh. The High Court gave effect to this contention and dismissed the application primarily on the ground that the High Court had no jurisdiction to issue the writ to the Commission. The assessees came up in appeal to this Court, and this Court substantially adopted the reasons given by it in its previous judgment in the case of Election Commission, India vs Saka Venkata Subba Rao (2). It is to be noted that when the High Court of Punjab decided the case, the decision of this Court referred to above had not been given. Relying upon its previous decision, this Court held that the Punjab High Court was in error in holding that it had no jurisdiction to deal with the matter under article 226 of the Constitution. The appeal was dismissed by this Court on other grounds, not material to this case. Learned counsel for the appellant has contended that the two decisions of this Court referred to above are distinguishable from the facts of the present case, inasmuch as in those cases the Election Commission and the Income tax Investigation 'Commission were statutory bodies, which had their location in Delhi, and, therefore, this Court held that the Punjab High Court was the High Court within whose jurisdiction those bodies functioned and had their location and were, therefore, amenable to its jurisdiction. He further contended that the Union Government functioned throughout the territory of India and could (1) (1943) L.R. 70 I.A. 129. (2) ; 837 not be said to be located only in Delhi simply because the capital for the time being was in Delhi. In this connection, strong reliance was placed on the decision of the Full Bench of the Allahabad High Court in Maqbulunnissa vs Union of India (1). That case does lend a great deal of support to this contention on behalf of the appellant. It was held by the High Court in that case that the words "any Government" in article 226(1) of the Constitution clearly indi cated that the Allahabad High Court had jurisdiction to entertain the petition under article 226, not only against the State of Uttar Pradesh, but also against the Union Government for the issue of a writ in the nature of mandamus, directing the Government to forbear from giving effect to the order asking the petitioner to leave India. The ratio of the decision was that, even though the capital of the Government of India is in Delhi, its executive power extends throughout the territory of India and that the real test to determine the jurisdiction would be the residence of the petitioners and the effect of the impugned order upon them. After holding that the High Court had the jurisdiction to entertain the petition, the Court dismissed it on other grounds, not material to this case. The Allahabad High Court distinguished the decision of a Division Bench of the Calcutta High Court dated January 17, 1951, in the case of The Lloyds Bank Limited vs The Lloyds Bank Indian Staff Association (Calcutta Branches) (2) which was unreported till then. In that case, Harries, C. J., speaking for the Court, had held that though article 226 of the Constitution had gone beyond the English practice by providing that writs in the nature of prerogative writs could issue even against a Government, that Government most be located within the territorial limits of the Court which was moved to exercise its power under that Article. He further observed that the Government of India could not be said to be located in the State of West Bengal and, therefore, writs under article 226 could not issue against that Government by the High Court of Calcutta. That (1) I.L. R. (1953) 2 All. 289. (2) I.L.R. 838 decision of the Calcutta High Court was distinguished by the Allahabad High Court on the ground that "the effects of the orders of the Union Government were not operative within the jurisdiction of the Court". It may be added that that decision came up in appeal to this Court in Civil Appeal No. 42 of 1952 but the appeal was dismissed by this Court by its judgment dated April 20, 1952, on other grounds. It will be noticed that when the Allahabad decision, so strongly relied upon by the appellant, was given, the two decisions referred to above of this Court were not there. The Allahabad High Court may not have given that judgment if the two decisions of this Court had then been in existence. The two main questions which arise, therefore, are: (i) whether the Government of India as such can be said to have a location in a particular place, viz., New Delhi, irrespective of the fact that its authority extends over all the States and its officers function throughout India, and (ii) whether there is any scope for introducing the concept of cause of action as the basis of exercise of jurisdiction under article 226. Before, however, we deal with these two main questions, we would like to clear the ground with respect to two subsidiary matters which have been urged on behalf of the appellant. The first argument is that the word "authority" used in article 226 cannot and does not include Government. We are not impressed by this argument. In interpreting the word "authority" we must have regard to the clause immediately following it. article 226 provides for "the issue to any person or authority including in appropriate cases any Government" within those territories. It is clear that the clause "including in appropriate cases any Government" goes with the preceding word "authority", and on a plain and reasonable construction it means that the word " authority" in the context may include any Government in an appropriate case. The suggestion that the said clause is intended to confer discretion on the High Courts in the matter of issuing a writ or direction on any Government seems to us clearly unsustainable. 839 To connect this clause with the issuance of a writ or order and to suggest that in dealing with cases against Government the High Court has to decide whether the case is appropriate for the issue of the order is plainly not justified by the rules of grammar. We have no hesitation in holding that the said clause goes with the word "authority" and that its effect is that the authority against whom jurisdiction is conferred on the High Court to issue a writ or appropriate order may in certain cases include a Government. Appro priate cases in the context means cases in which orders passed by a Government or their subordinates are challenged, and the clause therefore means that where such orders are challenged the High Court may issue a writ against the Government. The position, therefore, is that under article 226 power is conferred on the High Court to issue to any person or authority or in a. given case to any Government, writs or orders there specified for enforcement of any of the rights conferred by Part III and for any other purpose. Having thus dealt with the two subsidiary points raised before us, we may now proceed to consider the two main contentions which arise for our decision in the present appeal. This brings us to the first question, namely, whether the Government of India as such can be said to be located at one place, namely, New Delhi. The main argument in this connection is that the Government of India is all pervasive and is functioning throughout the territory of India 'and therefore every High Court has power to issue a writ against it, as it must be presumed to be located within the territorial jurisdiction of all State High Courts. This argument in our opinion confuses the concept of location of 'a Government with the concept of its functioning ' A Government may be functioning all over a State or all over India; but it certainly is not located all over the State or all over India. It is true that the Constitution has not provided that the seat of the Government, of India will be at New Delhi. That, however, does not mean ' that the Government of India as such has no seat where it is located. It is common knowledge that the seat of the 840 Government of India is in New Delhi 'and the Government as such is located in New Delhi. The absence of a provision in the Constitution can make no difference to this fact. What we have to see, therefore, is whether the words of article 226 mean that the person or authority to whom a writ is to be issued has to be resident in or located within the territories of the High Court issuing the writ? The relevant words of article 226 are these "Every High Court shall have power to issue to any person or authority within those territories. ". So far as a natural person is concerned, there can be no doubt that he can be within those territories only if he resides therein either permanently or temporarily. So far as an authority is concerned, there can be no doubt that if its office is located therein it must be within the territory. But do these words mean with respect to an authority that even though its office is not located within those territories it will be within those territories because its order may affect persons living in those territories? Now it is clear that the jurisdiction conferred on the High Court by article 226 does not depend upon the residence or location of the person applying to it for relief; it depends only on the person or authority against whom a writ is sought being within those territories. It seems to us therefore that it is not permissible to read in article 226 the residence or location of the person affected by the order passed in order to determine the jurisdiction of the High Court. That jurisdiction depends on the person or authority passing the order being within those territories and the residence: or location of the person affected can have no relevance on the question of the High Court 's jurisdiction. Thus if a person residing or located in Bombay, for example, is aggrieved by an order passed by an authority located, say, in Calcutta, the forum in which he has to seek relief is not the Bombay High Court though the order may affect him in Bombay but the Calcutta High Court where the authority passing the order is located. It would, therefore, in our opinion be wrong to introduce in article 226 the concept of the place where the order 841 passed has effect in order to determine the jurisdiction of the High Court which can give relief under article 226. The introduction of such a concept may give a rise to confusion and conflict of jurisdictions. Take , for example, the case of an order passed by an authority in Calcutta, which affects six brothers living, say , in Bombay, Madras, Allahabad, Jabalpur, Jodhpur and Chandigarh. The order passed by the authority in Calcutta has thus affected persons in six States. Can it be said that article 226 contemplates that all the six High Courts have jurisdiction in the matter of giving relief under it? The answer must obviously be 'No ', if one is to avoid confusion and conflict of jurisdiction. As we read the relevant words of article 226 (quoted above) there can be no doubt that the jurisdiction conferred by that Article on a High Court is with respect to the location or residence of the person or authority passing the order and there can be no question of introducing the concept of the place where the order is to have effect in order to determine which High Court can give relief under it. It is true that this Court will give such meaning to the words used in the Constitution as would help towards its working smoothly. If we were to introduce in article 226 the concept of the place where the order is to have effect we would not be advancing the purposes for which article 226 has been enacted. On the other hand, we would be producing conflict of jurisdiction between various High Courts as already shown by the illustration given above. Therefore, the effect of an order by whomsoever it is passed can have no relevance in determining the jurisdiction of the High Court which can take action under article 226. Now, functioning of a Government is really nothing other than giving effect to the orders passed by it. Therefore it would not be right to introduce in article 226 the concept of the functioning of Government when determining the meaning of the words "any person or authority within those territories". By introducting the concept of functioning in these words we shall be creating the same conflict which would arise if the concept of the place where the order is to have effect is introduced in 842 article 226. There can, therefore, be no escape from the conclusion that these words in article 226 refer not to the place where the Government may be functioning but only to the place where the person or authority is either resident or is located. So far therefore as a natural person is concerned, he is within those territories if he resides there permanently or temporarily. So far. as an authority (other than a Government) is concerned, it is within the territories if its office is located there. So far as a Government is concerned it is within the territories only if its seat is within those territories. The seat of a Government is sometimes mentioned in the Constitutions of various countries but many a time the seat is not so mentioned. But whether the seat of a Government is mentioned in the Constitution or not, there is undoubtedly a seat from which the Government as 'such functions as a fact. What article 226 requires is residence or location as a fact and if therefore there is a seat from which the Government functions as a fact even though that seat is not mentioned in the Constitution the High Court within whose territories that seat is located will be the High Court having jurisdiction under AA. 226 so far as the orders of the Government as such are concerned. Therefore, the view taken in Election Commission, India vs Saka Venkata Subba Rao (1) and K.S. Rashid and Son vs The Income tax Investigation Commission (2) that there is two fold limitation on the power of the High Court to issue writs etc. under article 226, namely, (i) the power is to be exercised 'throughout the territories in relation to which it exercises jurisdiction ', that is to say, the writs issued by the Court cannot run beyond the territories subject to its jurisdiction, and (ii) the person or authority to whom the High Court is empowered to issue such writs must be "within those territories" which clearly implies that they must be amenable to its jurisdiction either by residence or location within those territories, is the correct one. This brings us to the second point, namely, whether (1) ; (2) ; 843 it is possible to introduce the concept of cause of action in article 226 so that the High Court in whose jurisdiction the cause of action arose would be the proper one to pass an order thereunder. Reliance in this connection has been placed on the judgment of the Privy Council in Ryots of Garabandho vs Zamindar of Parlakimedi (1). In that case the Privy Council held that even though the impugned order was passed by the Board of Revenue which was located in Madras, the High Court would have no jurisdiction to issue a writ quashing that order, as it had no jurisdiction to issue a writ beyond the limits of the city of Madras except in certain cases, and that particular matter was not within the exceptions. This decision of the Privy Council does appa rently introduce an element of the place where the cause of action arose in considering the jurisdiction of the High Court, to issue a writ. The basis of the at decision, however, was the peculiar history of the issue of writs by the three Presidency High Courts as successors of the Supreme Courts, though on the literal construction of cl. 8 of the Charter of 1800 conferring jurisdiction on, the Supreme Court of Madras, there could be little doubt that the Supreme Court would have the same jurisdiction as the Justices of the Court of King 's Bench Division in England for the territories which then were or thereafter might be subject to or depend upon the Government of Madras. It will therefore not be correct to put too much stress on the decision in that case. The question whether the concept of cause of action could be introduced in article 226 was also considered in Saka Venkata Subba Rao 's case ( 2 ) and was repelled in these words: "The rule that cause of action attracts jurisdiction in suits is based on statutory enactment and cannot apply to writs issuable under article 226 which makes no reference to any cause of action or where it arises but insists on the presence of the person or authority within the territories ' in relation to which the High Court exercises jurisdiction. " Article 226 as it stands does not refer anywhere to (1) (1943) L.R. 70 I.A. 129. (2) ; 844 the accrual of cause of action and to the jurisdiction of the High Court depending on the place where the cause of action accrues being within its territorial jurisdiction. Proceedings under article 226 are not suits; they provide for extraordinary remedies by a special procedure and give powers of correction to the High Court over persons and authorities and these special powers have to be exercised within the limits set for them. These two limitations have already been indicated by us above and one of them is that the person or authority concerned must be within the territories over which the High Court exercises juris diction. Is it possible then to overlook this constitu tional limitation and say that the High Court can issue a writ against a person or authority even though it may not be within its territories simply because the cause of action has arisen within those territories? It seems to us that it would be going in the face of the express provision in article 226 and doing away with an express limitation contained therein if the concept of cause of action were to be introduced in it. Nor do we think that it is right to say that because article 300 specifically provides for suits by and against the Government of India, the proceedings under article 226 are also covered by article 300. It seems to us that article 300 which is on the same line as section L76 of the Government of India Act, 1935, dealt with suits as such and proceedings analogous to or consequent upon suits and has no reference to the extraordinary remedies provided by article 226 of the Constitution. The concept of cause of action cannot in our opinion be introduced in article 226, for by doing so we shall be doing away with the express provision contained therein which requires that the person or authority to whom the writ is to be issued should be resident in or located within the territories over which the High Court has jurisdiction. It is true that this may result in some inconvenience to persons residing far away from Now Delhi who are aggrieved by some order of the Government of India as such, and that may be a reason for making a suit. able constitutional amendment in article 226. But the argument of inconvenience, in our opinion,. cannot 845 affect the plain language of article 226, nor can the concept of the place of cause of action be introduced into it for that would do away with the two limitations on the powers of the High Court contained in it. We have given our earnest consideration to the language of article 226 and the two decisions of this Court referred to above. We are of opinion that unless there are clear and compelling reasons, which cannot be denied, we should not depart from the interpretation given in these two cases and indeed from any interpretation given in an earlier judgment of this Court, unless there is a fair amount of unanimity that the earlier decisions are manifestly wrong. This Court should not, except when it is demonstrated beyond all reasonable doubt that its previous ruling, given after due deliberation and full hearing, was erroneous, go back upon its previous ruling, particularly on a constitutional issue. In this case our reconsideration of the matter has confirmed the view that there is no place for the introduction of the concept of the place where the impugned order has effect or of the concept of functioning of a Government, apart from the location of its office concerned with the case, or even of the concept of the place where the cause of action arises in article 226 and that the language of that Article is plain enough to lead to the conclusion at which the two cases of this Court referred to above arrived. 'If any inconvenience is felt on account of this interpretation of article 226 the remedy seems to be a constitutional amendment. There is no scope for avoiding the inconvenience by an interpretation which we cannot reasonably, on the language of the Article, adopt and which the language of the Article does not bear. In this view of the matter the appeal fails and is hereby dismissed with costs. SUBBARAO, J. I have had the advantage of perusing the judgment prepared by my Lord the Chief Justice. I regret my inability to agree. I would not have ventured to differ from his weighty opinion but for the fact that the acceptance of the contention of 107 846 the respondents would practically deprive the majority of citizens of our country of the benefit of cheap, expeditious and effective remedy given to them under article 226 of the Constitution against illegal acts of the Union Government. If the relevant provisions are clear and unambiguous, the said contention must prevail however deleterious the effect may be to public interest. But if the words of the Article are capable of two or more interpretations, one that will carry out the intention of the Constituent Assembly and the other that would defeat it, the former interpretation must necessarily be accepted. We must also bear in mind that the provisions of the Constitution are not " mathematical formulae which have their essence in mere form". It being an organic statute, its provisions must be construed broadly and not in a pedantic way, but without doing violence to the language used. The facts have been fully stated in the judgment of my Lord the Chief Justice and it would be redundant to restate them. It would be enough if I formulate the point of law raised and express my opinion thereon. The question is whether the appellant, who is a citizen of India and is residing in the State of Kashmir, can enforce his fundamental right under Art 32(2A) of the Constitution by filing an appropriate writ petition in the High Court of Jammu & Kashmir, if his right is infringed by an order of the Union Government. The Constitution of India has been made applicable to the State of Jammu & Kashmir by the Constitution (Application to Jammu & Kashmir) Order, 1954 (Order No. 48 dated May 14, 1954) with certain exceptions and modifications. By the said Order, cl. (3) of article 32 of the Constitution was deleted, and a new clause (2A) was inserted after cl. The question falls to be decided on a true construction of the said el. (2A) which reads: "Without prejudice to the powers conferred by clauses (1) and (2), the High Court shall have power throughout the territories in rotation to which it exercises jurisdiction to issue to any person or authority, including in appropriate cases any Government within these territories, directions or orders or writs, 847 including writs in the nature of habeas corpus, mandamus, prohibition, quo warranto and certiorari, or any of them, for the enforcement of any of the rights conferred by this Part. " The operative part of this clause is in pari materia with article 226 of the Constitution with the difference that the words "for any other purpose" found in the latter Article are omitted in the former. Though the power of the High Court of Jammu & Kashmir is limited to that extent, in other respects it is as extensive as that of the other High Courts under article 226. The object of the amendment is self evident; it was enacted to enable the said High Court to protect the fundamental rights of the citizens of India in that part of the country. The learned Solicitor General broadly contends that this Court has construed the analogous provisons of article 226 of the Constitution and held that the writs under that Article do not run beyond the territories in relation to which a High Court exercises jurisdiction and that a High Court cannot issue a writ thereunder unless the person or authority against whom the writ is sought is physically resident or located within the territorial jurisdiction of that High Court; and that, therefore, on the same parity of reasoning, the High Court of Jammu & Kashmir cannot issue a writ to run beyond the territories of that State against the Union Government functioning through its officers in New Delhi. Learned counsel for the appellant contends, on the other hand, that neither article 32(2A) nor article 226 bears any such limited construction and that on a liberal and true construction of the said constitutional provisions it must be held that 'the High Court can issue a writ against any Government, including the Union Government, exercising the functions within the territories of a State, if it infringes the right of a person in that State. Before I attempt to construe the provisions of el. (2A) of article 32, I think it would be convenient to trace briefly the history of article 226, for it throws a flood of light on the legislative intention expressed in 848 article 32(2A). In pre independence India the High Courts, other than the High Courts in the presidency towns of Bombay, Calcutta and Madras, had no power to issue prerogative writs; even in the case of the said presidency High Courts the power to issue writs was very much circumscribed; their jurisdiction to issue the said writs was confined only to the limits of their original jurisdiction and the Governments were excluded from its scope. But the framers of our Constitution with the background of centuries of servility, with the awareness of the important role played by the High Court of England in protecting the rights of its citizens when they were infringed by executive action, with the knowledge of the effective and impartial part played by the High Courts in pre independence India within the narrow limits of their jurisdiction to protect the rights of the citizens of our country, with a vision to prevent autocracy raising its ugly head in the future, declared the fundamental rights in Part III of the Constitution, conferred powers on the High Courts to issue to any person or authority, including in appropriate cases any Government, directions, orders or writs for the enforcement of the fundamental rights or for any other purpose. In short, any person of India can approach an appropriate High Court to protect his rights against any person, authority or any Government if his fundamental right or any other right is infringed by the said person, authority or Government. If the contention of the respondents be accepted, whenever the Union Government infringes the right of a person in any remote part of the country. , he must come all the way to New Delhi to enforce his right by filing a writ petition in the Circuit Bench of the Punjab High Court. If a common man residing in Kanyakumari, the southern most part of India, his illegally detained in prison, or deprived of his property otherwise than by law, by an order of the Union Government, it would be a travesty of fundamental rights to expect him to come to New Delhi to seek the protection of the High Court of Punjab. This construction of the provisions of article 226 would attribute to the framers 849 of the Constitution an intention to confer the right on a person and to withhold from him for all practical purposes the remedy to enforce his right against the Union Government. Obviously it could not have been the intention of the Constituent Assembly to bring about such an anomalous result in respect of what they conceived to be a cherished right conferred upon the citizens of this country. In that event, the right conferred turns out to be an empty one and the object of the framers of the Constitution is literally defeated. The scope of article 226 vis a vis the reach of the High Courts ' power has been considered in two decisions of this Court, namely, Election Commission, India vs Saka Venkata Rao (1) and K. section Rashid and Son vs The Income tax Investigation Commission (2). As this Bench of seven Judges is constituted to enable this Court to approach the problem with a fresh mind unhampered by precedents, I propose to scrutinize the provisions of article 32(2A) free from the curbs imposed by the earlier decisions. The core of the Article is discernible in the following clause and phrases: "throughout the territories in relation to which it exercises its jurisdiction", "any Government", "within those territories", "directions or orders or writs, including writs in the nature of habeas corpus, etc. " The wore "throughout the territories, etc." delimit the territorial jurisdiction of the High Courts in the matter of issuing directions or writs. A High Court exercises jurisdiction throughout the State in which it is located. Its writs run only through. out the State and not beyond its territorial limits. The main object of the powers to keep the authorities or tribunals within their bounds and to prevent them from infringing the fundamental or other rights of citizens. At the instance of an aggrieved person it can issue one or other of the writs or orders or directions against the offending authority in respect of an act done or omitted tot be done by it. It is implicit in the, limitation that the impugned act must affect a person or property amenable to its territorial jurisdiction. (1) ; (2) ; 850 This question, in a different context, has been considered by the Judicial Committee of the Privy Council in Ryots of Garabandho vs Zemindar of Parlaki medi (1). There the Board of Revenue situated in the State of Madras under section 172 of the Madras Estates Land Act, 1908, enhanced the rents payable by the ryots in three villages, including Parlakimedi village, in the district of Ganjam in the Northern Circars. The question was whether the Madras High Court had power to issue a writ to quash the order of the Board. of Revenue, as the parties to that litigation were not subject to the original jurisdiction of the Madras High Court. The Judicial Committee held that the Madras High Court had no jurisdiction to issue a writ of certiorari to run beyond the territorial limits of that High Court. When it was contended that, as the Revenue Board was in Madras, the High Court had jurisdiction to quash its order, the Judicial Committee repelled that contention with the follow ing remarks at p. 164: "The Board of Revenue has always had its offices in the Presidency Town, and in the present case the Collective Board, which made the order complained of, issued this order in the town. On the other hand, the parties are not subject to the original jurisdiction of the High Court, and the estate of Parlakimedi ties in the north of the province. . . Their Lordships think that the question of jurisdiction must be regarded as one of substance, and that it would not have been within the competence of the Supreme Court to claim jurisdiction over such a matter as the present by issuing certiorari to the Board of Revenue on the strength of its location in the town. Such a view would give jurisdiction to the Supreme Court, in the matter of settlement of rents for ryoti holdings in Ganjam between parties not otherwise subject to its jurisdiction, which it would not have had over the Revenue Officer who dealt with the matter at first instance." This decision in clear terms lays emphasis on the substance of the matter and holds that mere physical (1) (1943) L.R. 70 I.A. 129. 851 presence of an authority within the jurisdiction of a High Court does not enable that Court to issue writs against the said authority in respect of an order made in a dispute between persons residing outside the territorial jurisdiction of the said High Court. Therefore, a High Court 's jurisdiction to issue an appropriate writ depends on the co existence of two conditions, namely, (i) the cause of action has accrued within the territories in relation to which it has jurisdiction, and (ii) the said authority is "within" the said territories. This interpretation may give rise to a criticism; it may be asked, which High Court could give the relief if the cause of action accrues within the territorial jurisdiction of one High Court and the authority concerned is located within that of another High Court? There may. be statutory authorities with all India jurisdiction, but for convenience located in a particular State. In exercise of the powers conferred under statutes, they may make orders affecting the rights of parties residing in different States. I am prima facie of the view that the said authorities, in so far as their orders operate in a particular territory, will be "within" those territories and the High Court, which exercises its jurisdiction throughout that territory, can issue a suitable writ against the said authorities. This interpretation avoids the anomaly of one High Court issuing a writ against an authority located "within" its territorial jurisdiction in respect of a cause of action accruing in another State or territory over which it has no jurisdiction. But this question does not arise in this case, for we re mainly concerned with the Union Government. Article 226 of the Constitution is expressed in wide and most comprehensive terms. There is no difficulty about. the words "person or authority", but the phrase "including any Government" gives rise to a conflict of opinion. If the framers of the Constitution intended to extend simply the power of the High Court to issue writs only against the Government of the State, they could have stated "or the Government of the State", instead they designedly used the words "any Government" which at first sight appear rather involved but on a deeper scrutiny reveal that the words 852 "any Government" cannot mean only the Government of the State. The word "any" clearly presupposes the existence of more than one Government functioning in a State. Under the Constitution two Governments function in each State. Under article 1, India shall be a Union of States and the territory of India shall comprise, inter alia, the territories of the States. Part 11 provides for one class of citizens, that is, citizens of India. In whatever State a person with the requisite qualifications of a citizen may reside, he is a citizen of India and not of that particular State. All the three departments of the Union as well as the State function in the State; both Parliament and the Legislature of the State make laws which govern the State in respect of matters allotted to them respectively. Both the Union and the State executive powers extend to the. State, and the former is exercised in regard to matters with respect to which Parliament has power to make laws and the latter in regard to matters with respect to which the Legislature of the State has power to make laws: see articles 73 and 162. The Judiciary consists of an hierarchy of courts and all the courts from the lowest to the Supreme Court exercise jurisdiction in respect of a cause of action arising in that State. The demarcation between the Union Government and the State Government is, therefore, not territorial but only : subjectwise and both the Governments function within the State. With this background it is easy to perceive that "any Government" must include the Union Government, for two State Governments cannot administer the same State, though for convenience or as a temporary arrangement, the offices of one State may be located in another State. Then it is asked why the Article confers power to issue writs against any Government only in appropriate cases. There are two answers to this question. Till the Constitution was framed there was no power in a High Court to issue a writ even against the Provincial Government. The Constitution conferred for the first time a power on the High Court to issue a writ not only against the State Government but also the Union Government. As the 853 Union Government has sway over not only the State in question but beyond it, it became necessary to administer a caution that a writ can only be issued in appropriate cases. The High Court 's jurisdiction is limited in the matter of issuing writs against the Union Government, for it cannot issue writs against it in respect of a cause of action beyond its territorial jurisdiction. There may also be a case where the secretariat of one of the State Governments is located in another State temporarily. In such a case also the High Court of the latter State cannot issue writs against that State Government as it is not appropriate to issue such writs, for the cause of action accrues ' within the former State. I have, therefore, no doubt that the words "any Government" must necessarily take in the Union Government. Much of the argument turns upon the words "within those territories". It is said that the Union Government is not within the territories of the State, for its headquarters are in Delhi. The Article does not use the word "headquarters", "resident" or "location". The dictionary meaning of the word "within" is "inside of, not out of or beyond". The connotation of the words takes colour from the context in which they are used. A person may be said to be within a territory if he resides therein. He may also be within a territory if he temporarily enters the said territory or is in the course of passing through the territory. Any authority may be in a territory if its office is located therein. It may also be said to be within a territory if it exercises its powers therein and if it can make orders to bind persons for properties therein. So too a Government may be within a State if it has a legal situs in that State. It may also be said to be within a State if it administers the State, though for convenience some of its executive authorities are residing outside the territory. We must give such meaning to these words as would help the working of the Constitution rather than retard it. To put it differently, can it be said that the Union Government 108 854 is within a particular State? Union Government in the present context means the executive branch of the Government. Where is it located? To answer this question it is necessary to consider what is "Union Government". The Constitution in Part V under the heading. "The Union" deals with separate subjects, namely, the executive, the Parliament and the Union judiciary. Under article 53, the executive power of the Union shall be vested in the President and shall be exercised by him either directly or through officers subordinate to him in accordance with the Constitution. Article 74 provides for a council of Ministers with the Prime Minister at the head to aid and advise the President in the exercise of his functions. By article 77, all executive action of the Government of India shall be expressed to be taken in the name of the President; and el. (3) thereof authorizes the President to make rules for the more convenient transaction of the business of the Government of India, and for the allocation among Ministers of the said business. Article 73 says that subject to the provisions of the Constitution, the executive power of the Union shall extend to the matters with respect to which Parliament has power to make laws and to the exercise of such rights, authority and jurisdiction as are exercisable by the Government of India by virtue of any; treaty or agreement. The Constitution nowhere fixes the seat of the Union Government or even that of the President. Shortly stated, the Union Government is the President acting on the advise of the Ministers directly or through officers subordinate to him in accordance with the Constitution and the jurisdiction of the said Government extends, so far as is relevant to the present purpose, to matters in respect of which Parliament has power to make laws. The question that immediately arises is, what is the situs of such a Government? There is no statutory situs. For convenience of administration, the officers of such Government may stay at one place,, or they may be distributed in different places; the President may. reside in one place, the Prime Minister in another, the 855 Ministers in a third place and the officers through whom the President exercises his powers in a place different from the rest. What happens when the Secretariat remains in New Delhi and the President resides for some months in a year in, say,, Hyderabad? Contrary wise, what would be the position if the President stays in New Delhi and the entire or part of the Secretariat or some of the Ministers stay in Hyderabad? It is, therefore, not possible to apply 'the test of residence or location in the absence of any statutory situs. The Union Government has no fixed legal abode; it is present throughout the territories over which it exercises jurisdiction and in respect whereof it can make effective and binding orders in the field allotted to it by the Constitution. The constitutional situs of the Union Government is the entire territories of the Union and it is "within" the territories of India and,, therefore, within the territories of every State. Let us look at the problem from another standpoint. Under article 300 of the Constitution, the Government of India may sue or be sued by the name of the Union of India. The word "sued" is used in a general sense and cannot be narrowly construed in the Constitution as to comprehend only action by way of filing a suit in a civil court. According to Webster, it means to seek justice or right by legal process. Generally speaking, it includes any action taken in a court. The practice followed in the various High Courts and the Supreme Court is also consistent with the wide meaning attributed to it, for writs are filed against the Government of India only in the name of the Union of India. Union of India is a juristic person and it is impossible to predicate its residence in a particular place in the Union. Its presence Synchronizes with the limits of the Union territories. That is the reason why that Order XXVII, rule 3, Code of Civil Procedure, says that in suits by or against the Government instead of inserting in the plaint the name and description and place of residence of the plaintiff or defendant, it shall be sufficient to insert the appropriate name as provided in section 79 Section 79 of the 856 Civil Procedure Code is in terms analogous to article 300 of the Constitution, and under that section, "In a suit by or against the Government, the authority to be named as plaintiff or defendant, as the case may be, shall be (a). in the case of a suit by or against the Central Government, the Union of India, and (b). in the case of a suit by or against a State Government, the State." As the Union of India has no statutory situs, Order XXVII, rule 3, Code of Civil Procedure, exempts its place of residence being given in the plaint or the written statement, as the case may be. The suit by or against the Union Government shall be filed in a court which has jurisdiction to entertain such a suit, having regard to the provisions of sections 15 to 20 of the said Code. On the same analogy, it may be held that the Union of India has no legal situs in a particular place and a writ petition can be filed against it in a place within the jurisdiction of the High Court wherein the cause of action accrues. It is said that the limits of the power to issue a writ are implicit in the nature of a particular writ. What is the nature of the principal writs, namely, habeas corpus, mandamus, prohibition, quo warranto and certiorari? The writ of habeas corpus "is a prerogative process for securing the liberty of the subject by affording an effective means of immediate release from unlawful or unjustifiable detention whether in prison or in private custody". The writ of mandamus "is, in form, a command directed to any person, corporation or inferior tribunal, requiring him or them to do some particular thing therein specified which appertains to his or their office and is in the nature of a public duty." An order of prohibition is an order directed to an inferior tribunal forbidding it to; continue with the proceedings pending therein. An information in the nature of a quo warranto lies against a person who claimed or usurped an office, franchise, or liberty, to inquire by what authority he supported his claim. A certiorari is directed to an authority "requiring the record of the proceedings in some cause or matter to 857 be transmitted into the High Court to be dealt with there. " (See Halsbury 's Laws of England, Vol. II, 3rd edition). It was asked how could the liberty of a subject be secured, the command be issued, the proceedings of an inquiry be prohibited, the credentials of a person to hold office be questioned, the records of a proceeding be directed to be transmitted to the High Court, if the authority concerned wag located, or the person directed resided, outside. the territorial jurisdiction of the High Court? It was also asked how, if the said authority, or person, disobeyed the order of the High Court, it could be enforced against the said authority or person. On the parity of the same reasoning the argument proceeded that, as the officers acting for the Government of India reside in Delhi, a writ which would become brutum fulmen could not be issued by the High Court. The questions so posed are based on a misapprehension of the relevant provisions of the Constitution. They also mix up the nature of the writs with the procedure in dealing with the writs or enforcing the orders made therein. As I have already indicated, the Article confers a power on the High Court to issue writs against the Union Government. If the said Government is "within the State", is it an answer to it that an officer of the Government dealing with a particular paper or papers is residing outside the territorial jurisdiction of the High Court? If the Union Government is bound by the order of the High Court, the question of service of notice on a particular officer acting for the Government or to enforce an order against him is a matter pertaining to the realm of procedure and appropriate rules calf be framed by the High Court or the requisite law made by the Parliament. If the Union Government disobeys the order it would certainly be liable for contempt of court under the . Even if the con temner happens to be an officer of the said Government residing outside the territorial limits of the High Court, the High Court has ample power to reach him under section 5 of the said Act. 858 The analogy drawn from English law is rather misleading. England is comparatively a small country and it has only one Government functioning throughout the State. The problem that has arisen now could not have arisen in England, for the jurisdiction of the Queen 's Bench Division of the High Court extends throughout England. In England the manner of the exercise of the jurisdiction was also regulated by a procedure brimming with technicalities, but later on simplified by statute. The framers of our Constitution therefore designedly used the words "in the nature of" indicating that they were not incorporating in the Constitution the entire procedure followed in England, for the procedure will have to be evolved having regard to the federal structure of our Government. How can the procedural law of England in the matter of writs be bodily lifted and implanted in India? This Court shall have to put a reasonable construction on the words without being unduly weighed down by the historical background of these writs and construe the Article in such a way, if legally permissible, to carry out the intention of the Constitution makers. That apart, Article 226 of the Constitution is not confined to the prerogative writs in vogue in England. The Article enables the appropriate High Court to issue also directions or orders, and there is no reason why the High Court could not, in an appropriate case, give a suitable direction to, or make a proper order on, the Union Government. Such directions or orders are certainly free from the procedural technicalities of the said writs. I shall now notice briefly the decisions cited at the Bar. The first is the decision of this Court in Election Commission, India vs Saka Venkata Rao(1). There the Governor of Madras referred to the Election Commission, which had its offices permanently located in New Delhi, the question whether the respondent was disqualified and could be allowed to sit and vote in the Assembly. The respondent thereupon applied to the High Court of Madras under article 226 of the Constitution for a writ restraining the Election Commission (1) [1953] S.C.R. lI44. 859 from enquiring into his alleged disqualification for membership of the Assembly. This Court held that the power of the High Court to issue writs under article 226 of the Constitution was subject to the two fold limitation: (i) that such writs cannot run beyond the territories subject to its jurisdiction; and (ii) that the person or authority to whom the High, Court is empowered to issue writs must be amenable to the jurisdiction of the High Court either by residence or location within the territories subject to its jurisdiction. On that basis the writ petition was dismissed. At the outset it may be noticed that there is one obvious difference between that case and the present one. In that case the respondent was not the Union of India but an authority which could have and had its location in a place outside the Madras State. The present case satisfies both the conditions: the writ does not run beyond the territorial jurisdiction of the High Court, as the Union Government must be deemed to be "within" the said territories; the second condition is also satisfied, as the Union Government, being within the State, is also amenable to its jurisdiction. The next case relied upon by the learned Solicitor General is a converse one. It is the decision of this Court in K. section Rashid & Son vs The Income tax Investigation Commission (1). In that case the Income tax Investigation Commission located in Delhi was investigating the case of the petitioners under section 5 of the Taxation on Income (Investigation Commission) Act 1947, although the petitioners were assessees belonging to Uttar Pradesh and their original assessments were made by the Income tax authorities of that State. It was contended that the Punjab High Court had no jurisdiction to issue a writ under article 226 of the Constitution to the said Commission. This Court, after restating the two limitations on the power of the High Court to issue a writ, held that the Commission was amenable to the jurisdiction of the Punjab High Court and, therefore, the Punjab High Court had jurisdiction to issue the writ. This decision also (1) ; 860 deals with a case of statutory authority located in Delhi and it has no application to the case of the Union Government. The question whether the principles that apply to the Government of India would equally apply to statutory authorities situate in one State but exercising jurisdiction in another, does not arise for consideration in this case; though, as I have already expressed, I am prima facie of the view that there is no reason why they should not. Now coming to the decision of the High Courts, there is a clear enunciation of the relevant principles in Maqbul Un Nissa vs Union of India(1). The Full Bench of the Allahabad High Court directly decided the point now raised before us. The importance of the decision lies in the fact that the learned Judges approached the problem without being oppressed by the decision of this Court in Saka Venkata Rao 's case (2), which was decided only subsequent to that decision. After considering the relevant Articles of the Constitution ' Sapru, J., speaking for the Full Bench, observed at pp. 293 294 thus: "The analogy between a government and a corporation or a joint stock company which has its domicile in the place where its head office is situate is misleading. To hold that the jurisdiction of this Court does not extend to the Union Government as it has its capital at Delhi and must be deemed to have its domicile at Delhi would be to place the Union Government not only in respect of the rights conceded in Part III but for any other purpose also beyond the jurisdiction of all State High Courts except the Punjab High Court. " The learned Judge proceeded to state at p. 294 "In our opinion, the jurisdiction of this Court to intervene under Article 226 depends not upon where the Headquarters or the Capital of, the Government is situate but upon the fact of the effect of the act done by Government, whether Union or State being within the territorial limits of this Court., Adverting to the words "any Government" in article 226, the learned Judge observed at p. 292 thus: (1) I.L.R. (2) ; 861 "They indicate that the founding fathers knew that more than one government would function within the same territory.)) I entirely agree with the observations of the learned Judge, for they not only correctly construe the provisions of article 226 but also give effect to the intention of the Constitution makers. After the decision of this Court in Saka Yenkata Rao 's case (1) the High Court of Madhya Pradesh considered the question in Surajmal vs State of M. P. (2). There, the Central Government rejected an application for a mining lease and the order rejecting the application was communicated to the applicant who was residing in the State of Madhya Pradesh. It was held by the High Court that the writ asked for could not be issued so as to bind the Central Government because, "(a) the Central Government could not be deemed to be permanently located or normally carrying on its business within the jurisdiction of the High Court; (b) the record of the case which the Central Government decided was not before the High Court and could not be made available from any legal custody within the State; (c) the order of the State Government must be deemed to have merged in that of the Central Government; (d) the order of the State Government could not be touched unless the order of the Central Government could be brought before the High Court and quashed. " We are concerned here with the first and second grounds. The learned Chief Justice, who delivered the judgment on behalf of the Full Bench, applied the principle of the decision of this Court in Saka Venkata Rao 's(1) to the Union Government; and for the reasons already mentioned I am of opinion that the decision Is not applicable to the case of the Union Government. The second reason in effect places the procedure 'on a higher pedestal than the substantive law. It is true that in a writ of certiorari the records would be called for; but, if once it is held that the Union Government is within the State within the meaning of article 226 of the Constitution, I do not think why the High Court in exercise (1) ; (2) A.I.R. 1958 M.P. 103, 862 of its constitutional power cannot direct the Union Government to bring the records wherever its officers might have kept them. This second ground is really corollary to the first, viz., that the Union Government is not within the territorial jurisdiction of the High Court concerned. The Bombay High Court in Radheshyam Makhanlal vs The Union of India (1) also held that a writ cannot issue against the Union Government whose office is located outside the territorial jurisdiction of the High Court. Shah, J., applying the principle of the decision in Saka Venkata Rao 's case (2 ) to the Union Government hold that as the office of the Union Government was not located within the State of Bombay, the Bombay High Court could not issue a writ to the Union Government. But section T. Desai, J.,, was not willing to go so far, and he based his conclusion on a narrower ground, namely, that even if the writ was issued it could not be enforced. I have already pointed out that both the grounds are not tenable. The Union Government is within the State of Bombay in so far as it exercises its powers in that State and the High Court has got a constitutional power to issue writes to the Union Government and, therefore, their enforceability does not depend upon its officers residing in a particular place. The foregoing discussion may be summed up in the following propositions: (1) The power of the High Court under article 226 of the Constitution is of the widest amplitude and it is not confined only to issuing of writs in the nature of habeas corpus, etc., for it can also issue directions or orders against any person or authority, including in appropriate cases any Government. (2) The intention of the framers of the Constitution is clear, and they used in the Article words "any Government" which in their ordinary significance must include the Union Government. (3) The High Court can issue a writ to run throughout the territories in relation to which it exercises jurisdiction. and to the person or authority or Government within the said territories. (4) The Union Government has (1) A.I.R. 1960 Bom. (2) ; 863 no constitutional situs in a particular place, but it exercises its executive powers in respect of matters to which Parliament has power to make laws and the power in this regard is exercisable throughout India; the Union Government must, therefore, be deemed in law to have functional existence throughout India. (5) When by exercise of its powers the Union Government makes an order infringing the legal right or interest of a person residing within the territories in relation to which a particular High Court exercises jurisdiction, that High Court can issue a writ to the Union Government, for in law it must be deemed to be "within" that State also. (6) The High Court by issuing a writ against the Union Government is not travelling beyond its territorial jurisdiction, as the order is issued against the said Government "within" the State. (7) The fact that for the sake of convenience a particular officer of the said Government issuing an order stays outside the territorial limits of the High Court is not of any relevance, for it is the Union Government that will have to produce the record or carry out the order, as the case may be. (8) The orders issued by the High Court can certainly be enforced against the Union Government, as it is amenable to its jurisdiction, and if they are disobeyed it will be liable to contempt. (9) Even if the Officers physically reside outside its territorial jurisdiction, the High Court can always reach them under the , if they choose to disobey the orders validly passed against the Union Government which cannot easily by visualized or ordinarily be expected. (10) The difficulties in communicating the orders pertain to the rules of procedure and adequate and appropriate rules can be male for communicating the same to the Central Government or its officers. For the aforesaid reasons, I hold that article 32(2A) of the Constitution enables the High Court of Jammu & Kashmir to issue the writ to ' the Union Government in respect of the act done by it infringing the fundamental rights of the parties in that State. In the result,, I allow the appeal, set aside the order of the High Court and direct ' it to dispose of the 864 matter in accordance with law. The appellant will have his costs. DAS GUPTA, J. I have had the advantage of reading the judgments prepared by my Lord the Chief Justice and Mr. Justice Subba Rao. I agree with the conclusions reached by the Chief Justice 'that the appeal should be dismissed. As, however, I have reached that conclusion by a slightly different process of reasoning I propose to indicate those reasons briefly. The facts have been fully stated in the judgment of My Lord the Chief Justice and it is not necessary to repeat them. It is sufficient to state that the appellant filed an application to the High Court of Jam mu & Kashmir under Article 32(2A) of the Constitution for the issue of an appropriate writ, order or directions restraining the Union of India and the State of Jammu & Kashmir from enforcing an order conveyed in the Government of India 's letter dated July 31, 1954, whereby the Government of India ordered the premature compulsory retirement of the appellant with effect from August 12, 1954. A preliminary objection was raised on behalf of the respondents that Government of India is not a Government within the territorial limits of the jurisdiction of the Jammu and Kashmir High Court and so the application was not maintainable. The High Court accepted this objection as valid and dismissed the application. The sole question in controversy in appeal is whether the High Court had jurisdiction, on the 'facts and circumstances of this case, to issue a writ to the Government of India under article 32(2A) of the Constitution. Article 32(2A) of the Constitution under which the appellant asked the High Court for relief is in the following words: "Without prejudice to the powers conferred by clauses (1) and (2), the High Court shall have power throughout the territories in relation to which it exercises jurisdiction to issue to any person or authority, including in appropriate cases, any Government within the territories, directions or orders or writs, 865 including writs in the nature of habeas corpus, mandamus, prohibition, quo warranto and certiorari, or any of them, for the enforcement of any of the rights conferred by this Part. " Except for the fact that "the High Court" in this Article means only the High Court of the State of Jammu & Kashmir, while article 226 of the Constitution refers to all other High Courts and the further fact that power granted by this Article is for the enforcement only of the rights conferred by Part III of the Constitution while article 226 gives power to the High Courts in the Union for the enforcement not only of the rights conferred by Part III but for any other purpose, the provisions of the two articles are exactly the same. Power is given to the High Court to give relief in certain matters by issuing appropriate writs and orders to (1) any person; (2) any authority other than the Government and (3) any Government. The exercise of this power is subject to the existence of the condition precedent that the person or the Government or the authority other than the Government must be "within the territories in relation to which the High Court exercises jurisdiction". A special limitation in respect of the issue of writs or orders to a Government is introduced by the words "in appropriate cases" before the words "any Government". Leaving for later consideration the effect of the words "in appropriate cases" we have first to examine the question: when is a Government within the territories under the jurisdiction of a particular High Court ? On behalf of the first respondent, the Union of India, it is urged that to be within the terri tories under the jurisdiction of a High Court the Government must be located within those territories. It is pointed out that "any person" ' to be within any specified territories has to be present within those territories; an authority other then Government has also, before it can be said to be within any particular territories, a physical existence within those territories by having its office therein. The same requirement of location within the particular territories, it is argued, should apply to the case of Governments. The 866 argument is no doubt attractive and at first sight even plausible. On closer examination however it becomes evident that this argument oversimplifies the problem by slurring over the fallacious assumption that a, Government has a location in the same way as any person or any authority other than Government. Has the Government any location in a similar sense in the same way as a person has a location at any point of time by being present at a particular place or an authority other than the Government can be said to be located at the place where its office is situated ? There is no doubt that when we think of a Government, whether of the States or of the Union we are thinking of the executive organ of the State. The executive power of the Union is under article 53 vested in the President and is to be exercised by him. The executive power of the States is vested in the Governors of the States and has to be exercised by them. Does it follow however that the Government of India is located at the place where the President resides and similarly the Government of each State is located at the place where the Governor resides ? It has to be noticed that while the Constitution contains specific provisions in article 130 as to where the Supreme Court shall sit, no such provision is made as to where the President of India shall reside or exercise his executive power vested in him. article 231 of the Constitution speaks of a principal seat for the High Court of each State. We search in vain however for any mention of any principal seat "for the President of India or the Governors of the States". The fact that the President of India has a special place of residence, the Rashtrapati Bhawan in Delhi and the Governors of States have also special places of residence at some places in the State known as Rai Bhavan is apt to make us forget that the Constitution does not provide for any place 'of residence for the President or Governors. There is nothing to prevent the President of India from having more than one permanent place of residence within the Union. If this happens and places of residence are provided for the President of India in, say, Bombay, Calcutta and 867 Madras in addition to the residence at Delhi, can it be said that the Government of India is located in Delhi when the President of India resides in Delhi, it goes to Calcutta when he resides in Calcutta, it goes to Bombay when the President resides in Bombay and to Madras when the President goes and resides in Madras? This may seem at first sight a fantastic illustration; but when we remember that in fact in the days of British rule, the Viceroy had a permanent place of residence at Simla for part of the year and another permanent place of residence at Calcutta for part of the year before 1911 and after 1911 one permanent place of residence in Delhi and another in Simla, it is easy to see that what has been said above by way of illustration is by no means improbable. If therefore a Government is to be held to be located at the place where the head of the State the President of India in the case of the Government of India and the Governor in the case of each State resides, it may well become impossible to speak of any particular place as the place where the Government is located throughout the year. This may not affect the question of any State Government being within the territories of the High Court of the State. For whatever place the Governor may have for his residence is bound to be within the territories of the State. The position will however become wholly uncertain and difficult as regards the Government of India being within the territorial jurisdiction of any particular High Court. For part of the year it may be, if the residence of the President be the criterion for ascertaining the location of the Government, that the Government of India will be within the territories of one High Court and for other parts of the year in another High Court. It will be wholly unreasonable therefore to accept the test of residence of the President of India for deciding where the Government of India is located. Finding the test of the President 's residence illusory, one may try to say that the Government of India or of a State is situated at the place *here the offices of the Ministry are situated. Under article 77, the President allocated the business of the. Government of India 868 among the Ministers while under article 166 the Governor of a State allocates the business of the Government of a State except business with respect to which the Governor is required to act in his discretion among the Ministers of the State. If therefore it was correct to say that all the Ministers of the Government of India had to perform their functions in respect of the business allocated to them at one particular place, it might be reasonable to say that the Government of India is located at that place. Similarly if all the Ministers of a State had to perform their functions in respect of the business allocated to them at one particular place the Government of the State might well be said to be located at that place. The Constitution however contains no provision that all the Ministers of a State shall perform their functions at one particular place in the State nor that the Ministers of the Union will perform their functions at one particular place in the State. Situations may arise not only in an emergency, but even in normal times, when some Ministers of the Government may find it necessary and desirable to dispose of the business allocated to them at places different from where the rest of the Ministers are doing so. The rehabilitation of refugees from Pakistan is part of the business of the Government of India and for the proper performance of this business there is a Ministry of Rehabilitation for Refugees. It is well known that the Minister in this Ministry has to perform a great portion of his business at Calcutta 'in West Bengal and stays there for a considerable part of the year. Many of the offices of this Ministry are situated in Calcutta. What is true of this Ministry, may happen as regards other Ministries also. Special circumstances may require that some portion of the business of the Minis. try of Commerce be performed at places like Bombay, Calcutta or Madras in preference to Delhi, and if this happens the Minister to whom the business of Government of India in respect of commerce has been allocated will be transacting his business at these places instead of at Delhi. If public interest requires that the greater portion of the business of the Ministry of 869 Defence should for reasons of security or other reasons be carried on at some place away from Delhi the Defence Minister will have to transact its business at that place. It is clear therefore that while at any particular point of time it may be possible to speak of any Ministry of the Government of India being located at a particular place, the Government of India as a whole may not necessarily be located at that place. In my opinion, it is therefore neither correct nor appropriate to speak of location of any Government. Nor is it possible to find any other satisfactory test for ascertaining the location of the Government of India. In Election Commission vs Saka Venkata Subba Rao (1) this Court held that before a writ under article 226 could issue to an authority, the authority must be located within the territories under the jurisdiction of the High Court. There however the Court was not concerned with the case of any Government, and had no occasion to consider whether a Government could be said to have a location. The decision in that case and in the later case of K. section Rashid and Son vs The Income tax Investigation Commission, etc., (2) does not therefore bind us to hold that a Government has a location in the same way as an authority like an Election Commission or an Income tax Investigation Commission. It appear,% reasonable therefore to hold that all that is required to satisfy the condition of a Government being within the territories under the jurisdiction of a High Court is that the Government must be functioning within those territories. The Government of India functions throughout the territory of India. The conclusion cannot therefore be resisted that the Government of India is within the territories under the jurisdiction of every High Court including the High Court of Jammu and Kashmir. The use of the words "any Government" appears to me to be an additional reason for thinking that the Government of India is within the territories under the jurisdiction of the Jammu & Kashmir High Court. "Any Government" in the context cannot but mean (1)[1953] S.C.R. 1144. (2) ; 870 every Government. If the location test were to be applied the only Government within the territories of the State of Jammu and Kashmir would be the Government of Jammu and Kashmir. It would be meaningless then to give the High Court the power to give relief against "any Government" within its territories. These words "any Government" were used because the Constitution makers intended that the High Court shall have power to give relief against the Government of India also. But, contends the respondent, that will produce an intolerable position which the Constitution makers could not have contemplated. The result of the Government of India being within the territories of every High Court in India will, it is said, be that the Government of India would be subjected to writs and orders of every High Court in India. A person seeking relief against the Government of India will naturally choose the High Court which is most convenient to him and so the Government of India may have to face applications for relief as against the same order affecting a number of persons in all the different High Courts in India. If a position of such inconvenience to the Government of India ' though of great convenience to the persons seeking relief, did in fact result from the words used by the Constitution makers, I for one, would refuse to shrink from the proper interpretation of the words merely to help the Government. I do not however think that that result follows. For, on a proper reading of the words "in appropriate cases", it seems to me that there will be, for every act or omission in respect of which relief can be claimed, only one High Court that can exercise jurisdiction. It has first to be noticed that the limitation introduced by the use of these words "in appropriate cases ' has not been placed in respect of issue of writs to persons and to authorities other than government. It has been suggested that the effect of these words is that in issuing writs against any Government the High Court has not got the same freedom as it has when issuing writs against any person or authority other than 871 Government and that when relief is asked against a Government the High Court has to take special care to see that writs are not issued indiscriminately but only in proper cases. I have no hesitation in rejecting this suggestion. It cannot be seriously contemplated for a moment that the Constitution makers intended to lay down different standards for the courts when the relief is asked for against the Government from when the relief is asked for against other authorities. In every case where relief under article 226 is sought the High Court has the duty to exercise its discretion whether relief should be given or not. It is equally clear that in exercising such discretion the High Court will give relief only in proper cases and not in cases where the relief should not be granted. Why then were these words "in appropriate cases" used at all? It seems to me that the Constitution makers being conscious of the difficulties that would arise if all the High Courts in the country were given jurisdiction to issue writs against the Central Government on the ground that the Central Government was functioning within its territories wanted to give such jurisdiction only to that High Court where the act or omission in respect of which relief was sought had taken ' place. In every case where relief is sought under article 226 it would be possible to ascertain the place where the act complained of was performed or when the relief is sought against an omission, the place where the act ought to have been performed. Once this place is ascertained the High Court which exercises jurisdiction over that place is the only High Court which has jurisdiction to give relief under article 226. That, in my view, is the necessary result of the words "in appropriate cases". On behalf of the appellant it Was contended on the authority of the decision of the Privy Council in Ryots of Garabandho vs Zemindar of Parlakimedi (1) that all that is necessary to give, jurisdiction to a High Court to act under article 226 is that a part of the cause of action has arisen within the ';territories in relation to which it exercises jurisdiction. The question whether the cause of action attracts jurisdiction for relief (1) (1943) L.R. 70 I.A. 129. 872 under article 226 of the Constitution as in the case of suits was considered by this Court in Saka Venkata Subba Rao 's Case (1) and the answer given was in the negative. Referring to the decision of the Privy Council in Parlakimedi 's Case (2) this Court pointed out that the decision did not turn on the construction of a statutory provision similar in scope, purpose or wording to article 226 of the Constitution, and is not of much assistance in the construction of that article. Delivering the judgment of the Court Patanjali Sastri C. J. also observed: "The rule that cause of action attracts jurisdiction in suits is based on statutory enactment and cannot apply to writs issuable under article 226 which makes no reference to any cause of action or where it arises but insists on the presence of the person or authority 'within the territories ' in relation to which the High Court exercises jurisdiction. " This decision is binding on us, and I may respectfully add that I find no reason to doubt its correctness. It is true that in that case the Court had to consider the question of jurisdiction in respect of an authority other than Government. It is difficult to see however why if cause of action could not attract jurisdiction against persons and authorities other than Government it would attract jurisdiction as against a Government. It seems to me clear that the principle of basing jurisdiction on cause of action has not been introduced in the Constitution under article 226 or article 32(2A) of the Constitution. It may seem at first sight that to hold that the High Court within whose jurisdiction the action or omission, complained of took place will have jurisdiction, is in effect to accept the accrual of cause of action as the basis of jurisdiction. This however is not correct. The High Court within. the jurisdiction of which the act or omission takes place, has jurisdiction, not because a part of the: cause of action arose there, but in consequence of the use of the words "in appropriate cases". (1) ; (1) (1943) L.R. 70 I.A. 129. 873 The several cases in the High Court in which the question now before us has been considered have been referred to in the majority judgment and also in the judgment of Mr. Justice Subba Rao and no useful purpose would be served in discussing them over again. For the reasons discussed above I have reached the conclusion that while the Government of India is within the territories of every High Court in India the only High Court which has jurisdiction to issue a writ or order or directions under article 226 or article 32 (2A) against it is the one within the territories under which the act or omission against which relief was sought took place. In the present case the act against which the relief has been sought was clearly performed at Delhi which is within the territories under the jurisdiction of the Punjab High Court and the Jammu and Kashmir High Court cannot therefore exercise its jurisdiction under article 226. In the result, I agree with my Lord the Chief Justice that the appeal should be dismissed with costs. BY COURT. In accordance with the opinion of the majority of the Court, this appeal is dismissed with costs. Appeal dismissed.

IN-Abs

The High Court of. Jammu and Kashmir, relying on the decisions of this Court in Election Commission, India vs Saka Venkata Subba Rao; , and K. section Rashid and Son vs The Income Tax Investigation Commission etc. ; , , dismissed an application for a writ made by the appellant against the Union of India and Anr. under article 32(2A), the relevant provisions of which are in the matter of enforcement of fundamental rights the same as in article 226 of the Constitution, on the preliminary objection that the said application was not maintainable against the Union of India as it was outside the territorial jurisdiction of that Court. The appellant 's case was that he was holding the substantive rank of Lieut. Col. in Jammu and Kashmir and had the right to continue in service until he attained the age of 53 on November 20, 1961, but was prematurely retired by a letter issued by the Government of India on July 31, 1954, without any allegation or charge and in contravention of article 16(1) of the Constitution. Held, that there can be no doubt as to the correctness of the decisions relied on by the High Court and the appeal must fail. 829 The jurisdiction of the High Court under article 226 of the Constitution, properly construed, depends not on the residence or location of the person affected by the order but of the person or authority passing the order and the place where the order has effect cannot enter into the determination of such jurisdiction. Since functioning of a Government really means giving effect to its order, such functioning cannot determine the meaning of the words "any person or authority within these territories" occurring in the article. A natural person, therefore, is within those territories if he resides there permanently or temporarily, an authority other than the Government is within those territories if its office is located there and a Government if its seat from which, in fact, it functions is there. It is not correct to say that the word "authority" in article 226 cannot include a Government. That word has to be read along with the clause "including in appropriate cases any Government" immediately following it, which, properly construed, means, that the word may include any Government in an appropriate case. That clause is not connected with the issuance of a writ or order and is not intended to confer discretion on the High Courts in the matter of issuing a writ or direction on any Government, and only means in such cases where the authority against whom the High Court has jurisdiction to issue the writ, happens to be a Government or its subordinates, the High Court may issue a writ against the Government. Election Commission, India vs Saka Venkata Subba Rao, and K. section Rashid and Son vs The Income tax Investigation Commission etc. ; , , approved. Maqbulunnissa vs Union of India, I.L.R. (1953) 2 All. 289, overruled. The Lloyds Bank Limited vs The Lloyds Bank Indian Staff Association (Calcutta Branches), I.L.R. , referred to. Proceedings under article 226 are not suits covered by article 300 of the Constitution. Such proceedings provide for extra ordinary remedies by a special procedure and there is no scope for introducing the concept of cause of action in it in the face of the express limitation imposed by it, that the person or authority concerned must be within the territories over which the High Court exercises jurisdiction. Ryots of Garabandho vs Zamindar of Parlakimedi, (1943) L.R. 70 I.A. 129, held inapplicable. The resulting inconvenience of such an interpretation of article 226 to persons residing far &way from New Delhi, where the Government of India is in fact located, and aggrieved by some order passed by it, may. be a reason for suitably amending the Article but cannot affect its plain language. This Court should not, except when it is demonstrated beyond all reasonable doubt that the previous ruling, given after 105 830 due deliberation and full hearing, was erroneous, go back upon it, particularly on a constitutional issue. Per Subba Rao, J. The object that the framers of our Con stitution had before them in declaring the fundamental rights in Part III of the Constitution and empowering the High Courts by article 226 of the Constitution to enforce them would be largely defeated if a person in a remote part of the country had to come to New Delhi to seek the protection of the Punjab High Court whenever the Union Government infringed his fundamental right. The power of the High Courts under article 226 of the Consti tution is of the widest amplitude and it can issue not merely writs but also directions and orders. The words "any Government" in the Article includes the Union Government which has no constitutional situs in a particular place and exercises its powers throughout India and must, therefore, be deemed in law to have functional existence throughout India and thus within the territories of every State. Consequently, when the Union Government infringes the legal right and interest of a person residing within the territorial jurisdiction of 'a High Court, the High Court has the power under the Article to issue a writ to that Government. If its orders are disobeyed by that Government or any of its officers, even though physically outside its territories, it can proceed in contempt against them under the Contempt. of Courts Act, 1952. Election Commission, India vs Saka Venkata Subba Rao, ; , held inapplicable. K. section Rashid and Son vs Income Tax Investigation Commission, ; and Ryots of Garabandho vs Zamindar of Parlakimedi, L.R. 70 I.A. 129, considered. Maqbul Unnissa vs Union of India, I.L.R. (1953) 2 All. 289, approved. Surajmal vs State of M.P., A.I.R. 958 M.P. 103 and Radhe shyam Makhanlal vs Union.of India, A.I.R. 1960 Bom. 353, held inapplicable. In the instant case, therefore, the High Court had the power to issue the writ to the Union Government under article 32(2A) of the Constitution. Per Das Gupta, J. It is neither correct nor appropriate to speak of location of any Government and there is no satisfactory test for ascertaining the location of the Government of India. Since the Government functions throughout the territory of India, the conclusion must be that it is within the territories under the jurisdiction of every High Court. The words "any Government" in article 226 clearly indicate that the High Court was intended to give relief against that Government as well. Even though the Government, of India is within the territories of every High Court, it will not have to face applications 831 for relief against the same order in all the High Courts in India. The words "in appropriate cases" in that Article, properly construed, indicate that there can be only one High Court thereunder that can exercise jurisdiction under the Article for every act or omission in respect of which relief is claimed. It is possible in every case to ascertain the place where the act or omission took place and that High Court alone, which exercises jurisdiction over that place, can have jurisdiction to grant relief under the Article. It is not correct to say that under article 226 the cause of action determines the jurisdiction. Neither that Article nor article 32(2A) of the Constitution is based on that principle. Election Commission, India vs Saka Venkata Subba Rao, ; , approved.

Appeal No. 37 of 1955. Appeal from the judgment and order dated December 7, 1954, of the Jammu and Kashmir High Court in Criminal Misc. No. 76 of 2011. Vir Sen Sawhney, for the appellant. C. K. Daphtary, Solicitor General of India, B. R. L. Iyengar, R. H. Dhebar and T. M. Sen, for the respondents. Sardar Bahadur, for the intervener. December 5. The Judgment of Sinha, C. J., Kapur, Gajendragadkar, Wanchoo and Shah, JJ., was delivered by Sinha, C. J. Subba Rao, J. and Das Gupta, J. delivered separate judgments. SINHA, C. J. This appeal on a certificate of fitness granted by the High Court of Judicature, Jammu and Kashmir, is directed against the judgment and order dated December 7, 1954, in an application under article 32(2A) of the Constitution for issue of. a writ, directions or. order against the Union of India, through the Secretary, Ministry of Defence,, New Delhi, a,% the first respondent and the State of Jammu and Kashmir through the Chief Secretary,, Jammu and Kashmir State, as the second respondent. The petition is based on the following allegations. The petitioner will be referred to as the appellant in the course of this judgment. He was aged 45 years 832 262 days on August 12, 1954. He was holding a regular commission in the Jammu and Kashmir State Forces, which were amalgamated with the Defence Forces of the Union with effect from September 1, 1949. The appellant holding the substantive rank of Lieut. Col. in the amalgamated forces had the right to continue in service until he attained the age of 53 years, which event will happen on November 20, 1961. The Government of India issued a letter dated July 31, 1954, retiring the appellant from the service with effect from August 12, 1954, This decision of the Government of India is not based on any allegations or charge of inefficiency, indiscipline or any other irregularity on the part of the appellant. The aforesaid decision of the Government of India prematurely retiring the appellant is impugned as illegal, unwarranted and discriminatory and as having been made in contravention of article 16(1) of the Constitution. The petition was opposed on behalf of the respondents aforesaid on a number of preliminary grounds of which it is only necessary to mention the first, namely, that the authority against whom the writ is sought, that is to say, respondent No. 1, being outside the territorial limits of the jurisdiction of the Jammu and Kashmir High Court, the same was not maintainable. This preliminary objection was heard by a Division Bench, (Janki Nath Wazir, C. J. and M. A. Shahmiri, J.) Jammu and Kashmir High Court. By its judgment. dated December 7, 1954, the High Court upheld the preliminary objection. The High Court, relying upon the decisions of this Court in Election Commission, India vs Saka Venkata Subba Rao (1) and K. section Rashid and Son vs The Income tax Investigation Commission etc. (2), held that it had no jurisdiction to issue a writ against the first respondent and, therefore, dismissed the petition, but the High Court granted the necessary certificate under article 132 of the Constitution; hence this appeal. The matter was first heard by a Bench of five judges. in the course of hearing it became clear to us that the appellant not only sought to distinguish (1) ; (2) ; 833 the two decisions aforesaid of this Court, but questioned the correctness of those decisions. Hence this larger Bench was constituted in order to examine the correctness of the decisions aforesaid of this Court on the strength of which the High Court had refused to entertain the appellant 's petition, on merits. It has been argued on behalf of the appellant, in the first instance, that the previous decisions of this Court were distinguishable on the ground that they did not, in terms, consider the question whether the Government of India wag amenable to the jurisdiction of the High Court under article 226 or of the Jammu and ' Kashmir High Court under article 32(2A) of the Constitution. that those provisions, on a true construction, would not stand in the way of the appellant, inasmuch as the Government of India has no location and its authority is present throughout the Union territory; that the correct test is whether or not the cause of action arose within the territorial limits of the High Court 's jurisdiction; that the High Court was in error in holding that the term "authority" included a Government. In answer to these contentions on behalf of the appellant, the learned Solicitor General contended that, on a proper construction of the relevant provisions of the Constitution, it is clear that Sastri C. J. 's observations relating to "authority" in the case of Election Commission, India vs Saka Venkata Subba Rao (1) applied with equal force to Government, inincluding the Union Government. The Government of India functions through its officers and, therefore, the location contemplated means the place at which the orders impugned are ordinarily passed. The considerations in a suit with reference to the cause of action for the suit do not stand on the same footing in a writ matter, because the writ has to reach the particular officers of the Government concerned. The expression "in appropriate cases" means that there may be cases where though the Union Government as such is not located within the territorial limits of a High Court yet a writ may be issued against it by the High (1) ; 834 Courts because an officer of the Union Government is functioning within such limits and it is his order which is the subject matter of the controversy. Therefore, it is not in every case that a High Court can issue a writ against the Union. A writ of mandamus, for example, is directed against a particular named person or authority. Similarly, a writ of certiorari is directed against a particular record. Therefore, the writ must issue to someone within the territorial limits of the High Court 's jurisdiction. The question that we have to determine in this case is of far reaching importance and is not a matter of first impression. The question was first raised in this Court in 1952 and was determined by a Constitution Bench in the case of Election Commission, India vs Saka Venkata Subba Rao (1). In that case a writ was applied for in the Madras High Court for restraining the Election Commission from, enquiring into the alleged disqualification of the respondent. A single Judge of the High Court of Judicature of Madras issued a writ of prohibition restraining the Election Commission, a statutory authority constituted by the President of India, with its office permanently located at New Delhi, when the matter was heard by the learned single Judge of the High Court. In the High Court the Election Commission demurred to the jurisdiction of the Court to issue any writ against it on the ground that the Commission was not within the territory in relation to which the High Court exercised jurisdiction, apart from other objections. The learned Judge of the High Court overruled the preliminary objection and decided the case on merits, and issued a writ prohibiting the Commission from ' proceeding with the enquiry. The learned Judge granted the certificate under article 132 that the case involved a substantial question of law as to the interpretation of the Constitution. The Election Commission accordingly came up in appeal to this Court and challenged the jurisdiction of the Madras High Court to issue the writ it had purported to do. This Court overruled the contention on behalf of the respondent which was (1) ; 835 based on the decision of the Privy Council in the Parlakimedi case (1) that the jurisdiction of the High Court to issue a writ is analogous to the jurisdiction of a court to grant a decree or order against persons outside the limits of its local jurisdiction, provided that the cause of action arose within those limits. This Court overruled that contention in these words: "The rule that cause of action attracts jurisdiction in suits is based on statutory enactment and cannot apply to writs issuable under article 226 which makes no reference to any cause of action or where it arises but insists on the presence of the person or authority 'within the territories ' in relation to which the High Court exercises jurisdiction". The Constitution Bench in that case considered that the language of article 226 of the Constitution was "reasoriably plain" and that the exercise of the power conferred by that Article was subject to a two fold limitation, namely, (1) that the power is to be exercised "throughout the territories in relation to which it exercises jurisdiction" and (2) that the person or authority to whom the High Court is empowered to issue the writs must be "within those territories". In other words, the writ of the Court could not run beyond the territories subject to its jurisdiction and that the person or authority affected by the writ must be amenable to the Court 's jurisdiction, either by residence or location within those territories. The second case of this Court, which dealt with this question is K. section Rashid and Son vs The Income Tax Investigation Commission (2). That was a case on appeal from the judgment and order dated August 10, 1950, of the High Court of Judicature, Punjab, at Simla, in a number of miscellaneous matters, in which the High Court had been moved under articles 226 and 227 of the Constitution praying for quashing proceedings started against the appellants under the Taxation on Income (Investigation Commission.) Act (XXX of 1947). It was prayed in the High Court that a writ of prohibition might issue against the Income Tax (1) (1943) L.R. 70 I.A. 129. (2) ; 836 Investigation Commission directing it not to proceed with the investigation of cases referred to it under the provisions of the Act. The writ petitions in the High Court were opposed on behalf of the Commission on a number of grounds, one of them being that the Pun. jab High Court had no jurisdiction to issue the writs prayed for under article 226 of the Constitution, simply because the Commission was located in Delhi. Reliance was placed on behalf of the Commission on the decision of the Privy Council in the Parliament case (1) that the substance of the matter was that the assessees against whom the investigation had been started belonged to U. P. and all the assessment pro ceedings, including reference to the High Court, would lie in Uttar Pradesh. The High Court gave effect to this contention and dismissed the application primarily on the ground that the High Court had no jurisdiction to issue the writ to the Commission. The assessees came up in appeal to this Court, and this Court substantially adopted the reasons given by it in its previous judgment in the case of Election Commission, India vs Saka Venkata Subba Rao (2). It is to be noted that when the High Court of Punjab decided the case, the decision of this Court referred to above had not been given. Relying upon its previous decision, this Court held that the Punjab High Court was in error in holding that it had no jurisdiction to deal with the matter under article 226 of the Constitution. The appeal was dismissed by this Court on other grounds, not material to this case. Learned counsel for the appellant has contended that the two decisions of this Court referred to above are distinguishable from the facts of the present case, inasmuch as in those cases the Election Commission and the Income tax Investigation 'Commission were statutory bodies, which had their location in Delhi, and, therefore, this Court held that the Punjab High Court was the High Court within whose jurisdiction those bodies functioned and had their location and were, therefore, amenable to its jurisdiction. He further contended that the Union Government functioned throughout the territory of India and could (1) (1943) L.R. 70 I.A. 129. (2) ; 837 not be said to be located only in Delhi simply because the capital for the time being was in Delhi. In this connection, strong reliance was placed on the decision of the Full Bench of the Allahabad High Court in Maqbulunnissa vs Union of India (1). That case does lend a great deal of support to this contention on behalf of the appellant. It was held by the High Court in that case that the words "any Government" in article 226(1) of the Constitution clearly indi cated that the Allahabad High Court had jurisdiction to entertain the petition under article 226, not only against the State of Uttar Pradesh, but also against the Union Government for the issue of a writ in the nature of mandamus, directing the Government to forbear from giving effect to the order asking the petitioner to leave India. The ratio of the decision was that, even though the capital of the Government of India is in Delhi, its executive power extends throughout the territory of India and that the real test to determine the jurisdiction would be the residence of the petitioners and the effect of the impugned order upon them. After holding that the High Court had the jurisdiction to entertain the petition, the Court dismissed it on other grounds, not material to this case. The Allahabad High Court distinguished the decision of a Division Bench of the Calcutta High Court dated January 17, 1951, in the case of The Lloyds Bank Limited vs The Lloyds Bank Indian Staff Association (Calcutta Branches) (2) which was unreported till then. In that case, Harries, C. J., speaking for the Court, had held that though article 226 of the Constitution had gone beyond the English practice by providing that writs in the nature of prerogative writs could issue even against a Government, that Government most be located within the territorial limits of the Court which was moved to exercise its power under that Article. He further observed that the Government of India could not be said to be located in the State of West Bengal and, therefore, writs under article 226 could not issue against that Government by the High Court of Calcutta. That (1) I.L. R. (1953) 2 All. 289. (2) I.L.R. 838 decision of the Calcutta High Court was distinguished by the Allahabad High Court on the ground that "the effects of the orders of the Union Government were not operative within the jurisdiction of the Court". It may be added that that decision came up in appeal to this Court in Civil Appeal No. 42 of 1952 but the appeal was dismissed by this Court by its judgment dated April 20, 1952, on other grounds. It will be noticed that when the Allahabad decision, so strongly relied upon by the appellant, was given, the two decisions referred to above of this Court were not there. The Allahabad High Court may not have given that judgment if the two decisions of this Court had then been in existence. The two main questions which arise, therefore, are: (i) whether the Government of India as such can be said to have a location in a particular place, viz., New Delhi, irrespective of the fact that its authority extends over all the States and its officers function throughout India, and (ii) whether there is any scope for introducing the concept of cause of action as the basis of exercise of jurisdiction under article 226. Before, however, we deal with these two main questions, we would like to clear the ground with respect to two subsidiary matters which have been urged on behalf of the appellant. The first argument is that the word "authority" used in article 226 cannot and does not include Government. We are not impressed by this argument. In interpreting the word "authority" we must have regard to the clause immediately following it. article 226 provides for "the issue to any person or authority including in appropriate cases any Government" within those territories. It is clear that the clause "including in appropriate cases any Government" goes with the preceding word "authority", and on a plain and reasonable construction it means that the word " authority" in the context may include any Government in an appropriate case. The suggestion that the said clause is intended to confer discretion on the High Courts in the matter of issuing a writ or direction on any Government seems to us clearly unsustainable. 839 To connect this clause with the issuance of a writ or order and to suggest that in dealing with cases against Government the High Court has to decide whether the case is appropriate for the issue of the order is plainly not justified by the rules of grammar. We have no hesitation in holding that the said clause goes with the word "authority" and that its effect is that the authority against whom jurisdiction is conferred on the High Court to issue a writ or appropriate order may in certain cases include a Government. Appro priate cases in the context means cases in which orders passed by a Government or their subordinates are challenged, and the clause therefore means that where such orders are challenged the High Court may issue a writ against the Government. The position, therefore, is that under article 226 power is conferred on the High Court to issue to any person or authority or in a. given case to any Government, writs or orders there specified for enforcement of any of the rights conferred by Part III and for any other purpose. Having thus dealt with the two subsidiary points raised before us, we may now proceed to consider the two main contentions which arise for our decision in the present appeal. This brings us to the first question, namely, whether the Government of India as such can be said to be located at one place, namely, New Delhi. The main argument in this connection is that the Government of India is all pervasive and is functioning throughout the territory of India 'and therefore every High Court has power to issue a writ against it, as it must be presumed to be located within the territorial jurisdiction of all State High Courts. This argument in our opinion confuses the concept of location of 'a Government with the concept of its functioning ' A Government may be functioning all over a State or all over India; but it certainly is not located all over the State or all over India. It is true that the Constitution has not provided that the seat of the Government, of India will be at New Delhi. That, however, does not mean ' that the Government of India as such has no seat where it is located. It is common knowledge that the seat of the 840 Government of India is in New Delhi 'and the Government as such is located in New Delhi. The absence of a provision in the Constitution can make no difference to this fact. What we have to see, therefore, is whether the words of article 226 mean that the person or authority to whom a writ is to be issued has to be resident in or located within the territories of the High Court issuing the writ? The relevant words of article 226 are these "Every High Court shall have power to issue to any person or authority within those territories. ". So far as a natural person is concerned, there can be no doubt that he can be within those territories only if he resides therein either permanently or temporarily. So far as an authority is concerned, there can be no doubt that if its office is located therein it must be within the territory. But do these words mean with respect to an authority that even though its office is not located within those territories it will be within those territories because its order may affect persons living in those territories? Now it is clear that the jurisdiction conferred on the High Court by article 226 does not depend upon the residence or location of the person applying to it for relief; it depends only on the person or authority against whom a writ is sought being within those territories. It seems to us therefore that it is not permissible to read in article 226 the residence or location of the person affected by the order passed in order to determine the jurisdiction of the High Court. That jurisdiction depends on the person or authority passing the order being within those territories and the residence: or location of the person affected can have no relevance on the question of the High Court 's jurisdiction. Thus if a person residing or located in Bombay, for example, is aggrieved by an order passed by an authority located, say, in Calcutta, the forum in which he has to seek relief is not the Bombay High Court though the order may affect him in Bombay but the Calcutta High Court where the authority passing the order is located. It would, therefore, in our opinion be wrong to introduce in article 226 the concept of the place where the order 841 passed has effect in order to determine the jurisdiction of the High Court which can give relief under article 226. The introduction of such a concept may give a rise to confusion and conflict of jurisdictions. Take , for example, the case of an order passed by an authority in Calcutta, which affects six brothers living, say , in Bombay, Madras, Allahabad, Jabalpur, Jodhpur and Chandigarh. The order passed by the authority in Calcutta has thus affected persons in six States. Can it be said that article 226 contemplates that all the six High Courts have jurisdiction in the matter of giving relief under it? The answer must obviously be 'No ', if one is to avoid confusion and conflict of jurisdiction. As we read the relevant words of article 226 (quoted above) there can be no doubt that the jurisdiction conferred by that Article on a High Court is with respect to the location or residence of the person or authority passing the order and there can be no question of introducing the concept of the place where the order is to have effect in order to determine which High Court can give relief under it. It is true that this Court will give such meaning to the words used in the Constitution as would help towards its working smoothly. If we were to introduce in article 226 the concept of the place where the order is to have effect we would not be advancing the purposes for which article 226 has been enacted. On the other hand, we would be producing conflict of jurisdiction between various High Courts as already shown by the illustration given above. Therefore, the effect of an order by whomsoever it is passed can have no relevance in determining the jurisdiction of the High Court which can take action under article 226. Now, functioning of a Government is really nothing other than giving effect to the orders passed by it. Therefore it would not be right to introduce in article 226 the concept of the functioning of Government when determining the meaning of the words "any person or authority within those territories". By introducting the concept of functioning in these words we shall be creating the same conflict which would arise if the concept of the place where the order is to have effect is introduced in 842 article 226. There can, therefore, be no escape from the conclusion that these words in article 226 refer not to the place where the Government may be functioning but only to the place where the person or authority is either resident or is located. So far therefore as a natural person is concerned, he is within those territories if he resides there permanently or temporarily. So far. as an authority (other than a Government) is concerned, it is within the territories if its office is located there. So far as a Government is concerned it is within the territories only if its seat is within those territories. The seat of a Government is sometimes mentioned in the Constitutions of various countries but many a time the seat is not so mentioned. But whether the seat of a Government is mentioned in the Constitution or not, there is undoubtedly a seat from which the Government as 'such functions as a fact. What article 226 requires is residence or location as a fact and if therefore there is a seat from which the Government functions as a fact even though that seat is not mentioned in the Constitution the High Court within whose territories that seat is located will be the High Court having jurisdiction under AA. 226 so far as the orders of the Government as such are concerned. Therefore, the view taken in Election Commission, India vs Saka Venkata Subba Rao (1) and K.S. Rashid and Son vs The Income tax Investigation Commission (2) that there is two fold limitation on the power of the High Court to issue writs etc. under article 226, namely, (i) the power is to be exercised 'throughout the territories in relation to which it exercises jurisdiction ', that is to say, the writs issued by the Court cannot run beyond the territories subject to its jurisdiction, and (ii) the person or authority to whom the High Court is empowered to issue such writs must be "within those territories" which clearly implies that they must be amenable to its jurisdiction either by residence or location within those territories, is the correct one. This brings us to the second point, namely, whether (1) ; (2) ; 843 it is possible to introduce the concept of cause of action in article 226 so that the High Court in whose jurisdiction the cause of action arose would be the proper one to pass an order thereunder. Reliance in this connection has been placed on the judgment of the Privy Council in Ryots of Garabandho vs Zamindar of Parlakimedi (1). In that case the Privy Council held that even though the impugned order was passed by the Board of Revenue which was located in Madras, the High Court would have no jurisdiction to issue a writ quashing that order, as it had no jurisdiction to issue a writ beyond the limits of the city of Madras except in certain cases, and that particular matter was not within the exceptions. This decision of the Privy Council does appa rently introduce an element of the place where the cause of action arose in considering the jurisdiction of the High Court, to issue a writ. The basis of the at decision, however, was the peculiar history of the issue of writs by the three Presidency High Courts as successors of the Supreme Courts, though on the literal construction of cl. 8 of the Charter of 1800 conferring jurisdiction on, the Supreme Court of Madras, there could be little doubt that the Supreme Court would have the same jurisdiction as the Justices of the Court of King 's Bench Division in England for the territories which then were or thereafter might be subject to or depend upon the Government of Madras. It will therefore not be correct to put too much stress on the decision in that case. The question whether the concept of cause of action could be introduced in article 226 was also considered in Saka Venkata Subba Rao 's case ( 2 ) and was repelled in these words: "The rule that cause of action attracts jurisdiction in suits is based on statutory enactment and cannot apply to writs issuable under article 226 which makes no reference to any cause of action or where it arises but insists on the presence of the person or authority within the territories ' in relation to which the High Court exercises jurisdiction. " Article 226 as it stands does not refer anywhere to (1) (1943) L.R. 70 I.A. 129. (2) ; 844 the accrual of cause of action and to the jurisdiction of the High Court depending on the place where the cause of action accrues being within its territorial jurisdiction. Proceedings under article 226 are not suits; they provide for extraordinary remedies by a special procedure and give powers of correction to the High Court over persons and authorities and these special powers have to be exercised within the limits set for them. These two limitations have already been indicated by us above and one of them is that the person or authority concerned must be within the territories over which the High Court exercises juris diction. Is it possible then to overlook this constitu tional limitation and say that the High Court can issue a writ against a person or authority even though it may not be within its territories simply because the cause of action has arisen within those territories? It seems to us that it would be going in the face of the express provision in article 226 and doing away with an express limitation contained therein if the concept of cause of action were to be introduced in it. Nor do we think that it is right to say that because article 300 specifically provides for suits by and against the Government of India, the proceedings under article 226 are also covered by article 300. It seems to us that article 300 which is on the same line as section L76 of the Government of India Act, 1935, dealt with suits as such and proceedings analogous to or consequent upon suits and has no reference to the extraordinary remedies provided by article 226 of the Constitution. The concept of cause of action cannot in our opinion be introduced in article 226, for by doing so we shall be doing away with the express provision contained therein which requires that the person or authority to whom the writ is to be issued should be resident in or located within the territories over which the High Court has jurisdiction. It is true that this may result in some inconvenience to persons residing far away from Now Delhi who are aggrieved by some order of the Government of India as such, and that may be a reason for making a suit. able constitutional amendment in article 226. But the argument of inconvenience, in our opinion,. cannot 845 affect the plain language of article 226, nor can the concept of the place of cause of action be introduced into it for that would do away with the two limitations on the powers of the High Court contained in it. We have given our earnest consideration to the language of article 226 and the two decisions of this Court referred to above. We are of opinion that unless there are clear and compelling reasons, which cannot be denied, we should not depart from the interpretation given in these two cases and indeed from any interpretation given in an earlier judgment of this Court, unless there is a fair amount of unanimity that the earlier decisions are manifestly wrong. This Court should not, except when it is demonstrated beyond all reasonable doubt that its previous ruling, given after due deliberation and full hearing, was erroneous, go back upon its previous ruling, particularly on a constitutional issue. In this case our reconsideration of the matter has confirmed the view that there is no place for the introduction of the concept of the place where the impugned order has effect or of the concept of functioning of a Government, apart from the location of its office concerned with the case, or even of the concept of the place where the cause of action arises in article 226 and that the language of that Article is plain enough to lead to the conclusion at which the two cases of this Court referred to above arrived. 'If any inconvenience is felt on account of this interpretation of article 226 the remedy seems to be a constitutional amendment. There is no scope for avoiding the inconvenience by an interpretation which we cannot reasonably, on the language of the Article, adopt and which the language of the Article does not bear. In this view of the matter the appeal fails and is hereby dismissed with costs. SUBBARAO, J. I have had the advantage of perusing the judgment prepared by my Lord the Chief Justice. I regret my inability to agree. I would not have ventured to differ from his weighty opinion but for the fact that the acceptance of the contention of 107 846 the respondents would practically deprive the majority of citizens of our country of the benefit of cheap, expeditious and effective remedy given to them under article 226 of the Constitution against illegal acts of the Union Government. If the relevant provisions are clear and unambiguous, the said contention must prevail however deleterious the effect may be to public interest. But if the words of the Article are capable of two or more interpretations, one that will carry out the intention of the Constituent Assembly and the other that would defeat it, the former interpretation must necessarily be accepted. We must also bear in mind that the provisions of the Constitution are not " mathematical formulae which have their essence in mere form". It being an organic statute, its provisions must be construed broadly and not in a pedantic way, but without doing violence to the language used. The facts have been fully stated in the judgment of my Lord the Chief Justice and it would be redundant to restate them. It would be enough if I formulate the point of law raised and express my opinion thereon. The question is whether the appellant, who is a citizen of India and is residing in the State of Kashmir, can enforce his fundamental right under Art 32(2A) of the Constitution by filing an appropriate writ petition in the High Court of Jammu & Kashmir, if his right is infringed by an order of the Union Government. The Constitution of India has been made applicable to the State of Jammu & Kashmir by the Constitution (Application to Jammu & Kashmir) Order, 1954 (Order No. 48 dated May 14, 1954) with certain exceptions and modifications. By the said Order, cl. (3) of article 32 of the Constitution was deleted, and a new clause (2A) was inserted after cl. The question falls to be decided on a true construction of the said el. (2A) which reads: "Without prejudice to the powers conferred by clauses (1) and (2), the High Court shall have power throughout the territories in rotation to which it exercises jurisdiction to issue to any person or authority, including in appropriate cases any Government within these territories, directions or orders or writs, 847 including writs in the nature of habeas corpus, mandamus, prohibition, quo warranto and certiorari, or any of them, for the enforcement of any of the rights conferred by this Part. " The operative part of this clause is in pari materia with article 226 of the Constitution with the difference that the words "for any other purpose" found in the latter Article are omitted in the former. Though the power of the High Court of Jammu & Kashmir is limited to that extent, in other respects it is as extensive as that of the other High Courts under article 226. The object of the amendment is self evident; it was enacted to enable the said High Court to protect the fundamental rights of the citizens of India in that part of the country. The learned Solicitor General broadly contends that this Court has construed the analogous provisons of article 226 of the Constitution and held that the writs under that Article do not run beyond the territories in relation to which a High Court exercises jurisdiction and that a High Court cannot issue a writ thereunder unless the person or authority against whom the writ is sought is physically resident or located within the territorial jurisdiction of that High Court; and that, therefore, on the same parity of reasoning, the High Court of Jammu & Kashmir cannot issue a writ to run beyond the territories of that State against the Union Government functioning through its officers in New Delhi. Learned counsel for the appellant contends, on the other hand, that neither article 32(2A) nor article 226 bears any such limited construction and that on a liberal and true construction of the said constitutional provisions it must be held that 'the High Court can issue a writ against any Government, including the Union Government, exercising the functions within the territories of a State, if it infringes the right of a person in that State. Before I attempt to construe the provisions of el. (2A) of article 32, I think it would be convenient to trace briefly the history of article 226, for it throws a flood of light on the legislative intention expressed in 848 article 32(2A). In pre independence India the High Courts, other than the High Courts in the presidency towns of Bombay, Calcutta and Madras, had no power to issue prerogative writs; even in the case of the said presidency High Courts the power to issue writs was very much circumscribed; their jurisdiction to issue the said writs was confined only to the limits of their original jurisdiction and the Governments were excluded from its scope. But the framers of our Constitution with the background of centuries of servility, with the awareness of the important role played by the High Court of England in protecting the rights of its citizens when they were infringed by executive action, with the knowledge of the effective and impartial part played by the High Courts in pre independence India within the narrow limits of their jurisdiction to protect the rights of the citizens of our country, with a vision to prevent autocracy raising its ugly head in the future, declared the fundamental rights in Part III of the Constitution, conferred powers on the High Courts to issue to any person or authority, including in appropriate cases any Government, directions, orders or writs for the enforcement of the fundamental rights or for any other purpose. In short, any person of India can approach an appropriate High Court to protect his rights against any person, authority or any Government if his fundamental right or any other right is infringed by the said person, authority or Government. If the contention of the respondents be accepted, whenever the Union Government infringes the right of a person in any remote part of the country. , he must come all the way to New Delhi to enforce his right by filing a writ petition in the Circuit Bench of the Punjab High Court. If a common man residing in Kanyakumari, the southern most part of India, his illegally detained in prison, or deprived of his property otherwise than by law, by an order of the Union Government, it would be a travesty of fundamental rights to expect him to come to New Delhi to seek the protection of the High Court of Punjab. This construction of the provisions of article 226 would attribute to the framers 849 of the Constitution an intention to confer the right on a person and to withhold from him for all practical purposes the remedy to enforce his right against the Union Government. Obviously it could not have been the intention of the Constituent Assembly to bring about such an anomalous result in respect of what they conceived to be a cherished right conferred upon the citizens of this country. In that event, the right conferred turns out to be an empty one and the object of the framers of the Constitution is literally defeated. The scope of article 226 vis a vis the reach of the High Courts ' power has been considered in two decisions of this Court, namely, Election Commission, India vs Saka Venkata Rao (1) and K. section Rashid and Son vs The Income tax Investigation Commission (2). As this Bench of seven Judges is constituted to enable this Court to approach the problem with a fresh mind unhampered by precedents, I propose to scrutinize the provisions of article 32(2A) free from the curbs imposed by the earlier decisions. The core of the Article is discernible in the following clause and phrases: "throughout the territories in relation to which it exercises its jurisdiction", "any Government", "within those territories", "directions or orders or writs, including writs in the nature of habeas corpus, etc. " The wore "throughout the territories, etc." delimit the territorial jurisdiction of the High Courts in the matter of issuing directions or writs. A High Court exercises jurisdiction throughout the State in which it is located. Its writs run only through. out the State and not beyond its territorial limits. The main object of the powers to keep the authorities or tribunals within their bounds and to prevent them from infringing the fundamental or other rights of citizens. At the instance of an aggrieved person it can issue one or other of the writs or orders or directions against the offending authority in respect of an act done or omitted tot be done by it. It is implicit in the, limitation that the impugned act must affect a person or property amenable to its territorial jurisdiction. (1) ; (2) ; 850 This question, in a different context, has been considered by the Judicial Committee of the Privy Council in Ryots of Garabandho vs Zemindar of Parlaki medi (1). There the Board of Revenue situated in the State of Madras under section 172 of the Madras Estates Land Act, 1908, enhanced the rents payable by the ryots in three villages, including Parlakimedi village, in the district of Ganjam in the Northern Circars. The question was whether the Madras High Court had power to issue a writ to quash the order of the Board. of Revenue, as the parties to that litigation were not subject to the original jurisdiction of the Madras High Court. The Judicial Committee held that the Madras High Court had no jurisdiction to issue a writ of certiorari to run beyond the territorial limits of that High Court. When it was contended that, as the Revenue Board was in Madras, the High Court had jurisdiction to quash its order, the Judicial Committee repelled that contention with the follow ing remarks at p. 164: "The Board of Revenue has always had its offices in the Presidency Town, and in the present case the Collective Board, which made the order complained of, issued this order in the town. On the other hand, the parties are not subject to the original jurisdiction of the High Court, and the estate of Parlakimedi ties in the north of the province. . . Their Lordships think that the question of jurisdiction must be regarded as one of substance, and that it would not have been within the competence of the Supreme Court to claim jurisdiction over such a matter as the present by issuing certiorari to the Board of Revenue on the strength of its location in the town. Such a view would give jurisdiction to the Supreme Court, in the matter of settlement of rents for ryoti holdings in Ganjam between parties not otherwise subject to its jurisdiction, which it would not have had over the Revenue Officer who dealt with the matter at first instance." This decision in clear terms lays emphasis on the substance of the matter and holds that mere physical (1) (1943) L.R. 70 I.A. 129. 851 presence of an authority within the jurisdiction of a High Court does not enable that Court to issue writs against the said authority in respect of an order made in a dispute between persons residing outside the territorial jurisdiction of the said High Court. Therefore, a High Court 's jurisdiction to issue an appropriate writ depends on the co existence of two conditions, namely, (i) the cause of action has accrued within the territories in relation to which it has jurisdiction, and (ii) the said authority is "within" the said territories. This interpretation may give rise to a criticism; it may be asked, which High Court could give the relief if the cause of action accrues within the territorial jurisdiction of one High Court and the authority concerned is located within that of another High Court? There may. be statutory authorities with all India jurisdiction, but for convenience located in a particular State. In exercise of the powers conferred under statutes, they may make orders affecting the rights of parties residing in different States. I am prima facie of the view that the said authorities, in so far as their orders operate in a particular territory, will be "within" those territories and the High Court, which exercises its jurisdiction throughout that territory, can issue a suitable writ against the said authorities. This interpretation avoids the anomaly of one High Court issuing a writ against an authority located "within" its territorial jurisdiction in respect of a cause of action accruing in another State or territory over which it has no jurisdiction. But this question does not arise in this case, for we re mainly concerned with the Union Government. Article 226 of the Constitution is expressed in wide and most comprehensive terms. There is no difficulty about. the words "person or authority", but the phrase "including any Government" gives rise to a conflict of opinion. If the framers of the Constitution intended to extend simply the power of the High Court to issue writs only against the Government of the State, they could have stated "or the Government of the State", instead they designedly used the words "any Government" which at first sight appear rather involved but on a deeper scrutiny reveal that the words 852 "any Government" cannot mean only the Government of the State. The word "any" clearly presupposes the existence of more than one Government functioning in a State. Under the Constitution two Governments function in each State. Under article 1, India shall be a Union of States and the territory of India shall comprise, inter alia, the territories of the States. Part 11 provides for one class of citizens, that is, citizens of India. In whatever State a person with the requisite qualifications of a citizen may reside, he is a citizen of India and not of that particular State. All the three departments of the Union as well as the State function in the State; both Parliament and the Legislature of the State make laws which govern the State in respect of matters allotted to them respectively. Both the Union and the State executive powers extend to the. State, and the former is exercised in regard to matters with respect to which Parliament has power to make laws and the latter in regard to matters with respect to which the Legislature of the State has power to make laws: see articles 73 and 162. The Judiciary consists of an hierarchy of courts and all the courts from the lowest to the Supreme Court exercise jurisdiction in respect of a cause of action arising in that State. The demarcation between the Union Government and the State Government is, therefore, not territorial but only : subjectwise and both the Governments function within the State. With this background it is easy to perceive that "any Government" must include the Union Government, for two State Governments cannot administer the same State, though for convenience or as a temporary arrangement, the offices of one State may be located in another State. Then it is asked why the Article confers power to issue writs against any Government only in appropriate cases. There are two answers to this question. Till the Constitution was framed there was no power in a High Court to issue a writ even against the Provincial Government. The Constitution conferred for the first time a power on the High Court to issue a writ not only against the State Government but also the Union Government. As the 853 Union Government has sway over not only the State in question but beyond it, it became necessary to administer a caution that a writ can only be issued in appropriate cases. The High Court 's jurisdiction is limited in the matter of issuing writs against the Union Government, for it cannot issue writs against it in respect of a cause of action beyond its territorial jurisdiction. There may also be a case where the secretariat of one of the State Governments is located in another State temporarily. In such a case also the High Court of the latter State cannot issue writs against that State Government as it is not appropriate to issue such writs, for the cause of action accrues ' within the former State. I have, therefore, no doubt that the words "any Government" must necessarily take in the Union Government. Much of the argument turns upon the words "within those territories". It is said that the Union Government is not within the territories of the State, for its headquarters are in Delhi. The Article does not use the word "headquarters", "resident" or "location". The dictionary meaning of the word "within" is "inside of, not out of or beyond". The connotation of the words takes colour from the context in which they are used. A person may be said to be within a territory if he resides therein. He may also be within a territory if he temporarily enters the said territory or is in the course of passing through the territory. Any authority may be in a territory if its office is located therein. It may also be said to be within a territory if it exercises its powers therein and if it can make orders to bind persons for properties therein. So too a Government may be within a State if it has a legal situs in that State. It may also be said to be within a State if it administers the State, though for convenience some of its executive authorities are residing outside the territory. We must give such meaning to these words as would help the working of the Constitution rather than retard it. To put it differently, can it be said that the Union Government 108 854 is within a particular State? Union Government in the present context means the executive branch of the Government. Where is it located? To answer this question it is necessary to consider what is "Union Government". The Constitution in Part V under the heading. "The Union" deals with separate subjects, namely, the executive, the Parliament and the Union judiciary. Under article 53, the executive power of the Union shall be vested in the President and shall be exercised by him either directly or through officers subordinate to him in accordance with the Constitution. Article 74 provides for a council of Ministers with the Prime Minister at the head to aid and advise the President in the exercise of his functions. By article 77, all executive action of the Government of India shall be expressed to be taken in the name of the President; and el. (3) thereof authorizes the President to make rules for the more convenient transaction of the business of the Government of India, and for the allocation among Ministers of the said business. Article 73 says that subject to the provisions of the Constitution, the executive power of the Union shall extend to the matters with respect to which Parliament has power to make laws and to the exercise of such rights, authority and jurisdiction as are exercisable by the Government of India by virtue of any; treaty or agreement. The Constitution nowhere fixes the seat of the Union Government or even that of the President. Shortly stated, the Union Government is the President acting on the advise of the Ministers directly or through officers subordinate to him in accordance with the Constitution and the jurisdiction of the said Government extends, so far as is relevant to the present purpose, to matters in respect of which Parliament has power to make laws. The question that immediately arises is, what is the situs of such a Government? There is no statutory situs. For convenience of administration, the officers of such Government may stay at one place,, or they may be distributed in different places; the President may. reside in one place, the Prime Minister in another, the 855 Ministers in a third place and the officers through whom the President exercises his powers in a place different from the rest. What happens when the Secretariat remains in New Delhi and the President resides for some months in a year in, say,, Hyderabad? Contrary wise, what would be the position if the President stays in New Delhi and the entire or part of the Secretariat or some of the Ministers stay in Hyderabad? It is, therefore, not possible to apply 'the test of residence or location in the absence of any statutory situs. The Union Government has no fixed legal abode; it is present throughout the territories over which it exercises jurisdiction and in respect whereof it can make effective and binding orders in the field allotted to it by the Constitution. The constitutional situs of the Union Government is the entire territories of the Union and it is "within" the territories of India and,, therefore, within the territories of every State. Let us look at the problem from another standpoint. Under article 300 of the Constitution, the Government of India may sue or be sued by the name of the Union of India. The word "sued" is used in a general sense and cannot be narrowly construed in the Constitution as to comprehend only action by way of filing a suit in a civil court. According to Webster, it means to seek justice or right by legal process. Generally speaking, it includes any action taken in a court. The practice followed in the various High Courts and the Supreme Court is also consistent with the wide meaning attributed to it, for writs are filed against the Government of India only in the name of the Union of India. Union of India is a juristic person and it is impossible to predicate its residence in a particular place in the Union. Its presence Synchronizes with the limits of the Union territories. That is the reason why that Order XXVII, rule 3, Code of Civil Procedure, says that in suits by or against the Government instead of inserting in the plaint the name and description and place of residence of the plaintiff or defendant, it shall be sufficient to insert the appropriate name as provided in section 79 Section 79 of the 856 Civil Procedure Code is in terms analogous to article 300 of the Constitution, and under that section, "In a suit by or against the Government, the authority to be named as plaintiff or defendant, as the case may be, shall be (a). in the case of a suit by or against the Central Government, the Union of India, and (b). in the case of a suit by or against a State Government, the State." As the Union of India has no statutory situs, Order XXVII, rule 3, Code of Civil Procedure, exempts its place of residence being given in the plaint or the written statement, as the case may be. The suit by or against the Union Government shall be filed in a court which has jurisdiction to entertain such a suit, having regard to the provisions of sections 15 to 20 of the said Code. On the same analogy, it may be held that the Union of India has no legal situs in a particular place and a writ petition can be filed against it in a place within the jurisdiction of the High Court wherein the cause of action accrues. It is said that the limits of the power to issue a writ are implicit in the nature of a particular writ. What is the nature of the principal writs, namely, habeas corpus, mandamus, prohibition, quo warranto and certiorari? The writ of habeas corpus "is a prerogative process for securing the liberty of the subject by affording an effective means of immediate release from unlawful or unjustifiable detention whether in prison or in private custody". The writ of mandamus "is, in form, a command directed to any person, corporation or inferior tribunal, requiring him or them to do some particular thing therein specified which appertains to his or their office and is in the nature of a public duty." An order of prohibition is an order directed to an inferior tribunal forbidding it to; continue with the proceedings pending therein. An information in the nature of a quo warranto lies against a person who claimed or usurped an office, franchise, or liberty, to inquire by what authority he supported his claim. A certiorari is directed to an authority "requiring the record of the proceedings in some cause or matter to 857 be transmitted into the High Court to be dealt with there. " (See Halsbury 's Laws of England, Vol. II, 3rd edition). It was asked how could the liberty of a subject be secured, the command be issued, the proceedings of an inquiry be prohibited, the credentials of a person to hold office be questioned, the records of a proceeding be directed to be transmitted to the High Court, if the authority concerned wag located, or the person directed resided, outside. the territorial jurisdiction of the High Court? It was also asked how, if the said authority, or person, disobeyed the order of the High Court, it could be enforced against the said authority or person. On the parity of the same reasoning the argument proceeded that, as the officers acting for the Government of India reside in Delhi, a writ which would become brutum fulmen could not be issued by the High Court. The questions so posed are based on a misapprehension of the relevant provisions of the Constitution. They also mix up the nature of the writs with the procedure in dealing with the writs or enforcing the orders made therein. As I have already indicated, the Article confers a power on the High Court to issue writs against the Union Government. If the said Government is "within the State", is it an answer to it that an officer of the Government dealing with a particular paper or papers is residing outside the territorial jurisdiction of the High Court? If the Union Government is bound by the order of the High Court, the question of service of notice on a particular officer acting for the Government or to enforce an order against him is a matter pertaining to the realm of procedure and appropriate rules calf be framed by the High Court or the requisite law made by the Parliament. If the Union Government disobeys the order it would certainly be liable for contempt of court under the . Even if the con temner happens to be an officer of the said Government residing outside the territorial limits of the High Court, the High Court has ample power to reach him under section 5 of the said Act. 858 The analogy drawn from English law is rather misleading. England is comparatively a small country and it has only one Government functioning throughout the State. The problem that has arisen now could not have arisen in England, for the jurisdiction of the Queen 's Bench Division of the High Court extends throughout England. In England the manner of the exercise of the jurisdiction was also regulated by a procedure brimming with technicalities, but later on simplified by statute. The framers of our Constitution therefore designedly used the words "in the nature of" indicating that they were not incorporating in the Constitution the entire procedure followed in England, for the procedure will have to be evolved having regard to the federal structure of our Government. How can the procedural law of England in the matter of writs be bodily lifted and implanted in India? This Court shall have to put a reasonable construction on the words without being unduly weighed down by the historical background of these writs and construe the Article in such a way, if legally permissible, to carry out the intention of the Constitution makers. That apart, Article 226 of the Constitution is not confined to the prerogative writs in vogue in England. The Article enables the appropriate High Court to issue also directions or orders, and there is no reason why the High Court could not, in an appropriate case, give a suitable direction to, or make a proper order on, the Union Government. Such directions or orders are certainly free from the procedural technicalities of the said writs. I shall now notice briefly the decisions cited at the Bar. The first is the decision of this Court in Election Commission, India vs Saka Venkata Rao(1). There the Governor of Madras referred to the Election Commission, which had its offices permanently located in New Delhi, the question whether the respondent was disqualified and could be allowed to sit and vote in the Assembly. The respondent thereupon applied to the High Court of Madras under article 226 of the Constitution for a writ restraining the Election Commission (1) [1953] S.C.R. lI44. 859 from enquiring into his alleged disqualification for membership of the Assembly. This Court held that the power of the High Court to issue writs under article 226 of the Constitution was subject to the two fold limitation: (i) that such writs cannot run beyond the territories subject to its jurisdiction; and (ii) that the person or authority to whom the High, Court is empowered to issue writs must be amenable to the jurisdiction of the High Court either by residence or location within the territories subject to its jurisdiction. On that basis the writ petition was dismissed. At the outset it may be noticed that there is one obvious difference between that case and the present one. In that case the respondent was not the Union of India but an authority which could have and had its location in a place outside the Madras State. The present case satisfies both the conditions: the writ does not run beyond the territorial jurisdiction of the High Court, as the Union Government must be deemed to be "within" the said territories; the second condition is also satisfied, as the Union Government, being within the State, is also amenable to its jurisdiction. The next case relied upon by the learned Solicitor General is a converse one. It is the decision of this Court in K. section Rashid & Son vs The Income tax Investigation Commission (1). In that case the Income tax Investigation Commission located in Delhi was investigating the case of the petitioners under section 5 of the Taxation on Income (Investigation Commission) Act 1947, although the petitioners were assessees belonging to Uttar Pradesh and their original assessments were made by the Income tax authorities of that State. It was contended that the Punjab High Court had no jurisdiction to issue a writ under article 226 of the Constitution to the said Commission. This Court, after restating the two limitations on the power of the High Court to issue a writ, held that the Commission was amenable to the jurisdiction of the Punjab High Court and, therefore, the Punjab High Court had jurisdiction to issue the writ. This decision also (1) ; 860 deals with a case of statutory authority located in Delhi and it has no application to the case of the Union Government. The question whether the principles that apply to the Government of India would equally apply to statutory authorities situate in one State but exercising jurisdiction in another, does not arise for consideration in this case; though, as I have already expressed, I am prima facie of the view that there is no reason why they should not. Now coming to the decision of the High Courts, there is a clear enunciation of the relevant principles in Maqbul Un Nissa vs Union of India(1). The Full Bench of the Allahabad High Court directly decided the point now raised before us. The importance of the decision lies in the fact that the learned Judges approached the problem without being oppressed by the decision of this Court in Saka Venkata Rao 's case (2), which was decided only subsequent to that decision. After considering the relevant Articles of the Constitution ' Sapru, J., speaking for the Full Bench, observed at pp. 293 294 thus: "The analogy between a government and a corporation or a joint stock company which has its domicile in the place where its head office is situate is misleading. To hold that the jurisdiction of this Court does not extend to the Union Government as it has its capital at Delhi and must be deemed to have its domicile at Delhi would be to place the Union Government not only in respect of the rights conceded in Part III but for any other purpose also beyond the jurisdiction of all State High Courts except the Punjab High Court. " The learned Judge proceeded to state at p. 294 "In our opinion, the jurisdiction of this Court to intervene under Article 226 depends not upon where the Headquarters or the Capital of, the Government is situate but upon the fact of the effect of the act done by Government, whether Union or State being within the territorial limits of this Court., Adverting to the words "any Government" in article 226, the learned Judge observed at p. 292 thus: (1) I.L.R. (2) ; 861 "They indicate that the founding fathers knew that more than one government would function within the same territory.)) I entirely agree with the observations of the learned Judge, for they not only correctly construe the provisions of article 226 but also give effect to the intention of the Constitution makers. After the decision of this Court in Saka Yenkata Rao 's case (1) the High Court of Madhya Pradesh considered the question in Surajmal vs State of M. P. (2). There, the Central Government rejected an application for a mining lease and the order rejecting the application was communicated to the applicant who was residing in the State of Madhya Pradesh. It was held by the High Court that the writ asked for could not be issued so as to bind the Central Government because, "(a) the Central Government could not be deemed to be permanently located or normally carrying on its business within the jurisdiction of the High Court; (b) the record of the case which the Central Government decided was not before the High Court and could not be made available from any legal custody within the State; (c) the order of the State Government must be deemed to have merged in that of the Central Government; (d) the order of the State Government could not be touched unless the order of the Central Government could be brought before the High Court and quashed. " We are concerned here with the first and second grounds. The learned Chief Justice, who delivered the judgment on behalf of the Full Bench, applied the principle of the decision of this Court in Saka Venkata Rao 's(1) to the Union Government; and for the reasons already mentioned I am of opinion that the decision Is not applicable to the case of the Union Government. The second reason in effect places the procedure 'on a higher pedestal than the substantive law. It is true that in a writ of certiorari the records would be called for; but, if once it is held that the Union Government is within the State within the meaning of article 226 of the Constitution, I do not think why the High Court in exercise (1) ; (2) A.I.R. 1958 M.P. 103, 862 of its constitutional power cannot direct the Union Government to bring the records wherever its officers might have kept them. This second ground is really corollary to the first, viz., that the Union Government is not within the territorial jurisdiction of the High Court concerned. The Bombay High Court in Radheshyam Makhanlal vs The Union of India (1) also held that a writ cannot issue against the Union Government whose office is located outside the territorial jurisdiction of the High Court. Shah, J., applying the principle of the decision in Saka Venkata Rao 's case (2 ) to the Union Government hold that as the office of the Union Government was not located within the State of Bombay, the Bombay High Court could not issue a writ to the Union Government. But section T. Desai, J.,, was not willing to go so far, and he based his conclusion on a narrower ground, namely, that even if the writ was issued it could not be enforced. I have already pointed out that both the grounds are not tenable. The Union Government is within the State of Bombay in so far as it exercises its powers in that State and the High Court has got a constitutional power to issue writes to the Union Government and, therefore, their enforceability does not depend upon its officers residing in a particular place. The foregoing discussion may be summed up in the following propositions: (1) The power of the High Court under article 226 of the Constitution is of the widest amplitude and it is not confined only to issuing of writs in the nature of habeas corpus, etc., for it can also issue directions or orders against any person or authority, including in appropriate cases any Government. (2) The intention of the framers of the Constitution is clear, and they used in the Article words "any Government" which in their ordinary significance must include the Union Government. (3) The High Court can issue a writ to run throughout the territories in relation to which it exercises jurisdiction. and to the person or authority or Government within the said territories. (4) The Union Government has (1) A.I.R. 1960 Bom. (2) ; 863 no constitutional situs in a particular place, but it exercises its executive powers in respect of matters to which Parliament has power to make laws and the power in this regard is exercisable throughout India; the Union Government must, therefore, be deemed in law to have functional existence throughout India. (5) When by exercise of its powers the Union Government makes an order infringing the legal right or interest of a person residing within the territories in relation to which a particular High Court exercises jurisdiction, that High Court can issue a writ to the Union Government, for in law it must be deemed to be "within" that State also. (6) The High Court by issuing a writ against the Union Government is not travelling beyond its territorial jurisdiction, as the order is issued against the said Government "within" the State. (7) The fact that for the sake of convenience a particular officer of the said Government issuing an order stays outside the territorial limits of the High Court is not of any relevance, for it is the Union Government that will have to produce the record or carry out the order, as the case may be. (8) The orders issued by the High Court can certainly be enforced against the Union Government, as it is amenable to its jurisdiction, and if they are disobeyed it will be liable to contempt. (9) Even if the Officers physically reside outside its territorial jurisdiction, the High Court can always reach them under the , if they choose to disobey the orders validly passed against the Union Government which cannot easily by visualized or ordinarily be expected. (10) The difficulties in communicating the orders pertain to the rules of procedure and adequate and appropriate rules can be male for communicating the same to the Central Government or its officers. For the aforesaid reasons, I hold that article 32(2A) of the Constitution enables the High Court of Jammu & Kashmir to issue the writ to ' the Union Government in respect of the act done by it infringing the fundamental rights of the parties in that State. In the result,, I allow the appeal, set aside the order of the High Court and direct ' it to dispose of the 864 matter in accordance with law. The appellant will have his costs. DAS GUPTA, J. I have had the advantage of reading the judgments prepared by my Lord the Chief Justice and Mr. Justice Subba Rao. I agree with the conclusions reached by the Chief Justice 'that the appeal should be dismissed. As, however, I have reached that conclusion by a slightly different process of reasoning I propose to indicate those reasons briefly. The facts have been fully stated in the judgment of My Lord the Chief Justice and it is not necessary to repeat them. It is sufficient to state that the appellant filed an application to the High Court of Jam mu & Kashmir under Article 32(2A) of the Constitution for the issue of an appropriate writ, order or directions restraining the Union of India and the State of Jammu & Kashmir from enforcing an order conveyed in the Government of India 's letter dated July 31, 1954, whereby the Government of India ordered the premature compulsory retirement of the appellant with effect from August 12, 1954. A preliminary objection was raised on behalf of the respondents that Government of India is not a Government within the territorial limits of the jurisdiction of the Jammu and Kashmir High Court and so the application was not maintainable. The High Court accepted this objection as valid and dismissed the application. The sole question in controversy in appeal is whether the High Court had jurisdiction, on the 'facts and circumstances of this case, to issue a writ to the Government of India under article 32(2A) of the Constitution. Article 32(2A) of the Constitution under which the appellant asked the High Court for relief is in the following words: "Without prejudice to the powers conferred by clauses (1) and (2), the High Court shall have power throughout the territories in relation to which it exercises jurisdiction to issue to any person or authority, including in appropriate cases, any Government within the territories, directions or orders or writs, 865 including writs in the nature of habeas corpus, mandamus, prohibition, quo warranto and certiorari, or any of them, for the enforcement of any of the rights conferred by this Part. " Except for the fact that "the High Court" in this Article means only the High Court of the State of Jammu & Kashmir, while article 226 of the Constitution refers to all other High Courts and the further fact that power granted by this Article is for the enforcement only of the rights conferred by Part III of the Constitution while article 226 gives power to the High Courts in the Union for the enforcement not only of the rights conferred by Part III but for any other purpose, the provisions of the two articles are exactly the same. Power is given to the High Court to give relief in certain matters by issuing appropriate writs and orders to (1) any person; (2) any authority other than the Government and (3) any Government. The exercise of this power is subject to the existence of the condition precedent that the person or the Government or the authority other than the Government must be "within the territories in relation to which the High Court exercises jurisdiction". A special limitation in respect of the issue of writs or orders to a Government is introduced by the words "in appropriate cases" before the words "any Government". Leaving for later consideration the effect of the words "in appropriate cases" we have first to examine the question: when is a Government within the territories under the jurisdiction of a particular High Court ? On behalf of the first respondent, the Union of India, it is urged that to be within the terri tories under the jurisdiction of a High Court the Government must be located within those territories. It is pointed out that "any person" ' to be within any specified territories has to be present within those territories; an authority other then Government has also, before it can be said to be within any particular territories, a physical existence within those territories by having its office therein. The same requirement of location within the particular territories, it is argued, should apply to the case of Governments. The 866 argument is no doubt attractive and at first sight even plausible. On closer examination however it becomes evident that this argument oversimplifies the problem by slurring over the fallacious assumption that a, Government has a location in the same way as any person or any authority other than Government. Has the Government any location in a similar sense in the same way as a person has a location at any point of time by being present at a particular place or an authority other than the Government can be said to be located at the place where its office is situated ? There is no doubt that when we think of a Government, whether of the States or of the Union we are thinking of the executive organ of the State. The executive power of the Union is under article 53 vested in the President and is to be exercised by him. The executive power of the States is vested in the Governors of the States and has to be exercised by them. Does it follow however that the Government of India is located at the place where the President resides and similarly the Government of each State is located at the place where the Governor resides ? It has to be noticed that while the Constitution contains specific provisions in article 130 as to where the Supreme Court shall sit, no such provision is made as to where the President of India shall reside or exercise his executive power vested in him. article 231 of the Constitution speaks of a principal seat for the High Court of each State. We search in vain however for any mention of any principal seat "for the President of India or the Governors of the States". The fact that the President of India has a special place of residence, the Rashtrapati Bhawan in Delhi and the Governors of States have also special places of residence at some places in the State known as Rai Bhavan is apt to make us forget that the Constitution does not provide for any place 'of residence for the President or Governors. There is nothing to prevent the President of India from having more than one permanent place of residence within the Union. If this happens and places of residence are provided for the President of India in, say, Bombay, Calcutta and 867 Madras in addition to the residence at Delhi, can it be said that the Government of India is located in Delhi when the President of India resides in Delhi, it goes to Calcutta when he resides in Calcutta, it goes to Bombay when the President resides in Bombay and to Madras when the President goes and resides in Madras? This may seem at first sight a fantastic illustration; but when we remember that in fact in the days of British rule, the Viceroy had a permanent place of residence at Simla for part of the year and another permanent place of residence at Calcutta for part of the year before 1911 and after 1911 one permanent place of residence in Delhi and another in Simla, it is easy to see that what has been said above by way of illustration is by no means improbable. If therefore a Government is to be held to be located at the place where the head of the State the President of India in the case of the Government of India and the Governor in the case of each State resides, it may well become impossible to speak of any particular place as the place where the Government is located throughout the year. This may not affect the question of any State Government being within the territories of the High Court of the State. For whatever place the Governor may have for his residence is bound to be within the territories of the State. The position will however become wholly uncertain and difficult as regards the Government of India being within the territorial jurisdiction of any particular High Court. For part of the year it may be, if the residence of the President be the criterion for ascertaining the location of the Government, that the Government of India will be within the territories of one High Court and for other parts of the year in another High Court. It will be wholly unreasonable therefore to accept the test of residence of the President of India for deciding where the Government of India is located. Finding the test of the President 's residence illusory, one may try to say that the Government of India or of a State is situated at the place *here the offices of the Ministry are situated. Under article 77, the President allocated the business of the. Government of India 868 among the Ministers while under article 166 the Governor of a State allocates the business of the Government of a State except business with respect to which the Governor is required to act in his discretion among the Ministers of the State. If therefore it was correct to say that all the Ministers of the Government of India had to perform their functions in respect of the business allocated to them at one particular place, it might be reasonable to say that the Government of India is located at that place. Similarly if all the Ministers of a State had to perform their functions in respect of the business allocated to them at one particular place the Government of the State might well be said to be located at that place. The Constitution however contains no provision that all the Ministers of a State shall perform their functions at one particular place in the State nor that the Ministers of the Union will perform their functions at one particular place in the State. Situations may arise not only in an emergency, but even in normal times, when some Ministers of the Government may find it necessary and desirable to dispose of the business allocated to them at places different from where the rest of the Ministers are doing so. The rehabilitation of refugees from Pakistan is part of the business of the Government of India and for the proper performance of this business there is a Ministry of Rehabilitation for Refugees. It is well known that the Minister in this Ministry has to perform a great portion of his business at Calcutta 'in West Bengal and stays there for a considerable part of the year. Many of the offices of this Ministry are situated in Calcutta. What is true of this Ministry, may happen as regards other Ministries also. Special circumstances may require that some portion of the business of the Minis. try of Commerce be performed at places like Bombay, Calcutta or Madras in preference to Delhi, and if this happens the Minister to whom the business of Government of India in respect of commerce has been allocated will be transacting his business at these places instead of at Delhi. If public interest requires that the greater portion of the business of the Ministry of 869 Defence should for reasons of security or other reasons be carried on at some place away from Delhi the Defence Minister will have to transact its business at that place. It is clear therefore that while at any particular point of time it may be possible to speak of any Ministry of the Government of India being located at a particular place, the Government of India as a whole may not necessarily be located at that place. In my opinion, it is therefore neither correct nor appropriate to speak of location of any Government. Nor is it possible to find any other satisfactory test for ascertaining the location of the Government of India. In Election Commission vs Saka Venkata Subba Rao (1) this Court held that before a writ under article 226 could issue to an authority, the authority must be located within the territories under the jurisdiction of the High Court. There however the Court was not concerned with the case of any Government, and had no occasion to consider whether a Government could be said to have a location. The decision in that case and in the later case of K. section Rashid and Son vs The Income tax Investigation Commission, etc., (2) does not therefore bind us to hold that a Government has a location in the same way as an authority like an Election Commission or an Income tax Investigation Commission. It appear,% reasonable therefore to hold that all that is required to satisfy the condition of a Government being within the territories under the jurisdiction of a High Court is that the Government must be functioning within those territories. The Government of India functions throughout the territory of India. The conclusion cannot therefore be resisted that the Government of India is within the territories under the jurisdiction of every High Court including the High Court of Jammu and Kashmir. The use of the words "any Government" appears to me to be an additional reason for thinking that the Government of India is within the territories under the jurisdiction of the Jammu & Kashmir High Court. "Any Government" in the context cannot but mean (1)[1953] S.C.R. 1144. (2) ; 870 every Government. If the location test were to be applied the only Government within the territories of the State of Jammu and Kashmir would be the Government of Jammu and Kashmir. It would be meaningless then to give the High Court the power to give relief against "any Government" within its territories. These words "any Government" were used because the Constitution makers intended that the High Court shall have power to give relief against the Government of India also. But, contends the respondent, that will produce an intolerable position which the Constitution makers could not have contemplated. The result of the Government of India being within the territories of every High Court in India will, it is said, be that the Government of India would be subjected to writs and orders of every High Court in India. A person seeking relief against the Government of India will naturally choose the High Court which is most convenient to him and so the Government of India may have to face applications for relief as against the same order affecting a number of persons in all the different High Courts in India. If a position of such inconvenience to the Government of India ' though of great convenience to the persons seeking relief, did in fact result from the words used by the Constitution makers, I for one, would refuse to shrink from the proper interpretation of the words merely to help the Government. I do not however think that that result follows. For, on a proper reading of the words "in appropriate cases", it seems to me that there will be, for every act or omission in respect of which relief can be claimed, only one High Court that can exercise jurisdiction. It has first to be noticed that the limitation introduced by the use of these words "in appropriate cases ' has not been placed in respect of issue of writs to persons and to authorities other than government. It has been suggested that the effect of these words is that in issuing writs against any Government the High Court has not got the same freedom as it has when issuing writs against any person or authority other than 871 Government and that when relief is asked against a Government the High Court has to take special care to see that writs are not issued indiscriminately but only in proper cases. I have no hesitation in rejecting this suggestion. It cannot be seriously contemplated for a moment that the Constitution makers intended to lay down different standards for the courts when the relief is asked for against the Government from when the relief is asked for against other authorities. In every case where relief under article 226 is sought the High Court has the duty to exercise its discretion whether relief should be given or not. It is equally clear that in exercising such discretion the High Court will give relief only in proper cases and not in cases where the relief should not be granted. Why then were these words "in appropriate cases" used at all? It seems to me that the Constitution makers being conscious of the difficulties that would arise if all the High Courts in the country were given jurisdiction to issue writs against the Central Government on the ground that the Central Government was functioning within its territories wanted to give such jurisdiction only to that High Court where the act or omission in respect of which relief was sought had taken ' place. In every case where relief is sought under article 226 it would be possible to ascertain the place where the act complained of was performed or when the relief is sought against an omission, the place where the act ought to have been performed. Once this place is ascertained the High Court which exercises jurisdiction over that place is the only High Court which has jurisdiction to give relief under article 226. That, in my view, is the necessary result of the words "in appropriate cases". On behalf of the appellant it Was contended on the authority of the decision of the Privy Council in Ryots of Garabandho vs Zemindar of Parlakimedi (1) that all that is necessary to give, jurisdiction to a High Court to act under article 226 is that a part of the cause of action has arisen within the ';territories in relation to which it exercises jurisdiction. The question whether the cause of action attracts jurisdiction for relief (1) (1943) L.R. 70 I.A. 129. 872 under article 226 of the Constitution as in the case of suits was considered by this Court in Saka Venkata Subba Rao 's Case (1) and the answer given was in the negative. Referring to the decision of the Privy Council in Parlakimedi 's Case (2) this Court pointed out that the decision did not turn on the construction of a statutory provision similar in scope, purpose or wording to article 226 of the Constitution, and is not of much assistance in the construction of that article. Delivering the judgment of the Court Patanjali Sastri C. J. also observed: "The rule that cause of action attracts jurisdiction in suits is based on statutory enactment and cannot apply to writs issuable under article 226 which makes no reference to any cause of action or where it arises but insists on the presence of the person or authority 'within the territories ' in relation to which the High Court exercises jurisdiction. " This decision is binding on us, and I may respectfully add that I find no reason to doubt its correctness. It is true that in that case the Court had to consider the question of jurisdiction in respect of an authority other than Government. It is difficult to see however why if cause of action could not attract jurisdiction against persons and authorities other than Government it would attract jurisdiction as against a Government. It seems to me clear that the principle of basing jurisdiction on cause of action has not been introduced in the Constitution under article 226 or article 32(2A) of the Constitution. It may seem at first sight that to hold that the High Court within whose jurisdiction the action or omission, complained of took place will have jurisdiction, is in effect to accept the accrual of cause of action as the basis of jurisdiction. This however is not correct. The High Court within. the jurisdiction of which the act or omission takes place, has jurisdiction, not because a part of the: cause of action arose there, but in consequence of the use of the words "in appropriate cases". (1) ; (1) (1943) L.R. 70 I.A. 129. 873 The several cases in the High Court in which the question now before us has been considered have been referred to in the majority judgment and also in the judgment of Mr. Justice Subba Rao and no useful purpose would be served in discussing them over again. For the reasons discussed above I have reached the conclusion that while the Government of India is within the territories of every High Court in India the only High Court which has jurisdiction to issue a writ or order or directions under article 226 or article 32 (2A) against it is the one within the territories under which the act or omission against which relief was sought took place. In the present case the act against which the relief has been sought was clearly performed at Delhi which is within the territories under the jurisdiction of the Punjab High Court and the Jammu and Kashmir High Court cannot therefore exercise its jurisdiction under article 226. In the result, I agree with my Lord the Chief Justice that the appeal should be dismissed with costs. BY COURT. In accordance with the opinion of the majority of the Court, this appeal is dismissed with costs. Appeal dismissed.

IN-Abs

The High Court of. Jammu and Kashmir, relying on the decisions of this Court in Election Commission, India vs Saka Venkata Subba Rao; , and K. section Rashid and Son vs The Income Tax Investigation Commission etc. ; , , dismissed an application for a writ made by the appellant against the Union of India and Anr. under article 32(2A), the relevant provisions of which are in the matter of enforcement of fundamental rights the same as in article 226 of the Constitution, on the preliminary objection that the said application was not maintainable against the Union of India as it was outside the territorial jurisdiction of that Court. The appellant 's case was that he was holding the substantive rank of Lieut. Col. in Jammu and Kashmir and had the right to continue in service until he attained the age of 53 on November 20, 1961, but was prematurely retired by a letter issued by the Government of India on July 31, 1954, without any allegation or charge and in contravention of article 16(1) of the Constitution. Held, that there can be no doubt as to the correctness of the decisions relied on by the High Court and the appeal must fail. 829 The jurisdiction of the High Court under article 226 of the Constitution, properly construed, depends not on the residence or location of the person affected by the order but of the person or authority passing the order and the place where the order has effect cannot enter into the determination of such jurisdiction. Since functioning of a Government really means giving effect to its order, such functioning cannot determine the meaning of the words "any person or authority within these territories" occurring in the article. A natural person, therefore, is within those territories if he resides there permanently or temporarily, an authority other than the Government is within those territories if its office is located there and a Government if its seat from which, in fact, it functions is there. It is not correct to say that the word "authority" in article 226 cannot include a Government. That word has to be read along with the clause "including in appropriate cases any Government" immediately following it, which, properly construed, means, that the word may include any Government in an appropriate case. That clause is not connected with the issuance of a writ or order and is not intended to confer discretion on the High Courts in the matter of issuing a writ or direction on any Government, and only means in such cases where the authority against whom the High Court has jurisdiction to issue the writ, happens to be a Government or its subordinates, the High Court may issue a writ against the Government. Election Commission, India vs Saka Venkata Subba Rao, and K. section Rashid and Son vs The Income tax Investigation Commission etc. ; , , approved. Maqbulunnissa vs Union of India, I.L.R. (1953) 2 All. 289, overruled. The Lloyds Bank Limited vs The Lloyds Bank Indian Staff Association (Calcutta Branches), I.L.R. , referred to. Proceedings under article 226 are not suits covered by article 300 of the Constitution. Such proceedings provide for extra ordinary remedies by a special procedure and there is no scope for introducing the concept of cause of action in it in the face of the express limitation imposed by it, that the person or authority concerned must be within the territories over which the High Court exercises jurisdiction. Ryots of Garabandho vs Zamindar of Parlakimedi, (1943) L.R. 70 I.A. 129, held inapplicable. The resulting inconvenience of such an interpretation of article 226 to persons residing far &way from New Delhi, where the Government of India is in fact located, and aggrieved by some order passed by it, may. be a reason for suitably amending the Article but cannot affect its plain language. This Court should not, except when it is demonstrated beyond all reasonable doubt that the previous ruling, given after 105 830 due deliberation and full hearing, was erroneous, go back upon it, particularly on a constitutional issue. Per Subba Rao, J. The object that the framers of our Con stitution had before them in declaring the fundamental rights in Part III of the Constitution and empowering the High Courts by article 226 of the Constitution to enforce them would be largely defeated if a person in a remote part of the country had to come to New Delhi to seek the protection of the Punjab High Court whenever the Union Government infringed his fundamental right. The power of the High Courts under article 226 of the Consti tution is of the widest amplitude and it can issue not merely writs but also directions and orders. The words "any Government" in the Article includes the Union Government which has no constitutional situs in a particular place and exercises its powers throughout India and must, therefore, be deemed in law to have functional existence throughout India and thus within the territories of every State. Consequently, when the Union Government infringes the legal right and interest of a person residing within the territorial jurisdiction of 'a High Court, the High Court has the power under the Article to issue a writ to that Government. If its orders are disobeyed by that Government or any of its officers, even though physically outside its territories, it can proceed in contempt against them under the Contempt. of Courts Act, 1952. Election Commission, India vs Saka Venkata Subba Rao, ; , held inapplicable. K. section Rashid and Son vs Income Tax Investigation Commission, ; and Ryots of Garabandho vs Zamindar of Parlakimedi, L.R. 70 I.A. 129, considered. Maqbul Unnissa vs Union of India, I.L.R. (1953) 2 All. 289, approved. Surajmal vs State of M.P., A.I.R. 958 M.P. 103 and Radhe shyam Makhanlal vs Union.of India, A.I.R. 1960 Bom. 353, held inapplicable. In the instant case, therefore, the High Court had the power to issue the writ to the Union Government under article 32(2A) of the Constitution. Per Das Gupta, J. It is neither correct nor appropriate to speak of location of any Government and there is no satisfactory test for ascertaining the location of the Government of India. Since the Government functions throughout the territory of India, the conclusion must be that it is within the territories under the jurisdiction of every High Court. The words "any Government" in article 226 clearly indicate that the High Court was intended to give relief against that Government as well. Even though the Government, of India is within the territories of every High Court, it will not have to face applications 831 for relief against the same order in all the High Courts in India. The words "in appropriate cases" in that Article, properly construed, indicate that there can be only one High Court thereunder that can exercise jurisdiction under the Article for every act or omission in respect of which relief is claimed. It is possible in every case to ascertain the place where the act or omission took place and that High Court alone, which exercises jurisdiction over that place, can have jurisdiction to grant relief under the Article. It is not correct to say that under article 226 the cause of action determines the jurisdiction. Neither that Article nor article 32(2A) of the Constitution is based on that principle. Election Commission, India vs Saka Venkata Subba Rao, ; , approved.

Appeal No. 37 of 1952. Appeal from the Judgment and Decree dated the 24th September, 1948, of the High Court of Judicature at Madras (Menon and Mack, JJ.) in A.A.O.No. 688 of. 1945 arising out of Judgment and Decree dated the 1st October 1945 of the Court of the ' District Judge of Anantapur in Original Petition No. 15 of 1945. D. Munikanniah (J. B. Dadachandji" with him) for the appellant. section P. Sinha(M. O. Chinnappa Reddi and K. B. Chowdhury withhim) for the respondents. October 29. The Judment of the Court was delivered by BHAGWATI J. The plaintiff filed 0. P. No. 15 of 1945 in the Court of the District Judge of Anantapur for setting aside an award the ground inter alia of legal misconduct of the arbitrator. The trial Court set aside the award. The High Court appeal reversed the judgment of the trial Court and dismissed the plaintiffs suit. This appeal has been filed by the plaintiff with the certificate of the High Court against that decision. One P.Narayanappa died in 1927 leaving him surviving the plaintiff his widow, the defendant I his undivided brother, the defendant 2 a son of his another pre deceased brother, and defedant 3 his son by his pre deceased wife. 'The deceased had purported to make a will dated 1st May, 1927 under which he had made certain provision for her maintenance , and residence, The plaintiff stayed with the family for 121 some time but had to leave the family house owing to disputes which arose between her and the senior wife of defendant 1. She lived with her mother for eleven years and ultimately filed a suit in forma pauperis 0. section No. 19 of 1943 in the Court of the District Judge of Anantapur, for maintenance, arrears of maintenance, residence and household utensils as also recovery of some jewels and clothes as her stridhanam properties. The defendants contested the claim of the plaintiff contending that sufficient arrangement bad been made for her maintenance and residence under the will dated the 1st May, 1927, that she had accordingly been in possession and enjoyment of the property and that her claim was unsustainable. The defendants also denied her claim for jewels and clothes. The suit came for hearing and final disposal before the Subordinate Judge of Anantapur. When the plaintiff was being examined as P.W. 1, in the suit the 27th February, 1945, all the parties filed a petition under section 21 of the Arbitration Act agreeing to appoint Sri Konakondla Rayalla Govindappa Garu as the 'sole arbitrator ' for settling the disputes in the suit and to abide by his decision, and asking the Court to send the plaint, written statement and other records to the arbitrator for his decision. A reference to arbitration was accordingly made by the Court. The arbitrator entered upon the reference and the 6th March, 1945, examined the plaintiff and got from her a statement which is Exhibit No. 4 in the record. He similarly examined the defendant I the 10th March, 1945, and got from him the statement which is Exhibit No. 5 in the record. After obtaining the two statements, the arbitrator made and published his award the 12th March, 1945. It was this award that was challenged by the plaintiff. The legal misconduct which was alleged against the arbitrator was that he examined each party in the absence of the other. It was contended behalf of 122 the plaintiff that even though the petition for reference to arbitration as also the statements Exhibits Nos. 4 & 5 authorised the arbitrator to settle the disputes according to law after perusing the plaint and the written statements, the arbitrator examined defendant I in the absence of the plaintiff and also perused what was called the settlement of the 1st May, 1927, without giving an opportunity to the plaintiff to have her say in the matter and was thus guilty of legal misconduct. It was contended the other hand by the defendants that what was done by the arbitrator was merely to obtain from the parties a reiteration of their request contained in the petition that he should give his award the basis of the pleadings, that not a single fact was recorded by the arbitrator from the defendant 1 which did not find a place in his written statement and that therefore the arbitrator was not guilty of legal misconduct. The petition filed by the parties the 27th February, 1915,did not give any special powers to the arbitrator. The arbitrator was appointed for settling the disputes in the suit and the parties agreed to abide by his decision. The plaint, the written, statement and the other records were agreed to be sent to him for his decision, and if the arbitrator was thus directed to make his award after perusing the plaint and the written statements which were give to him by the Court along with the order, we do not see why the arbitrator went to the plaintiff and defendant 1 and recorded their statements. The statement given by the plaintiff to the arbitrator did not mention anything beyond the request that be should peruse the plaint and written statement and give his decision according to law and justice. The statement which was obtained from the defendant 1 however did not merely repeat this request but contained several statements of facts, which did not find a place in his written statement. These statements were as follows: (1)"She felt glad with what was given to her by her husband. " 123 (2)"It is seen from the Government accounts that as per the settlement made by her husband, the lands given to her have been in her possession." (3)"Just like the plaintiff has her jewels in her possession, the other females in the house have their jewels in their respective possession only. The undivided family has no manner of right therein." and (4) "Considering the domestic circumstances our elder brother provided maintenance for the third wife, the plaintiff, just as he had provided maintenance for his second wife. " These statements constituted evidence given by the defendant I in addition to the averments contained in his written statement and it is futile for the defendant 1 to contend that in obtaining the statement Exhibit No. 5 from him the arbitrator merely obtained from him a narration of what was already found in his written statement: This position is confirmed when one turns to the award. The arbitrator stated that the Court had directed him to make the award after perusing the plaint and the written statements of the plaintiff and the defendants and that it had given him the plaint and the written statements along with the order. He however proceeded to state that in pursuance of the order he took statements from the plaintiff as well as the defendant I who was the manager of the defendant 's family. He further stated that he bad perused the settlement which the defendant 1 alleged as having been made Ist May, 1927, in favour of the plaintiff and proceeded to award to the plaintiff 8 acres 17 cents of land bearing Survey No. 507 in addition to the 40 acres of land already given by the deceased to her. It is clear from the terms of this award that the arbitrator took into consideration not only the plaint and the written statements of the parties but also the statement which he had obtained from the defendant I and the will dated 1st May, 1927. There is thus no doubt that the arbitrator heard the defendant 1 in the absence of the, plaintiff. No 124 notice of this hearing was given by the arbitrator to the plaintiff nor had she an opportunity of having the evidence of the defendant I taken in her presence so that she could suggest cross examination or herself cross examine the defendant I and also be able to find evidence, if she could, that would meet and answer the evidence given by the defendant 1. As was, observed by Lord Langdale M. R. in Harvey vs Shelton(1), "It is so ordinary a principle in the administration of justice, that no party to a cause can be allowed to use any means whatsoever to influence the mind of the Judge, which means are not known to and capable of being met and resisted by the, other party, that it is impossible, for a moment, not to see, that this was an extremely indiscreet mode of proceeding, to say the very least of it. , It is contrary to every principle to allow of such a thing, and I Wholly deny the difference which is alleged to exist between mercantile arbitrations and legal arbitrations. The first principles of justice must be equally applied in every case. Except in the few cases where exceptions are unavoidable, both sides must be heard and each in the presence of the other. In every case in which matters are litigated, you must attend to the representations made both sides, and you must not, in the administration of justice, in whatever form, whether in the regularly constituted Courts or in arbitrations, whether before lawyers or merchants, permit one side to use means of influencing the conduct and the decisions of the Judge, which means are not known to the other side. This case of Harvey vs Shelton(1) is the leading case this point and it has been followed not only in England but in India. (See Ganesh Narayan Singh vs Malida Koer(2). She had also no opportunity to have her say in the matter of the settlement of the 1st May, 1927. The course of proceeding adopted by the arbitrator was obviously contrary to the principles of ,natural justice. (i) ; at P. 462. (2) (1911) 13 c. L. J. 399 at pages 401, 402, 125 Shri section P. Sinha however urged before us that no prejudice was caused to the plaintiff by reason of the arbitrator having obtained the statement Exhibit No. 5 from defendant 1 and that therefore the arbitrator was not guilty of legal misconduct. This contention is unsound. The arbitrator may be a most respectable man; but even so, his conduct cannot be reconciled to general principles. "A Judge must not take upon himself to say, whether evidence improperly admitted had or had not an effect upon his mind The award may have done perfect justice: but upon general principles it cannot be supported. " Per Lord Eldon, Lord Chancellor, in Walker vs Frobisher(1). To the same effect are the observations of Lord Justice Knight Bruce in Haigh vs Haigh(1): "It is true that he states in his affidavit that he did not allow those explanations to influence him in his report upon the accounts, and I have no doubt he honestly intended this to be the case; but it is impossible to gauge the influence which such statements have upon the mind. We must hold, without meaning the least reflection the arbitrator, that he was guilty of legal misconduct and that was sufficient to vitiate the award. Shri section P. Sinha then urged that the plaintiff had waived her right if any to challenge the award the ground of legal misconduct. No waiver however was pleaded by the defendant I and it was not competent to him to urge this contention at this stage before us. The result therefore is that the judgment of the High Court cannot stand. Agent for the respondents M. section K. Aiyangar, (i) (18o1) at page 72.

IN-Abs

Where, in an arbitration under section 21 of the Indian Arbitration Act, the arbitrator took statements from each of the parties in the absence of the other and made an award: Held, that it is one of the elementary principles of the administration of justice, whether by courts or by arbitration by lawyers or merchants, that a party should not be allowed to use any means whatsoever to influence 120 the mind of the judge or arbitrator, which means, are not known to and capable of being met and resisted by the other party; the arbitrator was accordingly guilty of legal misconduct; and this was sufficent to vitiate the award, irrespective of the fact whether this misconduct bad caused prejudice to any one. Harvey vs Shelton ; , Ganesh Narayan Singh vs Malida Koer , and Haigh vs Haigh ; , referred to.

Appeal No. 303 of 1958. Appeal from the judgment and order dated August 3, 1956, of the Bombay High Court in Incometax Reference No. 10 of 1956. K. N. Rajagopal Sastri and D. Gupta, for the appellant. N. A. Palkhivala, section N. Andley, J. B. Dadachanji and Rameshwar Nath, for the respondents. May 4. The Judgment of the Court was delivered by HIDAYATULLAH, J. This is an appeal against the judgment and order of the High Court of Bombay dated August 3, 1956, in a reference under section 66 (1) of the Indian Income tax Act by the Appellate Tribunal, Bombay. The Tribunal referred four questions for the decision of the High Court. The High Court did not answer the first question because it was not pressed, and answered the remaining in the negative, after modifying them. It has certified this case as fit for appeal to this Court, and hence this appeal. The Com missioner of Income tax, Bombay City, is the appellant, and the Khatau Makanji Spinning and Weaving Co. Ltd., Bombay, (the assessee Company), is the respondent. The assessee Company has its year of account ending June 30 every year. At the close of the account year 1951, it carried forward profits amounting to Rs. 30,680. In that year, it appears it had earned a rebate by declaring dividends below the limit fixed by the Finance Act. For the account year 1952 its book profits were Rs. 28,67,235 less allowances for depreciation and tax. After these and other sundry adjustments, the balance available for distribution was Rs. 5,02,915. It may be pointed out that the Incometax Officer on processing the income found the total income to be Rs. 5,26,681. For the account year 1952, the assessee Company declared dividends amounting to Rs. 4,78,950 and carried forward the balance of Rs. 23,965. We are concerned with the assessment year 1953 54, and the Finance Act, 1953, is applicable. That Finance 875 Act applied the Finance Act, 1951, with some changes. The Finance Act, 1953, with the modifications will be referred to briefly, hereinafter, as the Finance Act. The Income tax Officer found that the assessee Company had declared excess dividends amounting to Rs. 1,87,691. He calculated additional income tax on it at 5 annas in the rupee after deducting income tax borne by the profits of the previous year at 4 annas per rupee, a surcharge of 5 per cent. less rebate of one anna in the rupee as allowed by the Finance Act. This additional tax amounted to Rs. 21,115 4 0. The appeals of the assessee Company under the Income tax Act failed. The Tribunal held that the excess dividends were deemed to be paid out of undistributed profits of earlier year ending June 30, 1951, amounting to Rs. 6,60,720 on which a rebate of 1 anna in the rupee was given in the assessment year, 1952 53. Tile Tribunal observed that additional incometax was also a tax on income, and that the Finance Act could say that the tax would be payable on the income of any year preceding the previous year. The Tribunal, however, referred four questions to the High Court, of which the first need not be quoted because it was abandoned before the High Court. The other questions were: " (ii) If the answer to question No. 1 is in the negative whether the said provisions go beyond the ambit and scope of the Indian Income tax Act ? (iii) Whether additional income tax can be levied, assessed and recovered under the provisions of the Indian Income tax Act ? (iv) Whether at any rate the additional incometax has been legally charged under the Indian Finance Act, 1953, read with the Indian Incometax Act?" The High Court compressed the three questions into one, and it reads: " Whether additional income tax has been legally charged under clause (ii) of the proviso to paragraph B of Part 1 of the. First Schedule to the Indian Finance Act, 1951, as applied to the assessment year 1953 54 by the Indian Finance Act, 1953, read with Section 3 of the Indian Income tax Act?" 876 This question was answered by the High Court in the negative. In the opinion of the High Court, section 3 of the Indian Income tax Act lays down the liability to tax, and it puts the tax on the total income of the previous year. The method of computing this total income is also to be found in the Finance Act. The Finance Act merely provides the rate applicable to the income so found. According to the High Court, the Finance Act in providing that additional income tax should be paid upon the accumulated profits of the previous years goes beyond the purpose for which the Central Act is passed every year, and cannot stand by itself without the support of section 3 of the Indian Income tax Act. The High Court held that the Finance Act had ' misfired ', because it did not resort to legislation which would have conformed to the object for which the Finance Act was passed every year. The learned Chief Justice, who delivered the judgment of the High Court, stated that there were several methods open to the legislature to achieve that purpose but that it had not resorted to any of them. This is what the learned Chief Justice observed: " The Legislature could have achieved this object by one of three methods. It could have treated the excess dividend declared by the company as a notional income and made it apart of the total income of the previous year. It could have provided for rectification of the assessment of the year in which these profits were charged at a lesser rate, and we now find that Parliament has actually provided for this in the Finance Act, 1956. Or, finally, it could have provided for a penalty imposed upon a company which transgressed the direction of Parliament that it should not pay dividend beyond a particular ceiling . The ambit of Section 3 is clear and the ambit is that the tax to be levied must be a tax on income and the power of Parliament is equally clear and that is to fix the rate at which income tax is to be charged upon the total income of the previous year of the assessee. In our opinion, the provision of the Finance Act travels beyond the ambit of Section 3, and if Parliament 877 has done so then no effective charge can be made on the total income of the previous year of the assessee under the provisions of the Finance Act which deals with additional tax on excess dividend. " It may be pointed out that before the High Court it was conceded that in order that the provisions of the Finance Act might be effective, the Finance Act had to come within the scope of section 3 of the Incometax Act. The point that was argued here was that it was not necessary to look only to section 3 of the Indian Income tax Act but also to the provisions of the Finance Act, through which Parliament could impose a new tax, if it so pleased. Other arguments involved modifications of language suitable to sustain the tax independently of section 3 of the Indian Income tax Act, a procedure which we do not think is open, for reasons which we have given in Civil Appeal No. 427 of 1957, decided today. These modifications, which were suggested, involve a recasting of the entire relevant paragraph of the Finance Act to make it independent of section 3 of the Indian Income tax Act, a course which is only open to a legislature and not to a Court. We need not give all the modifications suggested, because, in our opinion, the words of the Finance Act must be given their due meaning, and must be construed as they stand. The learned Chief Justice, with respect, very rightly pointed out that the Income tax Act puts the tax on income or something which it deems to be income. In other words, the tax deals with income and income only. It further provides that this tax shall be collected at a particular rate on the total income for which provision shall be made in an yearly Central Act. The Finance Act also follows the same scheme, and lays down the rate at which the tax is to be collected. In the Finance Act, the tax is laid on the total income, but two provisos modify the rate under certain circumstances. We may at this stage read the relevant provision (Part 1, First Schedule): 878 B. In the case of every company Rate. Surcharge. On the whole of Four annas One twentieth of total income. in the rupee. the rate specified in the preceding column: Provided that in the case of a company which, in respect of its profits liable to tax under the Income tax Act for the year ending on the 31st day of March, 1953, has made the prescribed arrangements for the declaration and payment within the territory of India excluding the State of Jammu and Kashmir, of the dividends payable out of such profits, and has deducted super tax from the dividends in accordance with the provisions of subsection (3D) or (3E) of section 18 of the Act (i) Where the total income, as reduced by seven annas in the rupee and by the amount, if any, exempt from income tax, exceeds the amount of any dividends (including dividends payable at a fixed rate) declared in respect of the whole or part of the previous year for the assessment for the year ending on the 31st day of March, 1953, and no order has been made under sub section (1) of section 23A of the Income tax Act, a rebate shall be allowed at the rate of one anna per rupee on the amount of such excess; (ii) Where the amount of dividends referred to in clause (i) above exceeds the total income as reduced by seven annas in the rupee and by the amount, if any, exempt from income tax, there shall be chargeable on the total income an additional income tax equal to the sum, if any, by which the aggregate amount of income tax actually borne by such excess (hereinafter referred to as ' excess dividend ') falls short of the amount calculated at the rate of five annas per rupee on the excess dividend. For the purpose of clause (ii) of the above proviso, the aggregate amount of income tax actually borne by the excess dividend shall be determined as follows : 879 (i) the excess dividend shall be deemed to be out, of the whole or such portion of the undistributed profits of one or more years immediately preceding; the previous year as would be just sufficient to cover the amount of the excess dividend and as have not likewise been taken into account to cover an excess dividend of a preceding year; (ii) such portion of the excess dividend as is deemed to be out of the undistributed profits of each of the said years shall be deemed to have borne tax, (a) if an order has been made under sub section (1) of section 23A of the Income tax Act, in respect of the undistributed profits of that year, at the rate of five annas in the rupee, and (b) in respect of any other year, at the rate applicable to the total income of the company for that year reduced by the rate at which rebate, if any, was allowed on the undistributed profits. " By the first Proviso, a rebate of one anna per rupee is given to a company which pays dividends less than 9 annas in the rupee out of its profits. By the second Proviso, the rebate disappears, and an additional income tax has to be paid on dividends in excess of that limit, paid in the year. The explanation says that " the excess dividend shall be deemed to be out of the whole or such portion of the undistributed profits of one or more years immediately preceding the previous year as would be just sufficient to cover the amount of the excess dividend and as have not likewise been taken into account to cover an excess dividend of a preceding year ". This fiction, as we have already pointed out, provides only that the dividends shall be deemed to be out of the profits not of the previous year under assessment but of some other years. What the Finance Act fails to do is to make them " total income ", so as to take in the rate which is prescribed for the total income in the Proviso. Unless the Finance Act stated that after the working out of the fiction the profits of the back year or years shall be deemed to be a part of the total income of the previous year under assessment, the purpose of the Act clearly fails. Income tax is a tax on income 880 of the previous year, and it would not cover something which is not the income of the previous year, or made fictionally so. The Finance Act could have gone further, as pointed out by the learned Chief Justice in the extract quoted, and made the profits a part of the total income of the previous year under assessment, but it did not do so. The Finance Act could have also resorted to some other fiction, which might conceivably have met the case; but it has failed to do so. Even if one considers the dividends as having come out of the profits of preceding years, they do not become the income of the relevant previous year, and unless the Finance Act expressly laid down that it should be taxed as part of the total income, the purpose is not achieved. Indeed, the Finance Act continues to say that the tax shall be on the total income, as defined in the Indian Income tax Act and as determined under that Act. It is impossible to say that the additional income tax was properly laid upon the total income, because what was actually taxed was never a part of the total income of the previous year. For these reasons, we are of opinion that the High Court was right in answering the question which it had framed, in the negative. In the result, the appeal fails, and is dismissed with costs. Appeal dismissed.

IN-Abs

The Income tax Officer found that in the assessment year 1953 54 the respondent assessee company had declared excess dividends amounting to Rs. 1,87,691 and he levied additional income tax on it at 5 annas in the rupee after deducting incometax borne by the profits of the previous year at 4 annas per rupee, a surcharge of 5 per cent. less rebate of one anna in the rupee as allowed by the Finance Act, 1953. The Income tax Tribunal held that the excess dividends were deemed to be paid out of undistributed profits of the earlier year ending June 30, 1951 on which a rebate of one anna in the rupee was given in the assessment year 1952 53. It further observed that additional income tax was also a tax on income, and that the Finance Act could say that the tax would be payable on the income of any year preceding the previous year. The Tribunal, however, referred three questions to the High Court which the High Court compressed into one as below : " Whether additional income tax has been legally charged under Clause (ii) of the proviso to paragraph B of Part 1 of the First Schedule :to the Indian Finance Act, 1951, as applied to the assessment year 1953 54 by the Indian Finance Act, 1953, read with section 3 of the Indian Income tax Act? " The High Court held that section 3 of the Indian Income tax Act put the liability to tax on the total income of the previous year or what can be deemed to be income. The Finance Act provided the rate applicable to the income so found and a method of computing the total income. The Finance Act in providing that additional income tax should be paid upon the accumulated profits of the previous years went beyond the purpose for which the Finance Act was passed every year, and the Finance Act could not stand by itself without the support Of section 3 of the Indian Income tax Act. On appeal by the Commissioner of Income tax on certificate of the High Court: Held, that the High Court was right in answering the ques tion framed by it, in the negative. The Finance Act provided that the tax should be levied on the " total income " as defined in and determined under the Indian Income tax Act. The Additional income tax was not properly laid upon the total income because what was actually taxed was never a part of the total income of the previous year, nor deemed to be so. 874

Appeal No. 312 of 1959. Appeal from the judgment and order dated August 23, 1956, of the Bombay High Court in Income tax Reference No. 21 of 1956. Hardyal Hardy and D. Gupta, for the appellant. A.V. Viswanatha Sastri and I. N. Shroff, for the respondent. December 6. The Judgment of the Court was delivered by KAPUR, J. This is an appeal by special leave brought by the Commissioner of Income tax against the judgment and order of the High Court of Bombay answering the question in favour of the assessee. The question referred by the Tribunal was: "Whether on the facts and in the circumstances of the case the amount of Rs. 3,20,162 is an allowable deduction under Section 10(2)(xi) or 10(2)(xv) of the Income tax Act?" which was amended by the High Court as follows: "Whether on the facts and in the circumstances of the case the amount Rs. 3,20,162 is an allowable deduction" and was answered in the affirmative and against the appellant. The facts of the case shortly stated are these: The respondent is a registered firm carrying on business as commission agents. It was treated as the agent of a non resident principal Haji Mohamed Syed Ali Barbari of Port Sudan (hereinafter 'referred to as the nonresident principal. It was carrying on the business of export of cloth and kariana (i.e., miscellaneous goods) to Aden, Saudi Arabia and sudan. It used to supply goods from India to the nonresident principal, who on his part, was sending cotton to the respondent and other merchants for sale in India. For the years 1942 43, 1943 44, 1944 45 and 1945 46, the respondent firm was treated as the agent of the nonresident principal under section 43 of the Income tax Act 951 (which will hereinafter be termed 'the Act ') for the purpose of income tax and Excess Profits Tax. The respondent firm had to pay in all Rs. 3,78,491 under section 42(1) of the Act and after allowing for the amounts which were in its hands the account of the principal non resident showed a debit balance of Rs. 3,20,162. For the year of assessment, 1953 54, the respondent firm treated this amount as a bad debt and claimed it as a deductible loss to be set off against profits. The Income tax Officer treating this claim as one under section 10(2)(xv) of the Act, disallowed it. The Appellate Assistant Commissioner treated it as one under section 10 (2)(xi) of the Act and he also disallowed it. On appeal to the Income tax Appellate Tribunal it was held to be a bad debt and an allowable deduction as it was incurred as a result of the business activities which the respondent firm was carrying on with the nonresident principal. At the instance of the Commissioner of Income tax, the case was stated to the High Court and the High Court modified the question and answered the same in the affirmative, i.e., against the appellant. The High Court held that as the law imposed an obligation upon the respondent firm to discharge the liability and it was incidental to the business of the respondent the amount was a deductible loss; and even if it was not a debt, then also the amount could be claimed by the assessee as a business or trading loss, because in arriving at the true profit of the respondent 's business that loss had to be deducted. The High Court thus applied section 10(1) of the Act to the amount claimed by the respondent. The allowability of the amount in dispute depends upon the nature of the liability imposed upon the respondent firm. The contention of the respondent 's counsel was that it was carrying on foreign trade and had dealings with a foreign merchant and in the course of the business there were imports and exports and therefore the interconnection between the respondent firm and the non ' resident principal was so intimate as to invite the application of section 42(1), i.e., the establishment of agency as 'contemplated in that section. The liability to pay arises under a. 42(2) which provides 952 "Where a person not resident or not ordinarily resident in the taxable territories carries on business with a person resident in the taxable territories, and it appears to the Income tax Officer that owing to the close connection between such persons the course of business is so arranged that the business done by the resident person with the person not resident or not ordinarily resident produces to the resident either no profits or less than the ordinary profits which might be expected to arise in that business, the profits derived therefrom or which may reasonably be deemed to have been derived therefrom, shall be chargeable to income tax in the name of the resident person who shall be deemed to be, for all the purposes of this Act, the assessee in respect of such income tax." Relying on this provision it was argued that the nature of the respondent 's business was foreign trade which was inter connected with the business of the non resident principal. Its nature was such as to attract the imposition of liability on the respondent firm under section 42(2) of the Act and therefore the loss so incurred must be taken to be incidental to and arising out of the business of the respondent. "The thing to be taxed", said Lord Halsbury, L. C., "is the amount of profits and gains. The word 'profits ' I think is to be understood in its natural and proper sense in a sense which no commercial man would. misunderstand": Gresham Life Assurance Society V. Styles (1). Hence even if a deduction is not specifically enumerated in sub section (2) of B. 10 it would still be a debatable item to reflect the taxable profits. The Privy Council in Commissioner of Income tax vs Sir section M. Chitnavis (1) held that the Act nowhere authorises the deduction of bad debts of a business, such a deduction is necessarily allowable because what is chargeable to income tax in respect of a business are the profits and gains of a year and in assessing the amount of profits and gains of that, year account must necessarily be taken of all losses incurred, otherwise true profits and gains cannot be ascertained. In order (1)(1892) , 188 (H.L.). (2)(1932) L.R. 59 I.A. 290, 296. 953 that a loss may be deductible it must be a loss in the business of the assessee and not payment relating to the business of somebody else which under the provisions of the Act is deemed to be and becomes the liability of the assessee. The loss becomes allowable if it "springs directly from and is incidental" to the business of the assessee. The decision therefore mainly depends upon whether the loss claimed is a business loss of that nature. In our opinion the amount which became payable by the respondent firm cannot be called its business loss. In order to be deductible the loss must be in the nature of a commercial loss and, as has been said above, must spring directly out of it and must really be incidental to the business itself. It is not sufficient that it falls on the trader in some 'other capacity or is merely connected with his business. Counsel for the respondent relied upon a judgment of this Court in Badridas Daga vs The Commissioner of Income tax (1). In that case an agent of the assessee engaged for the purpose of carrying on of the assessee 's business had authority to operate a bank account. Acting under such authority the agent withdrew from the bank monies and put them to his personal use. The assessee was able to recover from the agent only a part of the amount misappropriated and the balance was written off as irrecoverable debt and it was held that it was not allowable under section 10(2)(xi) or 10(2)(xv) of the Act but it was a loss deductible in computing the profits under section 10(1) of the Act as a loss incidental to the carrying on of his business. Counsel relied on the following observation of Venkatarama Ayyar, J., at p. 695: "The result is that when a claim is made for a deduction for which there is no specific provision in section 10(2), whether it is admissible or not will depend on whether having regard to accepted commercial practice and trading principles it can be said to arise out of the carrying on of the business and to be incidental to it. ,, That passage has to be read in the circumstances of (1)[1959] S.C.R. 690. 954 that case where the employment of agents was incidental to the carrying on of the business and it was observed that it logically followed that the losses which were incidental to such employment were also incidental to the carrying on of the business. At page 696, it was observed: "At the same time it should be emphasised that the loss for which a deduction could be made under section 10(1) must be one that springs directly from the carrying on of the business and is incidental to it and not any loss sustained by the assessee, even if it has some connection with his business." Reference may also be made to an English decision in Curtis vs J. & G. Oldfield Ltd. (1). In that case the managing director of a company of wine and spirit merchants embezzled monies of the ' company and that. was claimed as a loss as a bad debt and it was held that it was not a trading loss and was therefore not an admissible deduction. In that case the contention of the Crown *as that the sum was not an ordinary trading debt and therefore could not be a bad debt and that the loss was not connected with, and did not arise out of the trade. Rowlatt, J., said at p. 330: "When the Rule speaks of a bad debt it means a debt which is a debt that would have come into the balance sheet as a trading debt in the trade that is in question and that it is bad. It does not really mean any bad debt which, when it was a good debt, would not have come in to swell the profit. " In the present case the liability was imposed upon the respondent firm because it was treated as an agent within the meaning of section 42(1) of the Act and the liability was imposed because of the deeming provision in sub section (2) of section 42 of the Act. can it be said, in the present case, that the liability imposed upon the respondent firm was a business debt arising out of the business of the respondent or to use the words of Venkatarama Ayyar, J., "springs directly from the carrying on of the business and is incidental to it or is a trading debt in the business of the respondent firm. " As we have said above, that condition has not (1)(1925) 955 been fulfilled and the loss which the respondent has incurred is not in its own business but the liability arose because of the business of another person and that is not a permissible deduction within section 10(1) of the Act. It is not a loss which has to be deducted in respect of the business of the respondent from the profits and gains of the respondent 's business. Counsel for the respondent also relied on Lord 's Dairy Farm Ltd. vs Commissioner of Income tax, Bombay(1). That 'was a case of embezzlement by an employee and it was held that the loss directly arose from the necessity of employing cashiers and therefore the loss by embezzlement was a trading loss but in that very case it was held that before a claim could be made for deduction of a debt as bad debt it must be a debt in law. That case is not applicable to the facts of the present case and is of little assistance in the decision of the question before us. Counsel for the respondent next relied on Calcutta Co., Ltd. vs The Commissioner of Income tax (2). It was held in that case that the expression "profits and gains" has to be understood in its commercial sense and that there could be no computation of profits and gains until the expenditure necessary for earning those profits and gains is deducted therefrom and that when there is no specific provision in section 10(2) in regard to claim made, its allowability will depend on accepted commercial practice and trading principles and it will be allowed if it can be said to arise out of the carrying on of the business and is incidental to it. As a principle it is unexceptionable but it does not carry the matter any further. It was next contended that the matter falls within section 10(2)(xi) of the Act, i.e., it is in respect of the busi ness. This contention has even less substance than the claim of deduction under section 10(1). Under cl. (xi) also a debt is only allowable when it is a debt and arises out of and as an incident to the trade. Except in money lending trade debts can only be so described (1) (2) [1959] 37 I.T.R. 956 if they are due from customers for goods supplied or loans toconstituents or transactions of a similar kind. In every case the test is, was the debt due as an incident to the business; if it is not of that character it will be a capital loss. Thus a loan advanced by a firm of Solicitors to a company in the formation of which it acted as legal adviser is not deductible on its becoming irrecoverable because that is not a part of the profession of a Solicitor: C. I. R. vs Hagart & Burn Murdoch (1). In our opinion the High Court 'was in error in answering the question in favour of the respondent. We therefore allow this appeal, set aside the judgment and order of the High Court and answer the question against the respondent. The appellant will have his costs in this Court and in the High Court. Appeal allowed.

IN-Abs

The respondent was a registered firm carrying on business as commission agents, and for the purpose of income tax it was treated as the agent of a non resident principal doing business outside India. Under section 42(1) of the Indian Income tax Act the respondent was deemed to be the assessee and had to pay Rs. 3,78,49r as income tax on behalf of the non resident principal. After allowing for the amounts lying with the respondentfirm the account of the non resident principal showed a debit balance of RS. 3,20,162. The respondent treated this amount as a bad debt and claimed it as a deductible loss. The Incometax Officer and the Appellate Assistant Commissioner disallowed the respondent 's claim but the Income Tax Appellate Tribunal held it to be an allowable deduction being a bad debt incurred as a result of the respondent 's business activities with the nonresident principal. The High Court treating the amount as a deductible business loss incurred by the respondent affirmed the decision of the Income tax Tribunal. On appeal by the Commissioner of Income tax, Held, that the respondent was not entitled to the reduction claimed by it. The liability to pay imposed upon it under section 42(2) of the Income tax Act did not arise directly from the carrying on of the business nor was it incidental to the business. The loss was not a commercial loss incurred in the respondentfirm 's own business but it arose out of the business of another person and that was not a permissible deduction within section io(1) or section 10(2)(Xi) of the Act. Gresham Life Assurance Society vs Styles, L.), referred to. Commissioner of Income tax vs Sir section M. Chitnavis, (1932) L. R 59 I. A. 290, followed. Badridas Daga vs Commissioner of Income tax, [1959] S.C.R. 690 and Curtis vs I. and G. Oldfield, Ltd., (1925) 9 T. C. 319, discussed. Lord 's Dairy Farm Ltd. vs Commissioner of Income tax, Bom bay, , Calcutta Co., Ltd. vs Commissioner of Income tax, and C.I.R. vs Hagart and Burn Murdoch; ; , not applicable '. 120 950

iminal Appeals Nos. 57 and 58 of 1960. Appeals by special leave from the judgment and order dated November 5/6, 1958, of the Bombay High Court at Nagpur in Criminal Appeal No. 94 of 1958. Jai Gopal Sethi and G. C. Mathur, for the appellant (in Cr. A. No. 57 of 1960). G. C. Mathur, for the appellant (in Cr. A. No. 58 of 1960). Gopal Singh and D. Gupta, for the respondent. December 5. The Judgment of the Court was delivered by SUBBA RAO, J. These two appeals raise rather an important question on the interpretation of the provisions of section 207A of the Criminal Procedure Code (hereinafter referred to as the Code). ' The facts that have given rise to these appeals may be briefly stated. The appeals arise out of an incident that took place on November 29, 1957, when one Sadashiv was murdered in the courtyard of his house in village Nimgaon. The case of the prosecution was that the four appellants, armed with sticks, went to the house of the deceased, dragged him 'out of the house and beat him with sticks in the courtyard; and that as a result of the beating he died on the next day at about 5 p.m. at Bhandara Hospital. After investigation, the police submitted their report to the Magistrate under 'section 173 of the Code along with the relevant documents. After forwarding the report, the officer in charge of the; police station furnished 892 the appellants with a copy of the report forwarded under sub section (1) of section 173, the First Information Report recorded under section 154 and all other documents or relevant extracts thereof on which the prosecution proposed to rely, including the statements recorded under sub section (3) of section 161 and also intimated them of the persons the: prosecution proposed to. examine as its witnesses. The Magistrate posted the case for inquiry on February 10, 1958 and on that date the prosecution intimated that it did not intend to examine any witnesses in the Magistrate 's Court., , On behalf of the appellants no objection was raised, to,that course. But the Magistrate adjourned the inquiry to February 12, 1958, as he wanted to consider whether any evidence was necessary to be recorded before commitment. On February 12, 1958, reexpressed his opinion that no witness need. be examined at that stage; thereafter, he framed charges against accused appellants under section 302, read with section 34, of the Indian Penal Code, and also under section 448 thereof and committed the appellants to the Sessions Court. Before the learned Sessions Judge the prosecution led four types of evidence, i.e. (1) eye witnesses, namely, P.Ws. 6, 11, 20 and 25; (2) dying declaration, exhibit P 15, supported by P. Ws. 18,22 and 19; (3) the identification of the appellants in jail by P.Ws. 20 and 25; and (4) recovery of various articles at, the instance of the accused appellants. The defence examined four witnesses. On a consideration of the entire evidence, the learned Sessions Judge held that,the prosecution, case had been amply borne out and that the four appellants entered into the house of the deceased and beat him in the manner described by the prosecution wit nesses. no less than 12 confused wounds were inflicted on the deceased, which resulted in the fracture of his ribs and injury to the lung,. and as the, doctor opined that the death was due to shock and haemorrhage resulting from said fracture, the learned Sessions Judge hold that the accused appellants were guilty of murder and convicted them under s.302, read with a. 34, Indian Penal Code,and he further convicted them, under section 448 of the Indian 893 Penal Code for trespassing into the house of the deceased. On these findings the learned Sessions Judge sentenced the appellants to undergo imprisonment for life on the first count and for 3 months rigorous imprisonment on the second count. The appellants preferred an appeal against their convictions and sentences to the High Court of Bombay at Nagpur. The learned Judges of the High Court, on a resurvey of the entire evidence, agreeing with the learned Sessions Judge, accepted the prosecution case, but they held that the appellants were guilty only under section 304, Part 1, read with section 34, Indian Penal Code, and in the result they reduced the sentence from life imprisonment to 10 years ' rigorous imprisonment in regard to appellant 1 and to 7 years ' rigorous imprisonment in regard to appellants 2 to 4. Against the said convictions and sentences, the appellants have preferred, by special leave, appeals to this Court. Criminal Appeal No. 57 of 1960 has been preferred by the first appellant and Criminal Appeal No. 58 of 1960 by appel lants 2 to 4. Learned counsel for the appellants raised before us the following two points: (1) The Sessions Court and, on appeal, the High Court have not properly appreciated the evidence and the circumstances of the case in holding that the appellants had committed the offences. (2) The trial and conviction of the appellants by the Sessions Court were null and void, as the Magistrate had no jurisdiction to commit the appellants to Sessions without examining witnesses under sub section (4) of section 207A of the Code and that, as the order of 'committal was without jurisdiction, the defect was not cured either under section 532 or section 537 of the Code. The first question does not merit any consideration. Both the courts below have, carefully considered the evidence adduced by the prosecution as well as the accused appellants and have accepted the prosecution case. It is a well established practice of this Court not to interfere on questions of fact, particularly when they are concurrent findings, except under exceptional circumstances. We find, no such exceptional 894 circumstances in this case. We, therefore, reject the first contention. The second contention turns upon the interpretation of the relevant provisions of section 207A of the Code. Before attempting to construe the relevant provisions of the section it would be helpful to notice briefly the history of the said section. Under the Criminal Procedure Code, as it originally stood, in the matter of committal proceedings there was no distinction between the proceeding instituated on a police report and that instituted otherwise than on police report. The main object of the committal proceedings was to hold an inquiry to ascertain and record the case which was to be tried before the Court of Sessions. It was primarily to give an opportunity to an accused to know in advance the particulars of evidence that would be adduced against him in the Court of Sessions so that he could be in a position to prepare his defence. Another object, which was no less important, was to enable the Magistrate to discharge an accused if there was no prima facie case against him. This procedure prevented unnecessary harassment to such accused and at the same time saved the valuable time of the Sessions Court. In practice the committal proceeding, whether intended by the Legislature or not, served another purpose, namely, it gave an opportunity to the accused to test the credibility of witnesses by bringing out the discrepancies between their evidence in the committing court, the statements made by them to the police under section 161 of the Code and the evidence given by them in the Court of Sessions. Though very often accused persons took full advantage of this additional opportunity to test the veracity of the witnesses, as often as not, it had turned out to be duplication of trials with the resultants long delays in the disposal of criminal cases. The advantage of committal proceeding. was not solely for the accused, for the. prosecution by examining the witnesses before the committing Magistrate secured their testimony in the sense that though it was tampered subsequenty it is unfortunately a frequent phenomenon in criminal, cases it could use the said evidence as substantive 895 one under section 288 of the Code. The Legislature, in its wisdom, presumably thought that undue delay in the disposal of sessions cases was due to the elaborate and ' prolonged committal proceedings and stepped in to amend the Code in that respect. The whole of section 207A has been inserted by Act XXVI of 1955. While the section simplified the procedure in regard to commitment proceedings instituted on a police report, it confined the existing procedure to proceedings initiated otherwise than on a police report. This distinc tion between the two classes of cases had a reasonable factual basis. In the case of a police report, a thorough inquiry would have been made and the investigating officer would have sent a report to the Magistrate under section 173 of the Code. The amended section 173 of the Code also enjoins on the officer in charge of the police station a duty to furnish before trial, free of cost, to the accused copies of the report forwarded under that section to the Magistrate, the First Information Report recorded under section 154 and all other documents or relevant extracts thereof on which the prosecution proposes to rely, including the statements, if any, recorded under section 164 of the Code and those recorded under sub section (3) of section 161 and a list of witnesses whom the prosecution proposes to examine as its witnesses. The Magistrate in a proceeding instituted on police report would ordinarily be in a position, on the said material to understand the case of the prosecution and know the nature of the evidence that would be adduced on the basis of which the accused is sought to be proceeded against. The accused also would have an opportunity to know beforehand the case he would have to meet and the evidence that would be adduced against him. But in a proceeding instituted otherwise than on a police report, no such maternal would be available and therefore the old procedure continued to apply to such a case. With this background let us look at the provisions of section 207A of the Code. The relevant provisions of section 207A of the Code may now be read: Section 207A: (1) When, in any proceeding instituted on a police report, the Magistrate receives the 896 report forwarded under section 173, he shall, for the purpose of holding an inquiry under this section, fix a date which shall be a date not later than fourteen days from the date of the receipt of the report, unless the Magistrate, for reasons to be recorded, fixes any later date. If, at any time before such date, the officer conducting the prosecution applies to the Magistrate to issue a process to compel the attendance of any witness or the production of any document or thing, the Magistrate shall issue such process unless, for reasons to be recorded, he deems it unnecessary to do so. At the commencement of the inquiry, the Magistrate shall, when the accused appears or is brought before him, satisfy himself that the documents referred to in section 173 have been furnished to the accused and if he finds that the accused has not been furnished with such documents or any of them, he shall cause the same to be so furnished. The Magistrate shall then proceed to take the evidence of such persons, if any, as may be produced by the prosecution as witnesses to the actual commission of the offence alleged, and if the Magistrate is. of opinion that it is necessary in the interests of justice to take the evidence of any one or more of the other witnesses for the prosecution, he may take such evidence also. The accused shall be at liberty to cross examine the witnesses examined under sub section (4), and in such case, the prosecutor may re examine them. (6) When the evidence referred to in sub section (4) has been taken and the Magistrate has considered all the documents referred to in section 173 and has, if necessary, examined the accused for the purpose of enabling him to explain any circumstances appearing in the evidence against him and given the prosecution and the accused an opportunity of being heard, such Magistrate shall, if he is of opinion that such evidence and documents disclose no grounds for committing the accused person for trial, record his reasons ,and discharge him, unless it appears to the Magistrate 897 that such person should be tried before himself or some other Magistrate, in which case he shall proceed, accordingly. When, upon such evidence being taken, such documents being considered, such examination (if any) being made and the prosecution and the accused being given an opportunity of being heard, the Magistrate is of opinion that the accused should be committed for trial, he shall frame a charge under his hand, declaring with what offence the accused is charged. On the interpretation, of sub section (4), which is the main sub section under scrutiny in the present case, the High Courts in India have expressed conflicting views. It would not be necessary to consider the said decisions in detail, but it would be enough if we state the conflicting views, which areas follow: (1) Under sub section (4) the prosecution is bound to examine all the eye witnesses indicated in the police report, and the discretion of the Magistrate to examine witnesses under the second part of the said sub section is only in respect of witnesses other than the eye wit nesses: vide M. Pavalappa vs State of Mysore (1), State vs Andi Betankar (2), Ghisa vs State (3 ) and Chandu Satyanarayana vs The State (4). (2) The Magistrate 's power to examine eye witnesses under the first part of sub section (4) is confined only to such witnesses as are produced in court by the officer conducting the prosecution and if he has not produced any such witnesses, the Magistrate cannot examine any eye witnesses under the second part of the said sub section, for, according to this view, the second part deals with only witnesses other than eye ,witnesses. (3) If the prosecution has not produced any eye witnesses the court may not in its discretion examine any witness under the second part, but can, if satisfied, discharge or commit the accused to sessions on the basis of the documents referred to in section 178 of the Code: vide State vs Lakshmi Narain (5), State, of U. P. vs Satyavir (6). (4) The first part confers a power on a Magistrate only to examine the eyewitnesses produced, but (1) A.I.R. (3) A.I.R. 1919 Raj. (5) A.I.R. 1960 All. 237. (2) A.I.R. 1958 Orissa 241. (4) A.I.R. 1959 A.P.651. (6) A.I.R. 1959 All. 898 the second part empowers him to examine any witness other than those produced, whether eyewitnesses or not, and in a case where the prosecution failed to discharge its duty to produce any witnesses or any important eye witnesses, the court would not be exercising its judicial discretion if it commits the accused to sessions on the basis of documents referred to under section 173 of the Code without examining at least the important witnesses: vide State vs Yasin (1), In re Pedda Amma Muttigadu (2), A. Ishaque vs The State (3) and Manik Chand vs The State (4). We have gone through the judgments of the High Courts cited at the Bar and derived considerable assistance from them for deciding the question raised. But as the question is to be primarily decided on the interpretation of the relevant provisions, we think, without any disrespect to the learned Judges, that it is not necessary to consider the said decisions in detail. Now let us look at the relevant provisions of section 207A of the Code to ascertain its intendment. Sub section (4) is the most important section vis a vis the taking of evidence. It is in two parts, the first part provides for the examination of witnesses produced by the prosecution and the second part for the examination of other witnesses. One of the fundamental rules of interpretation is that if the words of a statute are in themselves precise and unambiguous "no more is necessary than, to expound those words in their natural and ordinary sense, the words themselves in such case best declaring the intention of the legislature". The first part of the sub section reads: "The. Magistrate shall then proceed to take the evidence of such persons, if any, as may be produced by the prosecution as witnesses to the actual commission of the offence alleged. " The word "shall" imposes a peremptory duty on the Magistrate to take the evidence; but the nature of the said evidence is clearly defined thereafter. The clause "as may be produced by the prosecution as witnesses to the actual commission of the offence alleged" governs the words "such persons"; (1) A.I.R. 1958 All. (3) A.I.R. 1958 Cal. (2) A.I.R. 1959 A.P. 469. (4) A.I.R. 1958 Cal. 324. 899 with the result that the duty of the Magistrate to take evidence is only confined to the witnesses produced by the prosecution. Learned counsel for the appellants contends that it could not have been the intention of the Legislature to permit the prosecution to keep back the eye witnesses in the committal court and therefore the word "produced" should be read as "cited". To accept this interpretation is to substitute the word "cited" in place of the word "produced": such a construction is not permissible, especially, when the plain meaning of the word used by the Legislature is clear and unambiguous, and the acceptance of that meaning does not make the section otiose. The phrase "if any" between the words "such persons" and the aforesaid clause emphasizes that the prosecution may not produce any such persons, in which case the obligation to examine such witnesses cannot arise. The wording of the second part of the sub section is also without any ambiguity and it reads: "and if the Magistrate is of opinion that it is necessary in the interests of justice to take the evidence of any one or more of the other witnesses for the prosecution, he may take such evidence also. " No doubt the word "may" in the clause "he may take evidence" imposes duty upon the Magistrate to take other evidence; but that duty can arise only if he is of opinion that it is necessary in the interests of justice to take the evidence. The fulfilment of the condition that gives rise to the duty is left to the discretion of the Magistrate. The duty to take evidence arises only if he is of the requisite opinion. Doubtless the discretion being a judicial one, it should be exercised reasonably by the Magistrate. If he exercises it perversely, it may be liable to be set aside by a superior court. If so, what do the words "other. witnesses" mean? Do they mean witnesses other than eyewitnesses or witnesses, eye witnesses or not, other than those produced before the Magistrate, by the prosecution? The witnesses who will depose to the prosecution case may be of different categories, namely, (i) witnesses who are eye witnesses to the actual commission of the offence alleged; (ii) witnesses who speak to the facts 900 which afford a motive for the commission of the offence; (iii) witnesses who speak to the investigation and to the facts unfurled by the investigation; and (iv) witnesses who speak to the circumstances and facts probablizing the commission of the offence, which is technically described as substantive evidence. Sub section (4) enjoins on the Magistrate a duty to examine the first category of witnesses produced by the prosecution. The word "actual" qualifying the word "commission" emphasises the fact that the said witnesses should be those who have seen the commission of the offence. We have held in interpreting the first part that the Magistrate should examine only such witnesses who are produced before him by the prosecution; but there may not be eyewitnesses in a case, or, if there are, the prosecution may not have produced all of them before the Magistrate. The second part of the sub section therefore confers a discretionary power on the Magistrate to examine any one or more of witnesses of all categories, including the eye witnesses who have not been produced by the prosecution within the meaning of the first part of the said sub section. But it is said that sub sections (6) and (7) indicate that taking of evidence by the Magistrate is a condition precedent for making an order of discharge or of committal and, therefore, the provisions of Sub section (4) must be so construed as to impose a duty on the Magistrate to examine some witnesses. Firstly, we cannot hold that the sub sections impose any such condition. The argument is that the clause in subs. (6), namely, "When the evidence referred to in subsection (4) has been taken" is a condition precedent for making an order of discharge. The adverb "when" in the clause in the context denotes a point of time and not a condition precedent. The clause means nothing more than that an order of discharge can be made under sub section (6) after the events mentioned therein have taken place. Secondly, the two clauses necessarily refer to the corresponding or appropriate situations under the earlier sub sections. The first clause will not come into play if the Magistrate has not taken any evidence. So too, in sub section (7) also the 901 adverb "when" denotes the time when the Magistrate can make the order of committal. If evidence has, not been taken, that sub section is not applicable a the Magistrate proceeds to make an order of committal on other material referred to in the sub section. On the other hand ', if the said two sub sections are construed as imposing a condition precedent for making an order of discharge or commitment, as the case may be, the said two sub sections will directly, come into conflict with the provisions of sub section When one. sub section clearly confers a discretion on the Magistrate to take or not to take evidence, the other subsections take it away. It is not permissible to create conflict by construction, when by an alternative construction all the three sub sections can be harmonized and reconciled. If the construction suggested by learned counsel for the appellants be adopted, it would also lead to an anomaly in that the Magistrate, though the documents referred to in section 173 clearly pronounce the innocence of the accused, has to go through the pretence of examining one or more witnesses to satisfy the provisions of the sub section. Reliance is placed upon section 251A of the Code relating to warrant cases whereunder the Magistrate is authorized, upon consideration of all the documents referred to in section 173 and upon making such examination of the accused as the Magistrate thinks necessary and after giving the prosecution and the accused an opportunity of being heard, to discharge the accused, if he considers the charge against the accused to be groundless; but if he is of opinion that there is ground that the accused has committed an offence alleged against him, he shall frame in writing a charge against the accused. By contrasting this provision with section 207A, it is contended that if the construction put forward by learned counsel is not accepted, the obvious difference between the two. procedures indicated by the Legislature would be obliterated. We cannot agree with this contention. The difference between the two procedures is that, in a case covered by section 207A, evidence will have to be taken under certain 902 contingencies, whereas under section 251A no evidence need be taken at all. That distinguishes the different procedures under the two sections and it is not the province of the court to add any further conditions or limitations to those provided by the Legislature. We are fortified in our view by a decision of this Court in Macherla Hanumantha Rao vs The State of Andhra Pradesh (1). There the point in controversy was whether sa. 207 and 207A, inserted in the Code by the Amending Act XXVI of 1955, violated the provisions of article 14 of the Constitution. In support of the contention that they violated article 14 of the Constitution, it was sought to be made out that the provisions of section 207A of the Code, in comparison and contrast with other provisions of Ch. XVIII of the Code, prescribed a less advantageous position for the accused persons in a proceeding started under a police report than the procedure prescribed in other cases in the succeeding provisions of that chapter. This Court held that there was a reasonable classification to support the difference in the procedures. Sinha J., as he then was, who spoke for the Court, in order to meet the argument based on discri mination, considered the scope of the new section. In doing so, the learned Judge observed thus at p. 403: "The magistrate then has to record the evidence of such witnesses as figure as eye witnesses to the occurrence, and are produced before him. He has also the power ' in the interest of justice, to record such other evidence of the prosecution as he may think necessary, but he is not obliged to record any evidence. Without recording any evidence but after considering all the documents referred to in section 1973 and after examining the accused person and after hearing the parties, it is open to the magistrate to discharge the accused person after recording his reasons that no ground for committing the accused 1 for trial has been made out, unless he decides to try the accused himself or to send him for trial by another magistrate. If, on the other hand, he finds that the accused should be committed for trial, he is required to frame a charge (1) ; 903 disclosing the offence with which the accused is charged. " Then the learned Judge proceeded to consider the scope of section 208 of the Code. After having found that there was obvious difference in the procedure, the learned Judge came to the conclusion that "the Legislature has provided for a clear classification between the two kinds of proceedings at the commitment stage based upon a very relevant consideration, namely, whether or not there has been a previous inquiry by a responsible public servant whose duty it is to discover crime and to bring criminals to speedy justice". It will thus be seen that the observations of the learned Judge at p. 403 cannot be said to be obiter, as learned counsel asks us to hold, for the construction of the provisions of section 207A was necessary to ascertain whether there was reasonable classification or not. Assuming that the said observations are obiter, even then, they record the considered opinion of five learned Judges of this Court. The view we have expressed also is consistent with the said observations. Our view could now be expressed in the following propositions: (1) In a proceeding instituted on a police report, the Magistrate is bound to take evidence of only such eye witnesses as are actually produced by the prosecution in court. (2) The Magistrate, if he is of opinion that it is in the interest of justice to take evidence, whether of eye witnesses or others, he has a duty to do so. (3) If the Magistrate is not of that opinion and if the prosecution has not examined any eye witnesses, he has jurisdiction to discharge or commit the accused to sessions on the basis of the documents referred to in s, 173 of the Code. (4) The discretion of the Magistrate under sub section (4) is a judicial discretion and, therefore, in appropriate cases the order of discharge or committal, as the case may be, is liable to be set aside by a superior court. Before closing we would like to make some observations. Rarely we come across cases where the prosecution does not examine important eye witnesses, for such a procedure would entail the danger of the said witnesses being tampered with by the accused, with 904 the result that there will not be any evidence taken by the committing Magistrate which could be used as substantive evidence under section 288 of the Code. Even if the prosecution takes that risk, the Magistrate shall exercise a sound judicial discretion under the second part of sub section (4) of section 207A in forming the opinion whether witnesses should be examined or not, and any perverse exercise of that discretion can always be rectified by a superior court. Rut there may be a case where the Magistrate can make up his mind definitely on the documents referred to in section 173 without the aid of any oral evidence and in that event he would be within his rights to discharge or commit the accused, as the case may be. In this view, it is not necessary to express our opinion whether even if the Magistrate acted illegally in committing an accused without taking any evidence, the said illegality is cured either by section 537 of the Code or any other section thereof. In the result, the appeals fail and are dismissed. Appeals dismissed.

IN-Abs

On the date fixed for the inquiry the prosecution intimated to the Magistrate that it did not intend to examine any witness in the Magistrate 's Court. The Magistrate adjourned the inquiry to consider whether it was necessary to record any evidence before commitment. On the adjourned date he expressed his opinion that no witnesses need be examined, framed charges against the appellants and committed them to the Sessions Court. The appellants contended that the Magistrate had ' no jurisdiction to commit them to Sessions without examining witnesses under sub section (4) of section 207 A of the Code of Criminal Procedure. Held, that the order of commitment was valid and the Magistrate had jurisdiction to make it 'Without recording any evidence. The position under section 207 A of the Code is that: (i) the Magistrate is bound to take evidence of only such eye witnesses as are actually produced by the prosecution before the Committing Court; 891 (ii) the Magistrate if he is of opinion that it is in the interests of justice to take evidence whether of. eye witnesses, or of others, he has a duty to do so; (iii). .the Magistrate, if he is not of that opinion and if the prosecution has not examined any eye witnesses, he has jurisdiction to discharge or commit the accused on the basis of the documents referred to in section 173 of the Code; (iv).the discretion of the Magistrate is a judicial dis cretion which is liable to be corrected by a superior Court, Macherla Hanumantha Rao vs The State of Andhra Pradesh, ; , relied on.

Appeals Nos. 351 356 and 358 369 of 1960. Appeals by special leave from the Award Part 1 of the Industrial Court, Bombay, in References IC Nos. 261, 297, 238, 241, 248, 263, 266, 271, 301, 302, 257, 237 296: 299, 300, 283 and 284 of 1959. 3 N. A. Palkhivala, I. M. Nanavati, section N. Andley J. B. Dadachanji, Rameshwar Nath and P. L. Vohra, for the appellants in C. A. No. 351 of 1960. N. A. Palkhivala, J. B. Mehta, section N. Andley, J. B. Dadachanji, Rameshwar Nath and P. L. Vohra, for the appellant; in C.As. Nos. 352 and 358 of 1960. R. J. Kolah, J. B. Mehta, section N. Andley, J. B. Dadachanji, Rameshwar Nath and P. L. Vohra, for the appellants in C.As. Nos. 353 and 362 of 1960. I. M. Nanavati, section N. Andley, J. B. Dadachanji, Rameshwar Nath and P. L. Vohra, for the appellants in C. As. Nos. 354, 356, 363 365, 367 and 369 of 1960. J. B. Mehta, section N. Andley, J. B. Dadachanji, Rameshwar Nath and P. L. Vohra, for the appellants in C. As. Nos. 355, 359 361, 366 and 368 of 1960. section R. Vasavada, for the respondent in C. As. Nos. 351, 352, 355, 358, 360 364, and 368 of 1960. N. H. Shaikh, for the respondent in C. As. Nos. 353 and 365 of 1960. N. M. Barot, for the respondent in C. As. Nos. 354, 359 and 367 of 1960. K. L. Hathi, for the respondent in C. As. Nos. 366 and 369 of 1960. December 7. The Judgment of Gajendragadkar, Sarkar, Wanchoo and Mudholkar, JJ. was delivered by Wanchoo, J. Subba Rao, J. delivered a separate Judgment. WANCHOO, J. These eighteen appeals by ' special leave raise a common question and will be dealt with by this judgment. The appellants are certain cotton textile mills in Ahmedabad while the respondent in each appeal is the Textile Labour Association, Ahmedabad, which is a representative union of the cotton textile workers in Ahmedabad. The total number of cotton textile mills in Ahmedabad is 66; therefore, 66 references under section 73 A of the Bombay Industrial Relations Act, No. XI of 1947 (hereinafter called the Act), were made to the industrial court for arbitration of disputes arising out of notices of change 4 given by the respondent making a demand for bonus for employees of textile mills in Ahmedabad. It appears that there was an agreement between the Textile Labour Association and the Ahmedabad Mill owners ' Association representing the member mills on June 27, 1955 (hereinafter referred to as the Agreement), with respect to payment of bonus by the mills to their employees. The Agreement was to remain in force for a period of five years, beginning with January 1, 1953, and ending with December 31, 1957, and related to bonus for the five calendar years from 1953 to 1957 (both inclusive). When the Agreement came to an end disputes arose about bonus for the year 1958. The Agreement was not extended and a notice of change under section 42 of the Act was given by the Textile Labour Association to the Ahmedabad Mill owners ' Association on July 21, 1959, claiming that all the employees employed during the year 1958 in the member mills be paid an adequate amount of bonus having regard to the volume of profits, if any, or some bonus irrespective of profits to fill the gap between the existing wage and the living wage so as to avoid unrest among the employees. It further appears that notice in the same terms was given to individual mills about the same time. As no agreement was arrived at between the parties, 66 references with respect to the sixty six mills were made to the industrial court as already mentioned above. The industrial court considered all the sixty six references together and came to the conclusion that the Agreement of 1955 had worked fairly to both sides and was substantially in accord with the long standing practice in the industry in Ahmedabad even before the Agreement and that its extension for one year was essential for keeping industrial peace. It therefore ordered the extension of the Agreement for the year 1958 and directed the parties to file within six weeks from the date of the award calculations of bonus payable for the year 1958 in the light of the decision and thereafter the court would proceed to award appropriate bonus in the case of each individual mill. Thereupon there were fifty two applications for special leave to 5 appeal to this Court in which special leave was granted. Thirty four of the appeals arising out of the special leave petitions have been withdrawn and only eighteen now remain for decision. It appears that the remaining fourteen mills accepted the decision of the industrial court, so that now forty eight mills are out of the picture and only eighteen are before the Court. The main contention of the appellants before the industrial court was that in view of the law laid down as to bonus by this Court in the Associated Cement Companies Ltd. vs The Workmen (1), it was not open to it to extend the Agreement for the year 1958 as that would be against the concept of bonus as understood in industrial law. The same point is being urged before us and the question that falls for decision is whether the industrial court was right in law in extending the Agreement for another year. In order to appreciate the dispute between the parties with respect to the extension of the Agreement we may refer to the salient terms of the Agreement. Before we do so, we may mention that the Agreement was "without renouncing the general principles enunciated in decisions and awards of the arbitration boards, the industrial court, the Labour Appellate Tribunal and the Supreme Court in respect of bonus or the rights and privileges created thereunder". It was entered into only with a view to creating goodwill among workers and for the purpose of maintaining peace in the industry and without creating a precedent for the future. The Agreement in the first place provided that the claim of the employees for bonus would only arise if there is an available surplus of profit after making provision for all the prior charges. These prior charges were: (i) statutory depreciation and the development rebate; (ii) taxes; (iii) reserve for rehabilitation, replacement and modernisation of block as calculated by the industrial court (basic year 1947); (iv) six per centum return on paid up capital including bonus shares; and (v) two per cent. return on reserves employed as working capital. After the available surplus was determined thus, a mill (1) 6 having an available surplus of profit had to pay to its employees bonus which would in no case be less than an amount equivalent to 4.8% of basic wages earned during the year; nor was it to exceed an amount equivalent to 25% of the basic wages earned during the year. It was also provided that in case the available surplus was more than sufficient for granting bonus at a higher figure than the ceiling of twenty five per centum of basic wages earned during the year and the maximum bonus of 25 per centum was paid, such a mill would be deemed to have set aside a part of the residue of available surplus after grant of maximum bonus not exceeding 25 per cent. of the basic wages earned during the year as a reserve for bonus for purposes of "set on" (adjustment) in subsequent years. Secondly it was provided that where in the case of a mill, the available surplus was not more than the ceiling of 25 per cent. of basic wages fixed for bonus, the bonus would be fixed after deducting at least Rs. 10,000 from the available surplus. Further it was provided that if a mill had an available surplus of profits which would suffice to pay bonus at a rate lower than the minimum of 4.8 per cent. it would pay the minimum and would be entitled to set off the excess amount thus paid against the available surplus in a subsequent year or years and there were provisions how this set off would be worked out. Lastly it was provided that if the profits of a mill were not sufficient to provide for all prior charges as mentioned above, though it had made profits, or where the mill had actually suffered a loss, such a mill would a& a special case for creating goodwill among its workers and for continuing peace in the industry but without creating a precedent pay to its employees the minimum bonus equivalent to 4.8 per cent. of the basic wages but would be entitled to set off this amount towards any available surplus in any subsequent years, subject, however, always to a payment of a minimum bonus at the rate of 4.8 per cent. of basic wages earned during the year. It has been contended on behalf of the appellants that the formula under the Agreement departs in 7 some vital aspects from what is known as the Full Bench formula evolved by the Labour Appellate Tribunal in The Mill owners ' Association, Bombay vs The Bashtriya Mill Mazdoor Sangh (1), which has been approved by this Court in the Associated Cement Companies ' case (2) and is thus the law of the land so far as bonus is concerned. It is urged therefore that inasmuch as the formula under the Agreement departs from the Full Bench formula which is now the law of the land, it was not open to the industrial court to extend the Agreement in the face of the decision of this Court in Associated Cement Companies ' case(1) and in so far as the industrial court has done so it has gone against the law relating to bonus and therefore the award should be set aside. Two questions immediately arise in this connection: the first relates to the jurisdiction of the industrial court to impose new obligations upon the parties and the second is whether if the industrial court has jurisdiction to impose new obligations it could do so in a matter of this kind considering the concept of bonus as laid down by the decisions of this Court. So far as the first question is concerned (namely, the general power of an industrial court to impose new obligations upon the parties), the matter is now well settled by the decisions of the Federal Court and also of this Court. It was held by the Federal Court in Western India Automobile Association vs Industrial Tribunal, Bombay and Others (3) that " adjudication does not in our opinion mean adjudication according to the strict law of master and servant. The award of the tribunal may contain provisions for settlement of a dispute which no court could order if it was bound by ordinary law, but the tribunal is not fettered in any way by these limitations. " The Federal Court also approved the view of Ludwig Teller that "industrial arbitration may involve the extension of an agreement or the making of a new one, or in (1) (2) (3) 8 general the creation of new obligations or modification of old ones while commercial arbitration generally concerns itself with interpretation of existing obligations and disputes relating to existing agreements (see p. 345)." This Court also in Rohtas Industries Ltd. vs Brijnandan Pandey (1) held that " a court of law proceeds on the footing that no power exists in the courts to make contracts for the people; and the parties must make their own contracts. The Courts reach their limit of power when they enforce contracts which the parties have made. An industrial tribunal is not so fettered and may create new obligations or modify contracts in the interests of industrial peace, to protect legitimate trade union activities and to prevent unfair practice and/or victimisation (see p. 810). " In Patna Electric Supply Co. vs Patna Electric Supply Workers ' Union (2), this Court held that "there is no doubt that in appropriate cases industrial adjudication may impose new obligations on the employer in the interest of social justice and with the object of securing peace and harmony between the employer and his workmen and full cooperation between them (see p. 1038)." and approved of the decision of the Federal Court in Western India Automobile Association 's case (3). There is no doubt therefore that it is open to an industrial court in an appropriate case to impose new obligations on the parties before it or modify contracts in the interest of industrial peace or give awards which may have the effect of extending existing agreement or making a new one. This, however, does not mean than an industrial court can do anything and every thing when dealing with an industrial dispute. This power is conditioned by the subject matter with which it is dealing and also by the existing industrial law and it would not be open to it while dealing with a particular matter before it to overlook the industrial (1) ; (2) [1959] SUPP. 2 S.C.R. 761. (3) 9 law relating to that matter as laid down by the legislature or by this Court. This brings us to the second question, which is the real question in dispute in this case, namely, when dealing with a bonus case, like the present, was it open to the industrial court to overlook the law laid 7 down by this Court in Associated Cement Companies ' case (1) and make an award extending the Agreement for a further period of one year? In order to determine this question, we have to look at the concept of bonus as evolved in the industrial law of this country by industrial tribunals and now by the decision of this Court. So far as we can see, there are four types of bonus which have been evolved under the industrial law as laid down by this Court. Firstly, there is what is called a production bonus or incentive wage (see Titaghur Paper Mills V. Its Workmen (2) ); the second is bonus as an implied term of contract between the parties (see Messrs. Ispahani Ltd. vs Ispahani Employees ' Union (3)); the third is customary bonus in connection with some festival (see The Graham Trading Co. vs Its Workmen (4)) and the fourth is profit bonus which was evolved by the Labour Appellate Tribunal in The Mill owners ' Association Bombay vs The Rashtriya Mill Mazdoor Sangh, Bombay (5), and which has been considered by this Court fully in two cases. We are in the present case dealing with bonus of the fourth kind, namely, profit bonus and what we say subsequently refers only to this kind of bonus. What is the concept of profit bonus with which we are concerned in this case, for it is this concept which will determine whether it was open to the industrial court in this case to extend the Agreement for 1958? In Muir Mills Co. Ltd. vs Suti Mills Mazdoor Union (6), this Court pointed out that "There are two conditions, which have to be satisfied before a demand for bonus can be justified and (1) [1959] SUPP. 2 S.C.R. 1012. (3) [1960] 1 S.C.R. 24.(4) [1960] 1 S.C.R. 107. (5) [1955] 1 S.C.R. 991. 2 10 they are: (1) when wages fall short of the living standard, and (2) industry makes huge profits part of which are due to the contribution which the workmen make in increasing production. The demand for bonus becomes an industrial claim. . The basis for the claim is that labour and capital both contribute to the earning of the industrial concern and it is fair that labour should ' derive some benefit, if there is a surplus after meeting prior or necessary charges. . . The surplus that remained after meeting the aforesaid prior charges would be available for distribution as bonus. " The matter was again considered by this Court in the Associated Cement Companies ' case (1) where the Full Bench formula evolved by the Labour Appellate Tribunal was gone into at length. The workmen contended in that case that the formula required revision as the employers were becoming increasingly more rehabilitation conscious and their appetite for the provision for rehabilitation was fast growing with the result that in most cases, after allowing for rehabilitation, there was no surplus left for the purpose of bonus and the main object of the formula was thus frustrated. It was further contended for the workmen that the whole of rehabilitation expenses should not be provided for out of trading profits and that the claim for rehabilitation should be fixed at a reasonable amount and the industry should be required to find the balance from other sources. It was there held that"though there may be some force in the plea made for the revision of the Full Bench formula, the problem raised by the said plea is of such a character that it can appropriately be considered only by a high powered commission and not by this Court, while hearing the present group of appeals. "This Court also held that "the Full Bench formula had on the whole work ed fairly satisfactorily in a large number of industries all over the country, and the claim for bonus should be decided by the Tribunals on the basis of this formula without attempting to revise it. The (1) 11 formula was elastic enough to meet reasonably the claims of the industry and labour for fair play and justice. . It was based on two considerations: first, that labour was entitled to claim a share in the trading profits of the industry, because it had parti ally contributed to the same; and second, that labour was entitled to claim that the gap between its actual wage and the living wage should within reasonable limits be filled up. " The Full Bench formula provided for arriving at the available surplus after meeting prior charges, namely, (i) depreciation, (ii) taxes, (iii) return on paid up capital, (iv) return on working capital and (v) rehabilitation. The formula further dealt with the claim for bonus on the basis that the relevant year is a selfsufficient unit and appropriate accounts have to be made in respect of the said year. Finally, it was pointed out that it was only after all the prior charges had thus been determined and deducted from the gross profits that the available surplus could be ascertained for payment of bonus, and that when the available surplus had been ascertained, there were three parties entitled to claim shares therein, namely, (i) labour 's claim for bonus, (ii) industry 's claim for the purpose of expansion and other needs, and (iii) the shareholders ' claim for additional return on the capital invested by them; the ratio of distribution would neces sarily depend on several factors. It would thus be clear that the essential concept of profit bonus is that there should be an available surplus determined according to the principles laid down in the cases mentioned above for distribution. If there is no such available surplus for distribution, there can be no case for payment of profit bonus. This is the industrial law as laid down by this Court with respect to this kind of bonus in Associated Cement Companies ' case (1). It would in our opinion be not open to an industrial court or tribunal to ignore this law as to bonus and to extend an agreement for payment of bonus, which is against the basic concept of bonus as laid down by the decisions of this Court on the ground that an (1) 12 industrial court has power generally to extend agreements or to create new obligations. As already pointed out, that power has to be exercised keeping in view the subject matter before the tribunal and the law laid down by the legislature or by the decisions of this Court, with respect to that subject matter. The industrial court in this case was not unaware of this position, viz., that it *as departing from the law laid down in the Associated Cement Companies ' case (1) and other bonus cases; but it held that this Court was dealing in those cases with individual units, and not with a case where there were numerous concerns in an industry at one centre, with its particular historical back ground, where previous awards had been on an industry wise basis. It therefore held that the decisions of this Court could not apply in their entirety to the dispute before it and that this Court could not have intended that in a case where there was the additional circumstance that the parties had themselves voluntarily modified the bonus formula in some respects by a long term agreement, that could not be extended by an industrial court. It is the correctness of this view which has been strongly disputed before us by the appellants. Before deal with this matter, we should like to point out that the fact that there are numerous concerns in a particular place can have no relevance in considering the question whether the Full Bench formula can apply to cases like the present. Even though this Court was dealing with the case of one concern, namely, the Associated Cement Companies, it pointed out that the Full Bench formula had worked fairly satisfactorily all over the country and should continue to be applied without revision till such time as a high powered commission went into the question. There is in our opinion no question of industry cum region approach in the matter of a bonus dispute of this kind. There is no doubt that in many matters, like wages, conditions of service, over time allowance, dearness allowance, gratuity, and so on, industry cum region approach has been made by industrial courts (1) 13 in this country and, rightly so. But there is, in our opinion, no scope for an approach of this kind in the case of bonus, the basic concept of which is that payment depends on surplus of profits available according to some formula in the case of each industrial concern. Nor can it be said that the Agreement in this case is dealing with bonus in what is known as industry cumregion basis. Its salient terms as set out above will show that it deals with bonus according to available surplus of each mill, so that bonus paid by each mill depends on its own available surplus and the sixty six mills situate in Ahmedabad may pay different amounts of bonus varying from a minimum of 4 8 per cent. of the basic wages to 25 per cent. of the basic wages. Similar differences will arise if the Full Bench formula is applied to the sixty six mills in Ahmedabad. Thus the Agreement which has been extended, is not based on industry cum region approach, as it is understood. That approach, say, with respect to wages means that wages of all concerns situate in a particular area engaged in a particular industry should be the same. On that approach the bonus of all these sixty six mills should also be the same percentage for each mill in that area; but that is not the basis on which the Agreement was arrived at. The basis of the Agreement is that each individual mill is treated as a separate unit and its available surplus worked out according to the formula in the Agreement itself. This is also the basis of the Full Bench formula and the available surplus of each unit is worked out according to that formula, though the result of the application of the two formulae in each case may not be the same. There is in our opinion therefore no justification for the view that the Full Bench formula approved by this Court in the Associated Cement Companies ' case (1) can have no application where there are numerous concerns of one nature at one centre. Some bonus awards were brought to our notice to show that they were on industry cum region basis, namely, The Sugar Mills of Bihar vs Their Workmen (2) and The Sugar Mills, Uttar Pradesh vs (1) (2) [1951] I. L. L. J. 469. 14 Their Workmen(1). These awards related to sugar industry in Uttar Pradesh and in Bihar. As we read these decisions, we do not find real industry cumregion approach which would result in uniform bonus for all the mills dealt with by these two awards. What we find is that a different formula was worked out for awarding profit bonus linked with production on the basis that there were profits; but when the formula is worked for each mill the bonus would differ from mill to mill according to its production. Further, we find that in the Uttar Pradesh case there were certain exemptions granted to certain factories, presumably on the ground that they were not in a position to pay bonus for want of sufficient profits. It is true that in the Bihar case it was said that the question of bonus could be considered on industry wise and not on unit wise basis, but that only meant that one formula was evolved for the whole of Bihar and applied to every mill in that area. That is what exactly the Full Bench formula also has done, for it is the same formula which applies to all industrial concerns all over the country now after the decision of this Court. In the Bihar case, an argument was addressed to apply the Full Bench formula, but that was not accepted on the ground that balance sheets and profit and loss accounts were not reliable and therefore bonus was linked with production. In the Bihar case also some factories were exempted from paying bonus presumably on the ground that they were unable to do so not having made profits. These cases therefore are not instances of real industry cum region approach. Reference was also made to The, Textile Mills in Coimbatore District vs Their Workmen (2) relating to Coimbatore textile mills. In that case the industrial court considered whether bonus at a flat rate for all the mills should be awarded or whether a distinction should be made between mills and mills. It held that the mills themselves when they paid bonus observed or maintained no distinction; therefore in the peculiar circumstances of that case a uniform rate of 33 1/3 per cent. was awarded for all the mills as specially all the mills had (1) (2) 15 without exception 'made unique profits. As we have said already the basic concept of profit bonus, as it appears from the judgments of this Court, is that there should be an available surplus of profits in a particular concern in a particular year, to which the bonus relates and on this basic concept there is no scope for an approach on the basis of industry cum region in the matter of bonus in the sense that every mill in a region should pay the same bonus. There is therefore no question of industry cum region approach in the present case, and even the formula in the Agreement is not on a real industry cum region approach and has to be worked out from mill to mill, which is like the Full Bench formula. The reasons therefore which led the industrial court in this case to distinguish and depart from the decision of this Court in The Associated Cement Companies ' case (1) do not appear to us to be substantial and there was therefore no ground for departing from that decision for those reasons. This brings us to a consideration of the formula as provided in the Agreement and the Full Bench formula as approved by this Court. It was urged on behalf of the respondent that the two formulae were basically the same; both provided for prior charges and in both bonus was to be paid on the availability of surplus profits, though it was admitted that in certain respects there were differences. Now if these differences were merely of detail and did not affect some of the vital aspects of the Full Bench formula it might be said that there was no ignoring of the law as laid down by this Court and therefore the tribunal was not unjustified in extending the Agreement for a year. But a comparison of the formula in the Agreement with the Full Bench formula shows differences in three vital aspects. In the first place, rehabilitation provided in the Agreement differs vitally from rehabilitation as explained in The Associated Cement Companies case (1). In the second place, the formula in the Agreement provides for payment of a minimum bonus even though there may be no available surplus and even though the particular mill might have made actual (1) 16 loss. Thirdly, while the Full Bench formula as approved by this Court treats a particular year as a selfsufficient unit, there is provision for set off and set on in the formula in the Agreement. Can it therefore be said that the formula in the Agreement which departs in these vital particulars from the Full Bench formula in the matter of bonus could be extended for another year by the industrial court in the face of the decisions of this Court laying down the law as to what profit bonus is and how it should be worked out? The tribunal therefore when it extended the formula in the Agreement which departed from the Full Bench formula in certain vital aspects was undoubtedly ignoring the industrial law as laid down by this Court and going against it. It was its duty when dealing with the question of profit bonus to apply the Full Bench formula, as approved by this Court and then arrive at the quantum of bonus to be awarded in the case of each mill. In particular by extending the Agreement the tribunal made it possible for payment of a minimum bonus even when there was either insufficient available surplus to pay bonus or no available surplus at all or even actual loss; the tribunal was thus definitely going against the industrial law relating to bonus as laid down by this Court. It had in our opinion no power to do so and the reasons which it gave for departing from the law laid down by this Court are unsubstantial and do not commend themselves to us. In these circumstances the order of the tribunal extending the Agreement for a year cannot be upheld. Further it was urged that in any case the Agreement contemplates payment of bonus out of profits of the industry at Ahmedabad as a whole and that is why it has provided for set off and set on. Whatever may be said about this provision on a long term basis, the tribunal 's jurisdiction was limited by its terms of reference. There was not one reference before the tribunal on industry cum region basis but sixty six separate references, one relating to each mill. It was required to consider the question of bonus for each mill for the year 1958 only and thus had nothing to 17 do with set off and set on or the profits of the industry as a whole at Ahmedabad. The tribunal was only concerned with 1958 and no consideration as to what happened before that year or what may happen after 1958 could enter into its decision of the question of bonus for the year 1958. The principle of set off and set on therefore to be found in the Agreement could not convert payment of bonus for 1958, say, by a loss making mill into profit bonus as laid down by the decisions of this Court. The tribunal 's award in this case therefore would clearly be against the law as to bonus laid down by this Court, for its jurisdiction was confined only to the year 1958 and no more. It was however urged on behalf of the respondent that there is a fifth kind of bonus, namely, goodwill bonus and that the Agreement when it provides for a minimum bonus irrespective of availability of profits provides for such bonus in the interest of industrial peace. It is enough to say that so far as what is called goodwill bonus is concerned it pre supposes that it is given by the employer out of his own free will without any compulsion by an industrial court. As its very name implies it is a bonus which is given by the employer out of his free consent in order that there may be goodwill between him and his workmen; but there can be no question of imposing a goodwill bonus by industrial courts, as imposition of such a bonus is a contradiction of its very concept. We have already referred to four kinds of bonus which prevail in the industrial law in India and which can in certain circumstances be imposed by industrial tribunals; but there can be no question of the imposition of the so called goodwill bonus, for that bonus depends upon the goodwill of the parties and on their free consent. In the absence of such free consent, there can be no question of any goodwill bonus. Before we part with these appeals, however, we must briefly advert to the general considerations which have been pressed before us very strongly by Mr. Vasavada for the respondents and Mr. Ambekar for the intervening parties. It has been urged before us 18 that we should be reluctant to interfere with the agreement because it has worked satisfactorily in Ahmedabad, and the reversal of the award under appeal may lead to discontent in a very important centre of.textile industry in this country. It has also been strenuously argued that the Agreement offers a very reasonable solution to the vexed problem of bonus and the pattern set by it has been copied in Bombay, Madhya Pradesh and Coimbatore. If the pattern thus set for determining the textile employees ' claim for bonus has been adopted by a substantial part of the textile industry in this country, the Court should desist from disturbing the smooth working of the said pattern unless it is com pelled to do so. It may be conceded that some features of the Agreement are undoubtedly very reasonable and in the interest of the industry as a whole. The agreement has put a ceiling on bonus and that is a term very much in favour of the employer, because in some cases where the available surplus is very large, then under the working of the Full Bench formula the employees are tempted to claim, and industrial tribunals are justified in awarding, a pro portionately substantial amount as bonus reaching or even exceeding in some cases the level of basic wages of even 8 or 9 months. This trend has been controlled by the Agreement. It is true that the Agreement requires the payment of the minimum bonus but this provision is intended to work as a part of the larger agreement spreading over some years and the employer has agreed to pay the minimum bonus even though in a particular year he may have no available surplus, because he and his employees expect or anticipate that the employer may have available surplus in the succeeding year. The working of the Agreement is really intended to spread over a number of years and the account between the employers and the employees in that behalf is conceived as a continuing and running account. These features of the Agreement may be regarded as commendable. The problem of rehabilitation which has assumed a complex form has also been attempted to be solved by the Agreement in a practical way. The solution 19 adopted by the Agreement in that behalf, it is claimed, is based on the historical and factual genesis of the original formula evolved by the Full Bench of the Labour Appellate Tribunal when it dealt with the problem of the textile industry in Bombay. The argument is that until 1962, the Agreement should be allowed to work when the position may be reviewed at length. Since this Court delivered its judgment in the case of The Associated Cement Companies (1) it has come to our notice that in cases where the employer claims an exaggerated amount for rehabilitation, or where a reasonable claim made by the employer in that behalf is unreasonably challenged by the employees, the dispute is protracted. The trial of the issue tends to become complicated, and that leads to bitterness between the parties. It has been urged before us that time has now come when the industrial courts will have to face the problem of radically changing the formula. It is argued that modern economic thought does not encourage the theory that the whole of the rehabilitation amount must come from the current profits of the industry, and it was stated before us that Government may have gradually to step in to assist the industry by advancing sufficient loans on reasonable terms to enable the industry to meet the demand of its rehabilitation. However, as we pointed out in our decision in the case of The Associated Cement Companies (1) these matters can be properly and effectively decided by an industrial court if the major representative industries in the country and their employees are brought before it with a proper reference, or it can be tackled more appropriately by a high power commission appointed in that behalf. We were told that the Government of India has taken a decision to appoint such a commission, and that it would soon resolve this problem on a more rational and scientific basis. During the course of the hearing of these appeals we suggested to the parties that in view of the pending appointment of the commission, parties may settle the present dispute amicably and that the appellant mills may fall in line with the rest (1) 20 of the mills in Ahmedabad, but despite their best efforts the parties could not settle the dispute and wanted a decision from this Court on the points of law raised in the present appeals; that is why we have had to decide the points of law, and in doing so inevitably general considerations to which we have just adverted cannot play a material part. In the course of the argument reference was made by Mr. Ambekar to the concept of goodwill bonus; that again is a matter which may be evolved by agreement between the parties or decided by a highpower commission. If the matter has to be decided according to law as has been laid down by this Court then the conclusion would be inevitable that on essential points the Agreement departs from the Full Bench formula, and however commendable it may be on the whole it can continue only by agreement and cannot be enforced by industrial adjudication against the will of any of the parties; that is why we have come to the conclusion, though not without regret, that the appeals must be allowed and the matter must be sent back to the tribunal for disposing of the issue before it in accordance with law. We direct that the tribunal should proceed to try the question whether any bonus should be awarded to the employees of the eighteen mills before us on the basis of the Full Bench formula as interpreted by this Court in the case of The Associated Cement Companies (1). In the circumstances there will be no order as to costs. SUBBA RAO, J. I have had the advantage of perusing the judgment prepared by my learned brother, Wanchoo, J. I regret my inability to agree. As mine is a solitary dissent, it may not serve any useful purpose to elaborate on the question raised at great length. I would, therefore, briefly refer to the relevant facts which have already been fully stated by my learned brother and express my views concisely on the question. presented before us. These appeals raise a dispute between the Textile Labour Association,, Ahmedabad, the representative (1) 21 union of the textile industry in Ahmedabad, and the various textile mills in that area in respect of the bonus payable for the year 1958. The said Labour Union entered into a five year pact with the Ahmedabad Mill Owners ' Association, representing the member mills, in regard to payment of bonus for the years 1953 to 1957. The Labour Union demanded bonus for the year 1958 on the basis of the said pact. The mill owners claimed that the said pact was contrary to the law laid down by the decision of this Court in the case of The Associated Cement Companies Ltd., Dwarka Cement Works, Dwarka vs Its Workmen (1) and that, if the rehabilitation cost was calculated on the basis of the principles laid down therein, there would not be any "available surplus" to sustain the claim for bonus. The Industrial Court to which the dispute was referred elaborately. considered the arguments advanced and came to the conclusion that the five year pact which originated in Ahmedabad was not only fair in itself but also an important contribution to industrial peace, and that it did not in any way run counter to the law laid down by the Supreme Court. On that finding it extended the operation of the pact for one more year and directed the parties to file within six weeks from the date of the award calculations in respect of the bonus payable for the year 1958, in the light of its decision and on the footing that the five year pact was for six years. The main question in the appeals is whether the said pact violates the law laid down by this Court. Before considering this contention it would be convenient to notice the terms of the said pact. The said pact is a lengthy document, though precisely drawn, and to read it in full is to unnecessarily burden the judgment. I shall, therefore, briefly summarize its terms. The contracting parties were the Textile Labour Association of Ahmedabad, a representative union for the local area of Ahmedabad on the one part, and the Ahmedabad Mill Owners ' Association, Ahmedabad, representing its local member mills, on the other part. (1) 22 It was executed on June 27, 1955, to cover a period of five years from 1953 to 1957, inclusive of both years, for grant of bonus to the employees of the Cotton Textile Mills of Ahmedabad. The object of the agreement was to create good will among the workers and for the purpose of maintaining peace in the industry. The basis of the agreement was that it applied for the entire Ahmedabad Textile Industry and for a period of five years. The "available surplus" of each mill was ascertained in accordance with the Full Bench Formula laid down by the Labour Appellate Tribunal in Mill Owners ' Association, Bombay vs The Rashtriya Mill Mazdoor Sangh, Bombay (1). The maximum bonus payable by every mill of the said area was fixed at 25 per cent. of the total basic wages earned during the year, and the minimum was fixed at 4.8 per cent. of the said basic wages. If in a particular year a mill had an "available surplus" adequate for granting bonus at a higher quantum than the ceiling of 25 per cent. of the basic wages. it would nationally set aside the part of the residue of the "available surplus" after the grant of the maximum bonus not exceeding an amount equivalent to 25 per cent. of the basic wages earned during that year as a reserve for bonus for the purpose of "set on" (adjustment) in subsequent years. If the "available surplus" was adequate only to grant bonus at a rate lower than the ceiling, the quantum of bonus would be fixed in such a manner that there would remain with the mill at least a minimum of Rs. 10,000. If in respect of any year a mill had an "available surplus" adequate to pay bonus at a rate lower than the minimum rate, it would be entitled to "set off" the excess amount of bonus that would be payable in a subsequent year or years. In setting off the said amount of bonus that, would be payable against subsequent year or years, if the surplus was adequate only to grant bonus at a rate lower than the maximum rate, the mill would first set aside out of the "available surplus" an amount of Rs. 10,000 and, then out of the balance, it would further take out the excess amount paid by it as bonus in the previous (1) 23 year, and then it would distribute the remainder as bonus. Even if a mill had made a loss in a particular year, it had to pay the minimum bonus, but it would be entitled to "set off" the amount thus paid against the amount of bonus that would be payable in the subsequent year or years, in the same manner as in the case of a surplus adequate to grant bonus only at a rate lower than 25 per cent. of the basic wages. In short, when the surplus was adequate to pay bonus at 25 per cent. of the basic wages earned during the year, a mill had to pay the maximum of 25 per cent. of the basic wages. When it was adequate only to grant bonus of less than 25 per cent. of the basic wages, it would pay the said bonus after reserving a sum of Rs. 10,000 for itself. If there was loss, it would pay the minimum bonus. Whatever amounts were paid were adjusted on the principle of "set on" and "set off" in the subsequent years. There was also a provision that after the prescribed period all the outstanding liabilities under the formula of "set on" and "set off" would come to an end. Three principles clearly underlie the entire scheme, namely, (i) that though for the purpose of ascertaining the surplus, the profits of a particular mill were taken as the criterion, the position of the entire Ahmedabad Textile Industry was taken into consideration; (ii) that the beneficent features of the scheme could be gathered only by its long term operation; and (iii) that though in a particular year in the case of a particular mill there might not be "available surplus", the principles of "set on" and "set off" indicate that the bonus was linked with profits. As reasonable men trying to settle their disputes, both the parties, representing their respective associations, adopted an optimistic attitude and proceeded on the basis that the entire industry would make a profit and that every mill could be expected to make reasonable profits in at least some of the five years, though it might incur loss in other years. The validity of the agreement should be judged on the basis adopted. In the Ahmedabad Textile Industry, it is in evidence, the average monthly wage for workers in 1957 24 was Rs. 54. Fifteen days ' basic wages, i.e., the minimum bonus prescribed under the pact, would come to an average total wages for 5 days; and 3 months ' basic wages would come to 19 days ' total wages on the average. Prima facie the bonus fixed is very reasonable and cannot be said to be oppressive to the mill owners. The said bonus agreement, by its reasonableness and beneficent effects on the industry, attracted the attention of other mills throughout India. Exhibit U 2 shows the particulars of other mills which have adopted the agreement. The Bombay Textile Industry, The Madhya Bharat Mill owners ' Association, The Modi Spinning & Weaving Mills, Modinagar, and the cotton mills at Surendranagar (Saurashtra) ' Sidhpur, Viramgam Nadiad and Petlad, Cambay Baroda, Surat adopted the said scheme with suitable modifications. The silk industry in Bombay and the plantation industry in Madras also accepted the principles underlying the said agreement. We are told that even the Coimbatore area has recently adopted a similar agreement. The fact that the said five year pact was followed by so many other mills is a fair indication that it was basically sound and capable of yielding good results. Experienced members of the Industrial Courts spoke highly of the pact. Late Shri section H. Naik, a Member of the Industrial Court, adopted the pact in a dispute between the Bombay Mill Owners ' Association and the Rashtriya Mill Mazdoor Sangh, and in making an award in terms of a similar pact, made the following observations: "This award, based upon an agreement arrived at as a result of persistent and continued efforts on the part of both the parties, keeping in view the prosperity of the employers as well as the well being of the employees, will go down in history as a significant landmark in collective bargaining. It augurs well for the future of the industry, as well as those employed therein, particularly in view of the ambitious Second Five Year Plan on which the country will shortly launch. It also avoids, for 25 some time, and let us hope for all time to come, the bonus dispute which cropped up every year since 1947. I congratulate both the parties and compliment them on the successful termination of their efforts to bring peace to the industry and set an example to the employers and employees in the country. " The said weighty observations apply mutatis mutandis to the agreement in question. Shri H. V. Divatia, another experienced Member of the Industrial Court, in his award on the bonus dispute of the Ahmedabad Textile Mills for 1952 observed: "Ever since the former practice of taking all the textile mills in one centre as one unit for the purpose of determining the bonus was given up, there has been dissatisfaction on both sides on the bonus question every year and in my view this change as well as the formula set up by the Labour Appellate Tribunal have made the bonus issue a very complicated one resulting in bitterness on both the sides instead of promoting peace and harmony between the employers and workers. I hope the whole matter is reconsidered at the highest level. If bonus is to be given, it must be awarded in such a way that it does not defeat its purpose. " The agreement did nothing more than reverting to the former practice of taking all the textile mills in one centre as one unit for the purpose of determining. the bonus, though for ascertaining the quantum of bonus payable the balance sheets of individual units were taken into consideration. In making the present award the Industrial Court on a consideration of the entire material placed before it came to a definite finding that on the. whole the five year pact had worked fairly for both the parties and that the extension of the said agreement for one more year would help in promoting peace in that industry in Ahmedabad and that owing to the goodwill created by the five year bonus pact, the industry also benefited by schemes of rationalization. It was also brought to our notice that in the textile industry 4 26 in Ahmedabad area there were never any strike and the disputes in the recent years were settled amicably across the table. In such a situation this Court was asked under article 136 of the Constitution to set aside the award and to bring about chaos where peace existed and to introduce unrest and disharmony where stability and harmony prevailed. It was said that this Court had no option but to do so as the agreement was contrary to law as laid down by this Court. I shall now examine briefly the relevant decisions laying down the principle governing bonus to ascertain whether the impugned agreement is in any way inconsistent with them. In Muir Mills Co. Limited vs Suti Mills Mazdoor Union, Kanpur (1) this Court defined the term "bonus" and laid down the conditions which would give rise to the claim for bonus. Bhagwati, J., after considering the relevant decisions and text books on the subject, accepted the following definition of "bonus" given by the Textile Labour Inquiry Committee: "The term bonus is applied to a cash payment made in addition to wages. It generally represents the cash incentive given conditionally on certain standards of attendance and efficiency being attained. " The learned Judge then proceeded to state at p. 998 thus: "There are however two conditions which have to be satisfied before a demand for bonus can be justified and they are: (1) when wages fall short of the living standard and (2) the industry makes huge profits part of which are due to the contribution which the workmen make in increasing production. The demand for bonus becomes an industrial claim when either or both these conditions are satisfied. " The learned Judge then referred to the formula evolved by the Full Bench of the Labour Appellate Tribunal in the Mill Owners ' Association, Bombay vs Rashtreeya Mill Mazdoor Sangh, Bombay (2) and narrated the first charges on the gross profits as laid. down by (1) ; (2) 27 that decision. The learned Judge then expressed his view thus at p. 999: "It is therefore clear that the claim for bonus can be made by the employees only if as a result of the joint contribution of capital and labour the industrial concern has earned profits. If in any particular year the working of the industrial concern has resulted in loss there is no basis nor justification for a demand for bonus. Bonus is not a deferred wage." This decision lays down in clear terms that the payment of bonus is linked with profits. But this decision was given in a dispute between one specified mill, namely, Muir Mills Co. Limited and the Union, representing its employees. This Court was not considering a case of a bonus claim on industry cum region basis. The principle of the decision, namely, that the claim for bonus is linked with profits, may equally apply to such a case; but the working of the principle must necessarily depend upon the peculiarities of such a claim. Industrial law is in the process of evolution and it cannot be put in a straight jacket, but must be allowed to grow to meet varying situations that present themselves to industrial tribunals, subject of course to the statutory provisions and the general principles laid down by courts. The application of the principles laid down by this decision to a bonus claim on industry cum region basis would, to some extent, be different from its application to a single unit. I shall consider this aspect at a later stage of the judgment. It is unnecessary to consider the other decisions on this subject except the recent decision of this Court in The Associated Cement Companies Ltd., Dwarka Cement Works, Dwarka vs Its Workmen That decision reviewed the entire law on the subject vis a vis the profit bonus. It accepted the principles laid down by the said Full Bench Formula and elaborately considered the mode of application of the prin. ciples for ascertaining the "available surplus. " Gajendragadkar, J., who spoke for the Court, referred to the earlier decision and restated the basis for awarding bonus thus at p. 995: (1) 28 "We have already noticed that the formula for awarding bonus to workmen is based on two considerations: first, that labour is entitled to claim a share in the trading profits of the industry because it has partially contributed to the same; and second, that labour is entitled to claim that the gap between its actual wage and the living wage should within reasonable limits be filled up. " Then the learned Judge, after referring to the earlier decisions, gave the various amounts that should be deducted from the bonus year 's profits and the 'manner in which they should be done to ascertain the "available surplus." According to the learned Judge the following items have to be deducted: "(1) Depreciation, which should be the notional normal depreciation. (2) Income tax. (3) A return on paid up capital as well as working capital. Though the usual rates were mentioned, it was made clear that the rates were not inflexible but would vary according to the circumstances of each case. (4) Rehabilitation: For ascertaining the amount necessary for rehabilitation, it was pointed out that a multiplier and divisor should be adopted; the former to ascertain the probable price which may have to be paid for the rehabilitation, replacement or modernization of machinery, and the latter in order to ascertain the annual requirement of the employer in that behalf year by year. " Out of the balance, which was described as "available surplus", it was stated that three parties, namely, the labour, the industry and the shareholders, were entitled to claim shares. This is the broad picture drawn by that decision for fixing the bonus. That decision, therefore, restated the pre existing law and reaffirmed the doctrine that bonus is linked with profits and also the Full Bench Formula for ascertaining the "available surplus". That decision was also not concerned with a claim for bonus on industry cum region basis, but only with a claim in regard to a particular unit. It also did not lay down that employer and 29 employee could not agree in regard to the distribution of the available surplus or in respect of the amount required for rehabilitation. It also did not purport to prevent the parties from agreeing on the payment of bonus linked with profits on industry cum region basis spread over a number of years. Some of the observations in the judgment indicate the consciousness of the court that the formula accepted or the directions given therein could not meet every conceiv able situation that might arise in the complicated field of industrial relations. Does the impugned pact contravene the law laid down by this Court? It is contended that it infringes the law mainly in three respects, namely, (i) bonus was payable thereunder by a mill incurring loss; (ii) the pact did not provide for rehabilitation of the post 1947 block; and (iii) the depreciation and the interest on the reserves allowed were not in accordance with the formula. The first objection appears to be plausible and has also been upheld by my learned brethren. But, in my view, there is a fallacy underlying it. The contention invokes the law of bonus laid down in respect of an industrial claim for bonus for a particular year made by the employees of a single mill and seeks to apply it to a case of an agreement evolving a scheme of bonus on the basis of industry cum region spread over a reasonable period of time. Though the fundamental principle, namely, that bonus is linked with profits, applies to both, the application of the same to two different situations must necessarily differ. The short question is whether under the impugned agreement the claim for bonus was not based on profits. The agreement was a multilateral one involving mutual obligations. It was on industry cum region basis, that is, it was entered into between the employers of the entire industry and the employees thereof. The basis of the agreement was that the entire industry would make a profit. For the purpose of convenient payment of bonus it was worked out on the unit basis. All the parties to the agreement, the employers and the 30 employees of different mills in Ahmedabad, desired in dustrial peace in order to build up the textile industry. The industry comprised many units with varying prospects and different strata of financial stability and prosperity. Some mills may earn profits throughout the period, some may earn profits in some years and incur loss in other years and under extremely unfortunate and unexpected circumstances, a mill may incur loss throughout. Though a,particular mill may earn abnormal profits, another mill may be just able to make its both ends meet and another may have a narrow margin of profits or even incur loss. But all of them were sincerely interested in the general prosperity of the industry as a whole in the said area which would have its repercussions on individual units. A mill which earns large profits may have to pay more than 25 per cent. of basic wages for the year as bonus and a mill which incurs loss may not have to pay bonus at all. The employees of a particular mill may be entitled in a particular year, having regard to the profits, to get bonus far in excess of 25 per cent. of the basic wages. But in the general interest of all concerned, they were all willing to make a little sacrifice for the common good. Each mill undertook the liability to pay bonus to its employees with a minimum and maximum limits in consideration of a similar undertaking of liability by other mills. So too, the employees, in consideration of a minimum bonus being guaranteed to them, agreed not to claim more than the maximum fixed and the mills as a whole guaranteed payment of the minimum bonus. But what is important to remember is that the entire scheme of payment of bonus was linked with profits. It would be paid on the basis of profits earned or to be earned by a mill. If a mill did not make profits in a particular year, bonus would be paid on account to be adjusted in subsequent years. The formula of "set on" and "set off" emphasizes the integral connection between bonus and profits, and the fact that the total loss incurred by a particular mill during the entire period may break that formula does not affect the basis of 31 the agreement. In effect and substance, under the agreement, each of the mills agreed for a consideration on the happening of a contingency to treat certain amounts as notional profits adequate to pay the minimum bonus with a right to "set off" in subsequent years against larger profits, if any, earned by them. In the premises, it is not correct to state that bonus is not linked with profits for four reasons, namely, (i) the agreement was between the employers and employees of the entire textile industry in Ahmedabad; (ii) the basis of the agreement was that the industry as a whole would make a profit; there is nothing illegal in parties to the agreement, who had ,intimate knowledge of the financial position of the entire industry, from accepting that position; (iii) instead of the profits of the entire industry being ascertained and bonus paid to all the employees, under the agreement, each mill for a consideration, namely, obligations undertaken by other parties, agreed to pay bonus ranging between a maximum and a minimum; and (iv) each mill also agreed for a consideration, even if in fact it incurred a loss in a particular year. , to set apart a notional amount as profits adequate to pay the minimum bonus with a right to readjust its bonus account in subsequent years. In this view the impugned pact does not contravene the law of the land for the simple reason that there is no decision of this Court which prevents the making of ouch agreements so long as the fundamental principle is not violated; and in this case, for the reason given by me, I am of the view that the said principle, viz., that bonus should be linked with profits has been adhered to in the agreement. Now let us see whether the Full Bench Formula in regard to rehabilitation has been contravened by the impugned pact. The main emphasis is on the want of a provision in the agreement in regard to valuation of the block subsequent to 1947. In The Associated Cement Companies ' case (1) this Court observed at p. 971 thus: "it has also been observed by the Labour Appellate Tribunal that if an appropriate multiplier and (1) 32 divisor are determined they are generally used because the tribunals take the view that the reconsideration of the said multiplier and divisor should not be hastily undertaken and could be justified only on the basis of a stable character extending or likely to extend over a sufficient number of years so as to make a definite and appreciable difference in the cost of replacement." The Industrial Court in the bonus. case of the textile industry at Ahmedabad for the year 1949 fixed the cost of replacement of the block of the entire industry at Ahmedabad at Rs. 33.89 crores spread over 15 years from 1947. The Industrial Court, on the material placed before it, fixed the multiplier at 2.7 and the divisor at 15. The result is that the cost of the machinery and building as it existed in 1947 was multiplied by 2.7 and after making the necessary deduction therefrom, such as that of depreciation and reserves available and the breakdown value of machinery, divided the surplus by 15 years. Ordinarily, change in the said multiplier and divisor, as laid down by this Court, should not be hastily undertaken and could be justified only on the basis of a substantial change of a stable character extending or likely to extend over a sufficient number of years. In the impugned pact the parties agreed to abide by the said multiplier and divisor and they did not think fit to revise the same. The decisions of this Court do not preclude employers and employees from agreeing to a particular valuation of the block or to their agreeing to a particular multiplier and 'divisor having regard to the circumstances obtaining at the time of the agreement. Nor does the agreement infringe any of the principles laid down by the Full Bench Formula in the matter of fixing the prior charges. A perusal of paragraph 2(a) of the agreement shows that the prior charges mentioned therein are only those that are stated in the Full Bench Formula, though there is certainly a difference in the particulars under different heads, such as, interest, etc. Certainly the decisions of this Court do not preclude the parties from 33 agreeing to certain amounts or to certain rates under different heads of prior charges. As the agreement does not infringe the law laid down by this Court, it cannot be contended that the Industrial Court could not extend the said agreement, if it is necessary to secure industrial peace for another year. In effect and substance, the Industrial Court adopted the said agreement as a part of the award by giving it a span of six years instead of five years; with the result that the entire formula of "set on" and "set off" would automatically apply in the sixth year. Courts have held that Industrial Courts have power to extend agreements in appropriate circum stances. The Federal Court of India in Western India Automobile Association vs Industrial Tribunal, Bombay (1) explained the scope of industrial adjudication and the functions of an industrial tribunal in labour disputes thus at p. 345: "Adjudication does not, in our opinion, mean adjudication according to the strict law of master and servant. The award of the Tribunal may contain provisions for settlement of a dispute which no Court could order if it was bound by ordinary law, but the Tribunal is not fettered in any way by these limitations. In Volume 1 of 'Labour Disputes and Collectiv e Bargaining ' by Ludwig Teller, it is said at page 536, 'that industrial arbitration may involve the extension of an existing agreement or the making of a new one, or in general the creation of new obligations or modifications of old ones, while commercial arbitration generally concerns itself with interpretation of existing obligations and disputes relating to existing agreements '. In our opinion, it is a true statement about the functions of an Industrial Tribunal in labour disputes." The same view in different phraseology has been expressed by this Court in Bohtas Industries Limited vs Brijnandan Pandey (2), section K. Das, J., speaking for the Court, observed at p. 810 thus: (1) [1949] F.C.R 321. (2) ; 5 34 "A Court of law proceeds on the footing that no power exists in the courts to make contracts for people; and the parties must make their own contracts. The courts reach their limit of power when they enforce contracts which the parties have made. An Industrial Tribunal is not so fettered and may create new obligations or modify contracts in the interests of industrial peace, to protect legitimate trade union activities and to prevent unfair practice or victimization. We cannot, however, accept the extreme position canvassed before us that an Industrial Tribunal can ignore altogether an existing agreement or existing obligations for no rhyme or reason whatsoever." This Court again reiterated the same principle in the case of Patna Electricity Supply Co. Limited (1) thus at p. 1038: "There is no doubt that in appropriate cases industrial adjudication may impose new obligations on the employer in the interest of social justice and with the object of securing peace and harmony between the employer and his workmen and full cooperation between them. This view about the jurisdiction and power of Industrial Tribunals has been consistently recognized in this country since the decision of the Federal Court in Western India Automobile Association vs Industrial Tribunal, Bombay (2)". These authorities clearly establish the proposition that an Industrial Tribunal can extend an existing agreement or make a new one if, for good reasons, it comes to the conclusion that such extension promotes industrial peace. If, as I have held, the impugned pact was lawful and did not contravene the law laid down by this Court, the Industrial Court in the present case was certainly within its rights to extend that pact for another year for the very good reasons given by it for doing so. I shall now state my view in the form of the following propositions: (1) Neither the Full Bench Formula nor the decisions of this Court affirming it preclude an (1) [1959] SUPP. 2 S.C.R. 76r. (2) 35 Industrial Court in appropriate cases from extending the terms of a pact by another year if that was necessary to maintain industrial peace. (2) The law laid down by the Federal Court and the Supreme Court recognizes such a power in an Industrial Court. (3) The fact that the subsequent block has not been valued does not affect the question, for the parties can certainly agree, for various reasons, that the value of the existing block should govern the situation for a specified period. (4) The impugned five year pact is not contrary to industrial law as laid down by this Court; indeed, it expressly followed the principles laid down in the Full Bench Formula which was subsequently affirmed by this Court in the case of Associated Cement Companies (1). (5) The impugned pact also does not infringe the principle that bonus depends upon profits; but it applied the same by evolving a formula of "set on" and "set off" to a complicated situation of the entire industry in a particular area for a number of years. For the foregoing reasons, and in view of the aforesaid definite findings of the Industrial Court, I hold that this is eminently a fit case for extending the agreement for the bonus year 1958. Before closing I must express my appreciation of the way in which the impugned pact was brought about between the parties. It is in the interest of both the employers and the employees while the employees of every mill are assured of payment of a minimum bonus, the employers of every mill also are assured protection against extravagant claims. The agreement avoided complicated and acrimonious disputes in courts every year in regard to bonus. The working of this agreement certainly helped the mills to achieve the introduction of schemes of rationalization. The agreement has become a model one for other mills. Ironically the Full Bench Formula, affirmed by this Court in the case of Associated Cement Companies Limited (1), mainly evolved to fix the amount required for rehabilitation in the interest of industrial peace, turned out to be the sheet anchor for (1) 36 the employers to depart from the path of negotiation and agreement which they were following all these years and to enter the arena of open fight with the employees. It may be, though it may turn out to be wrong, that they are under the belief that the Full Bench Formula, if strictly followed, would not leave any surplus and that they need not pay any bonus to the employees. This attitude is neither reasonable nor in the interest of industrial peace. I hope and trust that the parties, in spite of the temporary success in these appeals, would see better light and settle their disputes as they had been doing all these years. In the result, the appeals fail and are dismissed with costs. By COURT : In accordance with the opinion of the majority, the appeals are allowed and the matter sent back to the Tribunal for disposing of the issue before it in accordance with law. We direct that the Tribunal should proceed to try the question whether any bonus should be awarded to the employees of the eighteen mills before us on the basis of the Full Bench Formula as interpreted by this Court in the case of The Associated Cement Companies (1). In the circumstances, there will be no order as to costs. Appeals allowed. Cases remanded to the Tribunal.

IN-Abs

The respondent, the Textile Labour Association at Ahmedabad, entered into a five years pact with the Ahmedabad Mill Owners ' Association, representing the member mills, in regard to payment of bonus to the employees of the mills for the years 1953 57. The Labour Union demanded bonus for the year 1958 on the basis of the pact, but the mill owners claimed that the pact was contrary to the formula evolved by the Full Bench in Mill Owners ' Association, Bombay vs The Rashtriya Mill Mazdoor Sangh, Bombay, , which was approved by the Supreme Court in The Associated Cement Companies Ltd. vs Its Workmen, , inasmuch as (1) rehabilitation provided in the Agreement differed vitally from rehabilitation as explained in that decision, (2) the Agreement provided for payment of a minimum bonus even though there may be no available surplus and even though the particular mill might have made actual loss, and (3) while the Full Bench Formula, as approved by the Supreme Court treated a particular year as a self sufficient unit, there was provision for set off and set on in the Agreement. The Industrial Tribunal to which the dispute was referred in the. form of sixty six references, one relating to each mill, took the view that the pact did not in any way run counter to the law laid down by the Supreme Court, and that the extension of the agreement for one more year would help in promoting peace in the industry in Ahmedabad. Held (Subba Rao, J. dissenting) that the Agreement in question departed from the Full Bench Formula in the matter of bonus, in certain vital aspects and that the Tribunal when it extended the Agreement for the year 1958 was ignoring the law as laid down by the Supreme Court as, to what profit, bonus,was and how it should be worked out. 2 The Tribunal had no power by extending the Agreement to make it possible for payment of a minimum bonus for the year 1958 even when there was either insufficient available surplus to pay bonus or no available surplus at all or even actual loss. The jurisdiction of the Tribunal was limited by its terms of reference, which was not on industry cum region basis, but one for each mill to consider the question of bonus for each mill for the year 1958 and, consequently, it had no jurisdiction to apply the principle of set off and set on to be found in the Agreement in respect of payment of bonus or take into account the profits of the industry as a whole in Ahmedabad. Per Gajendragadkar, Sarkar, Wanchoo and Mudholkar, JJ.It is open to an industrial court in an appropriate case to impose new obligations on the parties before it or modify contracts in the interest of industrial peace or give awards which may have the effect of extending Agreement or making new one, but this power is conditioned by the subject matter with which it is dealing and also by the existing industrial law and it would,not be open to it while dealing with a particular matter before it to overlook the industrial law relating to that matter as laid down by the legislature or by the Supreme Court. Western India Automobile Association vs Industrial Tribunal, Bombay, , Rohtas Industries Limited vs Brijnandan Pandey; , and Patna Electricity Supply Co.v. Patna Electric Supply Workers ' Union, [1959] SUPP. 2 S.C.R. 761, relied on. Per Subba Rao, J. (1) The impugned five years pact was not contrary to industrial law as laid down by the Supreme Court. (2) The pact also did not infringe the principle that bonus depends upon profits; but it applied the same by evolving a formula of set off and set on to a complicated situation of the entire industry in a particular area for a number of years. (3) The Full Bench Formula in regard to rehabilitation was not contravened by the pact. The decisions of the Supreme Court did not preclude employers and employees from agreeing to a particular valuation of the block having regard to the circumstances obtaining at the time of the agreement. (4) Neither the Full Bench Formula nor the decisions of the Supreme Court affirming it precluded the Tribunal from extending the terms of the pact by another year if that was necessary to maintain industrial peace.

133 of 1959. Petition under article 32 of the Constitution of India for enforcement of Fundamental Rights. A. V. Viswanatha Sastri and G. Gopalakrishnan, for the petitioner. D. Narasa Raju, Advocate General, of Andhra Pradesh, D. Venkatappayya Sastri and ' T. M. Sen, for respondents Nos. T. V. R. Tatachari, for respondent '1 No. 4. 1960. December 6. The Judgment of the Court was delivered by section K. DAS, J. This is a writ petition under article 32 of the Constitution. Gazula Dasarstha Rama Rao is the petitioner. The respondents are (1) the State of Andhra Pradesh, (2) the Board of Revenue, Andhra Pradesh, (3) the Collector of Guntur in Andhra Pradesh and (4) Vishnu Molakala Chahdramowlesshwara 933 Rao. The petitioner prays that this Court must declare section 6 of the Madras Hereditary Village Offices Act,, 1895 (Madras Act III of 1895), hereinafter called the Act, as void in so far as it infringes the fundamental right of the petitioner under articles 14 and 16 of the Constitution, and further asks for an appropriate writ or direction quashing certain orders passed by respondents 1 to 3 in favour of respondent No. 4 in the matter of the latter 's appointment as Village Munsif of a newly constituted village called Peravalipalem. When this petition first came up for hearing we directed a notice to go to other States of the Union inasmuch as the question raised as to the constitutional validity of the law relating to a hereditary village office was of a general nature and might arise in relation to the existing laws in force in other States. Except the State of Andhra Pradesh which has entered appearance through its Advocate General, none of the other States have entered appearance. The Advocate General of Andhra Pradesh has appeared for respondents 1 to 3, and respondent 4 has been separately represented before us. These respondents have contested the application and have pleaded that section 6 of the Act does not violate any fundamental right, nor are the impugned orders of respondents 1 to 3 invalid in law. The short facts are these: Village Peravali in Tenali taluq of the district of Guntur in the State of Andhra Pradesh was originally comprised of a village of the same name and a fairly large hamlet called Peravalipalem. The two were divided by a big drainage channel. It is stated that for purposes of village administration the villagers felt some difficulties in the two being treated as one unit So the villagers, particularly those of the hamlet, but in an application to the Revenue authorities for constituting the hamlet into a separate village. This application was re commended by the Tehsildar and was accepted by the Board of Revenue and the State Government. By an order dated August 25, 1956, Peravali village was bifurcated and two villages were constituted. The 118 934 order was published in the District Gazette on October 115,1956, and was in these terms: "The Board sanctions the bifurcation of Peravali village of Tenali taluq, Guntur district, into two villages, viz., (1) Peravali and (2) Peravalipalem along the boundary line shown in the map submitted by the Collector of Guntur with his letter Re. A. 4. 28150/55 dated 30th June, 1956. These orders will come into effect from the date of publication in the District Gazette. The Board sanctions the following establishments on the existing scale of pay for the two villages: Peravali: 1 Village Munsif. 1 Karnam. 1 Talayari. 3 Vettians. Peravalipalem: 1 Village Munsif. 1 Karnam. 1 Talayari. 1 Vettian. " It is convenient to read at this stage sub section (1) of section 6 of the Act under which the bifurcation was made: "section 6(1). In any local area in which this Act is in force the Board of Revenue may subject to rules made in this behalf under section 20, group or amalgamate any two or more villages or portions thereof so as to form a single new village or divide any village into two or more villages and, thereupon, all hereditary village offices (of the classes defined in section 3, clause (1), of this Act) in the villages or portions of villages or village grouped, amalgamated or divided as aforesaid, shall cease to exist I and new offices, which shall also be hereditary shall the created for the new village or villages. In choosing persons to fill such new offices, the Collector shall select the persons whom he may consider the best qualified from among the families of the last holders of the offices which have been abolished. " 935 On the division of the village into two villages, all the hereditary village offices of the original village ceased to exist under the aforesaid sub section, and new offices were created for the two villages. We are concerned in this case with the appointment to the office of Village Munsif in the newly constituted village of Peravalipalem. In accordance with the provisions of sub section (1) of section 6 and certain Standing Orders of the Board of Revenue, the Revenue Divisional Officer, Tenali, invited applications for the post of Village Munsif of Peravalipalem. Eight applications were made including one by the petitioner and another by respondent 4. Respondent 4, be it noted, is a son of the Village Munsif of the old village Peravali. By an order dated October, 18, 1956, the Revenue Divisional Officer, appointed the petitioner as Village Munsif of Peravalipalem. From the order of the Revenue Divisional Officer, respondent 4 and some of the other unsuccessful applicants preferred appeals to respondent 3, the Collector of Guntur. By an order dated April 1, 1957, respondent 3 allowed the appeal of respondent 4 and appointed him as Village Munsif of Peravalipalem. In his order respondent 3 said: "Shri V. Chandramowleswara Rao is qualified for the post. He is the son of the present Village Munsif of Peravali and is, therefore, heir to that post. section 6(1) of the Hereditary Village Offices Act states that in choosing a person to fill a new office of this kind the Collector shall select the person whom he may consider best qualified from among the family of the last holder of the office which has been abolished. The Village Munsif 's post of the undivided village of Peravali was abolished when the village was divided and the new post of Village Munsif of Peravalipalem has to be filled up from among the family of the previous Village Munsif. The same instructions are contained in Board 's Standing Order 148(2). " The petitioner then carried an appeal from the order of respondent 3 to the Board of Revenue. By an order dated April 24, 1958, the Board dismissed the appeal and stated: "According to section 6, in choosing the person to fill 936 in a new office like this, the Collector shall select the person whom he considers best qualified from among the families of the last holders of the office, which have been abolished. Here the office of the Village Munsif was abolished and two new offices have been created. As the last holder of the office was appointed to the new village, Peravali, after bifurcation,, the Collector has appointed the son of the last office holder as Village Munsif of Peravalipalem as he is the nearest heir. The appellant before the Board cannot claim any preference over the son of the last office holder. 'The Board, therefore, holds that the Collector 's order is in accordance with the law on the subject. No interference, is, therefore, called for." The petitioner then moved respondent, 1, but without success. Thereafter, he filed the present writ petition. The petitioner relies mainly on clauses (1) and (2) of article 16 of the Constitution. We may read those clauses here: "article 16(1). There shall be equality of opportunity for all citizens in matters relating to employment or appointment to any office under the State: (2) No citizen shall, on grounds only of religion, race, caste, sex, descent, place of birth, residence or any of them, be ineligible for, or discriminated against in respect of, any employment or office under the State. " On behalf of the petitioner it has been contended that (1) the office of Village Munsif of Peravalipalem is an office under the State, and (2) respondents 1 to 3 in passing their orders in favour of respondent 4 expressly stated that they proceeded on the basis of the hereditary principle laid down in section 6(1) of the Act and discriminated against him as a citizen. on the ground of descent only. This discrimination, it is argued violates the guarantee of equal opportunity enshrined in article 16, cls. (1) and (2) and section 6(1) of the Act to the extent that it permits such discrimination is void under article 13(1) of the Constitution. The first question before us is if the office of Village 937 Munsif under the Act is an office under the State within the meaning of cls. (1) and (2) of article 16 of the Constitution. For determining that question it is necessary to examine the scheme and various provisions of the Act. The long title shows that it was an Act made to repeal Madras Regulation VI of 1831 and for other purposes. The purposes mentioned in the preamble are "to provide more precisely for the succession to certain hereditary village offices in the State; for the hearing and disposal of claims to such offices or the emoluments annexed thereto; for the appointment of persons to hold such offices and the control of 'the holders thereof, and for certain other purposes. " Section 3 of the Act refers to classes of village offices to which the Act applies and Village Munsif is one of such offices. Under section 4 "emoluments" of the office means and includes (i) lands; (ii) assignment of revenue payable in respect of lands; (iii) fees in money or agricultural produce; and (iv) money salaries and all other kinds of remuneration granted or continued in respect of, or annexed to, any office by the State. Section 5 lays down that the emoluments of village offices, whether such offices be or be not hereditary, shall not be liable to be transferred or encumbered in any manner whatsoever and it shall not be lawful for any Court to attach or sell such emoluments or any portion thereof Sub section (1) of section 6 relates to the grouping or division of villages; this sub section we have already read. Sub section (2) of section 6 gives a right to the Board of Revenue, subject to the approval of Government, to reduce the number of village offices, and on such reduction the Collector is empowered to dispense with the services of the officers no longer required. Sub section (3) of6 which was subsequently added in 1930 says thatminor shall not be ineligible for selection by reasonof his minority only. Section 7 states the circumstances in which the Collector may, of his own motion or on complaint and after enquiry suspend, remove or dismiss, etc. , some of the village officers mentioned in section 3. A similar power of punishment is also given to the Tehsildar. Under these provisions the Collector may suspend, remove 938 or dismiss the Village Munsif. Section 10 lays down certain rules which are to be observed in making appointments to some of the village offices and these rules lay down, among other things, the general qualifications requisite for appointment to the offices in question. For example, for the appointment to the office of Village Munsif no person. is eligible unless he has attained the age of. majority, is physically and mentally capable of discharging the duties of the office, has qualified according to the educational test prescribed for the office by the Board of Revenue, has not been convicted by a Criminal Court of any offence which, in the opinion of the Collector, disqualifies him for holding the office and has not been dismissed from any post under the Government on any ground which the Collector considers sufficient to disqualify him for holding the office. One of the qualifications prescribed by section 10 as it originally stood required that the applicant must be of the male sex. This requirement was deleted by the Adaptation (Amendment) Order of 1950, presumably to bring the section into conformity with articles 15 and 16 of the Constitution which prohibit discrimination on the ground of sex. Sub section (2) of section 10 says that the succession shall devolve on a single heir according to the general custom and rule of primogeniture governing succession to impartable zamindar is in Southern India. ' Sub section (3) of section 10 says that where the next heir is not qualified, the Collector shall appoint the person next in order of succession, who is so qualified, and, in the absence of any such person in the line of succession, may appoint any person duly qualified. Sub sections (4), (5) and (6) of section 10 deal with matters with which we ore not directly concerned. Section 11 lays down the rules to be observed in making appointments to certain offices in proprietary estates and one of the rules is that succession shall devolve in accordance with the law or custom applicable to the office in question. Section 13 in effect says that any person may sue before the Collector for any of the village offices specified in section 3 or for the recovery of the emoluments of, any such office on the ground that he is entitled to hold such office and 939 enjoy such emoluments. There are some provisos to the section which lay down limitations on the right of suit. With those limitations we are not concerned in the present case. Section 14 lays down the period of limitation for bringing a suit. Sections 15, 16 and 17 relate to the transfer and trial of such suits and the decrees or orders to be passed therein. Section 20 empowers the Board of Revenue to make rules and section 21 bars the jurisdiction of Civil Courts. Section 23 provides for appeals. The above gives in brief the scheme and provisions of the Act. These provisions show, in our opinion, that the office of Village Munsif under the Act is an office under the State. The appointment is made by the Collector, the emoluments are granted or continued by the State, the Collector has disciplinary powers over the Village Munsif including the power to remove, suspend or dismiss him, the qualifications for appointment can be laid down by the Board of Revenue all these show that the office is not a private office under a private employer but is an office under the State. The nature of the duties to be performed by the Village Munsif under different provisions of the law empowering him in that behalf also shows that he holds a public office. He not only aids in collecting the revenue but exercises power of a magistrate and of a Civil Judge in petty cases. He has also certain police duties as to repressing and informing about crime, etc. The learned Advocate General appearing for respondents 1 to 3 has contended that the expression " office under the State" in article 16 has no reference to an office like that of the Village Munsif, which in its origin was a customary village office later recognised and regulated by law. His contention is that the expression has reference to a post in a Civil 'Service and an ex cadre post under a contract of service,, as are referred to in articles 309 and 310 in Part XIV of the Constitution relating to the Services under the Union and the States. He has referred in support of his contention to Ilbert 's Supplement to the Government of India Act, 1915, p. 261, where a similar 940 provision with regard to the Indian Civil Service has been referred to as laying down that "no native of British India. . is by reason only of his religion, place of birth, descent, or colour, or any of them disabled from holding any place, office or employment under His Majesty in India" and has pointed out that the aforesaid provision reproduced section 87 of the Act of 1833 and historically the office to which the provision related was an office or employment in a Service directly under the East India Company or the Crown. He also referred to section 298 of the Government of India Act, 1935, which said inter alia that "no subject of His Majesty domiciled in India shall on grounds only of religion, place of birth, descent, colour or any of them be ineligible for office under the Crown in India. " The argument ' of the learned Advocate General is that article 16 embodies the same principle as inspired the earlier provisions referred to above, and like the earlier provisions it should be confined to an office or post in an organised public Service or an excadre post under a contract of service directly under the Union or the State. He has further suggested that the deletion of the requirement as to sex in section 10 of the Act was by reason of article 15 and not article 16 of the Constitution. The argument is plausible, but on a careful consideration we are unable to accept it as correct. Even if we assume for the purpose of argument that articles 309 and 310 and other Articles in Chapter 1, Part XIV, of the Constitution relate only to an organised public Service like the Indian Administrative Service, etc., and ex cadre posts under a direct contract of service which have not yet been incorporated into a Service, we do not think that the scope and effect of cls. (1) and (2) of article 16 can be out down by reference to the provisions in the Services Chapter of the Constitution. Article 14 enshrines the fundamental right of equality before the law or the equal protection of the laws within the territory of India. It is available to all, irrespective of whether the person claiming it is a citizen or not. Article 15 prohibits discrimination on some special grounds religion, race, caste, sex, place 941 of birth or any of them. It is available to citizens only, but is not restricted to any employment or office under the State. Article 16, cl. (1), guarantees equality of opportunity for all citizens in matters relating to employment or appointment to any office under the State; and el. (2) prohibits discrimination on certain grounds in respect of any such employment or appointment. It would thus appear that article 14 guarantees the general right of equality; articles 15 and 16 are instances of the same right in favour of citizens in some special circumstances. Article 15 is more general than article 16, the latter being confined to matters relating to employment or appointment to any office under the State. It is also worthy of note that article 15 does not mention 'descent ' as one of the prohibited grounds of discrimination, whereas article 16 does. We do not see any reason why the full ambit of the fundamental right guaranteed by article 16 in the matter of employment or appointment to any office under the State should be cut down by a reference to the provisions in Part XIV of the Constitution which relate to Services or to provisions in the earlier Constitution Acts relating to the same subject. These Service provisions do not enshrine any fundamental right of citizens; they relate to recruitment, conditions and tenure of service of persons, citizens or otherwise, appointed to a Civil Service or to posts in connection with the affairs of the Union or any State. The word 'State ', be it noted, has a different connotation in Part III relating to Fundamental Rights: it includes the Government and Parliament of India, the Government and Legislature of each of the States and all local or other authorities within the territory of India, etc. Therefore, the scope and ambit of the Service provisions are to a large extent distinct and different from the scope and ambit of the fundamental right guaranteeing to all citizens an equality of opportunity in matters of public employment. The preamble to, the Constitution states that one of its objects is to secure to all citizens equality of status and opportunity; article 16 gives equality of opportunity in matters 119 942 of public employment. We think that it would be wrong in principle to cut down the amplitude of a fundamental right by reference to provisions which have an altogether different scope and purpose. Article 13 of the Constitution lays down inter alia that all laws in force in the territory of India immediately before the commencement of the Constitution, in so far as they are inconsistent with fundamental rights, shall to the extent of the inconsistency be void. In that Article 'law ' includes custom or usage having the force of law. Therefore, even if there was a custom which has been recognised by law with regard to a hereditary village office, that custom must yield to a fundamental right. Our attention has also been drawn to cl. (4) of article 16 which enables the State to. make provision for the reservation of appointments or posts in favour of any backward class of citizens which, in the opinion of the State, is not adequately represented in the services under the State. The argument is that this clause refers to appointments or posts and further talks of inadequate representation in the services, and the learned Advocate General has sought to restrict the scope of cls. (1) and (2) of article 16 by reason of the provisions in el. We are not concerned in this case with the true scope and effect of cl. (4) and we express no opinion with regard to it. All that we say is that the expression 'office under the State ' in cls. (1) and (2) of article 16 must be given its natural meaning. We are unable, therefore, to accept the argument of the learned Advocate General that the expression " office under the State ' in article 16 has a restricted connotation and does not include a, village office like that of the Village Munsif. In M. Ramappa vs Sangappa and Others (1) the question arose whether certain village offices governed by the Mysore Villages Offices Act, 1908, were offices of profit under the Government of any State within the meaning of article 191 of the Constitution. This Court held that the offices were offices of profit under the Government and said. "An office has to be held under someone for it is impossible to conceive of an office held under no one. (1) 943 The appointment being by the Government, the office to which it is made must be held under it, for there is no one else under whom it can be held. The learned Advocate said that the office was held under the village community. But such, a thing is an impossibility for village communities have since a very long time, ceased to have any corporate existence. " Learned Counsel for respondent 4 has presented a somewhat different argument on this question. He has submitted that the office of Village Munsif is not merely an office simpliciter; but it is an office cum property. His argument is that article 16 does not apply to a hereditary village office because a person entitled to it under the Act has a pre existing right to the office and its emoluments, which he can enforce by a suit. We now proceed to consider this argument. Learned Counsel for respondent 4 has relied on the decision of this Court in Angurbala Mullick vs Debabrata Mullick (1) where it was held that in the conception of shebaiti under Hindu law, both the elements of office and property, of duties and personal interest, are mixed up and blended together; and one of the elements cannot be detached from the other. He has argued that on the same analogy the office of a village Munsif must be held to be an office cum property. We do not think that the analogy holds. As this Court pointed out in Kalipada Chakraborti and Another vs Palani Bala Devi and Others (2) shebaitship is property of a peculiar and anomalous character and it is difficult to say that it comes under the category of immovable property as it is known to law. As to the office of a Village Munsif under the Act, the provisions of the Act itself and a long line of decisions make it quite clear that what go with the office are its emoluments, whether in the shape of land, assignment of revenue, agricultural produce, money, salary or any other kind of remuneration. These emoluments are granted or continued in respect of, or annexed to, the office by the State. This is made clear by section 4 of the Act. Apart from the office there is no right to the emoluments. In other words, when a person is appoint (1) (2) 944 ed to be a "Village Munsif" it is an appointment to a an office by the State to be remunerated either by the use of land or by money, salary, etc. ; it is not the case of a grant of land burdened with service, a distinction which was explained by the Privy Council in Lakhamgouda Basavprabhu Sardesai vs Baswantrao and Others (1). In Venkata vs Rama (2) where the question for decision was the effect of the enfranchisement of lands forming the emoluments of the hereditary village office of Karnam, it was pointed out: "Emoluments for the discharge of the duties of the office were provided either in the shape of land exempt from revenue or subject to a lighter assessment, or of fees in grain or cash, or of both land and fees. . . . . . . . . . When the emoluments consisted of land, the land did not became the family property of the person appointed to the office, whether in virtue of an hereditary claim to the office or otherwise. It was an appanage of the office inalienable by the office holder and designed to be the emolument of the officer into whose hands soever the office might pass. If the Revenue authorities thought fit to disregard the claim of a person who asserted an hereditary right to the office and conferred it on a stranger, the person appointed to the office at once become entitled to the lands which constituted its emolument. " The same view was re affirmed in, Musti Venkata Jagannada Sharma vs Musti Veerabhadrayya (3) where the history of the office of Karnam was examined and it was observed that the "Karnam of the village occupies his office not by hereditary or family right, but as personal appointee, though in certain cases that appointment is primarily exercised in favour of a suitable person who is a member of a particular family." This latter decision was considered by a Full Bench of the Madras High Court in Manubolu Ranga Reddi vs Maram Reddi Dasaradharami. Reddi (4) (1) A.I.R. 1931 P.C. 157. (3) A.I.R. 1922 P.C. 96. (2) I.L.R. 8 'Mad. (4) I.L.R. 945 and it was pointed out that their Lordships of the Privy Council, though they indicated the nature of the right which the Karnam had, did not consider the ' question whether on the creation of an office under section 6(1), the members of the family of the last holder of the abolished office had the right to compel the Collector to carry out the duty cast upon him by the section. It was held that section 6(1) creates a right in the family which can be enforced by suit. Learned Counsel for respondent 4 has relied on this decision. It is worthy of note, however, that the decision was given on the footing that section 6(1) was valid and mandatory in character. No question arose or could at that time arise of the contravention of a fundamental right guaranteed by the Constitution, by_ the hereditary principle embodied in section 6(1) of the Act. The decision proceeded on the footing that the Act recognised a 'right vested in a family ' to the office in question and contained provisions to enforce that right. It did not proceed upon the footing that the family had a right to the property in the shape of emoluments, independent or irrespective of the office. In other words, the decision cannot be relied upon in support of the contention that a hereditary village office is like a shebaiti, that is, office cum property. That was not the ratio of the decision. The ratio simply was this that the Act bad recognised the right vested in a family to the office in question. That decision cannot assist respondent 4 in support of his contention that article 16, cls. (1) and (2), do not apply to the office, even though the office is an office under the State. In Ramachandurani purshotham vs Ramachandurani Venkatappa and Another (1) the question was whether the office of Karnam was 'property ' within the meaning of article 19(1)(f) of the Constitution. It was held that it was not property within the meaning of that Article. The same view was expressed in Pasala Rama Rao vs Board of Revenue (2) where if was observed that the right to succeed to a hereditary office was not property and the relation back of an adopted son 's rights was only with regard to property. (1) A.I.R. 1952 Mad. (2) A.I.R. 1954 Mad. 946 This view was not accepted in Chandra Chowdary vs The Board of Revenue (1) where it was observed that the fact that the adoption was posthumous did not make any difference and the adoption being to the last office holder, the adopted son must be deemed to have been in existence at the time of the death of the male holder and had the right to succeed to the office. It was further observed that the office of a Village Munsif was 'property ' so as to attract the operation of the rule that the adoption related back to the date of the death of the last male holder. We are not concerned in this case with the doctrine of relation back in the matter of a posthumous adoption. The simple question before us is whether the office, though it is an office under the State, is of such a nature that cls. (1) and (2) of article 16 of the Constitution are not attracted to it. We are of the view that there is nothing in the nature of the office which takes it out of the ambit of cls. (1) and (2) of article 16 of the Constitution. An office has its emoluments, and it would be wrong to hold that though the office is an office under the State, it is not within the ambit of article 16 because at a time prior to the Constitution, the law recognised a custom by which there was a preferential right to the office in the members of a particular family. The real question is is that custom which is recognised and regulated by the Act consistent with the fundamental right guaranteed by article 16? We do not agree with learned Counsel for respondent 4 that the family had: any pre existing right to property in the shape of the emoluments of the office, independent or irrespective of the office. If there was no such pre existing right to property apart from the office, then the answer must clearly be that article 16 applies and section 6(1) of the Act in so far as it makes a discrimination on the ground of descent only, is violative of the fundamental right of the petitioner. There can be no doubt that section 6(1) of the Act does embody a principle of discrimination on the ground of descent only. It says that in choosing the persons to fill the new offices, the Collector shall select the persons whom he may consider the best qualified from (1) A.I.R. 1959 Andhra Pradesh 343. 947 among the families of the last holders of the offices which have been abolished. This, in our opinion, is discrimination on the ground of descent only and is in contravention of article 16(2) of the Constitution. Learned Counsel for respondent 4 has also submitted that the petitioner cannot be permitted to assert the invalidity of section 6(1) of the Act when he himself made an application for appointment as Village Munsif under the Act. He has drawn our attention to the decision in Bapatla Venkata Subba Rao v, Sikharam Ramakrishna Rao(1). That was a case where the appellant was appointed as a hereditary Karnam under the Act and but for the Act, he would not have had any claim to be appointed to the office of Karnam. It was held that he could not be permitted to contend for the first time in appeal that the very Act but for which he would not have had any right to the office, was unconstitutional. Apart from the question whether a fundamental right can be waived, a question which does not fall for consideration in this case, it is clear to us that the facts here are entirely different. The petitioner had the right to make an application for the new village office and he was accepted by the Revenue Divisional Officer. Respondents 1 to 3, however, passed orders adverse to him and in favour of respondent 4, :acting on the principle of discrimination on the ground of descent only as embodied in section 6(1) of the Act. It is, we think, open to the petitioner to say that section 6(1) of the Act in so far as it violates his fundamental right guaranteed under article 16 of the Constitution is void and his application for appointment must, therefore, be decided on merits. Finally, we must notice one other argument advanced by the learned Advocate General on behalf of respondents 1 to 3. The argument is based on the distinction between articles 15 and 16. We have said earlier that article 15 is, in one respect, more general than article 16 because its operation is not restricted to public employment; it operates in the entire field of State discrimination. But in another sense, with (1) A.I.R. 1958 Andhra Pradesh 322. 948 regard to the grounds of discrimination, it is perhaps less wide than article 16, because it does not include , descent ' amongst the grounds of discrimination. The argument before us is that the provision impugned in this case must be tested in the light of article 15 and not article 16. It is submitted by the learned Advocate General that the larger variety of grounds mentioned in article 16 should lead us to the conclusion that article 16 does not apply to offices where the law recognises a right based on descent. We consider that such an argument assumes as correct the very point which is disputed. If we assume that article 16 does not apply, then the question itself is decided. But why should we make that assumptions If the office in question is an office under the State, then article 16 in terms applies; therefore, the question is whether the office of Village Munsif is an office under the State. We have held that it is. It is perhaps necessary to point out here that cl. (5) of article 16 shows that the Article does not bear the restricted meaning which the learned Advocate General has canvassed for; because an incumbent of an office in connexion with the affairs of any religious or denominational institution need not necessarily be a member of the Civil Service. For the reasons given above, we allow the petition. The orders of respondents 1 to 3 in respect of the appointment to the post of Village Munsif of Peravalipalem in favour of respondent 4 are set aside and we direct that the application of the petitioner for the said office be now considered on merits by the Revenue authorities concerned on the footing that section 6(1) of the Act in so far as it infringes the fundamental right of the citizens of India. under article 16 of the Constitution is void. The petitioner will be entitled to his costs of the hearing in this Court. Petition allowed.

IN-Abs

Village P in the State of Andhra Pradesh was originally comprised of a village of the same name and a fairly large hamlet called PP, but in view of the difficulties in the two being treated as one unit for purposes of village administration the Board of Revenue sanctioned the bifurcation of P into two villages, P and PP. On the division of the village all the hereditary village offices of the original village ceased to exist under section 6(1) of the Madras Hereditary Village Offices Act, 1895, and new offices were created for the two villages. The section provided, inter alia, that "in choosing persons to fill such new offices the Collector shall select the persons whom he may consider the best qualified from among the families of the last holders of the offices which have been abolished." Though applications for the post of Village Munsif of PP had been invited by the Revenue authorities and the petitioner among others had made the application, respondent 4 who was the son of the Village Munsif of the old village, P, was selected on the ground that in view of section 6(1) of the Act, as the last holder of the office was appointed to the new village, P, after bifurcation, respondent 4 as the son of the last holder and nearest heir had a preferential claim for the post of Village Munsif for PP. The petitioner challenged the validity of the order of the Revenue authorities on the grounds (1) that the office of Village Munsif was an office under the State, and that the order in favour of 932 respondent 4 which expressly stated that they proceeded on the basis of the hereditary principle laid down in section 6(1) of the Act, discriminated against him as a citizen on the ground of descent only and violated the guarantee of equal opportunity enshrined in article 16 of the Constitution of India, and (2) that section 6(1) of the Act, to the extent that it permitted such discrimination was void under article 13(1) of the Constitution. The plea of the respondents was (1) that the expression "office under the State" in article 16 had no, reference to an office like that of the Village Munsif which in its origin was a customary village office later recognised and regulated by law, and (2) that article 16 did not apply to a hereditary office because a person entitled to it under the Act had a pre existing right to the office and its emoluments which could be enforced by a suit. Held: (1) that a village office like that of the Village Munsif was an office under the State within the meaning of article 16 of the Constitution of India; M. Ramappa vs Sangappa and otheys; , 167, referred to. (2) that a person entitled to an office under section 6(1) of the Madras Hereditary Village Offices Act, 1895, did not have any pre existing right to property in the shape of emoluments of the office, independent or irrespective of the office, and consequently to such an office article 16 applied; and, (3) that section 6(1) of the Act embodied a principle of discrimination on the ground of descent only and was in contravention of article 16(2) of the Constitution.

l Appeal c, No. 380 of 1957. Appeal from the judgment and order dated March 8, 1956, of the Bombay High Court in Income tax Reference No. 4 of 1956. N. A. Palkhivala, section N. Andley, Rameshwar Nath, J. B. Dadachanji and P. L. Vohra, for the appellant. A. N. Kripal and D. Gupta, for the respondent. December 7. The Judgment of the Court was delivered by HIDAYATULLAH, J. This appeal, on a certificate by the High Court, has been filed by Shree Changdeo Sugar Mills, Ltd., to which section 23A of the Income tax Act (prior to its amendment by the Finance Act, 1955) was applied in respect of the assessment year, 1948 49. The question which was referred to the High Court was whether at the relevant time the assessee Company could be deemed to be a Company, in which the public were substantially interested. This question was answered in the negative by the High Court. During the assessment year, the Company had not distributed dividends to the extent of 60 per cent. of its profits, and an order under section 23A(1) of the Indian Income tax Act was passed by the Income tax Officer. The Company appealed to the Appellate Assistant Commissioner, who dismissed the appeal. It next appealed to the Tribunal, but was unsuccessful. The Tribunal, however, referred the above question which, as already stated, was answered in the negative by the High Court. The issued, subscribed and paid up capital of the assessee Company consisted of 60,000 shares, which were distributed as follows: 992 (1) 11 Directors of the Company 41,500 shares. (2) The Managing Agency Firm 2,300 shares. (3) Mysore Merchants Ltd. 11,880 shares. (4) Others. . 4,320 shares. 60,000 shares. The question arose in determining whether the public were substantially interested in the Company, that is to say, held 25 per cent. of the voting power. The Bombay High Court in determining this point followed its decision in Raghuvanshi Mills V. Commissioner of Income tax (1), and held that no holding by the Directors of a company could be regarded as one in which the public were substantially interested. We have heard Civil Appeal No. 30 of 1957 from the decision of the Bombay High Court in the Raghuvanshi Mills case (1), in which judgment has been pronounced today, and have held that that is not the correct test to apply. We have remanded the said appeal, after setting out the correct test to apply. What we have said there applies equally here. There is yet another question, which arose in this appeal but not in the appeal of the Raghuvanshi Mills. As we have already stated, Mysore Merchants Ltd., held 11,880 shares of the assessee Company. If these shares could be said to be held by the public along with 4,320 shares, the public would be holding 25 per cent of the voting power, whether or not the Directors of the Company held the rest of the shares. It was. , therefore, necessary for the High Court to consider whether the shares held by Mysore Merchants 'Ltd., could be said to be held by the public. The High Court held against the assessee Company that they could not be counted as part of the holding by the public, and, in our judgment, the High Court has reached the correct conclusion. The matter has to be judged under the third proviso to section 23A(1), which read as follows: "Provided further that this sub section shall not apply to any company in which the public are (1) 993 substantially interested or to a subsidiary company of such a company if the whole of the share capital of such subsidiary company is held by the parent company or by the nominees thereof. Explanation. For the purpose of this sub section, a company shall be deemed to be a company in which the public are substantially interested if shares of the company (not being shares entitled to a fixed rate of dividend, whether with or without a further right to participate in profits) carrying not less than twenty five per cent of the voting power have been allotted unconditionally to, or acquired unconditio nally by, and are at the end of the previous year beneficially held by, the public (not including a company to which the provisions of this sub section apply), and if any such shares have in the course of such previous year been the subject of dealings in any stock exchange in British India or are in fact freely transferable by the holders to other members of the public. " In applying the proviso and the Explanation, we have to give effect to the words "not including a company to which the provisions of this sub section apply", and have to determine whether Mysore Merchants Ltd., is a Company, to which the provisions of section 23A can be said to be applicable. Learned counsel for the assessee Company contends that in deciding this, we have to be satisfied on three points, which he summarises as follows: (a)The public should not be substantially interested in that Company; (b)It must have assessable profits for the relevant assessment year; and (c)It must not have distributed 60 per cent of its net assessable profits. He contends that unless these three conditions are fulfiled, section 23A will not apply to Mysore Merchants Ltd., and that the shares held by it will be deemed to be held by the public. He points out that Mysore Merchants Ltd., had no assessable income in the corresponding assessment year and had suffered a loss, that conditions (b) and (c) did not, therefore, apply, and 994 that section 23A is not applicable to that Company. In our opinion, the paramount condition is that even in that Company the public should be beneficially interested in 25 per cent. of the voting power, and it was admitted before us that it was not a public Company at all but a private Company, and that, therefore, the public were not interested in that Company. The shares held by Mysore Merchants Ltd., cannot at all be counted as a holding in which the public are beneficially interested, in view of the exclusion contained in the Explanation. This point will not, therefore, be open for the determination of the High Court, when the question is reconsidered by the High Court in the light of our observations in The Raghuvanshi Mills.Ltd. vs Commissioner of Income tax, Bombay (1), decided today. Learned counsel for the assessee Company also contended that in view of cl. 14 of the Part B States (Taxation Concessions) Order, 1950, the provisions of section 23A could not be applied to Mysore Merchants Ltd. That clause reads as follows: " 14. Requiring distribution of dividends by private companies. The provisions of section 23A of the Act shall not be applied in respect of the profits and gains of any previous year ending before the appointed day unless the State law contained a provision corresponding thereto. " This Concession would be open to Mysore Merchants Ltd., if it satisfied the terms of Cl. That, however, cannot detract from the application of section 23A to determine whether the shares hold by it can be described as those in which the public are beneficially interested in another company. The Explanation requires that the shares held by a company should be considered as held by the public, only if section 23A does not apply to it. The Concessions Order does not seek to negative this test; it only confers a benefit on a company, to which cl. 14 applies. Mysore Merchants Ltd., may be able to avail of that concession, and still fall within (1) ; 995 section 23A for other purposes. This contention has no force. The appeal is allowed, and the case is remitted to s the High Court for deciding the question in the light of the observations in our decision in the Raghuvanshi Mills case (1). As the case is remanded, the costs of this appeal shall be paid by the respondent, but the costs in the High Court will abide the result. Appeal allowed.

IN-Abs

During the assessment year, the company had not distributed dividends to the extent of 60% of its profits and an order under section 23A(1) of the Act was passed by the Income tax Officer. The question referred by the Tribunal to the High Court was whether at the relevant time the assessee company could be deemed to be a company in which the public were substantially interested, i.e., held 25% of the voting power, was answered in the negative. Held, that the test that no holding by the Directors of a company could be regarded as one in which the public were substantially interested was not the correct test to apply. The test as laid down in Raghuvanshi Mills vs Commissioner of Income tax, ; , would apply to this Case. Held, further, that the paramount condition in applying the proviso and the explanation of section 23A(1) was that the public should be beneficially interested in 25% of the voting power. , The explanation to section 23A required that shares held by the company should be considered as held by the public, only if section 23A did not apply to it. The concession order in cl. 14 of the; Part B States (Taxation Concession) Order, 1950, did not seek to negative that test, it only conferred a benefit on a company, 991 to which cl. 14 applied, and the company could avail that concession, and still might fall within section 23A for other purposes. The Raghuvanshi Mills Ltd. vs Commissioner of Income tax, SI ' Bombay, ; , applied.

Appeal No. 108/ 56. Appeal by special leave from the Judgment and decree dated May 27, 1953, of the Punjab High Court in Regular Second Appeal No. 176 of 1949, against the judgment and decree dated December 20, 1948, of the District Judge, Ludhiana, arising out of the Judgment and decree dated February 6, 1948, of the Subordinate Judge, 11 Class, Ludhiana, in Suit No. 918 of 1946. Gopal Singh, for the appellants. C. B. Aggarwala and K. P. Gupta, for the respondents. May 6. The Judgment of the Court was delivered by DAS GUPTA, J. The suit out of which this appeal has arisen was instituted by the respondents I and 2 Sher Singh and Labh Singh, for a declaration that a deed of gift executed by the first appellant, Jai Kaur, in respect of 8 (1 10) Bighas of land which she had inherited from her husband, Dev Singh, in favour of her two daughters, the 2nd & 3rd appellants before us, " shall be null and void against the reversionary rights of the plaintiffs ", and defendant Nos. 4 to 6 after the death of defendant No. 1 (i.e., Jai Kaur) and shall not be binding upon them. The plaintiffs ' case was that these lands left by Dev Singh were all ancestral lands qua the plaintiffs and according to the customary law which governs the Jats belonging to Grewal got to which these parties belong daughters do not succeed to property left by sonless fathers and so the gift by Dev Singh 's widow in favour of her daughters would be null and void as against the plaintiffs and others who would be entitled on Jai Kaur 's death to succeed to the estate as reversioners. In the alternative, the plaintiffs contended that even if the land in suit was not ancestral qua the plaintiffs then also the deed of gift would be null and void as against their reversionary interests inasmuch as even as regards nonancestral property daughters do not succeed among the Grewal Jats. The main contention of defendants 1 to 3 (the appellants before us) was that the suit land was not ancestral qua the plaintiffs and defendants 977 Nos. 4 to 6, and that according to the customary law governing the Jats of the Grewal got, daughters exclude collaterals as regards non ancestral property and a widow is competent to make a gift of such property in favour of her daughters. It was pleaded on behalf of the two daughters that they being preferential heirs in respect of the land in suit as against the plaintiffs, the gift is tantamount to acceleration of succession and is valid in every way. The Trial Judge held that 2B 2B,14 B out of the land in suit was ancestral and the gift was invalid to that extent, because as regards ancestral property a daughter does not succeed in the presence of collaterals. As regards the remainder of the suit land which he held was non ancestral, the learned Judge was of opinion that the gift was merely an acceleration of succession as under the customary law governing the parties daughters exclude collaterals as regards succession to non ancestral property. Accordingly he gave the plaintiffs a decree as prayed for as regards 2 B 2B, 14 B out of the land in suit and dismissed it as regards the remaining portion of the land in suit. The plaintiffs appealed to the District Judge, Ludhiana, against this decree and cross objections were filed by the defendants Nos. 1 to 3. The Trial Court 's finding about a portion of the land being ancestral and the rest non ancestral was not disputed before the appeal court. On the question of custom the learned District Judge agreed with the Trial Judge 's view that among the Grewal Jats of Ludhiana the daughter excluded collaterals as regards non ancestral property. He held, therefore, agreeing with the Trial Judge that as regards the non ancestral property the deed of gift was merely an act of acceleration of succession and was, therefore, valid and binding. The appeal was accordingly dismissed and so also were the cross objections which appear not to have been pressed. On second appeal the learned judges of the East Punjab High Court accepted the contention urged on behalf of the plaintiffs that a special custom was proved to be in force among the Grewal Jats under which the daughter does not inherit even as regards 978 non ancestral property. In that view they held that even as regards the non ancestral property the gift by Jai Kaur would be valid only during her lifetime, and allowed the appeal. Against this decree of the High Court defendants Nos. 1 to 3 Jai Kaur and her two daughters, the donees have filed this appeal on the strength of special leave granted by this Court. Two questions arise for consideration in this appeal. The first is whether under the customary law governing the Jats of the Grewal got in Ludhiana to which the parties belong, the daughter or the collaterals are the preferential heirs as regards non ancestral property. If the answer to this question be that daughters have preference over collaterals (the plaintiffs here), the other question which arises is whether this gift is such acceleration of succession in favour of the daughters as is permissible under the law. On the question of custom the appellants rely on the statements in paragraph 23 of Rattigan 's Digest of Customary Law (Thirteenth Edition) that in regard to the acquired property of her father the daughter is preferred to collaterals. It is not disputed that nonancestral property is " acquired property " within the meaning of this statement by Rattigan. Against this the plaintiffs respondents rely on the answers to question No. 43 relating to Hindu Grewal Jats of Ludhiana as appear in the Riwaji am prepared at the revised settlement of 1882. The question and the answer are in these words: Question: " Under what circumstances can daughters inherit ? If there are sons, widows or near collaterals, do they exclude the daughter ? If the collaterals exclude her, is there any fixed limit of relationship or degree within which such Dear kindred must stand Answer: " In our tribe the daughter does not succeed under any circumstances. If a person dies sonless, his collaterals succeed him. There is no fixed limit of relationship for purposes of excluding her. 979 If there are no collaterals of the deceased, the owners of the Thulla or Patti or village would be owners of his property." The authoritative value of Rattigan 's compilation of customary law is now beyond controversy, having been recognised in the judicial decisions of the Punjab courts too numerous to mention, which have also received the approval of the Judicial Committee of the Privy Council. Therefore it is not, and cannot be disputed that under the general customary law of the Punjab daughters exclude collaterals in succession to non ancestral property. The value of entries in the Riwaj i am has, also however, been repeatedly stressed. That they are relevant evidence under section 35 of the Evidence Act is clear and the fact that the entries therein the the result of careful research of persons who might also be considered to have become experts in these matters, after an open and public enquiry has given them a value which should not be lightly underestimated. There is ', therefore, an initial presumption of correctness as regards the entries in the Riwaj i am and when the custom as recorded in the Riwaj i am is in conflict with the general custom as recorded in Rattigan 's Digest or ascertained otherwise, the entries in the Riwaj i am should ordinarily prevail except that as was pointed out by the Judicial Committee of the Privy Council in a recent decision in Mt. Subhani vs Nawab (1), that where, as in the present case, the Riwaj i am affects adversely the rights of females who had no opportunity whatever of appearing before the revenue authorities, the presumption would be weak, and only a few instances would suffice to rebut it. In the present appeal the oral. testimony given on behalf of either party is practically valueless to show an ,, instance in favour of the custom pleaded by them. If, therefore, the Riwaj i am does show as urged by the plaintiffs a custom of daughters being excluded by collaterals in respect of non ancestral property, it is clear that Riwaji i am would prevail. The real controversy in this litigation is, however, on the question whether the entries in the Riwaj i am on which (1) A.I. R. 1941 (P.C.) 21. 980 the plaintiffs rely refer at all to non ancestral property or not. This controversy has 'engaged the attention of the courts in Punjab for a number of years beginning with 1916. In that year in Mst. Raj Kaur vs Talok Singh (1) Sir Donald Johnstone, the Chief Justice held that the Riwaj i am as compiled, did not cover self acquired property and that where the Riwaj i am talked about succession to land without discrimination between ancestral and self acquired, the rule laid down could usually only be taken to apply to ancestral property. A similar view was taken by Shadilal and Wil be force, JJ., in Budhi Prakash vs Chandra Bhan (2 ). The view taken in these cases was followed by other judges of the High Court in Narain vs Mst. Gaindo (3 ) and Fatima Bibi vs Shah Nawaz (4). In Sham Das vs Moolu Bai (5) the learned judges (LeRossignol and Fforde, JJ.) also laid down the same principles, without any reference to the previous decisions, in these words : "It is true in the Riwaj i ain no distinction is made between ancestral and acquired property, but it is a well recognised rule that unless there are clear indications to the contrary, such an entry in a record of custom refers only to the succession to ancestral property. " After this view had been followed in several other decisions a different line was struck in Jatan vs Jiwan Singh (6). That was a case between Grewal Jats and the contest lay between collaterals of the last male holder and his married daughter with respect to his non ancestral property. The learned judges were of opinion that the Question No. 43 in the Riwaj i am related to both ancestral and non ancestral property and so the answer to the question recorded in Riwaj iam proved that as regards the non ancestral property also the daughter was excluded by collaterals. In coming to this conclusion they laid stress on the fact that in two previous decisions, Ishar Kuar vs Raja Singh (7) and Pratap Singh vs Panjabu (8) the questions and answers in the Riwajiam as regards daughter 's (1) A.I.R. 1916 Lah. (3) A.I.R 1918 Lah. 304 (5) A.I.R. 1926; Lah. 210 (7) (2) A.T.R. 19T8 Lah. (4) A.I.R. 1921 Lah. (6) A.I.R. 1933 Lah. (8) 981 right to succession were interpreted as covering nonancestral property also and if it was contemplated that a daughter should succeed to self acquired property, one would have expected that fact to be mentioned in the answer. It was in view of the conflicting views which had thus arisen on the question whether Question No. 43 in the Riwaj i ani in the absence of a clear indication to the contrary related to ancestral property only or to both ancestral and non ancestral property that a reference was made by Mr. Justice Abdur Rahman in Mt. Hurmate vs Hoshiaru 1 to a Full Bench of the High Court. The Full Bench reviewed the numerous decisions of the Punjab courts in this matter and also took into consideration the fact that Mr. Gordon Walker who had prepared the Riwaj i am in 1882 had stated in the preface that no distinction between self acquired and inherited pro perty in land appeared to be recognised and the rules of succession, restriction on alienation, etc., applied to both alike; and after a careful consideration of all the relevant factors recorded their conclusion that " Question No. 43 of the Customary Law of Ludhiana district relates to ancestral property only and can in no circumstances be so interpreted as to cover self acquired property as well. " Mr. Justice Din Mohammad who delivered the leading judgment observed :" The raison d ' entre of those cases which lay down that the manuals of Customary Law were ordinarily concerned with ancestral property only is quite intelligible. Collaterals are, as stated by Addison, J., in 13 Lab. 458, really speaking interested in that property only which descends from their common ancestor and this is the only basis of the agnatic theory. What a male holder acquires himself is really no concern of theirs. It is reasonable, therefore, to assume that when manuals of Customary Law were originally prepared and subsequently revised, the persons questioned, unless specific ally told to the contrary, could normally reply in the light of their own interest alone and that, as stated above, was confined to the ancestral property only. The fact that on some occasions (1) A.I.R. 1944 Lah. 21, 127 982 the questioner had particularly drawn some distinction between ancestral and non ancestral property would not have put them on their guard in every case, considering their lack of education and lack of intelligence in general. Similarly, the use of the terms " in no case " or " under no circumstances " would refer to ancestral property only and not be extended so as to cover self acquired property unless the context favoured that construction. " One would have thought that after this pronouncement by a Full Bench of the High Court the controversy would have been set at rest for at least the Punjab courts. Surprisingly, however, only a few years after the above pronouncement, the question was raised again before a Division Bench of the East Punjab High Court in Mohinder Singh vs Kher Singh(1). The learned judges there chose to consider the matter afresh and in fact disregarded the pronouncement of the Full Bench in a manner which can only be said to be unceremonious. Teja Singh, J., who delivered the leading judgment said that the Full Bench, though noticing the cases of Ishar Kaur vs Raja Singh (2) and Pratap Singh vs Panjabu (3), had not said that those cases had been wrongly decided. It has to be noticed that the Full Bench in no uncertain terms expressed their conclusion that question No. 43 of the Customary Law of the Ludhiana district related to ancestral property only and could in no circumstances be so interpreted as to cover self acquired property as well. In coming to that conclusion they had considered numerous decisions of the Punjab courts in support of the general proposition that unless there are clear indications to the contrary the questions relate to ancestral property, considered the cases in which a contrary view had been taken including the three cases of Jattan vs Jiwan Singh (4), Ishar Kaur vs Raja Singh (2 ) and Pratap Singh vs Panjabu (3) and gave their own reasons why the view that unless there are clear indications to the contrary the manuals of customary law should be taken to refer to ancestral property only, and after considering the (1) A.I.R. 1949. East Punjab 328 (3) (2) (4) A.I.R. 1933 Lah. 983 question and answer in question No. 43 in the case before them as regards the Mohammadan Rajputs, recorded their final conclusion. It is neither correct nor fair to say that the learned judges of the Full Bench did not hold Jattan 's Case, Pratap Singh 's Case and Ishar Kaur 's Case to have been wrongly decided in so far as these decisions held the question No. 43 of the Customary Law of the Ludhiana dis trict to refer both to ancestral and non ancestral property. It is true that they did not say in so many words that these cases were wrongly decided; but when a Full Bench decides a question in a particular way every previous decision which had answered the same question in a different way cannot but he held to have been wrongly decided. We had recently occasion to disapprove of the action of a Division Bench in another High Court in taking it upon themselves to hold that a contrary decision of another Division Bench on a question of law was erroneous and stressed the importance of the well recognised judicial practice that when a Division Bench differs from the decision of a previous decision of another Division Bench the matter should be referred to a larger Bench for final decision. If, as we pointed out there, considerations of judicial decorum and legal propriety require that Division Benches should not themselves pronounce decisions of other Division Benches to be wrong, such considerations should stand even more firmly in the way of Division Benches disagreeing with a previous decision of the Full Bench of the same court. In our opinion, the view taken by the Full Bench in Mt. Hurmate vs Hoshiaru (1) is consonant with reasons and consistent with probability. The fact that the great majority of judges, who brought to bear on the question, an intimate knowledge of the ways and habits of the Punjab peasantry thought that when tribesmen were asked about succession to property, they would ordinarily think that they were being asked about succession to ancestral property, is entitled to great weight. It cannot, we think, be seriously disputed that at least in the early years (1) A.I.R. 1944 Lah 21. 984 when the Riwaj i am was in course of preparation most of the property in the countryside was ancestral property, and " self acquisitions " were few and far between. This fact, it is reasonable to think, had the consequence of concentrating the attention of the tribesmen on the importance of having the tribal custom correctly recorded by the Settlement Officers and their agents, as regards succession to ancestral property, and of attracting little attention, if any, to matters regarding non ancestral property. Unless the questions put to these simple folk, were so framed as to draw pointed attention to the fact that the enquiries were in respect of non ancestral property also, they could not reasonably be expected to understand from the mere fact of user of general words in the questions that these referred to both ancestral and non ancestral property. As Din Mohammad, J., said in his judgment in the Full Bench, even the fact that on some occasions, the questioner had drawn some distinction between ancestral and nonancestral property, could not have put them (i.e. , the persons questioned) on their guard in every case, considering their lack of intelligence in general. Their minds being obsessed with the idea that such enquiries would only refer to ancestral property, they would direct their answers to matters in respect of ancestral property only, and in using forceful terms like " in no case " and " under no circumstances these persons were really saying that " in no case would ancestral property devolve in a particular way and have a particular incidence; and under no " cir cumstances " would ancestral property devolve in a particular way, and have a particular incidence. These considerations, we think, outweigh the statement made by Mr. Gordon Walker that no distinction between self acquired and inherited property in land appeared to be recognised, and the rules of succession, restriction on alienation, etc., applied to both alike. We think, therefore,, that the view taken by the Full Bench, and the many previous cases mentioned in the judgment of the Full Bench, that questions and answers in the Riwaj i am refer ordinarily to 985 ancestral property, unless there is clear indication to the contrary, is correct. Question No. 43 in the Ludhiana district, appears to be the same for all the tribes. There is not the slightest indication there that the questioner wanted information about nonancestral property also. The answer given by the Grewal Jats to this question also gives no reason to think that the persons questioned were thinking in giving the answers of both ancestral and non ancestral property. We have, therefore, come to the conclusion that the entries in the Riwaj i am on which the plaintiffs respondents rely do not refer at all to non ancestral property, and are, therefore, not even relevant evidence to establish the existence of a custom among Grewal Jats of Ludhiana district, entitling collaterals to succession to non ancestral property, in preference to daughters. Reliance was next placed on behalf of these respondents on the fact that the existence of such a custom was recognised in a number of judicial decisions, viz., Jattan vs Jiwan Singh (1), I shar Kaur vs Raja Singh (2) and Pratap Singh vs Panjabu (3). If these decisions in so far as they recognised the existence of such a custom, had been solely or even mainly based on evidence, other than entries in the Riwaji i am, they might have been of some assistance. Examination of these cases, however, shows unmistakably that they were either wholly, or mainly based on the entries in the Riwaj i am on the assumption that these entries referred to both ancestral and non ancestral property. This assumption having been established to be baseless, these decisions are valueless, to show that the custom as alleged by the plaintiffs respondents did exist as regards non ancestral property. Further, the oral evidence produced in the present case is wholly insufficient to prove such a custom. It must, therefore, be held that the customary law among the Grewal Jats of Ludhiana district as regards succession to non ancestral property is the same as recorded generally for the Punjab in Paragraph 23 of Rattigan 's Digest i.e. , the daughter is preferred to (1) A.I.R. 1933 Lah. 553. (2) (3) 986 collaterals, and consequently, the second and the third appellants, were the next reversioners to that portion of Dev Singh 's property which has been found to be non ancestral. This brings us to the question whether the gift of this portion, by the first appellant to these reversioners, gives them a good title, beyond the widow 's lifetime. We have to remember in this connection that as regards the ancestral property, these daughters were not the reversioners, and the further fact that out of the ancestral property, the house was not included in the deed of gift. The position, therefore, is that out of the property in which the first appellant held a widow 's estate, she gave by the deed of gift a portion to the reversioners as regards that portion, a portion to persons who were strangers to the reversion as regards that portion and a portion was retained by her. The doctrine of Hindu law according to which, a limited owner can accelerate the reversion, by surrendering her interest, to the next reversioner, is based on a theory of self effacement of the limited owner. That is why it has been laid down that in order that a surrender by a limited owner to a reversioner, may be effective, the surrender must be of the entire interest of the limited owner in the entire property. The exception made in favour of the retention of a small portion of the property for her maintenance, does not affect the strictness of the requirement that a surren der to be effective, must be of the entire interest in the entire property: Vide Rangasami Gounden vs Nachiappa Gounden (1) and Phool Kaur vs Pem Kaur (2).) In so far as there is gift to a stranger, there is no effacement of the limited owner; nor is there any effacement in respect of the property which is retained. We find it impossible to say, therefore, that there is such effacement of the limited owner in this case, as would accelerate the daughter 's rights by converting the future contingent right into a present vested right. On behalf of the appellants it is argued that there is certainly a total effacement in respect of the nonancestral property, so that the right of the next reversioners the daughters in that property has (1) (1918) L.R. 46 I.A. 72. (2) ; , 987 been accelerated. We do not think we shall be justified in recognising this novel doctrine of the possibility of effacement of the limited owner vis a vis the next reversioner of the non ancestral property when there is no effacement vis a vis the reversioner of the ancestral property, and vice versa. Effacement cannot be broken up into two or more parts in this manner; and however much the limited owner may wish to efface herself only vis a vis those next reversioners whom she wants to benefit, law does not recognise such " partial effacement ". The Hindu Law doctrine of surrender does not, therefore, make the gift of the non ancestral property to the daughters valid beyond the widow 's lifetime. It is not suggested that there is any customary law, by which such surrender can be made. Though, therefore, we have found disagreeing with the learned judges of the High Court that tinder the customary law governing the Grewal got of Jats to which the parties belong, the daughters the second and the third appellants are preferential heirs to the non ancestral portion of the suit land, we hold that their conclusion that this deed of gift in favour of the daughters is not valid even as regards the non ancestral property, beyond the donor 's lifetime is correct and must be maintained. As a last attempt Mr. Gopal Singh, counsel for the appellants, wanted us to hold that under section 14 of the Hindu Succession Act, which became law in 1956, either the mother or the daughters have become full owners of this property, and so the plaintiffs ' suit should be dismissed. As the Hindu Succession Act was not on the statute book, when the written statement was filed or at any time before the suit was disposed of in the courts below, the defence under section 14 of that Act could not be thought of and was not raised. The necessary consequence is that evidence was not adduced, with the facts material for the application of section 14 in view, by either party. Mr. Agarwala has, on behalf of the plaintiffs respondents, contended that as the record stands the mother had ceased to be in possession and could not get the benefit of section 14 of the Hindu Succession Act, and that the 988 daughters in possession, would not become full owners under section 14. We do not think it would be proper to consider these questions in the present suit in this haphazard manner when on the all important question of possession, the appellants themselves do not wish to say whether the mother was in possession actually or constructively, whether the daughters ' possession was merely permissive, or whether the daughters were in independent possession, on their own behalf These and other questions of fact, and the questions of law that have to be considered in deciding a claim by the first appellant or the other two appellants under section 14 of the Hindu Succession Act, should properly be considered in any suit that they may bring in future, if so advised. We express no opinion on any of these questions. For the reasons which have been mentioned earlier, we hold that the High Court rightly decreed the suit in favour of the plaintiffs in respect of the nonancestral property also, and dismiss the appeal. In the circumstances of the case, we order that the parties will bear their own costs throughout. Appeal dismissed.

IN-Abs

Under the customary law prevalent amongst the Hindu Jats of Grewal got in Ludhiana, a daughter is a preferential heir to her father in respect of his self acquired property to his collaterals. Rattigan 's Digest of Customary Law, paragraph 23, which records the correct law on the point, is not in conflict with Riwaji am, 1882, Question NO. 43, which refers only to ancestral property and not to self acquired property at all. Mt. Hurmate vs Hoshiaru, A.I.R. 1944 Lah. 21, approved. Mohinder Singh vs Kher Singh, A.I.R. 1949 East Punjab 328, disapproved. Mt. Subhani vs Nawab, A.I.R. 1941 (P.C.) 21, referred to. Case law discussed. The doctrine of surrender in Hindu Law is based on a theory of complete self effacement by the widow in favour of the reversioner and in order that such surrender can accelerate the reversion, it must be of the entire interest in the entire property. The law does not recognise a partial self effacement nor a division between ancestral and non ancestral property. The exception made in respect of a small portion of the property retained for the widow 's maintenance does not detract from the rigour of the rule. Rangaswami Gounden vs Nachiappa Gounden, (1918) L.R. 46 I.A. 72 and Phool Kaur vs Prem Kaur, ; , referred to. Consequently, in a case where a Hindu widow of the Jat Grewal got made a gift only of the self acquired property of her husband to her daughters such gift had not the effect of a surrender in law so as to accelerate the daughters ' succession and the gift could not be valid beyond her lifetime.

Appeal No. 30 of 1957. Appeal by special leave from the judgment and order dated September 1, 1955, of the Bombay High Court in Income tax Reference No. 37 of 1952. N. A. Palkhivala and I. N. Shroff, for the appellant. K. N. Rajagopala Ayyangar and D. Gupta, for the respondent. December 7. The Judgment of the Court was delivered by HIDAYATULLAH, J. The Raghuvanshi Mills Ltd., Bombay (a public limited Company), has filed this appeal by special leave against the judgment and orders of.the High Court of Bombay dated March 10, 1953, and September 1, 1955. By the first order, the Bombay High Court directed the Income tax Tribunal to submit a supplementary statement in the case in the light of its judgment, giving the parties liberty to lead further evidence, if any. By the second order, the High Court re framed the question, and answered it against the assessee. The assessee Company 's issued and subscribed capital was, at the material time, Rs. 10,00,000 divided into 10,000 shares of Rs. 100 each. Prior to 980 November 14, 1941, one Maganlal Parbhudas, who was a Director of the Company, held 6,344 shares. On November 14, 1941, he made a gift of 1,000 shares to each of his five sons, Ravindra, Surendra, Bipinchandra, Hareshchandra and Krishnakumar. We are concerned with the account year of the Company, April 1, 1942, to March 31, 1943, the assessment year being 1943 44. In that year, the dividend which was declared at the Annual General Meeting held on December 17, 1943, was less than what was required under section 23A of the Indian Income tax Act. The question, therefore, arose whether the Company could be said to be one to which section 23A(1) of the Act was applicable, regard being had to the third proviso and the Explanation under it. During the accounting period, the Company had eight Directors, whose names along with the shares respectively held by them are given below: Shares (1) Shri Maganlal Parbhudas 1,344 (2) Ravindra Maganlal 1,168 (3) Surendra Maganlal. 1,100 (4) Amritlal Chunilal (jointly with Babulal Chunilal). 833 (5) Babulal Chunilal. 100 (6) Bhagwandas Harakchand. 50 (7) Haridas Purshottam. 50 (8) Sir Chunilal B. Mehta (jointly with Lady Tapibai Chunilal) 50 Total 4,695 Out of the balance of the shares, 4,754 shares were held by the relatives of some of the above named Directors, as stated below: Shares (1) Shrimati Kantabai Maganlal (wife of a Director) 771 (2) Shri Bipinchandra Maganlal 1,000 (3) Shri Hareshchandra Maganlal (son of a Director) 1,000 (4) Shri Krishnakumar Maganlal (do) 1,000 981 (5) Shrimati Dhanlaxmi Mohanlal (6) Srimati Prabhavati Nanalal Harilal (5 and 6 daughters of a Director) 50 (7) Shri Hirjibhai Purshottam and Haridas Purshottam (brothers of a Director) 25 (8) Shri Dhanjibhai Purshottam and Haridas Purshottam (brothers of a Director) 25 (9) Shri Chimanlal Vithaldas (cousin of a Director) 833 Total 4,754 The remaining 551 shares were held by the members of the public, who were not connected with the Directors of the Company in any way. Before March, 1942, Messrs. Ravindra Maganlal and Bros. were the Managing Agents of the Company. Maganlal Parbhudas was the sole proprietor of that firm. On March 7, 1942, the Company appointed Ravindra Maganlal & Co. Ltd. as the Managing Agents for. a period of 20 years. The Managing Company had a total issued and subscribed capital of Rs. 5,000 and the five sons of Maganlal Parbhudas who have been named before had subscribed that capital equally. During the account year, Maganlal Parbhudas and two of his sons, Ravindra Maganlal and Surendra Maganlal, were three of the Directors of the Company. Ravindra, Surendra and Bipinchandra were Directors of the Managing Company. On these facts, the Income tax Officer applied section 23A (as it stood prior to its amendment by the Finance Act, 1955) to the Company, holding that this was not a Company in which the public were substantially interested. The order of the Income tax Officer was confirmed on appeal, both by the Appellate Assistant Commissioner and the Tribunal. The Tribunal also refused to state a case under section 66(1) of the Incometax Act, but the High Court of Bombay acting under section 66(2) called for a statement of the case on the question: "Whether on the facts and circumstances of the 124 982 case the provisions of section 23A of the Indian Income tax Act (XI of 1922) are applicable to the petitioners?" In stating the cases the Tribunal pointed out that probably the question ought to have been: "Whether on the facts and circumstances of the case 1,000 shares each held by Bipinchandra, Haresh chandra and Krishnakumar in the capital of the assessee Company are held by members of the public within the meaning of the Explanation to the third proviso to section 23A?" The members of the Tribunal in deciding the appeal before them, gave slightly different reasons. According to the Accountant Member, the shares held by persons interested in the Managing Company were under the control of the Directors of the appellant Company, and those persons could not be considered to be members of the public. The Judicial Member held that the Directors were controlling the shareholders of the Company, that their relatives were mere nominees, whose voting power was controlled by the Directors, and that the public could not, therefore, be said to be substantially interested, as required by the Explanation to the third proviso to the section. When the High Court heard the case, the learned Judges addressed themselves to the question, what was the proper meaning of the expression "held by the public" in the Explanation. They came to the conclusion that the object of the third proviso and the Explanation was that the voting power to be exercised by the public should be independent of the control of the Directors, and that the word "Public" was used in contradistinction to the Directors. They apparently thought that a holding by a Director could not be described, in any event, as a holding by the public. The High Court came to the tentative opinion that both the tests stated by the Accountant Member and the Judicial Member were incorrect, and held that what the law required was de facto control, 4 c a control which is, in fact, exercised," and that no finding appeared to have been given on that point by the Tribunal. The case was accordingly remitted to 983 the Tribunal for submission of a fresh statement of the case whether the Directors were exercising de facto control. over any of the other shareholders, who belonged to the second category mentioned by us above. The Tribunal thereupon re stated the case, and after examining further evidence, gave the finding that the Directors, particularly the three sons of Maganlal Parbhudas who formed the Directors of the Managing Company were under the de facto control of their father. At no stage in the case did the Tribunal alter the finding reached by the Department that the shares of the Company were not, in fact, freely transferable by the holders to members of the public. The High Court then reheard the case, and came to the conclusion that there was evidence on which the Tribunal could hold that Maganlal Parbhudas exercised de facto control over his three sons. In view of this finding, the High Court held that the order made by the Tribunal was correct, and answered the question in the negative, re framing it as follows: "Whether on the facts and circumstances of the case the shares held by Bipinchandra, Harishchandra and Krishnakumar can be considered to be shares held by members of the public within the meaning of the explanation to the third proviso to Section 23A?" The High Court refused to grant a certificate; but the Company has obtained special leave from this Court, and has filed this appeal. It is first contended that the test that the shares held by the Directors of a company are not shares in which the public are substantially interested is incorrect. According to learned counsel, all the authorities, the Tribunal and the High Court have proceeded on this wrong assumption, and have failed to apply the proper test laid down by the Explanation to the third proviso. It may be pointed out that there is no dispute that 551 shares, were, in fact, held by the public. The total shares of the Company being 10,000, the Company can only avoid the application of section 23A, if the public hold shares carrying not less than 25 per cent. of the voting power, that is to say, 2,500 shares. The Directors between them hold 4,695 shares. These 984 have been held by the High Court to be shares, which cannot be said to be beneficially held by the public. Even so, if the rest of the shares can be said to be held by the public, then the minimum 25 per cent. would still be reached. It was in this context that the shares of the sons of Maganlal, Bipinchandra, Harishchandra and Krishnakumar, were considered. If those shares can be said to fall outside the category of shares beneficially held by the public, then those shares along with the shares held by the Directors reduced the number of shares held by the remaining shareholders to less than 25 per cent. It was on this view that the case was remitted to the Tribunal by the High Court to obtain a further statement whether Maganlal Parbhudas was de facto controlling these three shareholders. Two questions, therefore, arise in this appeal. The first is whether the shares held by the Directors must always be regarded as not held by the public. The second is what is the meaning of the provision: "a company shall be deemed to be a company in which the public are substantially interested, if its shares carrying not less than twenty five per cent. of the voting power have been allotted unconditionally to, or acquired unconditionally by, and are at the end of the previous year beneficially held by the public. " In this connection, we may point out that a ruling of the Privy Council appears to take a different view from that taken by the High Court, in regard to an Uganda Ordinance in pari materia with the proviso and the Explanation. We shall refer to that case as also to a case of the House of Lords, where also a different conclusion in law from that of the High Court has been reached. Section 23A (as it stood prior to its amendment in 1955), omitting the portions not material, read as follows: "23A. Power to assess individual members of certain companies. Where the Income tax Officer is satisfied that in respect of any previous year the profits and gains distributed as dividends by any company up to the end of the sixth month after its accounts for that 985 previous year are laid before the company in general meeting are less than sixty per cent. of the assessable income of the company of that previous year, as reduced by the amount of income tax and super tax payable by the company in respect thereof he shall, unless he is satisfied that having regard to losses incurred by the company in earlier years or to the smallness of the profit made, the payment of a divi dend or a larger dividend than that declared would be unreasonable, make with the previous approval of the Inspecting Assistant Commissioner an order in writing that the undistributed portion of the assessable income of the company of that previous year as computed for income tax purposes and reduced by the amount of income tax and super tax payable by the company in respect thereof shall be deemed to have been distributed as dividends amongst the shareholders as at the date of the general meeting aforesaid, and thereupon the proportionate share thereof of each shareholder shall be included in the total income of such shareholder for the purpose of assessing his total income: . . . . . . . Provided further that this sub section shall not apply to any company in which the public are substantially interested or to a subsidiary company of such a company if the whole of the share capital of such subsidiary company is held by the parent company or by the nominees thereof. Explanation. For the purpose of this sub section a company shall be deemed to be a company in which the public are substantially interested if shares of the company carrying not less than twentyfive per cent. of the voting power have been allotted unconditionally to, or acquired unconditionally by, and are at the end of the previous year beneficially held by the public. and if any such shares have in the course of such previous year been the subject of dealings in any stock exchange or are in fact freely transferable by the holders to other members of the public. " It is clear from the third proviso that the sub section 986 does not apply to a company in which the public are substantially interested. The Explanation lays down, among the tests, the minimum interest which can be called substantial ' by saying that shares of the company carrying not less than 25 per cent. of the voting power must be allotted unconditionally to, or acquired unconditionally by, the public and they must be beneficially held by the public. The essence of the Explanation lies not in the percentage which only shows the limit of the minimum holding by the public, but lies in the words "unconditionally" and "beneficially". These words underline the fact that no person who holds a share or shares not for his own benefit but for the benefit of another and who does not exercise freely his voting power, can be said to belong to that body, which is designated 'public '. The word 'Public ' is used in contradistinction to one or more persons who act in unison and among whom the voting power constitutes a block. If such a block exists and possesses more than seventy five per cent. of the voting power, then the company cannot be said to be one in which the public are substantially interested. In Sardar Baldev Singh vs The Commissioner of Income tax, Delhi and Ajmer (1), this Court took the following view: "The section thus applies to a company in which at least 75 per cent. of the voting power lies in the hands of persons other than the public, which can only mean, a group of persons allied together in the same interest. The company would thus have to be one which is controlled by a group. The group can do what it likes with the affairs of the company, of course, within the bounds of the Companies Act. It lies solely in its hands to decide whether a dividend shall be declared or not. " judged from the test we have indicated, it is clear that such a group may be formed by the Directors of a company acting in concert, or by some Directors acting in concert with others or even by some , shareholder or shareholders, none of whom may be a Director. Such a group which may, for convenience, be (1) ; 987 designated a block, must hold a controlling interest, and if the voting power of the block is 75 per cent. or more, then obviously it can do anything at a meeting, whether general or special. When a company starts, the promoters may subscribe a portion of its capital and release the other unconditionally to the public. This is a case of unconditional allotment of shares to the public. The public may also unconditionally acquire a portion of the shares which were previously held by the group which promoted the company. If at the end of the previous year 25 per cent. or more of the voting power is so held by the public, the company can take the benefit of the third proviso. But if more than 75 per cent. of shares have again passed into the hands of a group which acts as a block, the third proviso ceases to apply. In deciding if there is such a controlling interest, there is no formula applicable to all cases. Relationship and position as Director are not by themselves decisive. If relatives act, not freely, but with others, they cannot be said to belong to that body, which is described as 'public ' in the Explanation. But it would be otherwise if they were free. Similarly, if Directors or some of them do not act as a body or in concert with others, the fact that they are Di rectors is of no significance. The case of Tatem Steam Navigation Co., Ltd. vs Commissioners of Inland Revenue (2) illustrates the first proposition. There, the assessing Commissioners had made directions under section 21 of the Finance Act, 1922, against which the Company appealed on the ground that it was a Company in which the public were substantially interested, inasmuch as shares of the Company carrving not less than 25 percent. of the voting power had been allotted unconditionally to or acquired unconditionally by, and were, at the end of the relevant periods, beneficially held by the public and the decision of the Special Commissioners that 16,000 shares given by Lord Glanely to his niece were not allotted to or acquired by the public and that the Company was, therefore, not (1) 988 a Company in which the public were "substantially interested" was erroneous. It was held by Lawrence, J., that merely because she was a niece of Lord Glanely did not make her cease to be a member of the public. The Court of Appeal agreed with Lawrence, J. No doubt, there were other provisions which laid down the kind of relationship which would lead to the inference that the holder was controlled by another, and a niece was not such a relative. The Act we are considering did not lay down the kind of relationship which would show such a control, and the same principle will apply. Mere relationship thus is not of consequence, unless control of the voting power held by such a relative, by another relative, is proved. The other test adopted in the case by the Bombay High Court that Directors stand outside the 'public ' is also not decisive. In Commissioner of Income tax vs H. Bjordal (1), the Judicial Committee dealt with section 21(1) of the Income Tax Ordinance No. 8 of 1940 (Uganda), as amended by section 5 of the Income Tax (Amendment) Ordinance, 1943. That provision of law is completely in pari materia with section 23A. Two brothers, H. Bjordal and section Bjordal, held 73.96 and 25.09 per cent. of the voting power. Five others held 04 per cent. of the voting power. The shares held by section Bjordal were purchased for full value by him from his brother. There was no suggestion that he was a nominee of the respondent or that he was acting in concert with his brother. Both brothers were Directors of the Company. It was held by the Judicial Committee that shareholders in a company who are members of the 'public ' do not cease to be so, because they become Directors. In the Uganda Ordinance also, like our Act, there was no guidance as to the meaning of the word 'public ', as there was in the English statute considered in Tatem 's case (2). It is significant that in Jubliee Mills Ltd. vs Commissioner of Income tax (3), Chagla, C. J., and section T. Desai, J., speaking of the judgment under appeal and (1) (2) (3) , 41. 989 taking into consideration the Privy Council case, observed: "It may be that our view is erroneous; and it may be and very probably it is that the view taken by the Privy Council is the right one. " In our judgment, the test is first to find out whether there is an individual or a group which controls the voting power as a block. If there be such a block, the shares held by it cannot be said to be "unconditionally" and "beneficially" held by members of the public. In the category of shares held by the public, only those shares can be counted which are unconditionally and beneficially held by the public, or, in other words, which are uncontrolled by the group, which controls the affairs. The group itself may be composed of Directors or their nominees or relations in different combinations, but none can be said to be.long to that group, be he a director or a relative unless he does not hold the shares unconditionally and beneficially for himself. It is only such a person, who can fall properly outside the word 'public '. Judged from this point of view, the judgment and orders of the High Court cannot be upheld. Directors cannot, by reason of being Directors, be said not to be members of the public. To that extent, the judgment is erroneous. There is a finding by the Tribunal in the supplementary statement of the case that the shares held by Bipinchandra, Harishchandra and Krishnakumar were under the control of their father, Maganlal Parbhudas. Their holding was 3,000 and with Maganlal 's holding of 1,344 shares, makes up a total of 4,344 shares. Though the question as framed by the High Court appears to have been correctly answered in the negative, it does not dispose of the matter. The, question to be determined still is whether more than per cent. of the shares are not beneficially held by the public. We accordingly set aside the judgment and orders of the High Court, and direct the High Court to decide the question originally framed by it, viz.: "Whether on the facts and circumstances of the 125 990 case the provisions of section 23A of the Indian Income tax Act, XI of 1922, are applicable to the petitioners?" The High Court may call for a supplemental statement of the case from the Tribunal, if it finds it neces sary. The appeal is allowed. The respondents shall bear the costs of this appeal. The costs in the High Court shall abide the result. Appeal allowed.

IN-Abs

One Maganlal Parbhudas who was a Director of the assessee company held 6,344 shares out of a total of 10,000 shares of the company and he made a gift of 1000 shares to each of his five sons. During the accounting period the company had eight Directors including the said Maganlal Parbhudas and two of his sons and they held 4695 shares as between themselves. Out of the balance of the shares 4754 shares were held by the relatives of some of the Directors. Three sons of Maganlal Parbhudas were Directors of the Managing Company. The Income tax Officer applied section 23A of the Income tax Act as it stood prior to its amendment by the Finance Act, 1955 to the company holding that this was not a company in which the public were substantially interested. The order of the Income Tax Officer was confirmed on appeal both by the Assistant Commissioner and the Tribunal. The High Court remitted the case to the Tribunal for a statement whether the Directors were exercising de facto control over any of the other shareholders. The Tribunal thereupon gave the finding that the Directors, particularly the three sons of Maganlal Parbhudas who formed the Directors of the Managing Company were under the de facto control of their father. The High Court agreed with the finding of the tribunal and held that on the facts and circumstances of the case the shares held by the three sons of Maganlal Parbhudas could not be considered to be shares held by the members of the public within the meaning of the Explanation to the third proviso to section 23A of the Income Tax Act. On appeal by the assessee company, Held, that in the Explanation the word "public" is used in contradistinction to one or more persons who act in unison and among whom the voting power constitutes a block. If such a block exists and possesses more than seventy five per cent of the voting power, then the company cannot be said to be one in which the public are substantially interested. Sardar Baldev Singh vs Commissioner of Income tax, Delhi and Ajmer, ; , considered. The test is first to find out whether there is an individual or a group which controls the voting power as a block. If there is such a block the shares held by it cannot be said to be held 979 "unconditionally" or "beneficially" by the public. Only those shares which are "unconditionally" and "beneficially" held by the public uncontrolled by the controlling group can be treated as shares held by the public under the Explanation. The group may be composed of Directors or their nominees or relations in different combinations, but none can be said to belong to that c group, be he a Director or a relative unless he does not hold the shares unconditionally and beneficially for himself. It is only such a person who can fall properly outside the word "public". The view that Directors merely by reason of their being Directors stand outside the "public" is erroneous. Commissioner of Income tax vs H. Bjordal, , followed. Mere relationship is of no consequence unless it is proved that the voting power of one relative is controlled by another relative. Tatem Steam Navigation Co. vs Commissioner of Inland Reve nue, , followed.

Appeal No. 531 of 1959. Appeal by special leave from the Award dated October 21, 1957 of the Central Government Industrial Tribunal, Dhanbad, in Reference No. 6 of 1957. N. Dutta Mazumdar, G. N. Bhattacharjee and B. P. Maheshwari, for the appellants. M. C. Setalvad, Attorney General of India and R. Gopalakrishnan, for the respondent. December 7. The Judgment of the Court was delivered by GAJFNDRAGADKAR, J. The short question of law which falls to be decided in the present appeal is whether a dispute raised by the employees of a General Insurance Company against their employer for payment of bonus in any particular year can be referred for adjudication by an Industrial Tribunal under section 10(1) of the (XIV of 1947). This question arises in this way. The workmen of the Hercules Insurance Co. Ltd. are the appellants and the Insurance Company is the respondent before us. On April 11, 1957, the Central Government referred the appellants ' claim for bonus for the years 1954 and 1955 for adjudication to the Industrial Tribunal, Dhanbad, constituted under section 7A of the , and this reference has been made under section 10(1)(d) of the Act. Before the Tribunal the respondent urged a preliminary objection against the validity of the reference itself. Its case was that the payment of bonus by an Insurance Company is conditioned entirely by the relevant provisions of the (IV of 1938), and that the said provisions did not justify the reference of a dispute in that behalf for adjudication by any Industrial Tribunal. This preliminary objection was based on the provisions of section 31A(1) and proviso (vii) of the 997 . It was also urged by the respondent that having regard to the limitations imposed on the General Insurance Companies by section 40C of the the claim for bonus made by the appellants, could not be sustained. The Tribunal has upheld the preliminary objection thus raised by the respondent and held that the reference is invalid. Incidentally it has also considered the plea raised under section 40C and has observed that the said plea is also well founded In the result the Tribunal refused to entertain the reference and dismissed it accordingly. It is against this order of the Tribunal that the appellants have come to this Court by special leave. It is common ground that the respondent has paid the appellants bonus equivalent to two months ' basic wages for each of the two years 1954 and 1955. The appellants claim two months ' basic wages as additional bonus for each of the two years under reference. It is their case that if the trading profits made by the respondent are ascertained from the respondent 's balance sheet and the Full Bench formula is applied, it would appear that the respondent has in its hands a substantial amount of available surplus from which the additional bonus claimed by them can be awarded. Since the reference has been rejected on the preliminary ground the Tribunal has naturally not considered this aspect of the problem. The preliminary objection raised by the respondent is founded on the relevant provisions of section 31A of the (hereafter called the Act) and so we must now turn to the said provisions. Section 31A(1)(c) of the Act provides, inter alia, that notwithstanding anything to the contrary contained in the Indian Companies Act, 1913, or in the articles of association of the insurer, if a company, or in any contract or agreement, no insurer shall after the expiry of one year from the commencement of the Insurance (Amendment) Act, 1950, be directed or managed by, or employ as manager or officer or in any capacity, any person whose remuneration or any part thereof takes the form of commission or bonus in respect of the 126 998 general insurance business of the insurer. Thus looking section at 31A(1)(c) by itself without the proviso the position is absolutely at clear. The respondent cannot be directed to employ the appellants in any capacity so as to include in their remuneration a liability to pay bonus in respect of the general insurance business of the respondent. Bonus under the is not a part of wages, but the right to claim bonus which has been universally recognised by industrial adjudication in cases of employment falling under the said Act has now attained the status of a legal right. Bonus can be claimed as a matter of right provided of course by the application of the Full Bench formula it is shown that for the relevant year the employer has sufficient available surplus in hand. Therefore a claim for bonus made by the appellants in the present proceedings is a claim in respect of the general insurance business of the respondent, and if allowed it would add to the remuneration payable to them. In other words, bonus claimed by the appellants, if awarded, would, for the purpose of section 31A (1)(c), be a part of their remuneration, and that is precisely what is prohibited by the said provision. There are, however, certain exceptions to this general prohibition, and it is to one of these exceptions that we must now turn. Proviso (vii) to section 31A (1)(c) lays down that nothing in this subsection shall be deemed to prohibit "the payment of bonus in any year on a uniform basis to all salaried employees or any class of them by way of additional remuneration, such bonus, in the case of any employee, not exceeding in amount the equivalent of his salary for a period which, in the opinion of the Central Government, is reasonable having regard to the circumstances of the case. " This provision which constitutes an exception to the rule prescribed by section 31A(1)(c) allows the payment of bonus to the employees of Insurance Companies subject to the condition specified by it. Bonus intended to be paid to such employees must not exceed in amount the equivalent of their salary for a period which the Central Government regards as reasonable. 999 The result of this provision appears to be that the Central Government has to consider the circumstances of each insurer and then decide whether any bonus should be paid by the insurer to its employees. If the financial position of the insurer is sufficiently satisfactory, the Central Government may decide to allow the insurer to pay bonus to its employees, and in that context the Central Government would prescribe the maximum within which the payment should be made. In no case can payment exceed the maximum prescribed by the Central Government, and in all cases the matter has to be considered by the Central Government and no other authority. Having regard to the scheme of the Act which purports to supervise and regulate the working of Insurance Companies the legislature thought that the payment of bonus by the Insurance Companies to their employees should normally be prohibited and its payment should be permitted subject to the over riding control of the Central Government to prescribe the maximum in that behalf. If the Central Government decides that no bonus should be paid, no bonus can be paid by the insurer. If the Central Government decides that bonus should be paid but not beyond specified limit the insurer cannot exceed that limit. That, in our opinion, is the effect of proviso (vii) to section 31A(1). It is, however, urged that proviso (vii) merely enables the Central Government to prescribe the maximum. It does not take away the Central Government 's authority to refer an industrial dispute in respect of bonus for adjudication under section 10 of the . In this connection it is urged by Mr. Mazumdar that in some cases the Central Government may take the view that the financial position of the insurer justified the payment of bonus, but the quantum may be better left to the Industrial Tribunal. In such a case the Central Government should have authority to make the reference. Similarly it is urged that the Central Government may decide that within the maximum prescribed by it, bonus should be paid by an insurer, but the insurer 1000 may not comply with the Central Government 's decision and in that case the only way to make the Central Government 's decision effective is to refer the matter to adjudication and enable the employees to obtain an award which can be executed. That is why the appellants contend that the enabling provision contained in proviso (vii) should not be construed to constitute a bar against the Central Government 's power to act under section 10(1) of the . We are not impressed by this argument. In our opinion the policy of the relevant clause of the proviso is absolutely clear. Payment of bonus by insurers was intended by the legislature to be conditioned by the provisions contained in the said clause, and we feel no doubt or difficulty in reaching the conclusion that the intervention of the Industrial Tribunals was intended to be excluded and the matter was intended to be kept within the discretion of the Central Government so far as the payment of bonus by the insurers is concerned. Then, as to the argument that the Government directive issued under proviso (vii) may not be obeyed by any insurer, we do not think that such an event is likely to happen; but theoretically it is conceivable that an insurer may refuse to comply with the decision of the Government. In that case all we can say is that there is a lacuna left and the legislature may consider whether it is necessary to provide adequate remedy for making the Government decision binding and final. Having regard to the unqualified and absolute prohibition contained in section 31A(1)(c) it seems to us difficult to hold that the payment of bonus to the employees of Insurance Companies is not absolutely conditioned by proviso (vii). In the absence of the said provision no bonus could have been claimed by Insurance employees, and so the effect of the said provision must be to limit the said right to the conditions prescribed by it. That is why we think that the Tribunal was right in coming to the conclusion that the reference made by the Central Government is invalid. The fact that the Central Government took the view that it could make such a reference 1001 is hardly relevant in determining the scope and effect of the relevant provisions of the Act. This question must be considered on what we regard to be the fair construction of the relevant statutory provision, and as we have just indicated the construction of the relevant provision clearly supports the view taken by the Tribunal. Incidentally, it may be pointed out that in its award the Tribunal has referred to several other decisions of Industrial Tribunals which have taken the same view though there are one or two decisions which have upheld the validity of the reference without duly considering the effect of section 31A(1). In this connection we may refer to the decision of this court in The Central Bank of India vs Their Workmen (1), where a similar question has been considered. In that case the Court had to consider the effect of section 10 of the Banking Companies Act, 1949, prior to its amendment in 1956. The said section, according to that decision, prohibited the grant of industrial bonus to bank employees inasmuch as such bonus is remuneration which takes the form of a share in the profits of a banking company. In dealing with the character of bonus in relation to remuneration specified by section 10, section K. Das, J., who spoke for the Court, observed that "bonus in the industrial sense as understood in our country does come out of the available surplus gap, wholly or in the actual wage. id it fills the wage and age in that sense, whether it be called contingent or supplementary. None the less, it is labour 's share in the profits, and as it is a remuneration which takes the form of a share in profits, it comes within the mischief of section 10 of the Banking Companies Act". Section 10 of the Banking Companies Act is comparable to section 31A of the , and so this decision supports the view that we have taken about the effect of section 31A(1)(c). We have already held that the payment of bonus would be an additional remuneration to the employees of Insurance Companies and it would be (1) ; 1002 bonus in respect of the general insurance business of the insurer. In view of our conclusion that the Tribunal was right in upholding the preliminary objection, we do not propose to consider the other argument which had been urged by the respondent before the Tribunal under section 40C of the Act, and which the Tribunal has incidentally considered and accepted. The result is that the appeal fails and is dismissed. There will be no order as to costs. Appeal dismissed.

IN-Abs

In view of the unqualified and absolute prohibition contain ed in section 31A(1)(c) of the , against payment of bonus to the employees in general insurance business, the exception made by proviso (vii) to that section must be strictly confined to the limits prescribed by the said proviso. The policy underlying the proviso clearly is to exclude the intervention of Industrial Tribunals and leave the question of payment of such bonus entirely to the discretion of the Central Government. Consequently, where the workmen in general insurance business claimed bonus and the Central Government referred the dispute for adjudication to the Industrial Tribunal under section 10(1) of the , and the Tribunal, on a preliminary objection under section 31A(1)(c) of the , read with proviso (vii) thereof, held that the reference was invalid, (1) ; 996 Held, the decision of the Tribunal was correct and must be upheld. The Central Bank of India vs Their Workmen, [1960] 1 S.C.R. 200, relied on.

minal Appeal No. 169 of 1959. Appeal by special leave from the judgment and order dated March 27, 1958, of the Allahabad High Court in Criminal Appeal No. 785 of 1955. 972 Nuruddin Ahmad and Naunit Lal, for the appellant. G. C. Mathur and C. P. Lal, for the respondent. December 7. The Judgment of the Court was delivered by S.K. DAS, J. This is an appeal by special leave from the judgment and order of the High Court of Judicature at Allahabad dated March 27, 1958, whereby the said High Court maintained the conviction of the appellant under section 5(2) of the Prevention of Corruption Act, 1947 (2 of 1947) but reduced the sentence of four years ' rigorous imprisonment passed on the appellant by the Special Judge, Kanpur, to two years ' rigorous imprisonment. The short facts are these. The appellant Surajpal Singh was employed in the Police Department of the Uttar Pradesh Government. He started his service as a constable on a salary of Rs. 13 per month from August 1, 1930. In 1946 his pay was increased to Rs. 46 per month. He was appointed a Head constable on a salary of Rs. 50 per month in 1947. He officiated as a Sub Inspector of Police sometime in 1948 and 1949 on a salary of Rs. 150 per month. On March 1, 1949, he was reverted to his post of Head constable. Between the dates February 27, 1951, and September 9, 1952, he was posted as a Head constable attached to the Sadar Malkhana, Kanpur. The charge against him was that in that capacity he dishonestly or fraudulently misappropriated or otherwise converted to his own use many articles, principally those seized in connection with excise offences kept in deposit in the said Malkhana. These articles included opium, bottles of liquor etc. The charge further stated that a sum of Rs. 9,284 1 0 was recovered on a search of his house on September 9 and 10, 1952 and this amount was disproportionate to the known sources of income of the appellant. There was an allegation by the prosecution that the acts of dishonest misappropriation etc. were committed by the appellant in conspiracy with two other persons called Bhagawat Singh and Gulab Singh. Therefore, the charges against the 973 appellant were (1) for the offence of conspiracy under section 120B of the Indian Penal Code; (2) for the offence under section 5(1)(c) of the Prevention of Corruption Act, 1947, for the acts of dishonest misappropriation or user, read with section 5(2) of the said Act; and (3) for an offence under section 465 of the Indian Penal Code in respect of a particular entry said to have been forged in the Register of Properties kept in the Sadar Malkhana. The learned Special Judge who tried the appellant Bhagawat Singh and Gulab Singh recorded an order of acquittal in respect of the latter two persons. As to the appellant, he was also acquitted of all the charges except the charge under section 5(2) of the Prevention of Corruption Act. On this charge the learned Special Judge recorded an order of conviction, but this was based on the sole ground that the appellant had failed to account satisfactorily for the possession of Rs. 9,284 1 0 which, according to the finding of the learned Special Judge, was disproportionate to the known sources of income of the appellant. It should be noted here that the learned Special Judge held the appellant not guilty of the various acts of dishonest misappropriation or user alleged against him in respect of the properties kept in the Sadar Malkhana. In his appeal to the High Court the appellant urged various grounds, one of which was that he could not be convicted on the rule of presumption laid down in sub section (3) of section 5 of the Prevention of Corruption Act, 1947, when on the only charge of criminal misconduct alleged under section 5(1)(c) of the said Act he had been found not guilty. The High Court repelled this contention and upheld the conviction of the appellant but reduced the sentence. The principal question before us is whether in the circumstances of this case, the conviction of the appellant on the charge under sub section (2) of section 5 of the Prevention of Corruption Act, 1947, by invoking the rule of presumption as laid down in sub section (3) of that section, is correct. It is convenient to read here section 5 of the Prevention 123 974 of Corruption Act, 1947, in so far as it is relevant for our purpose. "section 5(1) A public servant is said to commit the offence of criminal misconduct in the discharge of his duty (a)if he habitually accepts or obtains or agrees to accept or attempts to obtain from any person for himself or for any other person any gratification (other than legal remuneration) as a motive or reward such as is mentioned in section 161 of the Indian Penal Code, or (b)if he habitually accepts or obtains or agrees to accept or attempts to obtain for himself or for any other person, any valuable thing without consideration or for a consideration which he knows to be inadequate, from any person whom he knows to have been, or to be, or to be likely to be concerned in any proceeding or business transacted or about to be transacted by him, or having any connection with the official functions of himself or of any public servant to whom he is subordinate, or from any person whom he knows to be interested in or related to the person so concerned, or (c)if he dishonestly or fraudulently misappropriated or otherwise converts for his own use any property entrusted to him or under his control as a public servant or allows any other person so to do, or (d)if he, by corrupt or illegal means or by otherwise abusing his position as public servant, obtains for himself or for any other person any valuable thing or pecuniary advantage. (2)Any public servant who commits criminal misconduct in the discharge of his duty shall be punishable with imprisonment for a term which shall not be less than one year but which may extend to seven years and shall also be liable to fine: Provided that the Court may, for any special reasons recorded in writing ' impose a sentence of imprisonment of less than one year. (2A). . . . . . . . . . (3) In any trial of an offence punishable under sub section (2) the fact that the accused person or any 975 other person on his behalf is in possession, for which the accused person cannot satisfactorily account, of pecuniary resources or property disproportionate to his known sources of income may be proved, and on such proof the court shall presume, unless the contrary is proved, that the accused person is guilty of criminal misconduct in the discharge of his official duty and his conviction therefor shall not be invalid by reason only that it is based solely on such pre sumption. " Now, learned Counsel for the appellant has put his argument on the principal question in the following way: he has submitted that the is not in a position in an appeal by special leave to go behind the finding of fact arrived at by the courts below. The appellant, it appears, gave some explanation with regard to the possession of Rs. 9,284 1 0. That explanation was not, however, accepted by the courts below. Learned Counsel has submitted that he does not wish to go behind that finding of fact. He has submitted, how ever, that the scheme of section 5 of the Prevention of Corruption Act, 1947 is this: sub section (1) defines the offence of criminal misconduct in the discharge of his duties by a public servant; the offence can be one or more of four categories mentioned in cls. (a), (b), (c) and (d): sub section (2) is the penal section which states the punishment for the offence of criminal misconduct; and sub section (3) lays down a rule of presumption and states that no conviction for the offence shall be invalid by reason only that it is based solely on such presumption. Learned Counsel has pointed out, rightly in our opinion, that the charge against the appellant in the present case referred only to criminal misconduct in the discharge of his duty by a public servant of the nature mentioned in cl. (c) of sub section In other words, the charge against the appellant was that he had dishonestly or fraudulently misappropriated or otherwise converted for his own use property entrusted to him etc. It was open to the learned Special Judge to have convicted the appellant of that offence by invoking the rule of presumption laid down in sub section He did not, however, do so. On the 976 contrary, he acquitted the appellant on that charge. Therefore, learned Counsel has submitted that by calling in aid the rule of presumption laid down in sub section (3), the appellant could not be found guilty of any other type of criminal misconduct referred to in cls. (a), (b) or (d) of sub section (1) in respect of which there was no charge against the appellant. We consider that the above argument of learned Counsel for the appellant is correct and must be, accepted. This Court pointed out in C. section D. Swamy vs The State (1) that sub section (3) of section 5 of the Prevention of Corruption Act, 1947 does not create a new offence but only lays down a rule of evidence which empowers the Court to presume the guilt of the accused in certain circumstances, contrary to the well known principle of Criminal law that the burden of proof is always on the prosecution and never shifts on to the accused person. In Swamy 's case there were charges for the offence of criminal misconduct under two heads, cl. (a) and cl. The trial court held the accused person ' in that case not guilty of the offence under cl. (a) but guilty of the offence under cl. (d) by invoking the rule of presumption laid down in sub section (3) of section 5. The distinction between that case and the case under our consideration is this: in Swamy 's case there were two charges either of which could be founded on the rule of presumption laid down in sub section (3); but in our case there is only one charge of criminal misconduct of which the appellant has been acquitted; therefore, there is no other charge which can be founded on the rule of presumption referred to in sub section This is the difficulty with which the respondent is faced in the present case. It appears to us that the learned Special Judge and the High Court proceeded wrongly on the footing as though sub section (2) or sub section (3) of section 5 of the Act creates an offence. The offence which is punished under sub section (2) or can be founded on the rule of presumption laid down in sub section (3) must be the offence of criminal misconduct of one or more of the categories mentioned in cls. (a) to (d) of sub section In the case before us the only category which was alleged against the appellant was that of category (c), (1) ; 977 namely, dishonest or fraudulent misappropriation etc. That charge having failed, there was no other charge which could be founded on the rule of presumption laid down in sub section Learned Counsel for the respondent State has contended before us that it was open to the appellate Court to affirm the conviction of the appellant under sub section (2) of section 5 by holding him guilty of the offence of criminal misconduct of the category mentioned in cl. (a) or cl. (d) of sub section We are unable to accept this contention as correct. The prosecution never alleged that the sum of Rs. 9,284 1 0 was the result of the appellant habitually accepting or obtaining illegal gratification etc. The prosecution case was that the sum of Rs. 9,284 1 0 was the result of the dishonest user of property which was entrusted with the appellant. It is not open to the appellate Court to affirm the conviction of the Appellant on an entirely new case never suggested against the appellant at any earlier stage. It is unfortunate that in this case the courts below did not choose to rely on the rule of presumption laid down in sub section (3) with reference to the charge under cl. (c) of sub section (1) of section 5. But that misfortune cannot now be repaired by evolving out of a vacuum as it were a new case against the appellant based on cl. (a) or cl. (d) of sub section (1) of section 5 in support of which no facts were ever alleged or suggested. For the reasons given above, we allow this appeal and set aside the conviction and sentence passed against the appellant. Appeal allowed.

IN-Abs

The appellant was a Head Constable attached to a malkhana where articles seized in connection with excise offences were kept in deposit. The appellant was charged under section 5(1)(c) read with section 5(2), Prevention of Corruption Act, 1947, in that he had dishonestly or fraudulently misappropriated or otherwise converted to his use these articles; the charge further stated that a sum of Rs. 9,284 1 0 was recovered from him which was disproportionate to his known sources of income. He was acquitted of the charge under section 5(1)(c) but was convicted under section 5(2) on the ground that he had failed to account satisfactorily for the possession of Rs. 9,284 1 0 which was disproportionate to his known sources of income. Held, that the conviction of the appellant under section 5(2) of the Prevention of Corruption Act, 1947, was illegal. The only charge against the appellant was of criminal misconduct under section 5(1)(c) of the Act for dishonestly or fraudulently misappropriating property entrusted to him and of this charge he could have been convicted by invoking the rule of presumption under section 5(3). But since this was not done and he was acquitted of that charge, he could not be convicted of criminal misconduct referred to in cls. (a), (b) or (d) of section 5(1) for which he had not been charged. The Courts below had proceeded wrongly on the footing as though sub section (2) or sub section (3) of section 5 created an offence; the offence which was punishable under section 5 (2) or which could be founded on the rule of presumption under section 5(3) was the offence of criminal misconduct of one or more of the cate gories mentioned in cls. (a) to (d) of sub section (1) of S 5. C.S. D. Swamy vs The State; , , refer red to.

Appeal No. 147 of 1951. Appeal from the Judgment and Decree dated September 4, 1946, of the late Chief Court of Oudh (now the High Court of Judicature at Allahabad, Lucknow Bench) (Misra and Wallford JJ.) in First Civil Appeal No. 139 of 1941, arising out of the Judgment,and Decree dated October 23, 1941, of the Court of the Civil Judge, Bahraich, in Regular Suit No. I of 1941. 234 Onkar Nath Srivastava for the appellant. Bishan Singh for the respondent. November 7. The Judgment of the Court was delivered by MUKHERJEA J. This appeal is on behalf of the plaintiff and is directed against a judgment and decree of the Chief Court of Avadh dated September 4, 1946, affirming, on appeal, those of the Civil Judge, Bahraich, passed in Regular Suit No. 1 of 1941. To appreciate the controversy between the parties to this appeal it would be necessary to state a few facts. One Raja Bisheshwar Bux Singh, the father of the plaintiff and of the defendant 's husband, was a taluqdar of Oudh, and the estate known as Gangwat Estate, to which he succeeded in 1925 on the death of the widow of the last holder, is one to which the Oudh Estates Act (I of,1869) applies. Raja Bisheshwar died on 16th October, 1930, leaving behind him two sons, the elder of whom, Bajrang Bahadur, is the plaintiff in the present litigation, while the younger, whose name was Dhuj Singh, has died since then, being survived by his widow Bakhtraj Kuer. who is the defendant in the suit. Shortly before his death Raja Bisheshwar executed a will dated 11th September, 1929, by which five properties, described in lists A and B attached to the plaint, were bequeathed to Dhuj Singh, the younger son, by way of making provisions for the maintenance of the said son and his heirs. On the death of Raja Bisheshwar,the estatement to the plaintiff as his eldest son under the provisions of the Oudh Estates Act and Dhuj Singh got only he five properties mentioned above under the terms of his father 's will. Dhuj Singh had no issue of his own and on his death in 1940 disputes arose in respect of these properties between the plaintiff on the one land and Dhuj Singh 's widow on the other. The plaintiff succeeded at first in having his name mutated as owner of these properties in the revenue records in place of his deceased brother, but the appellate 235 revenue authority ultimately set aside this order and directed mutation to be made in the name of the defendant. The plaintiff thereupon commenced the suit out of which this appeal arises, praying for declaration of his title to the five properties mentioned above on the allegation that they vested in him on the death of Dhuj Singh and that the defendant could not) in law, assert any right to, the same. It may be stated here that four out of these five properties have been described in list A to the plaint and there is no dispute that they are taluqdari properties. The fifth item is set out in list B and admittedly this property is not taluqdari in its character. Besides lists A and B there is a third list, viz., Catached to the plaint, which mentions two other properties as being in possession of the defendant and in the plaint a claim was made on behalf of the plaintiff in respect to these properties as well, although they were not covered by the will of Bisheshwar. This claim, however, was abandoned in course of the trial and we are not concerned with it in the present appeal. The plaintiff really rested his case on a two fold ground. It was averred in the first place that Dhuj Singh hadonly a life interest in the properties bequeathed to him by Bisheshwar and on the termination of his life interest, the property vested in the plaintiff as the heir of the late Raja. In the alternative the case put forward was that even if Dhuj Singh had an absolute interest created in his favour under the terms of his father 's will, the plaintiff was entitled to succeed to the taluqdari properties at any rate, under the provision of section 14(b) read with section 22 (5) of the Oudh Estates Act. The defendant in her written statement resisted the plaintiff 's claim primarily on the ground that Bisheshwar Bux Singh, as the full owner of the properties, was competent to dispose of them in any way he liked and under his will it was the defendant and not the plaintiff in whom the properties vested after the death of Dhuj Singh. The contention, in . substance, was that the will created a life estate for Dhuj 236 Singh followed by a devise in favour of the widow as his personal heir. The decision of the point in dispute between the parties thus hinges on the proper construction of the will left by Bisheshwar. The trial court after an elaborate consideration of the different portions of the will, viewed in the light of surrounding circumstances, came to the conclusion that Dhuj Singh got a life interest in the devised properties but there were similar life estates created in favour of his personal heirs in succession, the ultimate remainder being given to the holder of the estate when the line of personal heirs would become extinct. The defendant, therefore, was held entitled to the suit properties so long as she was alive and in that view the plaintiff 's suit was dismissed. Against this decision, the plaintiff took an appeal to the Chief Court of Avadh and the Chief Court affirmed the decision of the trial judge and dismissed the appeal. The plaintiff has now come, up to this court on the strength of a certificate granted by the High Court of Allahabad with which the Chief Court of Avadh was amalgamated sometime after the disposal of this case. The learned counsel appearing for the appellant first of all drew our attention to the provisions contained in certain sections of the Oudh Estates Act and it was urged by him on the basis of these provisions that as Dhuj Singh, who got the suit properties under the will of his father, the late. Taluqdar, came within the category of persons enumerated in clause (1) of section 13 A, Oudh Estates Act, he could, under section 14 of the Act, hold the properties subject to the same conditions and the same rules of succession as were applicable to the, taluqdari himself. In these circumstances, it is said that the provisions of section 22 (5) of the Act would be attracted to the facts of this case and the plaintiff, as the brother of Dhuj Siugh, would be entitled to succeed to the properties of the latter in preference to his widow. The argument formulated in this way does not I appear to us to be helpful to the appellant. Section. 11 237 of the Oudh Estates Act confers very wide powers of disposition upon a taluqdar and he is competent under the section "to transfer the whole or any portion of his estate, or of his right and interest therein, during his lifetime, by sale, exchange, mortgage, lease or gift, and to bequeath by his will to any person the whole or any portion of such estate, and interest. " Sections 13 and 13 A make certain special provisions in cases of transfers by way of gift and bequest in favour of certain specified persons and lay down the formalities which are to be complied with in such cases. Section 14 then provides that "if any taluqdar or grantee, or his heir or legatee, shall heretofore have transferred or bequeathed, or if any taluqdar:or grantee, or his heir or legatee shall hereafter transfer or bequeath the whole or any portion of his estate (a) . . . (b) to any of the persons mentioned in clauses (1) and (2) of section. 13 A, the transferee or legatee and his heirs and legatees shall have same rights and powers in regard to the property to which he or they may have become entitled under or by virtue of such transfer or bequest, and shall hold the same subject to the same conditions and to the same rules of succession as the transferor or testator. " It is true that Dhuj Singh being a younger son of the testator came within the purview of clause (1) of section 13 A of the Oudh Estates Act and if he became full owner of the properties under the will of his father, succession to such properties after his death would certainly be regulated by the special rules of succession laid down in the Oudh Estates Act, and not by the ordinary law of inheritance. But section 14 would have no application if the disposition by the will did not make Dhuj Singh an absolute owner of the properties and he was given only an interest for life which was followed by subsequent interests created in favour of 31 238 It cannot also be contended that a taluqdar governed by the Oudh Estates Act cannot convey anything less than his absolute proprietary right in a property by transfer inter vivos or by will, or that 'it is not competent for him to create any limited interest or future estate. Apart from the plenary provision contained in section 11, section 12 of the Act which makes the rule against perpetuity applicable to transfers made by a taluqdar, furnishes a clear indication that the Act does not interdict the creation of future; estates and limitations provided they do not trans gress the perpetuity rule. The questions, therefore, which require consideration in this case are really two in number. The first is whether Dhuj Singh got an absolute estate or an estate for life in the properties given to, him by the will of Raja Bisheshwar? If he got an absolute estate, the contention of the appellant should undoubtedly prevail with regard to the taluqdari properties specified in list A of the plaint. If, on the other hand,, the interest was one which was to inure only for the period of his life, the further question would arise as to whether any subsequent interest was validly created by the will in favour of the widow on the strength of which she can resist the plaintiff 's claim. If the life estate was created in favour of Dhuj Singh alone, obviously the plaintiff as the heir of the grantor would be entitled to come in as reversioner after his death . The answers to both the questions would have to be given on a proper construction of the will left by Raja Bisheshwar. The will has been rightly described by the trial judge as a most inartistic document with no pretension to any precision of language, and apparently it was drawn up by a man who was not acquainted with legal phraseology. The Civil Judge himself made a translation of the document, dividing its contents into several paragraphs and this was found useful and convenient by the learned Judges of the Chief Court. The material portions of the will, as translated by the trial judge, may be set out as follows: 239 "As I have become sufficiently old and no reliance can be placed on life, by God 's grace I have got two sons namely, Bajrang Bahadur Singh, the elder, and Dhuj Singh the younger. After my death the elder son would according to rule, become the Raja, the younger one is simply entitled to maintenance. Consequently with a view that after my death the younger son and his heirs and successors, generation after generation, may not feel any trouble and that there may not be any quarrel between them. I have decided after a full consideration that I should execute a will in favour of Dhuj Singh with respect to the villages detailed below. So that after my death Dhuj Singh may remain in possession of those villages as an absolute owner with the reservation that he will have no right of transfer. If God forbid, Dhuj Singh may not be living a the time of my death, his son or whoever may be his male heir or widow may remain in possession of the said villages on payment of the Government revenue as an absolute owner. The liability for the land revenue of the said villages will be with Dhuj Singh and his heirs and successors; the estate will have no concern with it. Although Dhuj Singh and his heirs are not given: the power of transfer, they will exercise all other rights of absolute ownership that is to say, the result is that the proprietor of the estate or my other heirs and successors will not eject Dhuj Singh or his heirs or successors in any way. Of course if Dhuj Singh or his heirs become ever heirless then the said villages will not escheat to the Government but will revert and form part of the estate. Hence with the soundness of my mind without any force or pressure and after having fully under , stood and also having thought it proper I execute this will in favour of Dhuj Singh, my own ;on, with the above mentioned terms. " 240 The learned counsel for the appellant naturally lays stress upon the words "absolute owner " (Malik kamil) and " 'generation after generation? ' (naslan bad naslan) used in reference to the interest which Dhuj Singh was to, take under the will. These words, it cannot be, disputed, are descriptive of a heritable and alienable estate in the donee, and they connote full proprietary rights unless there is something in the context or in the surrounding circumstances which indicate that absolute rights were not intended to, be conferred. In all such cases the true intention of the testor has to be gathered not by attaching importance to isolated expressions but by reading the will as a whole with all its provisions and ignoring none of them as redundant or contradictory. "The object of the testator in executing the will clearly set out in the preamble to the document and in spite of the somewhat clumsy drafting that object to have been kept in view by the testator throughout, in making the provisions. The language and tenor of the document leave no doubt in OUT minds that the dominant intention of the testator was to make provision not for Dhuj Singh alone but for the benefit of his heirs and successors, " generation after generation " as the expression has been used. The expression " heirs" in this context obviously means and refers to the personal heirs of Dhuj Singh determined according to the, general law of inheritance and not the successors to the estate under the special provisions of the Oudh Estates Act, for paragraph 6 of the will mentioned above is expressly intended to protect the personal heirs of Dhuj Singh from eviction from the properties in question by the future holders of the estate. Thus the beneficiaries under the will are Dhuj Singh himself and his heirs in succession and to each such heir or set of heirs the rights of malik are given but without any power of alienation. On the total, extinction of this line of heirs the properties affected by the will are to revert to the estate. As it was the intention of the testator that the properties should 241 remain intact till the line of Dhuj Singh was exhausted and each successor was to enjoy and hold the properties without any power of alienation, obviously what the testator wanted was to create a series of life estates one after another, the ultimate reversion being given to the parent estate when there was a complete failure of heirs. To what extent such intention could be, given effect to by law is another matter and that we shall consider presently. But it can be said without hesitation that it was not the intention of the testator to confer anything but a life estate upon Dhuj Singh in respect of the properties covered by the will. The clause in the will imposing total restraint on alienation is also a pointer in the same direction. In cases where the intention of the testator is to grant an absolute estate, an attempt to reduce the powers of the owner by imposing restraint on alienation would certainly be repelled on the ground 'of repugnancy; but where the restrictions are the primary things which the testator desires and they are consistent with the whole tenor of the Will, it is a material circumstance to be relied upon for displacing the presumption of absolute ownership implied in the use of the word "malik". We hold, therefore, that the courts below were right in holding that Dhuj Singh had only a life interest in the properties under the terms of his father 's will. Of course this by itself gives no comfort to the defendant; she has to establish, in order that she may be able to resist the plaintiff 's claim, that the will created an independent interest in her favour following the death of Dhuj Singh. As we have said already, the testator did intend to create successive life estates in favour of the successive heirs of Dhuj Singh. This, it is contended by the Appellant is not permissible in law and he relies on the case of Tagore vs Tagore(1). It is quite true that no interest could be created in favour of an unborn person but when the gift is made to a class or series of persons, some of (1) 18 Weekly Report 359. 242 whom are in existence and some are not, it does not fail in its entirety; it is valid with regard to the persons who are in existence at the time of the testator 's death and is invalid as to the rest. The Widow, who is the next heir of Dhuj Singh, was in existence when the testator died and the life interest created in her favour should certainly take effect. She thus acquired under the will an interest in the suit properties after the death of her husband, commensurate with the period of her own natural life and the plaintiff consequently has no present right to, possession. The result, therefore, is that the appeal fails and is dismissed with costs. Appeal dismissed. Agent for the appellant Rajinder Narain.

IN-Abs

The Oudh Estates Act (Act I of 1869) does not interdict the creation of future estates and limitations provided they do not transgress the rule of perpetuities and where a disposition by a will made by a taluqdar does not make the legatee an absolute owner but gives him only an interest for life which is followed by subsequent interests created in favour of other persons the rule of succession laid down in section 14 of the Act will not apply on the death of the donee and the property bequeathed to him will pass according to the will to the next person entitled to it under the will, 233 The words malik kamil (absolute owner) and naslan bad naslan (generation after generation) are descriptive of a heritable and alienable estate in the donee and they connote full proprietary rights unless there is something in the context or in the surrounding circumstances which indicate that absolute rights were not intended to be conferred. In all such cases the true intention of the testator has to be gathered not by attaching importance to isolated expressions but by reading the will as a whole with all its provisions and ignoring none of them as redundant or contradictory. In cases where the intention of the testator is to grant an absolute estate, an attempt to reduce the powers of the owner by imposing restraint on alienation would be repelled on the ground of repugnancy; but where the restrictions are the primary things which the testator desires and they are consistent with the whole tenor of the will, it is a material circumstance to be relied on for displacing the presumption of absolute ownership implied in the use of the word malik. Though under the rule laid down in Tagore vs Tagore no interest could be created in favour of unborn persons, yet when a gift is made to a class or series of persons, some of whom are in existence at the time of the testator 's death and some are not, it does not fail in its entirety ; it will be valid with regard to the persons who are in existence at the time of the testator 's death and invalid as to the rest. A will made by a taluqdar of Oudh recited that with a view that after his death his younger son D and his heirs and successors, generation after generation, may not feel any trouble or create any quarrel, D shall after the testator 's death remain in possession of certain villages as absolute owner, with the reservation that he will have no right to transfer, that if D may not be living at the time of his death D 's son or whoever may be his male heir or widow may remain in possession and that although D and his heirs are not given the power of transfer they will exercise all other rights of absolute ownership: Held, that the will did not confer an absolute estate on D and on D 's death the succession was not governed by section 14 of the Oudh Estates Act and D 's widow was entitled to succeed in preference to D 's elder brother.

Appeal No. 88 of 1957. Appeal from the judgment and order dated January 18, 1956, of the Rajasthan High Court (Jaipur Bench) in D.B.C. Writ Petition No. 262 of 1954. section K. Kapur and Ganpat Rai, for the appellants. N. section Bindra and D. Gupta, for the respondents. December 7. The Judgment of the Court was delivered by SARKAR, J. The appellants are traders of Jhalawar. Respondent No. 1, the Collector of Jhalawar, ,served on the appellants a notice under section 6 of the ,Rajasthan Public Demands Recovery Act, 1952, hereafter called the Act, for the recovery from them as a public demand, of Rs. 2,24,607/6/6 said to be due on account of loans taken by them from the Jhalawar State Bank. The appellants filed a petition under section 8 of the Act contending, among other things, that 964 the amount sought to be recovered from them was not a public demand. Respondent No. 1 appears to have called upon the appellants to prove that it was not a public demand. The appellants without proceeding further before respondent No. 1, filed a petition in the High Court of Rajasthan for the issue of a writ quashing the proceedings under the Public Demands Recovery Act. The High Court dismissed the petition but granted a certificate that the case was fit for an appeal to this Court. Hence the present appeal. The only question raised in this appeal is whether any loan due to the Jhalawar State Bank could be recovered as a public demand. A "public demand" within the meaning of the Act is "any money payable to the Government or to a department or an officer of Government under or in pursuance of a written instrument or agreement". The Government here means the Government of Rajasthan for the Act was passed in 1952 by the Rajasthan State Legislature. The question then is whether money due to the Jhalawar State Bank, is money payable to the Government of Rajasthan. Now, the Jhalawar State Bank was started in 1932. At that time Jhalawar was a ruling State. Sometime in or about April, 1948, the State of Jhalawar, along with nine other ruling States of Rajputana, integrated and formed the United State of Rajasthan under a covenant executed by the Rulers of these States. One of the articles of this covenant provided, "All the assets and liabilities of the covenanting States shall be the assets and liabilities of the United State." Subsequently, on March 30, 1949, the States of Bikaner, Jaipur, Jaisalmer and Jodhpur joined the United State of Rajasthan. On the promulgation of the Constitution of India, the United State of Rajasthan became a Part B State in the Indian Union. The assets of the previous ruling State of Jhalawar, which had earlier vested in the United State of Rajasthan, thereupon passed to and devolved upon the State of Rajasthan in the Indian Union. 965 The proceedings under the Act against the appellants were started by the filing of a requisition with respondent No. 1 by respondents Nos. 2 and 3, being respectively the Treasury Officer, Jhalawar, and the Recovery Officer, Jhalawar State Bank, under section 3 of the Act stating that the amount earlier mentioned was due from the appellants to the Government of Rajasthan in respect of the claims of the Jhalawar State Bank against them. This was done presumably shortly prior to June 16, 1953, on which date respondent No. 1 signed a certificate specifying the amount of the demand and certain other particulars and filed it in his own office under section 4 of the Act. A notice of the signing and filing of the certificate was served upon the appellants under section 6 of the Act. This notice and the subsequent proceedings have been referred to in the beginning of this judgment. The claim thus is in respect of moneys due to the Jhalawar State Bank. If that Bank was not the property of the Jhalawar State, then its dues cannot of course be said to have merged in the present State of Rajasthan. The appellants first contended that the Jhalawar State Bank was not the property of the State of Jhalawar. The only material to which we have been referred by the appellants in support of this contention is certain rules framed by the Ruler of Jhalawar in respect of the Bank. It was pointed out that the rules showed that the Bank was like any other commercial enterprise. We are unable to agree that for this reason it could not be an institution belonging to the State. There was nothing to prevent the Jhalawar State carrying on a commercial undertaking. If it did so, the assets of that undertaking would be those of the State and, in the circumstances earlier mentioned, must now be held to be vested in the State of Rajasthan. It was also said that the rules showed that the management of the Bank was in the hands of a board of which certain non officials were members. It was contended that this showed that the Bank was not the property of the State. It is clear, however, from the 122 966 rules that the Bank was not the property of the board. Again, the board was constituted from time to time by the Ruler and the majority of its members were officers of the State. This would show that the Ruler was in full control of the management of the Bank as a State undertaking. It is true that the rules indicate that the Bank might sue or be sued in respect of transactions made by or with it. That, however, would not indicate that the Bank had a separate identity. The rules in this connection only indicate in what name suits could be brought by or against the State 's banking business. On the other hand, it is perfectly clear that the capital of the Bank was derived solely from the funds of the Jhalawar State. No part of it was contributed by anyone else. One of the objects of the Bank was to invest the surplus funds of the State. The entire transaction of the business of the Bank was in the ultimate control of the Ruler. The Jhalawar State guaranteed the financial liabilities of the Bank. The name "Jhalawar State Bank" also indicates that the institution belonged to the State of Jhalawar. About the time of the formation of the United State of Rajasthan in 1948, the Chief Executive Officer, Jhalawar, issued a public notification in which, after referring to the article in the Covenant which provided that the assets and liabilities of the covenanting States would be the assets and liabilities of the United State, he proceeded to state that by virtue of this article, on the formation of the new State, the responsibility and guarantee of the existing transactions with the different departments of Jhalawar State or the Jhalawar State Bank, would be of the newly formed United State of Rajasthan. This would show that the assets of the Jhalawar State Bank were being treated by all concerned as assets of the former Jhalawar State, which, upon the formation of the United State of Rajasthan, had vested in the latter State. Further, no one else has at any time made any claim to the assets of the Jhalawar State Bank. It is, therefore, clear beyond all doubt, that the Jhalawar State Bank was one of the assets of Jhalawar State and is now vested in the State of Rajasthan. 967 The second point argued for the appellants is that the dues of the Jhalawar State Bank have in any case been transferred by the Government of Rajasthan to the Bank of Rajasthan Ltd. under certain Notifications to which we shall presently refer. It is said that the Bank of Rajasthan Ltd. is, as its name shows, obviously a limited company having an inde pendent existence and is not a department of the Government of Rajasthan State. It is also contended that this vesting took place before the proceedings under the Act had started. Therefore, it is said that at the commencement of those proceedings, the amount claimed from the appellants as due to the Jhalawar State Bank, was not a public demand within the meaning of the Act. This contention which is based on the Notifications, earlier mentioned, does not seem to us to be well founded. We will assume for the present purpose that the Bank of Rajasthan Ltd. is not a department of the Government of Rajasthan State. The question is whether the effect of these Notifications, which were two in number, was to vest the dues of the Jhalawar State Bank in the Bank of Rajasthan Ltd. The first Notification is dated February 15, 1951. It, stated that the Government of the State of Rajasthan had decided to transfer, among others, the Jhalawar State Bank, to the Bank of Rajasthan Ltd. It was contended that by this Notification the assets of the Jhalwar State Bank were transferred to the Bank of Rajasthan Ltd. We do not think that that was the effect of this Notification. It contained two very significant provisions which we set out below: "All debtors of the State Banks irrespective of the class, category and nature of the debt are hereby informed that within one month from the date of publication of this notice they should clear accounts with the aforesaid State Banks which will continue to function only to clear the old accounts, and thereafter their accounts with the securities pledged will automatically be transferred to the Bank of Rajasthan Ltd., who will be authorised on behalf of the State, to effect necessary recoveries and settle accounts. 968 The transfer of these debts to the Bank of Rajasthan Ltd. will not, on any account, take away the inherent right which the Rajasthan Govt. possess in these various transactions made on the guarantee of the respective convenanting States to make recoveries and settle accounts in accordance with the existing rules or laws that may hereafter be made to effect recovery of State dues or State debts. " It is clear from these provisions that the Bank of Rajasthan Ltd. was being authorised "on behalf of the State", that is, the Government of the State of Rajasthan, to recover the amounts due to the Jhalawar State Bank. The transfer of the latter Bank to the Bank of Rajasthan Ltd. was to be subject to this qualification that its dues would remain the dues of the Government of the State of Rajasthan and would only be recovered by the Bank of Rajasthan Ltd. as the agent of that Government. The last paragraph set out above emphasises this Position. It preserves the right of the Government of the State of Rajasthan to recover the amounts due to the Jhalawar State Bank in accordance with any law that might be made after the date of the Notification. The position then is that under this Notification the debts due to the Jhalawar Bank were not transferred to the Bank of Rajasthan Ltd. and remained payable to the Government of Rajasthan. The other Notification is dated April 16, 1952, and it repeats that the banks mentioned in the earlier Notification, including the Jhalawar State Bank, "will be merged in the Bank of Rajasthan Limited". It is said that the effect of this Notification was in any event to cancel the earlier Notification, in so far as the latter preserved the power of the State to collect the debts of the Jhalawar State Bank. We are wholly unable to agree. This Notifi cation only reiterates the intention of the Government of the State of Rajasthan to merge the banks named, in the Bank of Rajasthan Ltd. It says nothing specifically about the dues of these banks or as to their recoveries, with regard to which, therefore, the provisions of the previous Notification must have effect. Furthermore, there is nothing to show that the debts 969 due to the Jhalawar State Bank were by any document specifically transferred to or vested in the Bank of Rajasthan Ltd. and thereupon became its property. That being so, there is no basis for the contention that the debts due from the appellants are now due to the Bank of Rajasthan Ltd. in its own right. It would follow that such debts remained debts due to the Government of the State of Rajasthan. The third point argued was that the moneys claimed from the appellants were not payable under a written instrument or agreement. This contention is wholly unfounded. It appears that the loans were granted by the Jhalawar State Bank to the appellants on their own applications. In each application the appellants stated that they wanted a loan from the Jhalawar State Bank and promised to repay it with interest at the rate mentioned in it. By these applications the appellants also proposed to hypothecate various properties belonging to them as security for the due repayment of the loans taken. They signed the applications and the receipts, which latter also bore the signatures of the officers of the Bank in token of the sanction of the loan. In our view, the money payable by the appellants was payable under these applications and receipts and was, therefore, payable under written instruments or agreements. A point was sought to be made that in each case there were two documents, namely, the application by the appellants and the receipt for the moneys advanced signed by them, whereas a public demand as defined in the Act, required one instrument. It is enough to say in regard to this contention that the Act does not say that the moneys shall be due under a single instrument. It is well known that in a statute a singular includes the plural. In any case, the two documents constituted the written agreement between the parties and that is enough to satisfy the requirement of the Act, even if read in the way suggested by the appellants. The fourth point advanced was that the certificate under the Act was defective and therefore the proceedings were a nullity. Section 4 of the Act requires that the certificate shall be in the prescribed form. 970 One of the particulars to be stated in the form, requires that the period for which the demand was due should be specified. That period was not specified in the certificate in the present case. It seems to us however that this is no defect. In the case of loans due, there is no question of any period for which the demand is due. Obviously, the requirement as to, the specification of the period was meant to apply where the demand consisted of a claim for revenue or rent or the like, which could be due for a period. It is clear to us that the requirement as to stating the period for which the demand is due, as appears from the prescribed form, does not arise in the case of a loan due to the Government which is a public demand within the Act and in such a case no question of stating the period arises. The certificate was not, therefore, defective. The last point argued was that in so far as the Act enables moneys due to the Government in respect of its trading activities to be recovered by way of public demand, it offends article 14 of the Constitution. It is said that the Act makes a distinction between other bankers and the Government as a banker, in respect of the recovery of moneys due. It seems to us that the Government, even as a banker, can be legitimately put in a separate class. The dues of the Government of a State are the dues of the entire people of the State. This being the position, a law giving special facility for the recovery of such dues cannot, in any event, be said to offend article 14 of the Constitution. We have now discussed all the points raised in this appeal and are unable, for the reasons earlier mentioned, to find merit in any of them. In the result we come to the conclusion that the amount claimed from the appellants was a public demand within the meaning of the Act and was legally recoverable by the impugned proceedings. This appeal therefore must be dismissed with costs and we order accordingly Appeal dismissed.

IN-Abs

The jhalawar State Bank was originally a Bank belonging to the ruling State of jhalawar and its assets, including moneys 963 due to it, became vested in the United State of Rajasthan under the covenant executed by the Ruler of Jhalawar along with other Rulers by which the United State of Rajasthan was formed. On the promulgation of the Constitution of India, the United State of Rajasthan became the State of Rajasthan in the Indian Union and all its assets, including the jhalawar State Bank and its dues, vested in the State of Rajasthan. Moneys due from the appellants in respect of advances made to them by the jhalawar State Bank at a time when it belonged to the ruling State of jhalawar, could be recovered by the State of Rajasthan after the Bank had become vested in it, as a public demand under the Rajasthan Public Demands Recovery Act, 1952. The form prescribed in the Rajasthan Public Demands Recovery Act, in which a certificate has to be drawn up and filed under section 4 of the Act for commencing proceedings for recovery of public demands under the Act in so far as it required a statement as to the period for which a public demand is due, was not applicable to a public demand like a loan due to the Government in respect of which there is no question of any period for which it is due. The Rajasthan Public Demands Recovery Act did not off end article 14 of the Constitution as giving special facility to the Government as a banker for the recovery of the bank 's dues for, the Government can legitimately be put in a separate class for this purpose.

Appeal No. 366 of 1959. 38 Appeal from the judgment and order dated September 18, 1958, of the Calcutta High Court in Income Tax Reference No. 9 of 1955. section Mitra and section N. Mukherjee, for the appellant. K. N. Rajagopal Sastri and D. Gupta, for the respondent. December 8. section K. DAS, J. This is an appeal on a certificate of fitness granted by the High Court of Calcutta under section 66A(2) of the Indian Income tax Act, 1922. The assessee, Provat Kumar Mitter, is the appellant before us. He was a registered holder of 500 Ordinary shares. of the Calcutta Agency Ltd. By a written instrument, dated January 19, 1953, he assigned to his wife, Ena Mitter, the right, title and interest to all dividends and sums of money which might be declared or might become due on account or in respect of those shares for the term of her natural life. We may read here the material portion of the instrument: "This Deed Witnesseth that for effecting the said desire and in consideration of the natural love and affection of the Settlor for the Beneficiary the Settlor as the beneficial owner assigns unto the Beneficiary the right, title and interest to every dividend and sum of money which may be declared or become due and payable on account of or in respect of the said shares (not being the price or value thereof) and further hereby covenants with the Beneficiary to hand over and/or endorse over to the Beneficiary any dividend Warrant or any other document of title to such dividend or sum of money as aforesaid and to instruct the said Company to pay any such dividend or such sum of money to the Beneficiary To Hold the same unto the Beneficiary absolutely during the term of her natural life. And It Is Hereby Agreed And Declared that the Beneficiary shall remain entitled to and shall receive and stand possessed absolutely of every dividend and sum of money which she may receive on 39 account of the said shares during the term of her natural life and that the Settlor shall have no right, title or interest therein or derive any benefit therefrom during the said period. " It is to be noticed that under the terms quoted above the shares themselves remained the property of the assessee, and it was only the income arising therefrom which was sought to be settled or assigned to his wife. During the accounting year which ended on March 31, 1953, the dividend declared on the shares amounted to Rs. 12,000. In assessing the as sessee for the assessment year 1953 54 the Income tax Officer included the said sum of Rs. 12,000 in his income under the provisions of section 16(1)(c) and section 16(3) of the Act, as he said in his assessment order. The contention of the assessee was that since the settlement was for the lifetime of his wife, the third proviso to section 16(1)(c) applied and the dividend which his wife received could not be deemed to be his income under section 16(1)(c); as to section 16(3) of the Act the assessee contended that it did not apply, because there was no transfer of the shares to his wife. The assessee, accordingly, appealed to the Appellate Assistant Com missioner. Before that authority a somewhat unusual contention was put forward on behalf of the Department, viz., that the third proviso to section 16(1)(c) should be ignored inasmuch as it was repugnant to the main provisions contained in section 16(1)(c) and the general scheme of the Act. A further contention urged on behalf of the Department was that since the shares continued to stand in the name of the assessee and the dividends had been declared in his name, the transfer of the dividend to the beneficiary was only an application of the dividend income and, therefore,, the assessee could not claim exemption from being taxed on it as a part of his own income. The Appellate Assistant Commissioner accepted both the aforesaid contentions and dismissed the appeal. In a further appeal to the Income tax Appellate Tribunal, the assessee again relied on the third proviso to section 16(1)(c) of the Act and the Departmental Representative urged the same two contentions plus 40 a new one to the effect that the deed by which the dividend had been transferred was altogether invalid inasmuch as it was an unregistered instrument and, therefore, no valid transfer of the dividend income had been effected by it. The Tribunal rejected the Department 's contention that the third proviso was in conflict with the main provisions of section 16(1)(c) or the scheme of the Act. As to the second contention that the transfer of the dividend income was a mere application of it by the assessee after it had accrued to him, the Tribunal apparently expressed no opinion. It gave effect, however, to the third contention of the Department, namely, that the deed being an unregistered instrument did not operate as a valid transfer of the dividend income in favour of the assessee 's wife. Both the assessee and the Commissioner then moved the Tribunal to refer to the High Court the questions which had respectively been decided adversely to them. The Tribunal acceded to the request and referred three questions to the High Court, two at the instance of the Commissioner and one at the instance of the assessee. The questions referred were as follows : "(1) Whether the deed dated January 19, 1953, assigning the dividends to accrue, merely on account of natural love and affection, is void as it is not registered? (2) Whether the third proviso to section 16(1)(c) is repugnant to the main clause 16(1)(c) and the general scheme of the Act, and should not be given effect to? (3) Whether, on the facts and in the circum stances of the case, the payment of dividend income to the assessee 's wife, Ena Mitter, under the covenant in the deed of assignment dated January 19, 1953, was merely a case of application of the assessee 's income?" The High Court answered the first two questions in favour of the assessee. It answered the third question, however, against the assessee and in favour of the Department. The High Court expressed its conclusion on the third question in the following words: 41 ". . . the conclusion must be that there being only a voluntary covenant entere d into by the settlor to pay over the dividends received by him to the wife or to instruct the company to pay them to her and the income not having been made the wife 's income from the beginning, what the settlement provides for is only an application of the income and therefore the income is assessable in the hands of the settlor, irrespective of whether the wife is also assessable on her receipts. The case is outside the main clause of section 16(1)(c) and, therefore, the third proviso to the section is also not relevant. " The appeal before us is limited to the question of the correctness or otherwise of the answer given by the High Court to the third question. The first two questions having been answered in favour of the assessee and the Department not having filed any appeal with regard to them, we are not concerned with the correctness or otherwise of the answers given by the High Court to those questions and we express no opinion as respects those answers. On behalf of the appellant it has been argued that the High Court should not have answered the third question, because it did not arise out of the order of the Tribunal. The argument is that under section 66 of the Income tax Act, the Tribunal could refer to the High Court any question of law which arose out of its order, but it was not open to the Tribunal to refer a question which did not so arise. We are unable to accept the contention that the question did not arise out of the Tribunal 's order. Indeed, it is true as we have stated earlier, that the Tribunal did not state its specific finding on this question; but in the statement of the case drawn up by the Tribunal under section 66 it has stated that though no specific finding was given the question was raised by the Department and by implication was decided against the respondent. In its application to the Tribunal for a reference, the present respondent specifically mentioned the question as one decided adversely to it and though the appellant 42 submitted that the question did not arise, the Tribunal held that the question did arise out of its order. No objection appears to have been taken in the High Court to the reference made by the Tribunal on the three questions including the one now under consideration before us. In these circumstances it is not open to the appellant to contend now that the question did not arise out of the Tribunal 's order. We must, therefore, overrule this contention. Now, as to the correctness of the answer given by the High Court. Learned counsel for the appellant has contended that the High Court did not correctly construe the instrument of January 19, 1953, and on a proper construction, the High Court should have held that a right of property in present was assigned in favour of the wife. Learned counsel has submitted that the assessee as a registered holder of 500 Ordinary shares of the Calcutta Agency Ltd., had a bundle of rights in the Company: (1) a right to vote; (2) a right to participate in the distribution of assets on dissolution or liquidation of the Company; and (3) a right to participate in the profits, e.g., dividends which might be declared. It is contended that the aforesaid third right was assigned to the wife by the assessee, and that the High Court ignored the said assignment while it emphasised the other covenants for endorsing or handing over the dividend warrants, etc. In support of his contention learned counsel has relied on certain observations made by this Court in Bacha F. Guzdar vs Commissioner of Income tax, Bombay (1) at p. 883. , That was a case in which the question that arose for decision was whether dividend declared by a, company growing and manufacturing tea was agricultural income within the meaning of section 2(1) of the Income tax Act and hence exempt from income tax under section 4(3)(viii) of the said Act. It was held that the dividend of a shareholder was the outcome of his right to participate in the profits of the company arising out of the contractual relation between the company and the shareholder, and the observations on which learned counsel has relied were to the effect (1) ; 43 that "the right to participate in the profits exists independently of any declaration by the company with the only difference that the enjoyment of profits is postponed until dividends are declared. " We do not think that those observations are of any assistance to the appellant in the solution of the question before us, which is really one of construction of the instrument of January 19, 1953. A transfer of property may take place not only in the present, but also in future; but the property must be in existence. It is clear to us that the instrument of January 19, 1953, was not a transfer of any existing property of the assessee. It was in its true nature a contract to transfer or make over in future every dividend and sum of money which may be declared or become due and payable on account or in respect of the shares held by the assessee, to his wife during her lifetime; the other covenants are ancillary in nature and subserve this main object of the contract. The assessee did not assign the shares and, therefore, retained the right to participate in the profits of the company; he did not part with that right. What the contract provided for was merely this: the beneficiary was given the right to receive from the assessee every dividend and other sum of money which may be declared or become due and payable in respect of the shares. If this is the true construction of the document, then it is clear to us that the answer given by the High Court to the question referred to it is correct. The High Court rightly pointed out that the Company paying the dividend can pay. it only to the registered shareholder or under his orders (see Howrah Trading Co. Ltd. vs Commissioner of Income tax, Central, Calcutta) (1); therefore, section 16(1)(c) of the Income tax Act was not attracted nor the third proviso thereto, and the income continued to accrue to the assessee but was thereafter paid over to his wife under the terms of the contract. The income was, therefore, assessable in the hands of the assessee, because it was part of his income though applied subsequently towards payment to the wife under the terms of the contract. (1) [1959] Supp. 2 S.C.R. 448. 44 In this view of the matter, it is not necessary to decide the further question if a contract of this nature operates only as a contract to be performed in future which may be specifically enforced as soon as the property comes into existence or is a contract which fastens upon the property as soon as the settlor acquires it. In either view, the income from the shares will first accrue to the settlor before the beneficiary can get it. Such income will undoubtedly be assessable in the hands of the settlor despite the contract. We think that the true position is that if a person has alienated or assigned the source of his income so that it is no longer his, he may not be taxed upon the income arising after the assignment of the source, apart from special statutory provisions like section 16(1)(c) or section 16(3) which artificially deem it to be the assignor 's income. But if the assessee merely applies the income so that it passes through him and goes on to an ultimate purpose, even though he may have entered into a legal obligation to apply it in that way, it remains his income. This is exactly what has happened in the present case. We need only add that the principle laid down by the Privy Council in Bejoy Singh Dudhuria vs Commissioner of Income tax (3), does not apply to this case; because this is not a case of an allocation of a sum out of revenue before it becomes income in the hands of the assessee. In other words, this is not a case of diversion of income before it accrues but of application of income after it accrues. We have, therefore, come to the conclusion that the High Court correctly answered the question referred to it. The appeal fails and is dismissed with costs. Appeal dismissed.

IN-Abs

The appellant who was the registered holder of 500 shares of a company executed a deed dated January 19, 1953, by which he assigned to his wife the right, title and interest to all dividends and sums of money which might be declared or might become due on account or in respect of those shares for the term of her natural life. During the accounting year which ended on March 31, 1953, the dividend declared on the shares amounted to Rs. 12,000, and in assessing the appellant for the assessment year 1953 54 the Income tax Officer included the said sum in his income under section 16(i)(c) and section 16(3) of the Indian Income tax Act, 1922. The appellant claimed that since the settlement was for the lifetime of his wife, the third proviso to section 16(i)(c) applied and the dividend which his wife received could not be deemed to be his income under section 16(i)(c), and that section 16(3) was not applicable because there was no transfer of the shares to his wife. Held, that on its true construction the deed dated January 19, 1953, was not a transfer of any existing property of the appellant namely, the shares held by him, but only a contract to transfer or make over in future every dividend and sum of money which may be declared or become due and payable on account or in respect of the shares, to his wife during her lifetime. Since the company could pay the dividend only to the registered shareholder or under his orders, the income continued to accrue to the appellant though applied subsequently towards payment to the wife under the terms of the contract. The income, therefore, was assessable in the hands of the appellant. Howrah Trading Co. Ltd. vs Commissioner of Income tax, Cal cutta, [1959] SUPP. 2 S.C.R. 448, relied on. Bacha F. Guzday vs Commissioner of Income tax, Bombay, ; , held not applicable. Bejoy Singh Dhudhuria vs Commissioner of Income tax, (1933) L.R. 60 I.A. 196, distinguished.

l Appeals Nos. 153 and 154 of 1960. Appeals by special leave from the Award dated February 5,1959, of the Industrial Tribunal, Bombay, in Reference (I.T.) No. 212 of 1958. S.D. Vimadalal, section N. Andley and J. B. Dadachanji, for the appellant in C. A. No. 153/60 and Respondent in C.A. No. 154/60. M.C. Setalvad, Attorney General for India and Janardan Sharma, for the respondents in C.A. No. 153/ 60 and Appellants in C.A. No. 154/60. December 9. The Judgment of the Court was delivered by WANCHOO, J. The only question raised in these two appeals by special leave is about the quantum of bonus to be paid to the workmen (hereinafter called the respondents) by Voltas Limited (hereinafter called the appellant) for the financial year 1956 57. The dispute between the parties was referred to the adjudication of the industrial tribunal Bombay. The appellant, it appears, had already paid 4 1/2 months ' basic wages as bonus for the relevant year but the respondents claimed it at the rate of six months ' basic wages subject to the minimum of Rs. 250 per employee. 169 The tribunal went into the figures and after making the relevant calculations came to the conclusion that the available surplus worked out according to the Full Bench formula justified the grant of bonus equal to five months ' basic salary; it therefore ordered payment of this amount excluding the amount already paid. The appellant in its appeal claims that the tribunal should have allowed nothing more than what the appellant had already paid; the respondents in their appeal on the other hand claim that they should have been allowed six months ' bonus. The principles on which bonus has to be calculated have already been decided by this Court in the Associated Cement Companies Ltd. vs Their Workmen (1) and the only question that arises for our consideration is whether the tribunal in making its calculations has acted in accordance with those principles. This leads us to the consideration of various points raised on behalf of the parties to show that the tribunal had not acted in all particulars in accordance with the decision in the Associated Cement Companies ' case (1). We shall first take the points raised on behalf of the appellant. The first point raised is that the tribunal was wrong in not allowing a sum of rupees one lac paid as contribution to political fund as an item of expense. It is urged that this is a permissible item of expense and therefore the tribunal should not have added it back in arriving at the gross profits. We are of opinion that the tribunal was right in not allowing this amount as expenditure. In effect this payment is no different from any amount given in charity by an employer, and though such payment may be justified in the sense that it may not be against the Articles of Association of a company it is nonetheless an expense which need not be incurred for the business of the company. Besides, though in this particular case the donation considering the circumstances of the case was not much, it is possible that permissible donations may be out of all proportion and may thus result in reducing the available (1) [1059] 2 S.C.R. 925. 22 170 surplus from which low paid workmen are entitled to bonus. We are therefore of opinion that though the law or the rules of the company may permit the appellant to pay such amounts as donations to political funds, this is not a proper expense to be deducted when working out the available surplus in the light of the Full Bench formula. The tribunal 's decision therefore on this point must be upheld. The second contention of the appellant relates to deduction of what it calls extraneous income. This matter has been considered by this Court in The Tata Oil Mills Co. Ltd. vs Ite Workmen and Others (1) and what we have to see is whether in accordance with the decision in that case, the appellant 's claim for deducting certain amounts as extraneous income is correct. Learned counsel for the appellant has pressed four items in this connection. The first item relates to a sum of Rs. 3.47 lacs. It is said that this was not the income of the year and therefore should not have been taken into account in arriving at the gross profits. The exact position with respect to this item is not clear and in any case learned counsel for the appellant appearing before the tribunal conceded that the amount could not be deducted from the profits. In view of that concession we are not prepared to allow the deduction of this amount as extraneous income. The second item is a sum of Rs. 1.76 lacs in respect of the rebate earned on insurance by the appellant with other companies by virtue of its holding principal agency. Obviously this is part of the insurance business of the appellant and the work in this connection is entirely handled by the insurance department of the appellant; as such the tribunal was right in not allowing this amount as extraneous income. The third item is a sum of Rs. 3 33 lacs being gain on foreign exchange transactions. These transactions are carried on in the normal course of business of the appellant. As the tribunal has rightly pointed out, if there had been loss on these transactions it would have certainly gone to reduce the gross profit,%; if there is a profit it has to be taken into account as (1)[1960] 1 S.C.R. 1. 171 it has arisen out of the normal business of the appellant. The tribunal was therefore right in not allowing this amount as extraneous income. The last item is a sum of Rs. 9.78 lacs being commission on transactions by government agencies and other organisations with manufacturers abroad direct. It seems that the appellant is the sole agent in India of certain foreign manufacturers and even when transactions are made direct with the manufacturers the appellant gets com mission on such transactions. The tribunal has held that though the transactions were made direct with the foreign manufacturers, the respondents were entitled to ask that the commission should be taken into account inasmuch as the respondents serviced the goods and did other work which brought such business to the appellant. It seems that there is no direct evidence whether these particular goods on which this commission was earned were also serviced free by the appellant like other goods sold by it in India. We asked learned counsel for the parties as to what the exact position was in the matter of free service to such goods. The learned counsel however could not agree as to what was the exact position. It seems to us that if these goods are also serviced free or for charges but in the same way as other goods sold by the appellant in India, the respondents are entitled to ask that the income from commission on these goods should be taken into account. As however there is no definite evidence on the point we cannot lay down that such commission must always be taken into account. At the same time, so far as this particular year is concerned we have to take this amount into account as the appellant whose duty it was to satisfy the tribunal that this was extraneous income has failed to place proper evidence as to servicing of these goods. A claim of this character must always be proved to the satisfaction of the tribunal. In the circumstances we see no reason to interfere with the order of the tribunal so far as this part of its order is concerned. Two other points have been urged on behalf of the 172 appellant with respect to the interest allowed on capital and on working capital. The tribunal has allowed the usual six per cent on capital and four per cent on working capital. The appellant claimed interest at a higher rate in both cases. We agree with the tribunal that there is no special reason why any higher rate of return should be allowed to the appellant. This brings us to the objections raised on behalf of the respondents. The main objection is to a sum of Rs. 4.4 lacs allowed by the tribunal as income tax, which is said to be with respect to the previous year. It appears that there is a difference between the accounting year of the appellant and the financial year. In the particular year in dispute there was an increase in the rate of tax which resulted in extra payment which had to be paid in this year. In these special circumstances, therefore, the tribunal allowed this amount and we see no reason to disagree. Next it is urged that the tribunal had allowed a sum of Rs. 4.76 lacs for making provision for gratuity as a prior charge. This is obviously incorrect, as this Court has pointed out in the Associated Cement Companies ' case (1) that no fresh items of prior charge can be added to the Full Bench formula, though at the time of distribution of available surplus such matters, as provision for gratuity and debenture redemption fund, might be taken into account. This disposes of the objections relating to the accounts. Two other points have been urged on behalf of the respondents. They are with respect to (1) salesmen and (2) apprentices. The tribunal has excluded these two categories from the award of bonus made by it. The respondents contend that they should also have been included. We are of opinion that the decision of the tribunal in this behalf is correct. So far as salesmen are concerned, the tribunal has examined the relevant decisions of other tribunals and has come to the conclusion that salesmen who are given commission on sales are not treated on par with other workmen in the matter of bonus. It has also been found that the clerical work done by salesmen is small and incidental to their duty as such; salesmen have (1) 173 therefore been held not to be workmen within the meaning of the Industrial Disputes Act. The tribunal has pointed out that the commission on an average works out at about Rs. 1,000 per mensem in the case of salesmen and therefore their total emoluments are quite adequate. Besides, the salesmen being paid commission on sales have already taken a share in the profits of the appellant on a fair basis and therefore there is no justification for granting them further bonus out of the available surplus of profits. As for the apprentices, the tribunal has held that there is a definite term of contract between them and the appellant by which they are excluded from getting bonus. Besides, as the appellant has pointed out, the apprentices are merely learning their jobs and the appellant has to incur expenditure on their training and they hardly contribute to the profits of the appellant. The view of the tribunal therefore with respect to apprentices also is correct. We now turn to calculation of the available surplus according to the decision in the Associated Cement Companies ' case (1). The gross profit found by the tribunal will stand in view of what we have said with respect to various items challenged by either party. The chart of calculation will be as follows: in Lacs Gross profits Rs. 109.97 Less depreciation 3.28 Balance 106.69 Less income tax @ 51.15 per cent. 54.20 Balance 52.49 Less dividend tax, wealth tax etc. 7.50 Balance 44.99 Less return on capital at 6 per cent. 13.20. Balance 31.79 Less return on working capital at 4 per cent. 1.66 Available surplus 30.13. (1) 174 Out of this, the tribunal has allowed five months ' basic wages as bonus to the respondents which works out at Rs. 16.80 lacs. In the circumstances it cannot be said that the award of the tribunal is not justified. We do not think that we would be justified in giving anything more than what the tribunal has awarded, because the appellant has to provide for a fund for gratuity, for it is a new concern which took over the old employees of another concern when it was started and has thus a greater liability towards gratuity than otherwise would be the case. We are therefore of opinion that the tribunal 's award of five months ' basic wages as bonus for the year in dispute should stand. We therefore dismiss both the appeals. In the circumstances we pass no order as to costs. Appeals dismissed.

IN-Abs

The question in this appeal was whether the Tribunal was wrong in not allowing the amount paid to a political fund which was permissible as an item of expense and for disallowing the claim for deduction of certain amounts as extraneous income and whether the salesmen and apprentices were entitled to bonus. 168 Held, that though the law or the rules of the company per mitted the employer to pay amounts as donations to political funds, it was not a proper expense to be deducted when working out the available surplus in the light of the Full Bench formula. Held, further, that neither the profits from transactions which were carried out in the normal course of business, nor the commission earned on transactions entered directly with foreign manufacturers, where the workmen had serviced the goods and did other work which brought such business to the employer, could be allowed as extraneous income. Held, also that the salesmen who were given commission on sales had already taken a share in the profits of the company on a fair basis and there was no justification for granting them further bonus out of the available surplus of profits. That the apprentices hardly contributed to the profits of the company. Thus they were not entitled to any bonus. The Associated Cement Companies Ltd. vs Their Workmen, and The Tata Oil Mills Co. Ltd. vs Its Workmen and Ors., ; , applied.

Appeal No. 370 of 1959. Appeal by special leave from the judgment and order dated August 6, 1957, of the Bombay High Court, Nagpur, in Misc. Petition No. 512 of 1956. M. N. Phadke and Naunit Lal, for the appellant. Shankar Anand and A. G. Ratnaparkhi, for the respondents Nos. 2 4. N.P. Nathvahi, K. L. Hathi and R. H. Dhebar, for the Intervener (State of Bombay). December 9. The Judgment of the Court was delivered by WANCHOO, J. This is an appeal by special leave in an industrial matter. The appellant is the manager of a biri factory in Nagpur. Respondents 2 to 4 are working in that factory. They applied for leave for fifteen days from December 18, 1955, to January 1, 1956, and did not go to work during that period. The appellant did not pay their wages for these days and in consequence they applied to the Payment of Wages Authority (hereinafter called the Authority) for payment to them of wages which had been withheld. Their claim was that they were entitled to fifteen days ' leave in the year under sections 79 and 80 of the . The Authority allowed the claim and granted them a sum of Rs. 90/16/ in all as wages which had been withheld for the period of leave. Thereupon, the appellant filed an application under article 226 of the Constitution before the High Court at Nagpur. His main contention was that respondents 2 to 4 were not workers within the meaning of the and could not therefore claim the benefit 163 of a. 79 thereof The respondents contended that they were workers within the meaning of the and were entitled to the sum awarded to them by the Authority. The High Court on a consideration of the circumstances came to the conclusion that respondents Fir2 to 4 were workers under section 2(1) of the and therefore the order of the Authority was correct and dismissed the petition. The appellant then applied for a certificate to appeal to this Court which was refused. He then obtained special leave from this Court and that is how the matter has come up before US. 2(1) defines a worker to mean a person employed, directly or through any agency, whether for wages or not, in any manufacturing process, or in cleaning any part of the machinery or premises used for a manufacturing process or in any other kind of work incidental to, or connected with, the manufacturing process, or the subject of the manufacturing process. The main contention of the appellant is that respondents 2 to 4 are not employed in the factory within the meaning of that word in section 2(1). Reliance in this connection is placed on two decisions of this Court, namely, Dharangadhara Chemical Works Ltd. vs State of Saurashtra (1) and Shri Chintaman Rao vs The State of Madhya Pradesh (2). In Dharangadhara Chemical Works (1), this Court held with reference to section 2 (s) of the Industrial Disputes Act, which defined "workman" that the word "employed" used therein implied a relationship of master and servant or employer and employee and it was not enough that a person was merely working in the premises belonging to another person. A distinCtion was also drawn between a workman and an independent contractor. The prima facie test whether the relationship of master and servant or employer and employee existed was laid down as the existence of the right in the employer not merely to direct what work was to be done but also to control the manner in which it was to be done, the nature or extent of such control varying in different industries and being (1) ; (2) ; 164 by its nature incapable of being precisely defined. The correct approach therefore to the question was held to be whether having regard to the nature of the work, there was due control and supervision of the employer. The matter came up again for consideration in Chintaman Rao 's case (1) which also happened to relate to biri workers, and section 2(1) of the had to be considered in it. It was held that the test laid down in Dharangadhara Chemical Works (2) with respect to section 2(s) of the Industrial Disputes Act would also apply to section 2(1) of the . Finally, it was pointed out that the question whether a particular person working in a factory was an independent contractor or a worker would depend upon the terms of the contract entered into between him and the employer and no general proposition could be laid down, which would apply to all cases. Thus in order to arrive at the conclusion whether a person working in a factory (like respondents 2 to 4 in this case) is an independent contractor or a worker the matter would depend upon the facts of each case. Let us then turn to the facts which have been found in this case. It has been found that the respondents work at the factory and are not at liberty to work at their homes. Further they work within certain hours which are the factory hours, though it appears that they are not bound to work for the entire period and can go away whenever they like; their attendance is noted in the factory; and they can come and go away at any time they like, but if any worker comes after midday he is not supplied with tobacco and is thus not allowed to work, even though the factory closes at 7 p.m. in accordance with the provisions of the and when it is said that they can return at any time, it is subject to the condition that they cannot remain later than 7 p.m. There are standing orders in the factory and according to those standing orders a worker who remains absent for eight days (presumably without leave) can be removed. The payment is made on piece rates according to the amount of work done but the management has the (1) ; (2) ; 165 right to reject such biris as do not come up to the proper standard. It is on these facts that we have to decide the question whether respondents 2 to 4 were employed by the appellant. It will be immediately noticed that the facts in this case are substantially different from the facts in Shri Chintaman Rao 's case (1). In that case the factory entered into contracts with independent contractors, namely, the Sattedars, for the supply of biris. The Sattedars were supplied tobacco by the factories and in some cases biri leaves also. The Sattedars were not bound to work in the factory nor were they bound to prepare the biris themselves but could get them prepared by others. The Sattedars also employed some coolies to work for them and payment to the coolies was made by the Sattedars and not by the factory. The Sattedars in their turn collected the biris prepared by the coolies and took them to the factory where they were sorted and checked by the workers of the factory and such of them as were rejected were taken back by the Sattedars to be remade. The payment by the factory was to the Sattedars and not to the coolies. In these circumstances it was held that the Sattedars were independent contractors and the coolies who worked for them were not the workers of the factory. The facts of the present case, however, are different. Respondents 2 to 4 have to work at the factory and that in itself implies a certain amount of supervision by the management. Their attendance is noted and they cannot get the Work done by others but must do it themselves. Even though they are not bound to work for the entire period during which the factory is open it is not in dispute that if they come after midday, they are not given any work and thus lose wages for that day, the payment being at piece rates. Further though they can stay away without asking for leave, the management has the right to remove them if they so stay away for a continuous period of eight days. Lastly, there is some amount of supervision inasmuch as the management has the right of rejection of the biris prepared if they do not come up to the proper standard. (1) ; 166 The question therefore that arises is whether in these circumstances it can be said whether the appellant merely directs what work is to be done but cannot control the manner in which it has to be done; of course, the nature or extent of control varies in different industries and cannot by its very nature be precisely defined. Taking the nature of the work in the present case it can hardly be said that there must be supervision all the time when biris are being prepared and unless there is such supervision there can be no direction as to the manner of work. In the present case the operation being a simple one, the control of the manner in which the work is done is exercised at the end of the day, when biris are ready, by the method of rejecting those which do not come up to the proper standard. In such a case it is the right to supervise and not so much the mode in which it is exercised which is important. In these circumstances, we are of opinion that respondents 2 to 4 who work in this factory cannot be said to be independent con tractors. The limited freedom which respondents 2 to 4 have of coming and going away whenever they like or of absenting themselves (presumably without leave) is due to the fact that they are piece rate workers; but the mere fact that a worker is a piece rate worker would not necessarily take him out of the category of a worker within the meaning of section 2(1) of the . Considering the entire circumstances and particularly the facts that if the worker does not reach the factory before midday he is given no work, he is to work at the factory and cannot work else where, he can be removed if lie is absent for eight days continuously and finally his attendance is noted and biris prepared by him are liable to rejection if they do not come up to the standard, there can be no doubt that respondents 2 to 4 are workers within the meaning of section 2(1) of the . This is also the view taken by the Bombay High Court in State vs Shankar Balaji Waje (1) in similar circumstances and that we think is the right view. Then it was urged that even if the respondents are (1) A.I.R. 1960 Bom. 167 workers under section 2(1), section 79 should not be applied to them as they can absent themselves whenever they like. In this very case it is said that the respondents remained absent for a longer period than that provided in the Act and therefore they do not need any leave. This argument has in our opinion no force. The leave provided under section 79 arises as a matter of right when a worker has put in a minimum number of working days and he is entitled to it. The fact that the respondents remained absent for a longer period than that provided in s, 79 has no bearing on their right to leave, for if they so remained absent for such period they lost the wages for that period which they would have otherwise earned. That however does not mean that they should also lose the leave earned by them under section 79. In the circumstances they were entitled under section 79 of the to proportionate leave during the subsequent calendar year if they had worked during the previous calendar year for 240 days or more in the factory. There is nothing on the record to show that this was not so. In the circumstances the appeal fails and is hereby dismissed with costs. One set of hearing costs. Appeal dismissed.

IN-Abs

The appellant employed workmen in his bidi factory who had to work at the factory and were not at liberty to work at their houses; their attendance were noted in the factory and they had to work within the factory hours, though they were not bound to work for the entire period and could come and go away when they liked; but if they came after midday they were not supplied with tobacco and thus not allowed to work even though the factory closed at 7 p.m.; further they could be removed from service if absent for 8 days. Payment was made on piece rates according to the amount of work done, and the bidis which did not come upto the proper standard could be rejected. The respondent workmen applied for leave for 15 days and did not go to work, for which period the appellants did not pay their wages; in consequence the concerned workmen applied to the Payment of Wages Authority for payment of wages to them. The appellant 's contention that the respondent workmen were not his workmen within the meaning of the , was rejected and the claim for payment of wages was allowed. The question therefore was whether the appellants were workmen within the meaning of the . Held, that the nature of extent of control varies in different industries and cannot by its very nature be precisely defined. When the operation was of a simple nature and could not be supervised all the time and the control was at the end of day by the method of rejecting the work done which did not come up to proper standard, then, it was the right to supervise and not so much the mode in which it was exercised which would determine whether a person was a workman or an independent contractor. The mere fact that a worker was a piece rate worker would not necessarily take him out of the category of a worker within the meaning of section 2(1) Of the . In the instant case the respondent workmen could not be said to be independent contractors and were workmen within the meaning of section 2(1) of the . Held, further, that the leave provided for under section 79 of the arose as a matter of right when a worker had put 21 162 in a minimum number of working days and he was entitled to it. The fact that the workman remained absent for a longer period had no bearing on his right to leave. State vs Shankar Balaji Waje, A.I.R. 1960 Bom. 296, approved. Dharangadhara Chemical Works Ltd. vs State of Saurashtra, ; and Shri Chintaman Rao vs The State of Madhya Pradesh, ; , referred to.

Appeal No. 506 of 1957. Appeal from the judgment and order dated July 21, 1955, of the High Court of Andhra, Guntur, in Writ Appeal No. 122 of 1954. K. N. Rajagopala Sastri and D. Gupta, for the appellant. T. V. B. Tatachari, for the respondent. December 8. , J. This appeal by the State of Andhra is from the judgment of the High Court, Andhra, dated July 21, 1955, on a ' certificate under article 133(1) (c) of the Constitution. The respondent joined the Madras Police Force as a Constable on September 1, 1939. He became a permanent Head Constable in 1946 and was promoted to officiate as a Sub Inspector on October 1, 1947, when his probation commenced. By order dated September 24, 1950, he was declared to have satisfactorily completed his period of probation and was brought to the "A" list with effect from September 10, 1950. He 47 was still merely officiating as a Sub Inspector, the effect of his being placed in List "A" being that he came into the category of an "approved probationer", i.e., fit for being confirmed as Sub Inspector when substantive vacancies arose. On August 3, 1952, the District Superintendent of Police, Krishna, issued an order reverting the respondent to the rank of Head Constable with effect from August 14, 1952, i.e., to the post which he substantively held, for the reason that there was not a sufficient number of vacancies in the post of Sub Inspectors for being filled by him. It may be mentioned that such reversion was not confined to the respondent alone but extended to 'a very large number of officiating Sub Inspectors, who were similarly promoters from the rank of Head Constables. The reverted officers petitioned to the Inspector General of Police and in reply thereto and in further explanation and clarification of the reasons for the reversions the Inspector General of Police, Madras, issued a memorandum on January 15, 1953, in the following terms: "MEMORANDUM. Sub: Officiating Sub Inspector Reverting as Head Constables Seniority over direct recruits Petitions. As direct recruits are recruited against vacancies specially reserved for them and cannot be reverted for want of vacancies, seniority between directly recruited Sub Inspectors and promoted Sub Inspectors should be determined separately. Their contention that they should not have been reverted in preference to direct recruits is not, therefore, correct. Their reversion as Head Constables is in order. " The respondent thereafter submitted a memorial to Government in which the principal challenge was to the view of the Government that the directly recruited Sub Inspectors formed a category distinct from the promotee Sub Inspectors as not being countenanced by the relevant rules relating to the constitution of the Police Establishment. Not having obtained any redress by reason of his memorial, the respondent 48 filed before the High Court of Madras a petition under article 226 of the Constitution (Writ Petition No. 524 of 1953) and prayed therein that the State of Madras may be directed by the issue of a writ of mandamus to refrain from enforcing the order reverting him as Head Constable but to consider his claim to be confirmed as Sub Inspector on the basis of his seniority in the list of approved probationers. Balakrishna Iyer, J., who heard the petition allowed it and issued a direction to the State "to forbear from giving effect to the ' order of reversion if the petitioner by virtue of his seniority among promoters can be included in the 30 per cent. already referred to". We shall be dealing in detail with the nature and scope of the rule as to the 30 per cent. referred to here, which formed the basis of the learned Judge 's order in its proper place and will not interrupt the narration of the events which have led to the appeal now before us. The State preferred an appeal from this judgment which was transferred to the High Court of Andhra after that Court. was formed. The learned Judges who heard the appeal differed from the learned Single Judge in his view as to the scope of the rule as to 30 per cent. but dismissed the appeal holding that the Government in directing the reversion of the promotee probationers had not observed strictly the relevant rule as to juniority prescribed in rule 5 of the Service Rules, to which rule we shall refer in due course. The State of Andhra thereafter moved the High Court for the grant of a certificate and having obtained it, has filed this appeal. Though in his petition under article 226 filed before the High Court of Madras, the petitioner had alleged that his reversion from the officiating post of Sub Inspector to his substantive post as Head Constable was a reduction in rank within the meaning of article 311(2) of the Constitution, i.e., a reduction by way of punishment effected without giving him an opportunity to show cause therefor, this contention was abandoned early in the proceedings before the Court and the case has proceeded throughout on both sides on the footing that the reversion was effected solely for administrative 49 reasons and not for any misconduct by way of punishment. Indeed, it may be mentioned that when the respondent was normally due for promotion to the substantive post of Sub Inspector without reference to the judgment of the High Court he was duly promoted to that post and he now occupies the post of a Sub Inspector drawing the increments and salary fixed therefor. Article 311(2) being out of the way. the questions that arise fall under two heads: (1) Was there a violation of the Service Rules when the respondent was reverted as Head Constable? (2) If there was such a violation, do breaches of Service Rules by themselves constitute an infringement of the legal rights of officers to whom they apply, entitling them to seek remedies therefor before Courts. The rules on the construction of which the answer to the first point depends are those framed, inter alia, under section 243 of the Government of India Act, 1935, entitled "Rules relating to the Madras Police Subordinate Service". Rule 3 which relates to recruitment and which was held to be violated, by the learned Single Judge ran in these terms: "Rule 3. Method of appointment and promotions: (a) Appointment to the several classes and categories shall be made as indicated in Annexure 1. ANNEXURE I Category 2 Method of Limitation Appointing appointment authority (1) (2) (3) (4) Sub Inspec Promotion Up to not In the mofus tors from Head more than sil the D.I.G. Constables 30% of the Police con Cadre cerned Direct recruitment Nil do This is followed by rules 4 and 5 which read: "Rule 4. Right of probationers and approved probationers to appointment to vacancies: A 7 50 vacancy in any class or category shall not be filled by the appointment of a person who has not yet commenced his probation in such class or category when an approved probationer or a probationer therein is available for such appointment. " "Rule 5. Order of discharge of probationers and approved probationers: (a) The order in which probationers and approved probationers. shall be discharged for want of vacancies shall be first, the probationers in order of juniority; and ,second, the approved probationers in order of juniority. (b) The order of discharge laid down in sub rule(a) may be departed from in cases where such order would involve excessive expenditure on traveling allowance or exceptional administrative inconvenience. " The other rules merely carry out the principles underlying those extracted and do not need to be set out. To appreciate the points urged before us by the learned counsel for the appellant State on the proper interpretation of these rules, it is necessary to set out the contentions respectively urged by the two parties in the Courts below and how they were dealt with. On behalf of the respondent the points urged were: (1) That on a proper construction of Rule 3, promotee Sub Inspectors referred to in departmental parlance as rank promotees, as distinguished from those directly recruited were entitled to be appointed to a minimum of 30 per cent. of the cadre strength and that this rule was violated in that at the time of the respondent 's reversion the force consisted only of less than 25 per cent. of rank promotees and more than 75 per cent. of those directly recruited. If the rule as to the proportion of appointments as laid down in Rule 3 had strictly been followed there would have been no necessity for reverting the respondent as Head Constable. (2) The3O per cent. and the 70 per cent. laid 51 down in r. 3 applied only at the stage of the initial recruitment of Sub Inspectors and that when once that recruitment was made and the probation of the officers started, no difference could under the rules be thereafter made between the two classes of appointees but that both of them constituted one unified force the members of which were entitled to be appointed to substantive posts as full members of the Service solely on the basis of their inter se seniority (apart from misconduct or inefficiency, etc.). The appointment to substantive posts of officers directly recruited in preference to persons like the respondent whose probation had commenced at an earlier date was therefore a violation of r. 4 of the Service Rules. (3) If at any time the cadre strength was reduced by the abolition of temporary posts there might have, to be reversions, but in reverting officers the rule as to juniority laid down by r. 5(a) had to be strictly followed. This rule made no distinction between Sub Inspectors appointed directly and rank promotees. Both formed a single category and among them those who had not completed their probation had to be reverted first and thereafter the approved probationers in the order of their juniority. In the present case the respondent urged that approved probationers like himself who were senior to several of the officiating Sub Inspectors directly recruited had been reverted out of turn in violation of r. 5(a). (4) If in the circumstances stated by the Government (which would be mentioned later), the directly recruited Sub Inspectors could not properly be reverted because of the assurances given to them, Government were bound to retain all rank promotee approved probationers as officiating Sub Inspectors until they could be appointed in substantive vacancies as full members thereof. In answer to these contentions the case which the State put forward was as follows: (1) The rule as to the proportion between the rank promotees and direct recruits laid down by r. 3 read with the Annexure, fixed only the maximum percentage of rank promotees. The words "up to, not 52 more than" meant and could in the context mean only, that the maximum proportion of rank promotees could be only 30 per cent. This was made clear by there being no limitation placed on the proportion of direct recruits. In other words, the 30 per cent. was the ceiling fixed and not any minimum and the rule in effect guaranteed direct recruits a minimum proportion of 70 per cent. There was therefore no violation of this rule when the, proportion of rank promotees fell to a little below 25 per cent. at the relevant date. (2) Even if r. 3 had been strictly followed the respondent would have derived no benefit from the operation of that rule because he was well below the level of rank promotees who would even then had to be absorbed. It may be mentioned that it was because of this feature that the order of Balakrishna lyer, J., took the form of directing the Government"to forbear from giving effect to the order of reversion if the petitioner by virtue of his seniority among promotees can be included among 30 per cent. " (3) On a proper construction of the rules, the proportions laid down in r. 3 applied whether or not at the stage of the initial recruitment, certainly at the stage of appointments to substantive posts, i.e., absorption as full members of the permanent strength of the cadre. It was their further contention based on the above, that for considering confirmations provided for by r. 4 the category of direct recruits had to be treated as a class different from the category of rank promotees and there was no question of seniority as between members of the two groups but only within each group. On this basis the State Government urged that at the stage of absorption governed by r. 4 the rule as to proportion had to be worked out and that consequently there had been no violation of that rule. (4) There had been no violation of r. 5 either, on two grounds (1) based on denying that there was a unified category of Sub Inspectors and in putting forward that the two classes which made up the Service, viz., direct recruits and rank promotees formed 53 different categories, and (ii) that even if they formed a single category of officers after their initial appoint ments, there had been no violation of the rule fixed for reversion by r. 5(a) by reason of the special circumstances of the case which brought their action within the specific provision in r. 5(b). In connection with this last submission it was pointed out that at the time of the police action in Hyderabad a large number of persons were recruited direct as Sub Inspectors to whom an assurance had been given that they would not be reverted. A large number of such temporary appointments were made and these directly recruited Sub Inspectors had to be provided with posts when temporary posts were getting abolished. This introduced an administrative problem which could be solved only by reverting the rank promotees. We shall now proceed to a consideration of the points thus in controversy between the parties and which were urged on either side before us. The first point to be dealt with is as to whether there had been an infraction of r. 3 of the Service Rules by reason of the proportion of rank promotees being less than 30 per cent. of the total number of Sub Inspectors in service at the date of the respondent 's reversion. As has already been pointed out, the learned Single Judge had rested his decision in favour of the respondent on an infraction of this rule, but the learned Judges of the High Court in appeal had taken a different view. Learned Counsel for the respondent sought to support the view that the words "up to, not more than 30 per cent" in the rule meant up to a minimum of 30 per cent. the effect of the addition of the words " not more than" being merely to eliminate fractions and permit the number to be rounded off to the nearest lower integer. It would be seen that the learned Single Judge had stressed the use of the words "up to" and practically gave no effect to the words " not more than" in arriving at the construction that he adopted. We consider that this construction is erroneous, particularly in the context of the provision as regards direct recruits, in regard to whom there is no limitation placed on the proportion which they 54 could have in the Service. Taken in conjunction with this provision it is clear that the words "up to, not more than" merely fix the maximum percentage of rank promotees in the category, leaving it to the appointing authorities to adopt any percentage below this figure. We consequently endorse the view which the learned Judges of the Andhra High Court took in dissenting from the construction which the learned Single Judge placed on the scope of r. 3. The reversion of the respondent cannot, therefore, be challenged on the ground that there had been an infraction of r. 3 of the Service Rules. The next question is as to whether r. 4 of the Service Rules by which confirmations were regulated, had been violated in promoting the more junior direct recruits to substantive posts in preference to rankpromotees like the respondent who were senior to them in service in the sense that the latter 's probation as officiating Sub Inspectors commenced earlier. The application of these rules in the context of the facts of this case depends largely on whether rank promotees and officers directly recruited form or do not form the same class or category becoming integrated into, one Service on their initial appointment to the Service. It is common ground that the two classes become integrated as members of a unified Service after appointment as full members of the Service. The point in controversy is limited to the period between the date of their initial appointment and their absorption as full members. If up to that date they formed two categories and the seniority in each group ha,,; to be reckoned separately, the order of the Government would be perfectly in order and constitute no breach of the rules. But if on the other hand officers recruited by either of the two modes promotions from the rank of Head Constables and Sub Inspectors directly recruited form an integrated and unified force from the very commencement of their appointments, then on the application of r. 4 confirmations ought to depend on mere seniority (subject to factors relevant to merit or demerit) as officiating Sub Inspectors without regard to the manner in which they were originally appointed. Though the 55 learned Single Judge did not directly pronounce on the effect of r. 4, the Andhra High Court held that the rule of seniority.prescribed by the rule had been violated. After expressing their disagreement with the learned Single Judge in his view that the minimum of 30 per cent. laid down by r. 3 had been violated, they observed: "Nor does it follow that we can countenance the argument of the learned Government Pleader that irrespective of the percentage of promoters on the cadre at a given time, all vacancies can be filled up, if the Government so chooses, only with direct recruits. We think that from both the classes of approved probationers, be it direct recruits or be it candidates from the ranks, selection should be made without any distinction, provided of course that so far as promotees are concerned the percentage of 30 is not exceeded. Now, it is admitted by the Government that the percentage of promotees, was only 24.5 at the time when the petitioner was sent back as Head Constable. That being so, it cannot be con tended for the State that the ceiling will be exceeded if the petitioner is promoted. As we read the rules, when once an officer qualifies as an approved probationer, no distinction can be made between him and a direct recrui t approved probationer. " We are unable to agree with the reasoning or the conclusion here expressed. It would be seen that the learned Judges have, though tacitly, accepted the case put forward by the Government, and in our view correctly, that the integration of the two groups is only after the stage of absorption as full members of the Service, and that at that stage the rule as to the proportion laid down in the annexure to r. 3 comes into operation. If the 30% which is the limit set for rank promotees for absorption as full members is merely a ceiling imposed for the benefit of direct recruits, as rightly held by the learned Judges, it is difficult to see how the rule could be Held to be violated because the proportion of rank promotees confirmed fell below the figure of 30. We, therefore, consider that there was no violation of the rule as to seniority 56 prescribed by r. 4 in the appointment of the direct recruits to substantive posts before the absorption of rank promotees like the respondent. We shall next proceed to deal with r. 5 which deals with the power of Government to effect reversions and the conditions and limitations prescribed there for. It would be seen that cl. (a) of r. 5 substantially reverses for the purpose of discharge or reversion the order in which confirmations are to be made as set out in r. 4. We have held that the respondent had no right under the rules to insist on his being confirmed, on the terms of r. 4 read in the light of r. 3. On the same line of reasoning it would follow that as direct recruits and rank promotees belonged to distinct classes the juniority for reversion had to be determined separately for each class and not on the basis of the two classes forming part of a unified force before con firmation. If ' this test were applied, it cannot be contended that the reversion of the respondent infringed r. 5(a). But this apart, the impugned order could also be sustained on the basis of the provision contained in cl. (b) of r. 5 which reads: "The order of discharge laid down in sub rule (a) may be departed from in cases where such order would involve excessive expenditure on travelling allowance or exceptional administrative inconvenience. " In the present case the Government explained their reason for the order for reversion of rank promotees in the affidavit which they filed to the writ petition in these terms: "His reversion was necessitated by the fact that a large number of Sub Inspectors on other duty in Hyderabad State reverted to this Stat e and that a number of temporary posts created for special purposes during the disturbed period immediately following the police action in Hyderabad had to be abolished and that the direct recruited Sub Inspectors had necessarily to be absorbed as Sub Inspectors as they cannot be asked to work in any lower 57 post being direct recruits to a particular category, viz., that of the Sub Inspector. This reversion of rank promoted Sub Inspectors was rendered absolutely necessary in the exigencies of service and for administrative purposes and as such, it cannot be deemed to be arbitrary or contrary to rules or in the nature of punishment as alleged by the peti tioner. " It was this circumstance that was stated before the High Court of Madras in the Writ Petition as that which brought the impugned order of reversion within "exceptional administrative inconvenience" provided for by the last words of the rule. The learned Single Judge accepted as correct the facts stated by the Government as the reason for the reversion, stating: "Mr. Seshachalapathi explained that Government were in a difficult position as a consequence of the members taken in connection with the police action in Hyderabad. A large number of persons were directly recruited as Sub Inspectors on the assurance that they would not be ousted. I do not suggest that Government should go back on any assurance that they may have given to these direct recruits. Far be it from me to encourage anything that might savour of bad faith on the part of Government. But I would still say that in order that Government may keep faith with those whom they recruited directly as Sub Inspectors they cannot break faith with or ignore the rights of those who were promoted as Sub Inspectors. " If the facts were accepted as correct, and we might point out that their accuracy was never challenged at any stage either in the High Court or before us, it appears to us that the order of reversion passed would be justified as being covered by the last words of cl. (b) even if the order laid down in r. 5(a) were infringed. In these circumstances it is not clear why the learned Judge should have observed: "The Government do not rest their case on Rule 5(b)" when the facts stated by Government and accepted by 8 58 him brought their action well within the scope of that clause. In their memorandum of grounds in Writ Appeal No. 122 of 1954 which the State filed to the High Court the appellants urged: "The learned Judge failed to appreciate the special circumstances of the situation which rendered the reversion necessary in the instant case". When the matter was before the High Court of Andhra the learned Judges observed"The learned Judge stated in his, judgment that the Government do not rest their case on Rule 5(b)". In their turn they too accepted the case of the Government as regards the circumstances which necessitated the order of reversion and observed: "The Government frankly stated, however, that they were in a difficult position because of certain measures which they were compelled to take in connection with the police action in Hyderabad when a large number of persons were directly recruited as Sub Inspectors with the assurance that they would be entertained per manently. In order to keep that assurance with such persons they were constrained to revert the rank promotees but there is no rule which enables the Government to do so. " We must express our dissent from the last sentence extracted above, because r. 5(b) makes specific provision for an order of discharge laid down in cl. (a) being departed from in cases where such order would entail "exceptional administrative inconvenience" and on the facts accepted both by the learned Single Judge and by the High Court of appeal the words extracted were attracted. Before leaving r. 5 there is one other matter to which we desire to advert and that relates to the observation of the High Court in the judgment now under appeal which seems to imply that if the Government found itself in difficulty owing to the assurances given to the officers directly recruited, they could under the rules have solved it, not by ordering the reversion of the rank promotees but by continuing them in their officiating posts until they could be absorbed as full members of the Service. This was one of the contentions urged by the respondent and the learned Judges say: 59 "It seems to us clear that whether they imposed merely a ceiling or whether there is an obligation upon the Government to fill up 30 per cent. of the vacancies from among promotees, the State cannot say, on the facts, before us, that there are no vacancies for promotees as such. " It looks to us impossible to support this view on any construction of the rules. In effect it means either that temporary posts could not be abolished, or that approved probationers could not be reverted. The first alternative could not obviously have been meant and the other is plainly contrary to the terms of r. 5(a) which makes provision for the reversion of approved probationers. Of course, as a measure of relief to their subordinates and to avoid hardship to them Government might retain people in their officiating posts, but it is quite a different thing to import a legal and enforceable obligation on their part to do so. In the view that we have taken that there has been no breach of the Service Rules in ordering the reversion of the respondent as a Head Constable, the question as to whether an infraction of a Service Rule confers a legal right which could be agitated in Court does not arise. We do not propose, therefore, to consider that question and indeed we did not call upon learned counsel for the appellant to argue that part of his case. The appeal is accordingly allowed, the judgment of the High Court set aside and Writ Petition No. 524 of 1953 dismissed. In view of the order of the High Court dated February 3, 1956, by which the appellant was granted a certificate under article 133(1)(c) of the Constitution subject to the condition that the respondent would be entitled to his taxed costs incurred in this Court in any event from the appellant, there will be an order that the appellant will pay the costs of the respondents in the appeal, in this Court. Appeal allowed.

IN-Abs

The respondent, holding the substantive rank of a Head Constable in the Madras Police Service, was promoted to officiate as a probationary Sub Inspector and, on the completion of the period of probation, placed in the category of approved probationers for confirmation when substantive vacancies arose. Instead of being confirmed he was, for administrative reasons, reverted to his substantive post as the number of vacancies in the post of Sub Inspectors was not sufficient to include him. Having failed to obtain redress from the Government, he moved the High Court under article 226 of the Constitution. Annexure 1 of r. 3 of the service rules provided that the percentage of promotions from the rank of Head Constable to that of Sub Inspector was to be "upto not more than 30% of the cadre", but provided no limitation for direct recruitment, r. 4 provided that no vacancy shall be filled by the appointment of a person who had not yet commenced his probation when an approved probationer or a probationer was available; cl. (a) of r. 5 provided that, for want of vacancy, the probationers were to be discharged first in order of juniority and thereafter the approved probationers in order of juniority and cl. (b) provided that this order of discharge might be departed from in cases involving, among others, exceptional administrative inconvenience. The Single judge, who heard the matter, held that there was a violation of r. 3 of the Service Rules and directed the State not to give effect to the order of reversion if by virtue of his seniority he could be included within the 30% prescribed for rank promotees by that rule. The Division Bench, on appeal, disagreed with the trial judge as to the scope of r. 3 but dismissed the appeal holding that the rule as to juniority prescribed by r. 5 of the service rules had not been strictly observed. The State filed an appeal on a certificate granted by the High Court. Held, that the words "upto and not more than 30% Of the cadre" in the Annexure 1 to r. 3, construed in the context of the provision relating to direct recruits which prescribes no limitation, clearly fix 30 as the maximum percentage of promotions 46 from the rank of Head Constables to the post of Sub Inspectors and leave the appointing authorities free to adopt any other percentage below that figure. There could, therefore, be no infraction of the rule if the percentage of rank promotees was less than 30% of the total number of the Sub Inspectors on ' the date of the reversion in question. Rule 4, which regulates the right of probationers and approved probationers to confirmation, applies only to the stage prior to confirmation when the integration of the rank promotees and the direct recruits takes place so as to form a united service and the proportion prescribed by r. 3 has effect. That rule has to be separately applied to the two classes and, consequently, there was no violation of that rule in appointing direct recruits to substantive posts in preference to the respondent. Under r. 5(a) the juniority for purposes of reversion has, on the same reasoning, to be determined separately for the direct recruits and the rank promotees who constitute separate classes. Even otherwise, the impugned order could be sustained under r. 5(b) in view of the case of administrative inconvenience made by the Government and accepted by the Courts below.

Criminal Appeal No. 63 of 1957. Appeal from the judgment and order dated March 2, 1956, of the Bombay High Court in Cr. A. No. 1258 of 1955. H. R. Khanna and R. H. Dhebar, for the appellant. N. section Bindra, for the respondents (Amicus curiae). December 9. The following Judgment of the Court was delivered by AYYANGAR, J. This appeal on a certificate under article 134(1) of the Constitution granted by the High Court of Bombay, principally raises for consideration the application and scope of article 20(2) of the Constitution and s.26 of the . 109 The facts necessary for the appreciation of the points involved in this appeal are few and may be briefly stated. The two respondents section L. Apte and Miss Dwarkabai Bhat were respectively the Managing Director, and the Managing Director of the Women 's department, of an insurance Company by name 'The Long Life Insurance Company ' which had its headquarters at Poona. A power of attorney had been executed by the company in favour of the first respondent in June, 1942, under which he was vested with the power, control and possession inter alia of the moneys belonging to the company with a view to have them invested in proper securities. The second respondent as Manaaing Director also acted under another power of attorney executed by the company in her favour in or about June, 1942, and by virtue thereof she was assisting the first respondent in main taining the accounts of the company. While the respondents were thus functioning, an audit conducted in 1952 disclosed that considerable sums of money amounting to over Rs. 55,000 were shown as cash balances with the first respondent. Further enquiries made by the Directors showed that moneys aggregating to over Rs. 95,000 had from time to time been withdrawn from the company by the first respondent with the assistance and sanction of the second respondent, professedly for the expenses of the company. Among the papers of the company was a voucher dated August 9, 1952, evidencing the withdrawal of this amount by the first respondent and signed by him and this also bore the signature of the second respondent in token of her sanction. The respondents, however, could furnish no proper account of the legitimate expenses of the company for which the amount was purported to be taken. Both the respondents were thereupon prosecuted for an offence under section 409 of the Indian Penal Code and also for an offence under section 105 of the Indian Insurance Act in Criminal Case 82 of 1953. The learned Magistrate convicted and sentenced both the respondents for both the offences with which they were charged. The respondents thereupon filed 110 appeals to the Court of the Sessions Judge, Poona and the learned Sessions Judge, by his order dated May 3, 1954, while confirming the conviction and sentence on the respondents under section 409 of the Indian Penal Code set aside their conviction under section 105 of the Indian Insurance Act. The reason for the latter order was the finding of the learned Sessions Judge that the sanction required by section 107 of the Indian Insurance Act which was a prerequisite for the initiation of the prosecution under section 105 had not been obtained before the complaint in respect thereof had beed filed. The conviction and sentence under section 409 of the Indian Penal Code which had been affirmed by the Sessions Judge in both the cases have now become final. Subsequetly the Insurance Company obtained the sanction of the Advocate General of Bombay under section 107 of the Indian Insurance Act and filed a complaint in the Court of the Judicial Magistrate, Poona, on January 18, 1955, against the two respondents charging each of them with an offence under section 105 of the Indian Insurance Act. The Magistrate took the case on file and directed the issue of process. Thereupon the two respondents made an application before the Magistrate on March 22, 1955, praying that the complaint against them may be dismissed as being barred by section 403(1) of the Criminal Procedure Code, by reason of their previous conviction by the Magistrate for the same offence under the Insurance Act and their acquittal in respect thereof by the Sessions Judge, pleading in addition that when the conviction by the Magistrate stood, they had even undergone a portion of the sentence imposed. The learned Magistrate overruled this plea on the ground that the acquittal of the respondents was not on the merits of the case, but for lack of sanction under section 107 of the Indian Insurance Act which rendered the Magistrate without jurisdiction to entertain the complaint. The trial was then proceeded with and evidence was led. But finally the Magistrate acquitted the respondents on the ground that article 20(2) of the Constitution and section 26 of the were a bar to their 111 conviction and punishment. The State of Bombay thereupon filed an appeal to the High Court under section 417 of the Criminal Procedure Code. The appeal was dismissed by the learned Judges who however granted a certificate on the strength of which this appeal has been preferred. As the prosecution against the respondents under section 105 of the Insurance Act has been held to be barred by reason of the provisions contained in article 20(2) of the Constitution and section 26 of the , it would be convenient to set out these provisions before entering on a discussion of their content and scope. Article 20(2) of the Constitution runs: "No person shall be prosecuted and punished for the same offence more than once. " Section 26 of the enacts: "Where an act or omission constitutes an offence under two or more enactments, then the offender shall be liable to be prosecuted and punished under either or any of those enactments, but shall not be liable to be punished twice for the same offence." As the application of these two provisions is conditioned by the identity of the two offences which form the subject of the prosecution or prosecutions, we might as well reproduce the relevant provisions constituting the two offences, viz., section 409 of the Indian Penal Code and section 105 of the Indian Insurance Act: "409. Whoever, being in any manner entrusted with property, or with any dominion over property in his capacity of a public servant or in the way of his business as a banker, merchant, factor, broker, attorney or agent, commits criminal breach of trust in respect of that property, shall be punished with imprisonment for life, or with imprisonment of either description for a term which may extend to ten years, and shall also be liable to fine. " Criminal breach of trust referred to in the section is defined in section 405 of the Indian Penal Code in these terms: "405. Whoever, being in any manner entrusted 112 with property, or with any dominion over property, dishonestly misappropriates or converts to his own use that property, or dishonestly uses or disposes of that property in violation of any direction of law prescribing the mode in which such trust is to be discharged. or of any legal contract, express or implied, which he has made touching the discharge of such trust, or wilfully suffers any other person so to do, commits 'criminal breach of trust '. " The offence created by the Indian Insurance Act is as follows: "105. (1) 'Any director, managing agent, manager or other officer or employee of an insurer who wrongfully obtains possession of any property of the insurer or having any such property in his possession wrongfully withholds it or wilfully applies it to purposes other than those expressed or authorised by this Act shall on the complaint of the Controller made after giving the insurer not less than fifteen days ' notice of his intention, or, on the complaint of the insurer or any member or any policy holder thereof, be punishable with fine which may extend to one thousand rupees and may be ordered by the Court trying the offence to deliver up or refund within a time to be fixed by the Court any such property improperly obtained or wrong fully withheld or wilfully misapplied and in default to Buffer imprisonment for a period not exceeding two years. (2)This section shall apply in respect of a provident society as defined in Part III as it applied in respect of an insurer." Before addressing ourselves to the arguments urged before as by the Yearned Counsel for the appellant State it is necessary to set out one matter merely to put it aside. The entire argument on behalf of the State before the High Court proceeded on denying that the order of a Criminal Court passed under section 105 of the Indian Insurance Act directing the accused to "deliver up or refund. any such property improperly withheld or wilfully misapplied" was a "punish ment" within either article 20(2) of the Constitution or 113 section 26 of the . The learned Judges of the High Court rejected this contention. Though learned Counsel for the appellant originally submitted that he was contesting this conclusion of the High, Court, he did not address us any argument under that head and we do not therefore find it necessary to dwell on this point any further, but shall proceed on the basis that a direction by the Magistrate to replace the moneys of the insurer with a penalty of imprisonment in default of compliance therewith was a "punishment" within article 20(2) of the Constitution and section 26 of the . Turning to the main points urged before us, we may premise the discussion by stating that it was not disputed before us by learned Counsel for the State, as it was not disputed before the learned Judges of the High Court, that the allegations to be found in the original complaint in Criminal Case 82 of 1953 on which the conviction under section 409 of the Indian Penal Code was obtained were similar to the allegations to be found in the complaint under section 105 of the Indian Insurance Act. It should, however, be mentioned that there was not any complete identity in the statement of facts which set out the acts and omissions on the part of the respondents which were alleged to constitute the two offences section 409 of the Indian Penal Code and section 105 of the Insurance Act. For instance, in the complaint which has given rise to this appeal, the crucial paragraphs detailing the allegations are 12 and 13 of the complaint which run: "12. The company submits that the accused has thus wrongfully obtained possession of Rs. 95,000 or having that property in his possession wrongfully withheld it or wilfully applied it to purposes other than those expressed or authorised by the , and committed an offence on the 9th August, 1952, under Sectionof the ." "13. The company through their Solicitorscalled upon the accused to explain his conduct within7 15 114 days from the receipt of the letter. The accused has failed and neglected to reply to the said letters. " It is obvious that on these allegations alone the offence of criminal breach of trust could not be established as they lack any reference to any entrustment or to the dishonest intent which are the main ingredients of the offence of criminal breach of trust. But to this point about the difference in the ingredients of the two offences we shall revert a little later. Even assuming that the allegations to be found in the two complaints were identical, the question, however, remains whether to attract the ban imposed by either article 20(2) of the Constitution or section 26 of the General ClausesAct on a second punishment, it is sufficient that the allegations in the two complaints are substantiallythe same or whether it is necessary further that theingredients which constitute the two offences should be identical. We shall first take up for consideration article 20(2) of the Constitution whose terms we shall repeat: "20. (2) No person shall be prosecuted and punished for the same offence more than once. " To operate as a bar the second prosecution and the consequential punishment thereunder, must be for "the same offence". The crucial requirement therefore for attracting the Article is that the offences are the same, i.e., they should be identical. If, however, the two offences are distinct, then notwithstanding that the allegations of facts in the two complaints might be substantially similar, the benefit of the ban cannot be invoked. It is, therefore, necessary to analyse and compare not the allegations in the two complaints but the ingredients of the two offences and see whether their identity is made out. It would be seen from a comparison of section 105 of the and a. 405 of Indian Penal Code (a. 409 of the Indian Penal Code being only an aggravated form of the same offence) that though some of the necessary ingredients are common they differ in the following: (1)Whereas under a. 405 of the Indian Penal Code the accused must be "entrusted" with property or with "dominion over that property", under section 105 of 115 the the entrustment or dominion over property is unnecessary it is sufficient if the manager, director, etc. "obtains possession" of the property. (2)The offence of criminal breach of trust (section 405 of the Indian Penal Code) is not committed unless the act of misappropriation or conversion or "the disposition in violation of the law or contract", is done with a dishonest intention, but section 105 of the postulates no intention and punishes as an offence the mere withholding of the property whatever be the intent with which the same is done, and the act of application of the property of an insurer to purposes other than those authorised by the Act is similarly without reference to any intent with which such application or misapplication is made. In these circumstances it does not seem possible to say that the offence of criminal breach of trust under the Indian Penal Code is the "same offence" for which the respondents were prosecuted on the complaint of the company charging them with an offence under section 105 of the . This aspect of the matter based on the two offences being distinct in their ingredients, content and scope was not presented to the learned Judges of the High Court, possibly because the decisions of this Court construing and explaining the scope of article 20(2) were rendered later. In Om Prakash Gupta vs State of U.P. (1) the accused, a clerk of a municipality had been convicted of an offence under section 409 of the Indian Penal Code for having misappropriated sums of money received by him in his capacity as a servant of the local authority and the conviction had been affirmed on appeal, by the Sessions Judge and in revision by the High Court. The plea raised by the accused before this Court, in which the matter was brought by an appeal with special leave, was that section 409 of the Indian Penal Code had been repealed by implication by the enactment of sub sections (1) (c) and (2) of section 5 of the Prevention of Corruption Act because the latter dealt with an offence of substantially the same type. This Court repelled that contention. It (1) ; 116 analysed the ingredients of the two offences and after pointing out the difference in the crucial elements which constituted the offences under the two provisions, held that there was no repeal of section 409 of the 'Indian Penal Code implied by the constitution of a new offence under the terms of the Prevention of Corruption Act. It was the application of this decision and the ratio underlying it in the context of article 20(2) ,of the Constitution that is of relevance to the present appeal. The occasion for this arose in State of Madhya Pradesh vs Veereshwar Rao Agnihotry (1). The res pondent was a tax collector under a municipality and was prosecuted for offences among others under section 409 of the Indian Penal Code and s 5(2) of the Prevention of Corruption Act for misappropriation of sums 'entrusted to him as such tax collector. By virtue of the provision contained in section 7 of the Criminal Law Amendment Act, XLVI of 1952, the case was transferred to a Special Judge who was appointed by the State Government after the prosecution was commenced before a Magistrate. The Special Judge found the accused guilty of the offence under section 409 of the Indian Penal Code and convicted him to three years ' rigorous imprisonment but as regards the charge under section 5(2) of the Prevention of Corruption Act, he acquitted the accused on the ground of certain procedural non compliance with the rules as to investigation prescribed by the latter enactment. The respondent appealed to the High Court against this conviction and sentence under section 409 of the Indian Penal Code and there urged that by reason of his acquittal in res pect of the offence under section 5(2) of the Prevention of Corruption Act, his conviction under section 409 of the Indian, Penal Code could not also be maintained, the same being barred by article 20(2) of the Constitution. The High Court of Madhya Bharat accepted this argument and allowed the appeal and the State challenged the correctness of this decision by an appeal to this Court. Allowing the appeal of the State, Govinda Menon, J., delivering the judgment of the Court observed: (1)[1957] S.C.R. 868: 117 "This Court has recently held in Om Prakash Gupta vs The State of U.P. that the offence of criminal misconduct punishable under section 5(2) of the Prevention of Corruption Act, 11 of 1947, is not identical in essence, import and content with an offence under section 409 of the Indian Penal Code In view of the above pronouncement, the view taken by the learned Judge of the, High Court that the two offences are one and the same, is wrong, and if that is so, there can be no objection to a trial and conviction under section 409 of the Indian Penal Code, even if the respondent has been acquitted of an offence under section 5(2) of the Prevention of Corruption Act, II of 1947 The High Court also relied on article 20 of the Constitution for the order of acquittal but that Article cannot apply because the res pondent was not prosecuted after he had already been tried and acquitted for the same offence in an earlier trial and, therefore, the well known maxim "Nemo debet bis vexari, si constat curiae quod sit pro una et eadem causa" (No man shall be twice punished, if it appears to the court that it is for one and the same cause) embodied in article 20 cannot apply" Before leaving this part of the case we might also point out that a similar view of the scope of the rule as to double jeopardy has always been taken by the Courts in America. The words of the Vth Amendment where this rule is to be found in the American Constitution are: "Nor shall any person be subject, for the same offence, to be twice put in jeopardy of life or limb." and it will be noticed that there as well, the ban is confined to a second prosecution and punishment for the same offence. Willoughby after referring to the words quoted in the Fifth Amendment says: "Cases may occur in which the same act ma y render the actor guilty of two distinct offences; In such cases the accused cannot plead the trial and acquittal, or the conviction and punishment for one offence in bar to a conviction for the other"(1). In Albrecht vs (1)Constitution of the United States, Vol. II. p. 1158. , 118 United States (1) Brandeis, J., speaking for a unanimous Court said: "There is a claim of violation of the Vth Amendment by the imposition of double punishment. This contention rests upon the following facts. Of the nine, counts in the information four charged illegal possession of liquor, four illegal sale and one maintaining a common nuisance. The contention is that there was double punishment because the liquor which the defendants were convicted for having sold is the same that they were convicted for having possessed. But possessing and selling are distinct offences. One may obviously possess without selling; and one may sell and cause to be delivered a thing of which he has never had possession; or one may have possession and later sell, as appears to have been done in this case. The fact that the person sells the liquor which he possessed does not render the possession and the sale necessarily a single offence. There is nothing in the Constitution which prevents Congress from punishing separately each step leading to the consummation of a transaction which it has power to prohibit and punishing also the completed transaction. " If, therefore, the offences were distinct there is no question of the rule as to double jeopardy as embodied in article 20(2) of the Constitution being applicable. The next point to be considered is as regards the scope of section 26 of the . Though section 26 in its opening words refers to "the act or omission constituting an offence under two or more enactments", the emphasis is not on the facts alleged in the two complaints but rather on the ingredients which constitute the two offences with which a person is charged. This is made clear by the concluding portion of the section which refers to "shall not be liable to be punished twice for the same offence,". If the offences are not the same but are distinct, the ban imposed by this provision also cannot be invoked. It therefore follows that in the present case as the respondents are not being sought to be punished for "the (1) (1927) 273 TT.S. I: ; 119 same offence" twice but for two distinct offences con stituted or made up of different ingredients the bar of the provision is inapplicable. In passing, it may be pointed out that the construction we have placed on article 20(2) of the Constitution and section 26 of the is precisely in line with the terms of section 403(2) of the Criminal Procedure Code which runs: "403. (2) A person acquitted or convicted of any offence may be afterwards tried for any distinct offence for which a separate charge might have been made against him on the former trial under section 235, sub section (1). " It would be noticed that it is because of this provision that the respondents before us were originally charged before the Magistrate in Criminal Case 82 of 1953 with offences under section 409 of the Indian Penal Code as well as section 105 of the Indian . The respondents in this case did not appear in this Court and as the appeal had to be heard ex parte Mr. N. section Bindra was requested to appear as amicus curiae to assist the Court at the hearing of the appeal. We express our thanks to him for the assistance he rendered. The appeal is accordingly allowed and the judgment and the order of the High Court is set aside and the case will go back to the Judicial Magistrate, Fourth Court, Poona, for being proceeded with according to law. Appeal allowed. Case remanded.

IN-Abs

By article 20(2) of the Constitution "No person shall be prose cuted and punished for the same offence more than once. " Section 26 of the , provides, "Where an act or omission constitutes an offence under two or more enactments, then the offender shall be liable to be prosecuted and punished under either or any of those enactments, but shall not be liable to be punished twice for the same offence. " The respondents were both convicted and sentenced by the Magistrate under section 409 Of the Indian Penal Code and section 105 Of the Insurance Act. The Sessions judge on appeal upheld the conviction and sentence under section 409 of the Indian Penal Code, but set aside the conviction and sentence under section 105 of the Insurance Act on the ground that no sanction under section 107 of the Insurance Act had been obtained. Sanction was thereafter obtained and a fresh complaint was filed against the respondents under section 105 of the Insurance Act. The trial ended in an acquittal by the Magistrate who held that article 20(2) Of the Constitution and also section 26 of the were a bar to conviction. The State appealed to the High Court against the 108 order of acquittal but the appeal was dismissed. On further appeal by the State, Held, that the crucial requirement to attract article 202) Of the Constitution is that the two offences should be identical. it is, therefore, necessary to analyse and compare the ingredients of the two offences, and not the allegations made in the two complaints, to see whether their identity is established. So judged, there can be no doubt that in spite of the presence of certain common elements between the two, the offences under section 409 of the Indian Penal Code and section, 105 of the Insurance Act are distinct in their ingredients, content and scope and cannot be said to be identical. Om Prakash Gupta vs State of U. P., ; and State of Madhya Pradesh vs Veereshw ar Rao Agnihotry; , , referred to. A similar view of the scope of the rule as to double jeopardy has always been taken by the American Courts. Albrecht vs United States, ; 71 Law Ed. 505, referred to. In section 26 of the also the emphasis is not on the facts alleged in the two complaints but on the ingredients of the two offences charged. This construction of article 20(2) of the Constitution and section 26 of the , is precisely in line with section 403(2) of the Code of Criminal Procedure. Consequently, it could not be said, in the instant case, that the respondents were being sought to be punished for the same offence so as to attract either article 20(2) Of the Constitution or section 26 of the .

Appeals Nos. 494 and 495 of 1958. Appeals from the judgment and order dated April 18, 1955, of the Madras High Court in Case referred Nos. 53 of 1952 and 44 of 1953. Hardayal Hardy and D. Gupta, for the appellant. A. V. Viswanatha Sastri, R. Ganapathy Iyer, section Padmanabhan and G. Gopalakrishnan, for the respondent. December 8. The Judgment of the Court was delivered by SHAH, J. These are two appeals filed with certificates of fitness granted by the High Court of Judicature at Madras. Appeal No. 494 of 1958 arises out of orders passed in certain Excess Profits Tax Appeals and Appeal No. 495 of 1958 arises out of orders passed in certain Income tax References, Excess Profits Tax Appeals and Business Profits Tax Appeals. M/s. N. M. Rayaloo Iyer & Sons hereinafter referred to as the assessees are a firm carrying on business principally in dyes and chemicals. They are the chief representatives in "South India" of the products of the Imperial Chemical Industries Company (India) Ltd. hereinafter referred to as the "I.C.I.". The business in dyes and chemicals was in the years material to these appeals, conducted in the name and style of "Colours Trading Company", with its Head Office at Madura and in thirteen branch offices in different 63 towns in "South India". The busines was carried on originally in partnership by three brothers, N. M. R. Venkatakrishna Iyer, N. M. R. Subbaraman and N. M. ' R. Krishnamurti. On April 13, 1946, N. M. R. Subbaraman retired from the firm and the share of N. M. R. Venkatakrishna Iyer was taken over by a private limited company N. M. R. Venkatakrishna Iyer & Sons Ltd., but the business was, notwithstanding the changes in the personnel, continued in the original name and style. One N. M. R. Mahadevan (son of N. M. R. Venkatakrishna Iyer) hereinafter referred to as Mahadevan was employed by the assessees as the General Manager of the Colours Trading Co. By letter dated April 17, 1940, the assessees wrote to Mahadevan agreeing to pay him remuneration at the rate of Rs. 1,800 per annum and 5% of the net profits of the concern (Colours Trading Company) calculated by deducting from the gross profits of the business, salaries, wages and other outgoings but without making any deduction for capital. By letter dated March 30, 1943, the salary of Mahadevan was fixed at Rs. 3,000 per annum and the commission was enhanced to 12 1/2% of the net profits of the Colours Trading Company. The branch offices were managed by local managers and assistant managers who were paid in addition to monthly salary, annual and special bonus and dearness allowance. The assessees received from the I. C. I. commission at rates varying between 7 1/2% and 12% on different products sold to them. With effect from April 1, 1944, the I. C. I. allowed a special emergency commission of 5% on all dyes and dye stuffs sold to the assessees. This special emergency commission was increased to 15 % on all sales on or after March 1, 1945, but was subsequently reduced to 10% on sales on and after September 1, 1946. These appeals relate to the liability of the assessees to Excess Profits Tax for the chargeable accounting periods ending April 13, 1943, April 12, 1944, April 12, 1945, and, March 31, 1946, and for Business Profits Tax for the chargeable accounting periods ending April 12, 1946, March 31, 1947, April 13, 1947, March 31, 1948, and April 12, 1948. 64 The assessees claimed that they had paid to their employees in the years of account 1942 43 to 1947 48 under agreements executed from time to time a share in the special emergency commission received from the I. C. I., in addition to monthly salary, dearness allowance and general and special bonus. The I. C. I. in allowing the emergency commission by its letter dated January 24, 1944, recommended that 1% out of the 5% commission allowed may be "passed on" by the assessees to their "sub distributors". The assessees claimed that pursuant to this recommendation, they paid to their employees commission at rates varying between 1 1/2% to 4%, and when the emergency commission was increased to 15% and the I. C. I. by letter dated February 23, 1945, recommended that 6% out of this commission may be passed on to the sub distributors, the assessees claimed to have distributed commission at rates varying from 2% to 7 1/2% and in some cases at a rate as high as 12%. Under the service agreements, commission was payable to the employees only if the turnover in dyes exceeded Rs. 1,00,000 net in any year, but to employees in several branches the assessees claimed to have paid commission at generous rates even when the turnover fell far short of that amount. In the year of account ending April 12, 1945, there was a revision of the scales of salaries of the employees, and the assessees commenced giving to their employees dearness allowance and special bonus which in the aggregate exceeded 50% of the basic annual salary and also annual bonus equal to the annual salary. The result of this revision of emoluments was that each employee received an amount equal to at least 21 times his enhanced basic salary. In addition to this remuneration, the assessees claimed that they had paid a share in the commission which in some cases exceeded 12 times the basic salary. In computing the total income of the assessees for the years 1943 44 and 1944 45 for purposes of income tax, the Income tax Officer disallowed the payment of 12 1/2% of the net profits of the Colours Trading Co. to Mahadevan and in computing the income for the 65 assessment years 1945 46, 1946 47, 1947 48 and 194849 the Income tax Officer disallowed the commission. paid to the branch managers and other employees. In appeal the Appellate Assistant Commissioner set aside the order which disallowed the amount of commission paid to Mahadevan and following the order of the Income tax Appellate Tribunal in certain Excess Profits Tax appeals, allowed 5% of the net profits without deduction of Excess Profits Tax or Business Profits Tax, or 121% after deduction of Excess Profits Tax or ' Business Profits Tax whichever was higher. That order was confirmed in appeal by the Income tax Appellate Tribunal. The Tribunal also confirmed the order disallowing the emergency commission paid to the branch managers and other employees, and in the computation of taxable income for purposes of Income tax, Excess Profits Tax and Business Profits Tax, added back all those payments. At the instance of the assessees, the Tribunal referred two sets of questions to the High Court under section 66(1) of the Income tax Act read with section 21 of the Excess Profits Tax Act. Questions 1 to 3 in Referred Case No. 44 of 1953 were: (1) Whether in allowing a deduction under section 10(2) (xv) of the Income tax Act, the Income tax Officer is precluded from going into the question whether the amount was paid wholly and exclusively for the purpose of the assessee 's business? (2) Whether there was any material before the Tribunal to hold that the commission payment to N. M. R. Mahadevan at 121 % before deduction of Excess Profits Tax or Business Profits Tax was not wholly and exclusively laid out for the purpose of the assessee 's business? (3) Whether the commission payment to the branch managers, assistant managers and other employees is an expenditure laid out wholly and exclusively for the purpose of the business? Questions referred in Referred Case No. 53 of 1952 were: 66 (1) Whether the Appellate Tribunal erred in law in holding that in accordance with the terms of letters dated 17th April, 1940, and 30th March, 1943, and the conduct of the parties the Excess Profits Tax payable by the assessee should be deducted from the profits before the commission of 12 1/2% payable to M. N. R. Mahadevan is calculated? (2) Whether there is any material on evidence sufficient in law for the Appellate Tribunal to hold that the commission of 12 1/2% on profits paid to Mahadevan was unreasonable within the meaning of Rule 12 of Schedule 1 of the Excess Profits Tax Act? (3) Whether on the facts and circumstances of the case the disallowance by the Excess Profits Tax authorities of the commission paid to branch managers is justified under Rule 12 of Schedule 1 of the Excess Profits Tax Act? The material provisions relating to allowances under the Excess Profits Tax Act and the Business Profits Tax Act (which Act superseded the Excess Profits Tax Act as from March 30, 1946) were on the questions arising in this case substantially the same and hereafter reference to the Excess Profits Tax Act will in respect of the period after March 30, 1946, be deemed to be a reference to the Business Profits Tax Act. In the opinion of the High Court, in computing the taxable income, the deductions claimed by the assessees fell to be considered not under section 10(2)(xv) of Income tax Act but properly under section 10(2)(x) of the Income tax Act, the latter being a specific provision in the Act relating to deduction of commission or bonus paid to an employee. The High Court observed that in assessing liability to Excess Profits Tax the bonus or commission paid to the employees of the tax payer may be permitted as a deduction in the light of section 10(2)(x) of the Income tax Act and r. 12 of Sch. 1 to the Excess Profits Tax Act. The case of Mahadevan, according to the High Court, did not present much difficulty, the only question which fell to be determined in this case being whether in allowing deduction of commission at the rate of 12 1/2% on the net profits, the 67 Excess Profits Tax paid by the assessees was to be taken into account. Following a judgment of the Punjab High Court in Commissioner of Income tax, Delhi vs Delhi Flour Mills Ltd. (1), the High Court observed that in computing net profits Excess Profits Tax could not be deducted, but on the materials on the record, the question whether the commission paid to the branch managers and other employees was properly deductible could not be decided, and accordingly the High Court called for and obtained from the Tribunal a supplementary statement of facts. The High Court after considering the supplementary statement observed that the assessees had undoubtedly distributed substantial sums out of the emergency commission to its managers and assistant managers in the branches at rates well above the minima recommended by the I. C. I., but the distribution was at rates within the percentages allowed by the I. C. I., as additional commission and the balance retained by the appellants out of the emergency Commission was also substantial. In the view of the High Court, the Tribunal had to consider three factors, (1) the reasonableness of the commission in the light of the conditions laid down in section 10(2)(x), (2) the reasonableness of the percentages above the minima suggested by the I. C. I., and (3) the need for maintaining the reputation of the I. C. I., and the distributor in conditions that prevailed during that period when "black marketing was rampant", but observed the High Court "the Tribunal had made no real attempt to analyse the evidence before it to justify its conclusion that only the minima recommended by the I.C.I. and nothing in excess satisfied the test of reasonableness under r. 12, Sch. 1, of the Excess Profits Tax Act". They then observed that, whether the test of reasonableness is that prescribed by section 10(2)(x) of the Income tax Act or whether reasonableness has to be judged in the light of commercial expediency under r. 12, Sch. 1, of the Excess Profits Tax Act, the expenditure was to be judged from the point of view of a businessman and not by the application of any subjective standard of a taxing (1) 68 officer and that on an analysis of the materials furnished, they were unable to see anything per se unreasonable in the amounts of commission actually paid by the assessees to the branch managers and assistant managers in the branches. The High Court also observed that the minima recommended by the I. C. I. did not provide the only or an absolute standard for judging the reasonableness of the payments made, and stated: "No doubt, the employees of the assessee were in receipt of regular salaries and bonuses. But then, a sub distributor if he had not been paid a salary, would have had to be paid a share of the basic commission itself. What the assessee got in the years in question was in the nature of a windfall. It shared it with its employees. It had been instructed to share it. The emergency commission was allowed by the Imperial Chemical Industries so that the distributors could maintain the reputation of the Imperial Chemical Industries in the market even under the disturbed conditions that prevailed in those years. If, to maintain that reputation and to maintain its own, the assessee paid to its employee s even on a liberal basis, a share of that emergency commission, it is a little difficult to hold that, while receipt of the emergency commission was reasonable, sharing it beyond a particular point would per se be unreasonable, in the sense that no prudent businessman in that line of business, in those years, and in the market condition that prevailed then, with ample scope for black marketting, would have paid out commission on such a basis". They then concluded: "Though, of course, it was for the assessee to show that it was entitled to the deduction claimed under section 10(2)(x) of the Income tax Act and r. 12 of Sch. 1 of the Excess Profits Tax Act, there was really no basis on record to show that judged from the point of view of a businessman, payments in excess of the minima recommended by the Imperial Chemical Industries were not reasonable. We are of 69 opinion that the entire claim should have been allowed both under section 10(2)(x) of the Income tax Act and under r. 12 of Sch. 1 of the Excess Profits Tax Act on the ground that the statutory requirements were satisfied by the assessee. " The High Court accordingly answered the questions about the disallowance of commission paid to the employees of the assessees being justified under r. 12, Sch. 1, of the Excess Profits, Tax Act in the negative. Against those orders, these two appeals have been preferred with certificates of fitness from the High Court. The first question which falls to be considered is whether in the computation of taxable income for purposes of Income tax and Excess Profits Tax, commission allowed to Mahadevan at 12 1/2% should be allowed after deducting the Excess Profits Tax paid. By the agreement dated April 17, 1940, as modified by the agreement dated March 30, 1943, Mahadevan was to be paid remuneration at the rate of Rs. 3,000 per annum and 121 % of the net profits of the Colours Trading Company. In the view of the High Court in determining the "net profits" under the agreement "in accordance with the principles of commercial accountancy and the principles laid down under the Excess Profits Tax Act" the Excess Profits Tax which is a tax on profits could not be deducted. In our judgment the question is one of the true interpretation of the agreement. Mahadevan was under the agreement to receive 121% commission on the net profits of the Colours Trading Co. calculated by deducting from the gross. profits of the business the salaries, wages and other outgoings. The expression "outgoings" is not restricted to business or commercial outgoings. The agreement specifically disentitles the employers to make deductions of capital expenditure, but there is no indication that the outgoings are to be business outgoings only. There is nothing in the agreement or in the context justifying the view that in the expression 'outgoings ' is not included the Excess Profits Tax paid by the assessees. In Commissioner of Income Tax, Delhi vs Delhi 70 Flour Mills Co. Ltd. (1), it was observed by this Court in construing a similar agreement that the Excess Profits Tax was a part of the profits itself, but it was no part of the net profits contemplated by the parties; if it was a part which had to be deducted in arriving at the net profits, that is to say, the divisible profits which alone the parties had in mind, as a matter of construction the net profits meant divisible profits and were to be ascertained after deduction of Excess Profits Tax. Counsel for the Revenue has not challenged the decision of the High Court that in computing taxable income for the purpose of income tax commission paid to the various employees is a permissible deduction under section 10(2)(x) of the Income tax Act. The only question which survives on this branch for consideration is, therefore, whether those deductions are permissible in the assessment of Excess Profits Tax. By section 21 of the Excess Profits Tax Act, amongst other provisions, section 10 of the Income tax Act is made applicable with modifications if any as may be prescribed as if it were a provision of the Excess Profits Tax Act and refers to the Excess Profits Tax instead of Income tax. By section 2(19), the expression "profits" means profits determined in accordance with Sch. 1 of the Act which lays down the rules for computation of profits for the purpose of Excess Profits Tax Act. Rule 12 of Sch. 1 (which was added by section 4 of the Excess Profits Tax Ordinance, 1943 provided as follows: "(1) In computing the profits of any chargeable accounting period no deduction shall be allowed in respect of expenses in excess of the amount which the Excess Profits Tax Officer considers reasonable and necessary having regard to the requirements of the business and in the case of directors ' fees or other payments for services, to the actual services rendered by the person concerned: Provided that no disallowance under this rule shall be made by the Excess Profits Tax Officer unless he has obtained the prior authority of the Commissioner of Excess Profits Tax. (2) [1959] Supp. 1 S.C.R. 28. 71 (2) Any person who is dissatisfied with the decision of the Excess Profits Tax Officer under this rule may. appeal in the prescribed time and manner to the Appellate Tribunal. (3) In relation to chargeable accounting periods ending after the 31st day of December, 1942, the Central Government may make rules for determining the extent to which deductions shall be allowed in respect of bonuses or commissions paid. We were informed at the bar that though authorised, the Central Government did not make rules for determining the extent to which deductions shall be allowed in respect of bonuses or commissions paid. The Excess Profits Tax Act was substituted as from the year 1946 by the Business Profits Tax Act, 1947. That Act also defined by ' section 2, cl. (16), the expression "profits" as meaning profits determined in accordance with Sch. 1 and by section 19, the provisions of the sections of the Indian Income tax Act as applied to the Excess Profits Tax Act by virtue of sections 21 and 21A in so far they were not repugnant to the provisions of the Business Profits Tax Act applied to that Act as they applied to Excess Profits Tax Act and by cl. (3) of Sch. 1, a provision substantially similar to cls. (1) & (2) of cl. 12, Sch. 1, of the Excess Profits Tax Act was incorporated. Profits of a business for purposes of Excess Profits Tax Act have to be ascertained by reference to section 10 of the Income tax Act modified to the extent directed by Sch. 1 of the Excess Profits Tax Act. By cl. (12) of Sch. 1 of the Excess Profits Tax Act, a deduction in respect of expenses in excess of the amounts which the Excess Profits Tax Officer considers reasonable and necessary having regard to the requirements of the business and in the case of payments for services to the actual services rendered by the persons concerned, is not to be allowed. The deduction to be allowed, it is true, does not depend upon any subjective satisfaction of the Excess Profits Tax Officer, but on objective standards as to what is reasonable and necessary having regard to the requirements of the business and in the case of payments for services 72 to the actual services rendered by the persons concerned. The order passed by the Excess Profits Tax , 'Officer is open to review by the Tribunal to which appeal against the order of the Excess Profits Tax Officer lies. But in considering whether the deduction is properly claimed, the primary duty is vested by the Legislature in the Excess Profits Tax Officer. It is for him subject to review by the Tribunal to decide whether the deduction is reasonable and necessary, having regard to the requirements of the business and in case of payments for services to the actual services rendered. The jurisdiction which the High Court exercises on questions referred to it under the Excess Profits Tax Act is merely advisory; the High Court is not sitting in appeal over the judgment of the taxing authorities. If the taxing authorities having regard to the circumstances come to a conclusion that expenditure claimed as a deduction is not reasonable and necessary, it is not open to the High Court to substitute its own view as to what may be regarded as reasonable and necessary. Even if the High Court holds that the taxing authorities have committed an error in law by misconceiving the evidence, or by applying erroneous tests, or otherwise by acting perversely, the High Court may in answering the questions submitted, lay down the true principles applicable to the ascertainment of the permissible deductions and leave it to the taxing authorities to adjudicate upon the reasonableness and necessity of the expenses in the light of the requirements of the business. In the case in hand, the Excess Profits Tax Officer held, (a) that the employees of the assessees were being amply remunerated for services rendered by adequate salary, generous dearness allowance and annual bonus equal to the basic salary, (b) that the emoluments of the employees had been increased year after year and there was no material to show that the employees had made a persistent demand for increased emoluments, (c) that the commission was credited to the employees ' account at the end of the year and was carried forward but no payments were made to 73 them ' (d) that the agreements which had been produced by the assessees were fabricated with a view to, reduce tax liability, and (e) that the expenditure ' claimed was not proved to have been laid out wholly and exclusively for the purpose of the business. Taking into account these circumstances, the Excess Profits Tax Officer held that the remuneration paid to the employees was adequate and any additional commission paid was in excess of what was reasonable and necessary. The only criticism urged by counsel for the assessees against the grounds given is that the Excess Profits Tax Officer observed that while the net profit according to the Profit & Loss Account of the firm was Rs. 20,487 leaving a share of Rs. 6,800 only to each of the partners, some of the managers got more than this amount. It appears that the Excess Profits Tax Officer committed an error in so observing. The profits of the Colours Trading Co. as disclosed by the order of assessment for the year 1945 46 were Rs. 99,435 and not Rs. 20,487; but that error did not affect the ultimate conclusion recorded by the Excess Profits Tax Officer. According to the books of account of the assessees for the year 1943 44 of the business in dyes, the profits were Rs. 99,435 and they claimed to have distributed a commission of Rs. 1,00,715 to their employees out of the emergency commission, which was prima facie wholly disproportionate to the amount received by them. The order passed by the Excess Profits Tax Officer was confirmed in appeal by the Appellate Tribunal. In the view of the Appellate Tribunal, no additional incentive was required to sell dyes and chemicals in the years in question because dyes and chemicals were in short supply and there was a rise in demand. The Tribunal also referred to the table setting out the distribution among the employees of dearness allowance, bonus and salary in the relevant years, and observed: "In addition to the generous allowances, the payment of this sum appears to us a payment made in order to dissipate the profits. It would be sufficient to say that including the commission alleged 10 74 to have been paid, the total emoluments would be something like 1200% and in some cases even more than the basic annual salary. There is no doubt in our mind, that this was wholly unnecessary for business purposes. " Observing that the assessees having no sub distributors, the direction given by the I.C.I. did not require the assessees to "pass on" the commission to their employees, they concluded that the expenditure alleged to have been incurred was not reasonable and necessary within the meaning of r. 12, Sch. 1, of the Excess Profits Tax Act. The following table which is incorporated in the statement of case of the Tribunal sets out for the four years in question the emergency commission received by the assessees and the aggregate amount paid by them to their employees. Extra commis Amount of commis Assessment sion received sion paid by the year. by the assessee. assessee. Rs. Rs. 1945 46 1,28,533 1,00,715 1946 47 3,20,391 2,44,698 1947 48 3,15,934 1,28,506 1948 49 3,70,964 1,75,079 This distribution out of the emergency commission to the employees has to be viewed in the context of the following circumstances set out by the Tribunal: (1)that even though the I.C.I. recommended payment to sub distributors and the assessees had no sub distributors, they claimed to have paid commission to their employees at rates in excess of the minimum rates recommended by I.C.I. (2) that this commission was paid to the employees in branches in which the annual turnover did not exceed Rs. 1,00,000 even though the agreements which the assessees had executed expressly provided that the commission was to be paid only if the annual turnover in a branch exceeded Rs. I lakh and (3)that the basic salaries of the employees had been substantially increased from time to time and generous dearness allowance and Deepavali bonus 75 were given besides the annual bonus to the employees. An analysis of annexure 'IL" to the supplemental statement of case made by the Tribunal discloses some striking instances of Payments to employees. One Themaswamy was paid annually commission varying from Rs. 15,000 to Rs. 23,000 when his basic salary was Rs. 2,100 per annum; one K. N. Rajagopalachari was paid commission varying from Rs. 16,000 to Rs. 12,000 when his basic salary was Rs. 1,260 per annum; one section L. Radhakrishnan was paid commission varying from Rs. 5,700 to Rs. 13,000 when his salary varied between Rs. 516 and Rs. 636 per annum and one K. R. Rama Rao was paid commission varying from Rs. 4,600 to Rs. 10,520 his salary being Rs. 492 and later increased to Rs. 612 per annum. There was thus ample evidence in support of the conclusion of the Excess Profits Tax Officer which was confirmed by the Tribunal. As we have already observed, it is the province of the Excess Profits Tax Officer and the Tribunal to assess the permissible deductions in the context of reasonableness and necessity having regard to the requirements of the business and interference with the conclusion is permissible if the view of the taxing authorities is vitiated by an error of law or is not based on any materials, or the conclusion is such that no man instructed in law could have arrived at. It is true that in considering whether the deduction claimed by the assessees for payments made as bonus or commission paid to an employee is to be allowed, the taxing officer must have regard to the provisions of section 10(2)(x) of the Income tax Act and cl. (12) of Sch. 1 of the Excess Profits Tax Act; and in assessing the reasonableness, consideration of commercial expediency must undoubtedly be taken into account. But commercial expediency must be viewed in the light of the requirements of the business and the actual services rendered by the persons concerned. Any abstract consideration of commercial expediency is out of place. In our view, the High Court was not justified in seeking to reappreciate the evidence on which the 76 conclusion of the Excess Profits Tax Officer which was confirmed by the Tribunal was based. Their jurisdiction being advisory, the High Court had to answer the questions submitted for opinion on the facts found; if the High Court held the view that the taxing authorities had misdirected themselves in law or had made a wrong inference in law or had failed to apply the correct tests or had misconceived the evidence, it was. open to them to invite the attention of taxing authorities to the error committed by them; but the High Court could not set aside the decision of the taxing authorities on a reappreciation of the evidence. We may also point out that even if the High Court concluded that the total disallowance of the deduction claimed was not justified, the High Court could not substitute its own view as to what was reasonable and necessary. The High Court bad, if it disagreed with the taxing authorities, still to answer the questions submitted and leave to the consideration of the Excess Profits Tax Officer what in the circumstances was reasonable and necessary. Counsel for the assessees submitted that in any event, the Tribunal having in its supplementary statement of case stated that payment in excess of what was recommended by the I.C.I. was unjustified, this court may so modify the order of the High Court that deductions of the amounts which were recommended by the I.C.I. may be regarded as permissible deductions. The I.C.I. recommended distribution of a certain percentage out of the emergency commission to the sub distributors; but in the administrative set up of the assessees, the sub distributors did not find a place. The assessees carried on their business through paid employees. In terms therefore the recommendation by the I.C.I. had no application to the assessees. It is true that even if the assessees did not carry on the business through sub distributors, payment made to its employees if reasonable and necessary having regard to the requirements of the business, may still be deductible, but that in our judgment is a matter to be decided by the taxing authorities and not by us. 77 The Tribunal had come to the conclusion that no payment in addition to the salary, annual bonus and, special bonus was justified and any expression of opinion to the contrary in the supplementary statement pursuant to the order for statement of case could not in our judgment affect the conclusion originally recorded. In our view the answer to the question whether the disallowance by the Excess Profits Tax authorities of the commission paid to branch managers was justified under r. 12, Sch. 1, of the Excess Profits Tax Act should have been answered in the affirmative. On the view taken by us, Appeal No. 494/1958 will be allowed, but there will be no order as to costs. Appeal No. 495 of 1958 will be allowed with *costs. Appeals allowed.

IN-Abs

The respondents, a firm carrying on business in dyes and chemicals under the name and style of Colours Trading Com pany, with their head office at Madurai and thirteen branch offices in different towns, were the chief representatives in South India of the products of the I. C. I., a manufacturing concern. M was employed as the General Manager of the respondents and by virtue of an agreement, he was to be paid remuneration at the rate of Rs. 3,000 per annum and 12 1/2% of the net profits of the company calculated by deducting from the gross profits of the business the salaries, wages and other outgoings. The branch offices were managed by local managers and assistant managers who were paid in addition to monthly salary, annual and special bonus and dearness allowance. The respondents received from the I. C. I. commission at varying rates on the different products sold to them and with effect from April 1, 1944, the I.C.I. allowed a special emergency commission of 5% recommending that 1% out of the commission allowed may be passed on by the respondents to their sub distributors. The respondents claimed to have distributed to their employees commission pursuant to the recommendation of the I.C.I. at rates varying between 2% and 7 1/2% and in some cases at a rate as high as 12%. Though under the service agreement, commission was payable to the employees only if the turnover exceeded Rs. 1,00,000 net in any year, the respondents claimed to have paid them commission at generous rates even when the turnover fell far short of that amount. In the year of account ending April 12, 1945, there was a revision of the scales of salaries of the employees, as a result of which the employees received an amount equal to 2 1/2 times the enhanced basic salary and also commission sometimes exceeding 12 times the basic salary. In computing the total income of the respondents for the years 1943 44 and 1944 45 for purposes of income tax, the income tax Officer disallowed the payment Of 12 1/2% of the net 61 profits to M, and for the years 1945 49 he disallowed the commission paid to the branch managers and other employees on the ground that taking into account all the circumstances the remuneration paid to the employees was adequate and that any additional commission paid was in excess of what was reasonable or necessary. The Appellate Tribunal confirmed the order of the Income tax Officer except in the case of M to whom payment of 5% of the net profits without deduction of Excess Profits Tax or Business Profits Tax, or 12% after deduction of Excess Profits Tax or Business Profits Tax, whichever was higher, was regarded as permissible deduction. The High Court, on reference, took the view, inter alia, that in determining the net profits under the agreement with M, the excess profits tax could not be deducted, that in considering the question whether the bonus or commission paid to the employees in the present case might be permitted as a justifiable deduction, in the light of section 10(2)(X) Of the Income tax Act and r. 12 of Sch. 1 of the Excess Profits Tax Act, the test of reasonableness of the expenditure was to be judged from the point of view of a business man and not by the application of any subjective standard of a taxing officer, and that on an analysis of the materials furnished, there was nothing per se unreasonable in the amounts of commission actually paid by the respondents to the branch managers and assistant managers. Held: (i) that the question whether in the computation of the taxbale income, the commission payable to M under the agreement entered into with him by the respondents should be allowed before deducting the excess profits tax, depended on the true interpretation of the agreement; the expression "outgoing" in the agreement was not restricted to business or commercial outgoings but included the excess profits tax paid by the assessees, and that, consequently, the net profits of which M was to be given a percentage by way of commission should be computed after deducting the excess profits tax paid. Commissioner of Income tax, Delhi vs Delhi Flour Mills Co., Ltd., [1959] SUPP. 1 S.C.R. 28, relied on. (2) that under cl. (12) Of Sch. 1 of the Excess Profits Tax Act, 1940, it was for the Excess Profits Tax Officer, subject to review by the Tribunal, to decide whether the deduction was reasonable and necessary, having regard to the requirements of the business and in case of payments for services, to the actual services rendered by the persons concerned; it was not open to the High Court exercising its jurisdiction on questions referred to it under the Excess Profits Tax Act, to substitute its own view as to what may be regarded as reasonable and necessary and to set aside the decision of the taxing authorities on a re appreciation of the evidence. If the High Court considered that the taxing authorities had committed an error in law by misconceiving the evidence or by applying erroneous tests or 62 otherwise by acting perversely, the proper course for it was in answering the questions submitted, to lay down the true principles applicable to the ascertainment of the permissible deductions and to leave it to the taxing authorities to adjudicate upon the reasonableness and necessity of the expenses in the light of the requirements of the business. (3) that there was ample evidence in support of the conclu sion of the Excess Profits Tax Officer which was confirmed by the Tribunal, and that the question, whether the disallowance by the excess profits tax authorities of the commission paid to branch managers was justified under r. 12 of Sch. 1 of the Excess Profits Tax Act, should have been answered in the affirmative.

Appeal No. 427 of 1959. Appeal by special leave from the Award dated February 18, 1958, of the Industrial Tribunal (Textiles) U.P., Allahabad, in Petitions (under section 6 E) Nos. (Tex.) 3 and 4 of 1957 and 1 of 1958. M. C. Setalvad, Attorney General for India and G. C. Mathur, for the appellant. B. P. Maheshwari, for the respondents. December 12. The Judgment of the Court was delivered by GAJENDRAGADKAR, J. Three applications made by the appellant the Lord Krishna Textile Mills under section 6 E(2)(b) of the United Provinces (Act XXVIII of 1947) for obtaining the approval of the Industrial Tribunal to the dismissal of 8 of its workmen have been rejected; and the Tribunal has refused to accord its approval to the action taken by the appellant. This appeal by special leave challenges the legality, validity as well as the propriety of the said order, and the principal question which it seeks to raise is in regard to the scope of the enquiry permissible under section 6 E(2)(b) as well as the extent of the jurisdiction of the Tribunal in holding such an enquiry. Section 6 E(2) of the U. P. Act is identical in terms with section 33 of the (XIV of 1947) (hereafter called the Act), and for convenience we would refer to the latter section because what we decide in the present appeal will 206 apply as much to cases falling under section 6 E(2)(b) of the U. P. Act as those falling under section 33(2)(b) of the Act. It appears that on October 12, 1957 when the appellant 's Controller of Production and the General Superintendent were discussing certain matters in the office of the appellant mills, Har Prasad, one of the 8 workmen dismissed by the appellant, came to see the Controller along with some other workmen. These workmen placed before the Controller some of their grievances; and when the Controller told their leader Har Prasad that the grievances set forth by them were not justified Har Prasad replied that the Controller was in charge of the management of the appellant mills and could do what he liked, but he added that the ways adopted by the management were not proper and "it may bring very unsatisfactory results". With these words Har Prasad and his companions left the office of the Controller. Two days thereafter Har Prasad and Mool Chand saw the Controller again in his office and complained that one of the Back Sizers Yamin had reported to them that the Controller had beaten him; the Controller denied the allegation whereupon the two workmen left his office. At about 6 p.m. the same evening a number of workmen of the appellant mills surrounded Mr. Contractor, the General Superintendent, and Mr. Surti when they were returning to their bungalows from the mills and assaulted and beat them. The two officers then lodged a First Information Report at Thana Sadar Bazar, Saharanpur about 9 p.m.; thereupon the Inspector of Police went to the scene of the offence, and on making local enquiries arrested two workmen Ramesh Chander Kaushik and Tika Ram. This offence naturally led to grave disorder in the mills, and the officers of the mills felt great resentment in consequence of which the mills remained closed for three days. The appellant 's management then started its own investigations and on October 17 it suspended five workmen Har Prasad, Majid, Zinda, Yamin and Manak Chand. Notice was served on each of these suspended workmen calling upon them to explain their conduct and 207 to show cause why they should not be dismissed from the service of the mills. As a result of further investigation the management suspended two more workmen Om Parkash and Satnam on October 24 and served similar notices on them. Ramesh Chander Kaushik and Tika Ram were then in police custody. After they were released from police custody notices were served on them on November 24 asking them to show cause why their services should not be terminated. All the workmen to whom notices were thus served gave their explanations and denied the charges levelled against them. An enquiry was then held according to the Standing Orders. At 'the said enquiry all the. workmen concerned as well as the representatives of the union were allowed to be present and the offending workmen were given full opportunity to produce their witnesses as also to cross examine the witnesses produced by the management against them. As a result of the enquiry thus held the management found the charges proved against the workmen concerned, and on November 19 Om Parkash, Satnam, Majid, Yamin, Zinda and Har Prasad were dismissed. These dismissed workmen were asked to take their final dues together with one month 's pay in lieu of notice as required by the Standing Orders, On Decem ber 20, the enquiry held against Tika Ram and Ramesh Chander concluded and as a result of the findings that the charges were proved against them the said two workmen were also dismissed from service and required to take their final dues with one month 's wages in lieu of notice. At this time an industrial dispute in respect of bonus for the relevant year was pending before the Industrial Tribunal (Textile) U.P., Allahabad. The appellant, therefore, made three applications before the Tribunal under section 6 E(2) of the U. P. Act on November 21 and 27 and December 21, 1957 respectively. By these applications the appellant prayed that the Industrial Tribunal should accord its approval to the dismissal of the workmen concerned. On February 18, 1958 the Tribunal found that the appellant had failed to make out a case for dismissing the 208 workmen in question, and so it refused to accord its approval to their dismissal. Accordingly it directed the appellant to reinstate the said workmen to their original jobs with effect from the dates on which they were suspended with continuity of service, and it ordered that the appellant should pay them full wages for the period of unemployment. It is on these facts that the question about the construction of section 6 E(2)(b) of the U.P. Act falls to be considered. As we have already observed the material provisions of section 6 E of the U. P. Act are the same as section 33 of the Act after its amendment made by Act 36 of 1956; and since the fatter section is of general application we propose to read the relevant provisions of section 33 of the Act and deal with them. All that we say about this section will automatically apply to the corresponding provisions of section 6 E of the U. P. Act. Section 33 occurs in Chapter VII of the Act which contains miscellaneous provisions. The object of section 33 clearly is to allow continuance of industrial proceedings pending before any authority prescribed by the Act in a calm and peaceful atmosphere undisturbed by any other industrial dispute; that is why the plain object of the section is to maintain status quo as far as is reasonably possible during the pendency of the said proceedings. Prior to its amendment by Act 36 of 1956 section 33 applied generally to all cases where alteration in the conditions of service was intended to be made by the employer, or an order of discharge or dismissal was proposed to be passed against an employee without making a distinction as to whether the said alteration or the said order of discharge or dismissal was in any manner connected with the dispute pending before an industrial authority. In other words, the effect of the unamended section was that pending an industrial dispute the employer could make no alteration in the conditions of service to the prejudice of workmen and could pass no order of discharge or dismissal against any of his employees even though the proposed alteration or the intended action had no connection whatever with the dispute pending. between him and his employees. This led to a general 209 complaint by the employers that several applications had to be made for obtaining the permission of the specified authorities in regard to matters which were not connected with the industrial dispute pending adjudication; and in many cases where alterations in conditions of service were urgently required to be made or immediate action against an offending workman was essential in the interest of discipline, the employers were powerless to do the needful and had to submit to the delay involved in the process of making an application for permission in that behalf and obtaining the consent of the Tribunal. That is why, by the amendment made in section 33 in 1956 the Legislature has made a broad division between action proposed to be taken by the employer in regard to any matter connected with the dispute on the one hand, and action proposed to be taken in regard to a matter not connected with the dispute pending before the authority on the other. Section 33(1) provides that during the pendency of such industrial proceedings no employer shall (a) in regard to any matter connected with the dispute alter to the prejudice of the workmen concerned in such dispute the conditions of service applicable to them immediately before the commencement of such proceedings, or (b) for any misconduct connected with the dispute discharge or punish whether by dismissal or otherwise any workman connected with such dis pute, save with the express permission in writing of the authority before which the proceeding is pending. Thus the original unamended section has now been confined to cases where the proposed action on the part of the employer is in regard to a matter connected with a dispute pending before an industrial authority. Under section 33(1) if an employer wants to change the conditions of service in regard to a matter connected with a pending dispute he can do so only with the express permission in writing of the appropriate authority. Similarly, if he wants to take any action against an employee on the ground of an alleged misconduct connected with the pending dispute he 27 210 cannot do so unless he obtains previous permission in writing of the appropriate authority. The object of placing this ban on the employer 's right to take action pending adjudication of an industrial dispute has been considered by this Court on several occasions. In the case of the Punjab National Bank Ltd. V. Its Workmen (1) this Court examined its earlier decisions on the point and considered the nature of the enquiry which the appropriate authority can hold when an application is made before it by the employer under section 33(1) and the extent of the jurisdiction which it can exercise in such an enquiry. "The purpose the Legislature had in view in enacting section 33", it was held, "was to maintain the status quo by placing a ban on any action by the employer pending adjudication"; and it was added "but the jurisdiction conferred on the Industrial Tribunal by section 33 was a limited one. Where a proper enquiry had been held and no victimisation or unfair labour practice had been resorted to, the Tribunal in granting permission had only to satisfy itself that there was a prima facie case against the employee and not to consider the propriety or adequacy of the proposed action". It is significant that the Tribunal can impose no conditions and must either grant permission or refuse it. It is also significant that the effect of the permission when granted was only to remove the ban imposed by section 33; it does not necessarily validate the dismissal or prevent the said dismissal from being challenged in an industrial dispute. This position is not disputed before us. What is in dispute before us is the nature of the enquiry and the extent of the authority 's jurisdiction in holding such an enquiry under section 33(2). Section 33(2) deals with the alterations in the conditions of service as well as discharge or dismissal of workmen concerned in any pending dispute where such alteration or such discharge or dismissal is in regard to a matter not connected with the said pending dispute. This class of cases where the matter giving rise to the proposed action is unconnected with the pending industrial dispute has now been taken (1) ; 211 out of the scope of section 33(1) and dealt with separately by section 33(2) and the following sub sections of section 33. Section 33(2) reads thus: "During the pendency of any such proceeding in respect of an industrial dispute, the employer may, in accordance with the standing orders applicable to a workman concerned in such dispute, (a) alter, in regard to any matter not connected with the dispute, the conditions of service applicable to that workman immediately before the commencement of such proceeding; or (b) for any misconduct not connected with the dispute, discharge or punish, whether by dismissal or otherwise, that workman: Provided that no such workman shall be discharged or dismissed, unless he has been paid wages for one month and an application has been made by the employer to the authority before which the proceeding is pending for approval of the action taken by the employer. " It would be noticed that even during the pendency of an industrial dispute the employer 's right is now recognised to make an alteration in the conditions of service so long as it does not relate to a matter connected with the pending dispute, and this right can be exercised by him in accordance with the relevant standing orders. In regard to such alteration no application is required to be made and no approval required to be obtained. When an employer, however, wants to dismiss or discharge a workman for alleged misconduct not connected with the dispute he can do so in accordance with the standing orders but a ban is imposed on the exercise of this power by the proviso. The proviso requires that no such workmen shall be discharged or dismissed unless two conditions are satisfied; the first is that the employee concerned should have been paid wages for one month, and the second is that an application should have been made by the employer to the appropriate authority for approval of the action taken by the employer. It is plain that whereas in cases falling under section 33(1) no action can be taken by the employer unless he has 212 obtained previously the express permission of the appropriate authority in writing, in cases falling under sub section (2) the employer is required to satisfy the specified conditions but he need not necessarily obtain the previous consent in writing before he takes any action. The requirement that he must obtain approval as distinguished from the requirement that he must obtain previous permission indicates that the ban imposed by section 33(2) is not as rigid or rigorous as that imposed by section 33(1). The jurisdiction to give or withhold permission is prima facie wider than the jurisdiction to give or withhold approval. In dealing with cases falling under section 33(2) the industrial authority will be entitled to enquire whether the proposed action is in accordance with the standing orders, whether the employee concerned has been paid wages for one month, and whether an application has been made for approval as prescribed by the said sub section. It is obvious that in cases of alteration of conditions of service falling under section 33(2)(a) no such approval is required and the right of the employer remains unaffected by any ban. Therefore, putting it negatively the jurisdiction of the appropriate industrial authority in holding an enquiry under section 33(2)(b) cannot be wider and is, if at all, more limited, than that permitted under section 33(1), and in exercising its powers under section 33(2) the appropriate authority must bear in mind the departure deliberately made by the Legislature in separating the two classes of cases falling under the two sub sections, and in providing for express permission in one case and only approval in the other. It is true that it would be competent to the authority in a proper case to refuse to give approval, for section 33(5) expressly empowers the authority to pass such order in relation to the application made before it under the proviso to section 33(2)(b) as it may deem fit; it may either approve or refuse to approve; it can, however, impose no conditions and pass no conditional order. Section 33(3) deals with cases of protected workmen and it assimilates cases of alterations of conditions of service or orders of discharge or dismissal proposed to 213 be made or passed in respect of them to cases falling under section 33(1); in other words, where an employer wants to alter conditions of service in regard to a protected workman, or to pass an order of discharge or dismissal against him, a ban is imposed on his rights to take such action in the same manner in which it has been imposed under section 33(1). Sub section (4) provides for the recognition of protected workmen, and limits their number as therein indicated; and sub section (5) requires that where an employer has made an application under the proviso to sub section (2), the authority concerned shall without delay hear such application and pass as expeditiously as possible such orders in relation thereto as it deems fit. This provision brings out the legislative intention that, though an express permission in writing is not required in cases falling under the proviso to section 33(2)(b), it is desirable that there should not be any time lag between the action taken by the employer and the order passed by the appropriate authority in an enquiry under the said. proviso. Before we proceed to deal with the merits of the dispute, however, we may incidentally refer to another problem of construction which may arise for decision under section 33(2)(b) and which has been argued before us at some length. When is the employer required to make an application under the proviso to section 33(2)(b)? Two views are possible on this point. It may be that the proviso imposes two conditions precedent for the exercise of the right recognised in the employer to dismiss or discharge his workman pending a dispute. The use of the word "unless" can be pressed into service in support of the argument that the two conditions are conditions precedent; he has to pay wages for one month to the employee, and he has to make an application for approval; and both these conditions must be satisfied before the employee is discharged or dismissed. On this view it would be open to the employer to discharge or dismiss his employee after satisfying the said two conditions without waiting for the final order which the authority may pass on the application made before it in that 214 behalf. The Legislature has indicated that there should be no time lag between the making of the application and its final disposal, and so by sub section (5) it has specifically and expressly provided that such application should be disposed of as expeditiously as possible. This view proceeds on the assumption that the word "unless" really means "until" and introduces a condition precedent. On the other hand, it is possible to contend that the application need not be made before any action has been taken, and that is clear from the fact that the application is required to be made for approval of the action taken by the employer. "Approval" according to its dictionary meaning suggests that what has to be approved has already taken place; it is in the nature of ratification of what has already happened or taken place. The word "approval" in contrast with the word "previous permission" shows that the action is taken first and approval obtained afterwards. Besides, the words "action taken" which are underlined by us, it may be argued, show that the order of discharge or dismissal has been passed, and approval for action thus taken is sought for by the application made by the employer. On the first construction the words "action taken" have to be construed as meaning action proposed to be taken, whereas on the latter construction the said words are given their literal meaning, and it is said that the discharge or dismissal has taken place and it is the action thus taken for which approval is prayed. In support of the first view it may be urged that the words "action taken" can well be interpreted to mean "action proposed to be taken" because it is plain that the condition as to payment of wages cannot be literally construed and must include cases where wages may have been tendered to the workman but may not have been accepted by him. In other words, the argument in support of the first interpretation is that in the construction of both the conditions the words "paid" and "action taken" cannot be literally construed, and in the context should receive a more liberal interpretation. "Paid wages" would on that view mean "wages 215 tendered" and "action taken" would mean "action proposed to be taken". If these two words are literally construed there may be some inconsistency between the notion introduced by the use of the word "unless" and these words thus literally construed. It may also be urged in support of the first contention that if the ban imposed by the proviso does not mean that an application has to be made before any action is taken by the employer it would be left to the sweet will of the employer to make the requisite application at any time he likes. The section does not provide for any reasonable period within which the application should be made and prescribes no penalty for default on the part of the employer in making such an application within any time. On the other hand, this argument can be met by reference to section 33A of the Act. If an employer does not make an application within a reasonable time the employee may treat that as contravention of section 33(2)(b) and make a complaint under section 33A, and such a complaint would be tried as if it is an industrial dispute; but, on the other hand an employer can attempt to make such a complaint ineffective by immediately proceeding to comply with section 33(2)(b) by making an application in that behalf and the authority may then have to consider whether the delay made by the employer in making the required application under section 33(2)(b) amounts to a contravention of the said provision, and such an enquiry could not have been intended by the Legislature; that is why the making of the applica tion should be treated as a condition precedent under the proviso. If that be the true position then the employer has to make an application before he actually takes the action just as he has to tender money to the employee before dismissing or discharging him. But, if it is not a condition precedent, then he may pass an order of discharge or dismissal and make an application in that behalf within reasonable time. We have set forth the rival contentions in regard to the construction of the proviso, but we do not propose to express our decision on the point, because, having regard to their pleadings, we cannot allow the respondents to raise this question for our decision in the 216 present appeal. It is clear from the contentions raised before the Tribunal and the pleas specifically raised by the respondents in their statement of case before this Court that both parties agreed that the application in question had been properly made under the proviso; and the only point at issue between them is about the validity and propriety of the order under appeal having regard to the limited jurisdiction of the enquiry under section 33(2)(b), and it, is to that question that we must now return. Before we do so, however, we ought to add that our attention had been drawn to three decisions of this Court in which, without any discussion of the point, the validity of the employers ' applications made under section 33(2)(b) appears to have been assumed though the said applications were presumably made after the employers had dismissed their employees. They are: Delhi Cloth and General Mills Ltd vs Kushal Bhan (1); The Management of Swatantra Bharat Mills, New Delhi vs Ratan Lal (2 ); and The Central India Coal fields Ltd., Calcutta vs Ram Bilas Shobnath (3). We wish to make it clear that these decisions should not be taken to have decided the point one way or the other since it was obviously not argued before the Court and had not been considered at all. In view of the limited nature and extent of the enquiry permissible under section 33(2)(b) all that the authority can do in dealing with an employer 's application is to consider whether a prima facie case for according approval is made out by him or not. If before dismissing an employee the employer has held a proper domestic enquiry and has proceeded to pass the impugned order as a result of the said enquiry, all that the authority can do is to enquire whether the conditions prescribed by section 33(2)(b) and the proviso are satisfied or not. Do the standing orders justify the order of dismissal? Has an enquiry been held an provided by the standing order? Have the wages for the month been paid as required by the proviso?; and, has an application been made as prescribed by the proviso? This last (1) ; (2) Civil Appeal No. 392 of 1959 decided on 28.3.1960 (3) Civil Appeal No. 162 of 1959 decided on 31.3.1960 217 question does not fall to be decided in the present appeal because it is common ground that the application has been properly made. Standing Order 21 specifies ' acts of omission which would be treated as misconduct, and it is clear that under 21(s) threatening or intimidating any operative or employee within the factory premises is misconduct for which dismissal is prescribed as punishment. This position also is not in dispute. There is also no dispute that proper charge sheets were given to the employees in question, an enquiry was properly held, and opportunity wag given to the employees to lead their evidence and to cross examine the evidence adduced against them; in other words, the enquiry is found by the Tribunal to have been regular and proper. As a result of the enquiry the officer who held the enquiry came to the conclusion that the charges as framed had been proved against the workmen concerned, and so orders of dismissal were passed against them. In such a case it is difficult to understand how the Tribunal felt justified in refusing to accord approval to the action taken by the appellant. It has been urged before us by the appellant that in holding the present enquiry the Tribunal has assumed powers of an appellate court which is entitled to go into all questions of fact; this criticism seems to us to be fully justified. One has merely to read the order to be satisfied that the Tribunal has exceeded its jurisdiction in attempting to enquire if the conclusions ,of fact recorded in the enquiry were justified on the merits. It did not hold that the enquiry was defective or the requirements of natural justice had not been satisfied in any manner. On the other hand it has expressly proceeded to consider questions of fact and has given reasons some of which would be inappropriate and irrelevant if not fantastic even if the Tribunal was dealing with the relevant questions as an appellate court. "The script in which the statements have been recorded", observes the Tribunal, "is not clear and fully decipherable". How this can be any reason in upsetting.the finding of the enquiry it is impossible to 28 218 understand. The Tribunal has also observed that the evidence adduced was not adequate and that it had not been properly discussed. According to the Tribunal the charge sheets should have been more specific and clear and the evidence,should have been more satisfactory. Then the Tribunal has proceeded to examine the evidence, referred to some discrepancies in the statements made by witnesses and has come to the conclusion that the domestic enquiry should not have recorded the conclusion that the charges have been proved against the workmen in question. In our opinion, in making these comments against the findings of the enquiry the Tribunal clearly lost sight of the limitations statutorily placed upon its power and authority in holding the enquiry under section 33(2)(b). It is well known that the question about the adequacy of evidence or its sufficiency or satisfactory character can be raised in a court of facts and may fall to be considered by an appellate court which is entitled to consider facts; but these considerations are irrelevant where the jurisdiction of the court is limited as under section 33(2)(b). It is conceivable that even in holding an enquiry under section 33(2)(b) if the authority is satisfied that the finding recorded at the domestic enquiry is perverse in the sense that it is not justified by any legal evidence whatever, only in such a case it may be entitled to consider whether approval should be accorded to the employer or not; but it is essential to bear in mind the difference between a finding which is not supported by any legal evidence and a finding which may appear to be not supported by sufficient or adequate or satisfactory evidence. Having carefully considered the reasons given by the Tribunal in its award under appeal, we have no hesitation in holding that the appellant is fully justified in contending that the Tribunal has assumed jurisdiction not vested in it by law, and consequently its refusal to accord approval to the action taken by the appellant is patently erroneous in law. Mr. Maheshwari, however, wanted us to examine the case of Har Prasad, because, according to him, Har Prasad has been victimised by the employer for 219 his trade union activities. Har Prasad is the President of the Kapra Mill Mazdoor Union, Saharanpur, and it is because of his activities as such President that the appellant does not like him. It is common ground that at the relevant time Har Prasad was not recognised as a protected workman, and so his case does not fall under section 33(3). The Tribunal has observed that this workman has not been named by any witness as having taken part in any assault, and it was therefore inclined to take the view that his dismissal amounted to victimisation. We have carefully considered this workman 's case, and we are satisfied that the Tribunal was not justified in refusing to accord approval even to his dismissal. It is common ground that Har Prasad led the deputation to the Controller of Production both on October 12 and October 14; and the threat held out by him on the earlier occasion is not denied by him. In terms he told the Controller that his conduct would bring trouble. It is significant that some of the workmen who assaulted the officers on October 14 had accompanied Har Prasad and were present when he gave the threat to the Controller. Sushil Kumar, who is the appellant 's Controller of Production, has deposed to this threat. The sequence of events that took place on October 14 unambiguously indicates that it was the threat held out by Har Prasad and the incitement given by him that led to the assault on the evening of October 14. Mr. Sushil Kumar 's evidence appears to be straightforward and honest. He has frankly admitted that in the past Har Prasad had been co operating with him and that he had. never instigated any attack on the officers on any previous occasion. Har Prasad no doubt denied that there was any exchange of hot words during the course of his interview with the officers but he has not disputed Mr. Sushil Kumar 's evidence that he uttered a warning at the time of the said interview. In fact his contention appears to have been that action should have been taken against him soon after he uttered the threat. On the evidence led at the enquiry, the enquiry officer came to the conclusion that the charge framed against this workman had 220 been clearly proved. The charge was that he had plotted and hatched a conspiracy for assaulting the General Superintendent, Weaving Master, Chief Engineer, Factory Manager and the Controller of Production. The details of the charge were specified, and at the enquiry it was held that these charges had been proved. There is no doubt that these charges, if proved, deserve the punishment of dismissal under the relevant standing orders. The Tribunal, however, purported to examine the propriety of the finding recorded against Har Prasad and came to the conclusion that the said finding was not justified on the merits. As we have already pointed out the Tribunal had no jurisdiction to sit in appeal over the findings of the enquiry as it has purported to do. The result is that the conclusion of the Tribunal in regard to all the workmen is unjustified and without jurisdiction. The appeal is accordingly allowed, the order passed by the Tribunal is set aside, and approval is accorded to the action taken by the appellant under section 6E. There will be no order as to costs. Appeal allowed.

IN-Abs

Two officers of the appellant were assaulted by the workmen. In this connection the appellant served notices on eight workmen calling upon them to explain their conduct and to show cause why they should not be dismissed. In their explanations the workmen denied the charges. Thereupon a proper enquiry was held according to the Standing Orders, as a result of which the charges were found proved against the workmen and the appellant dismissed the workmen and asked them to take their final dues together with one month 's pay in lieu of notice. As a dispute in respect of bonus was pending before the Industrial Tribunal, the appellant made applications to it under section 6E(2) of the U. P. , for approval of the dismissal of the workmen. The Tribunal refused to accord its approval and directed the appellant to reinstate the workmen from the date of suspension and to pay full wages for the period of unemployment. The appellant contended that the Tribunal acted beyond its jurisdiction and assumed powers of an appellate Court over the decision of the appellant. Held, that the Tribunal had assumed jurisdiction not vested in it by assuming powers of an appellate Court and its refusal to accord approval was patently erroneous in law. The requirement of obtaining approval under section 6E(2)(b) of the U. P. Act (or section 33(2) Of the Central Act) in cases of dismissal or discharge for misconduct not connected with a pending dispute as distinguished from the requirement of obtaining previous permission under section 6E(1) of '.the U. P. Act (or section 33(1) of the Central Act) in cases of misconduct connected with a pending dispute indicated that the ban imposed by section 6E(2) was not as rigid or rigorous as that imposed by section 6E(1). The jurisdiction to give or withhold permission was Prima facie wider than the jurisdiction to give or withhold approval. Where the employer had held a proper domestic enquiry and had dismissed the workmen as a result of such enquiry, all that the Tribunal could do was to enquire: (i) whether the Standing Orders justified the dismissal, (ii) whether the enquiry had been held as provided by the Standing Orders, (iii) whether wages for one month had been paid and (iv) whether an application for approval had been made as prescribed. In the present case all these conditions were 205 satisfied but the Tribunal lost sight of its limitations and assumed powers of an appellate Court entitled to go into question of fact. The Punjab National Bank Ltd. vs Its Workmen, [1960] S.C.R. 806, referred to. Quaere: Whether the application for approval under section 6E(2)(b) of the U. P. Act or under section 33(2)(b) of the Central Act could be made after the order of dismissal had been passed or whether it had to be made before passing such an order. Note: Section 6E of the U.,P. is identical in terms with section 33 of the Central .

Appeal No. 31 of 1960. Appeal by special leave from the judgment and order dated March 14, 1957, of the Patna High Court in Miscellaneous Judicial Case No. 165 of 1957. P. K. Chatterjee, for the appellant. section P. Varma, for respondents Nos. 1 and 4. Nooni Coomar Chakravarti and B. P. Maheshwari, for respondent No. 2. 1960. December 12. The Judgment of the Court was delivered by DAS GUPTA, J. This appeal by special leave is against an order of the High Court of Judicature at Patna dismissing summarily an application of the present appellant under article 226 and article 227 of the Constitution. The appellant was a workman employed in the Digha factory of Bata Shoo Company (Private) Limited, since October, 1943. On January 13, 1954, the management of the company served him with a charge sheet alleging that he had been doing anti union activities inside the factory during the working hours and so was guilty under section 12B(1) of the Standing Orders and Rules of the company. On 198 January 14, he submitted a written reply denying the charge and asking to be excused. On January 15, the management made an order terminating his services with effect from January 18, 1954. An industrial dispute was raised on this question of dismissal by the Union and was referred along with a number of other disputes to the Industrial Tribunal, Bihar, by a notification dated April 29, 1955. After written statements were filed by the Union and the management, February 20, 1956, was fixed for hearing at Patna. Thereafter numerous adjournments were given by the Tribunal on the joint petition for time filed by both the parties stating that all the disputes were going to be compromised. On November 16, 1956, the Tribunal made an order fixing December 20, 1956, "for filing compromise or hearing". On December 20, 1956, however a fresh application for time was filed but it was stated that agreement had already been reached on some of the matters and opportunity was asked for to settle the other matters. The case was however adjourned to January 21, 1957, for filing a compromise or hearing. On that date a further petition was again filed and a further extension of time was allowed till February 1, 1957. On January 31, the parties, that is, the management and the Union filed a joint petition of compromise settling all points of disputes out of court. Prior to this, on January 12, 1957, the present appellant had made an application praying that D. N. Ganguli and M. P. Gupta, two of his co workers might be allowed to represent his case before the Tribunal instead of Fateh Singh, the Secretary of the Union and that he did not want his case to be represented by Fateh Singh as he had no faith in him. This application was dismissed by the Tribunal by an order dated February 26, 1957. On March 7, 1957, the appellant filed a fresh petition stating that he had not authorised Fateh Singh to enter into any agreement in his case and praying that the agreement filed in respect of his case should not be accepted and that he and his agents should be heard before the disposal 199 of the case. This prayer was not allowed by the. Tribunal and by an order dated March 11, 1957, an award in terms of the petition of compromise was made. The appellant filed his application to the Patna High Court on March 13, 1957, praying for an issue of an appropriate writ or direction quashing the Tribunal 's order of February 26, 1957, by which the Tribunal had rejected his prayer for representation by a person of his own choice in place of Fateh Singh, the Secretary of the Union. Prayer was made in this petition also for a direction on the Tribunal not to record the compromise in so far as it related to the appellant 's case and to give its award without reference to the settlement and on proper adjudication of the matter. The High Court dismissed this application summarily. It is against that order of dismissal that the present appeal by special leave has been preferred. On behalf of the appellant it is argued that the Tribunal committed a serious error in rejecting his application to be represented by a person of his own choice instead of Fateh Singh, the Secretary of the Union and thereafter in making an award on the basis of the reference. It has to be noticed that on the date the application *as made before the High Court the award had already been made and so there could be no direction as prayed for on the Tribunal not to make the award. If however the appellant 's contention that the Tribunal erred in rejecting his application for separate representation was sound he would have been entitled to an order giving him proper relief on the question of representation as well as regarding the award that had been made. The sole question that arises for our determination therefore is whether the appellant was entitled to separate representation in spite of the fact that the Union which had espoused his cause was being repre. sented by its Secretary, Fateh Singh. The appellant 's contention is that he was a party to the dispute in his own right and so was entitled to representation according to his own liking. The question whether when a dispute concerning an individual workman is taken up by the Union, of which the workman is a member, as 200 a matter affecting workmen in general and on that basis a reference is made under the Industrial Disputes Act the individual workman can claim to be heard independently of the Union is undoubtedly of some importance. The question of representation of a workman who is a party to a dispute is dealt with by section 36 of the Industrial Disputes Act. That section provides that such a workman is entitled to be represented in any proceeding under the Act, by (a) an officer of a registered trade union of which he is a member, (b) an officer of a federation of trade unions to which the trade union of which he is a member is affiliated and (c) where the workman concerned is not a member of any trade union by an officer of any trade union concerned with the industry, or by any other workman employed in that industry. The appellant was the member of a trade union; and he was actually represented in the proceedings before the Tribunal by an officer of that Union, its Secretary, Fateh Singh. The Union through this officer, filed a written statement on his behalf. Upto January 12, 1957, when the appellant filed his application for separate representation, this officer, was in charge of the conduct of the proceedings on behalf of the appellant. Never before that date, the appellant appears to have raised any objection to this representation. The question is, whether, when thereafter he thought his interests were being sacrificed by his representative, he could claim to cancel that representation, and claim to be represen. ted by somebody else. In deciding this question, we have on the one hand to remember the importance of collective bargaining in the settlement of industrial dis putes, and on the other hand, the principle that the party to a dispute should have a fair hearing. In assessing the requirements of this principle, it is necessary and proper to take note also of the fact that when an individual workman becomes a party to a dispute under the Industrial Disputes Act he is a party, not independently of the Union which has espoused his cause. It is now well settled that a dispute between an individual workman and an employer cannot be an 201 industrial dispute as defined in section 2(k) of the Industrial Disputes Act unless it is taken up by a Union of the workmen or by a considerable number of workmen. In Central Provinces Transport Service Ltd. vs Raghunath Gopal Patwardhan (1) Mr. Justice Venkatarama Ayyar speaking for the Court pointed out after considering numerous decisions in this matter that the preponderance of judicial opinion was clearly in favour of the view that a dispute between an employer and a single employee cannot per se be an industrial dispute but it may become one if it is taken up by an Union or a number of workmen. "Notwithstanding that the language of section 2(k) is wide enough to cover disputes, between an employer and a single employee", observed the learned Judge, "the scheme of the Industrial Disputes Act does appear to contemplate that the machinery provided therein should be set in motion to settle only disputes which involve the rights of workmen as a class and that a dispute touching the individual rights of a workman was not intended to be the subject of adjudication under the Act, when the same had not been taken up by the Union or a number of workmen". This view which has been re affirmed by the Court in several later decisions recognises the great importance in modern industrial life of collective bargaining between the workman and the employers. It is well known how before the days of collective bargaining labour was at a great disadvantage in obtaining reasonable terms for contracts of service from his employer. As trade unions developed in the country and collective bargaining became the rule the employers found it necessary and convenient to deal with the representatives of workmen, instead of individual workmen, not only for the making or modification of contracts but in the matter of taking disciplinary action against one or more workmen and as regards all other disputes. The necessary corollary to this is that the individual workman is at no stage a party to the industrial dispute independently of the Union. The Union or those (1)[1954] S.C.R. 956. 26 202 workmen who have by their sponsoring turned the individual dispute into an industrial dispute, can therefore claim to have a say in the conduct of the proceedings before the Tribunal. It is not unreasonable to think that section 36 of the Industrial Disputes Act recognises this position, by providing that the workman who is a party to a dispute shall be entitled to be represented by an officer of a registered trade union of which he is a member. While it will be unwise and indeed impossible to try to lay down a general rule in the matter, the ordinary rule should in our opinion be that such representation by an officer of the trade union should continue throughout the proceedings in the absence of excep tional circumstances which may justify the Tribunal to permit other representation of the workman concerned. We are not satisfied that in the present case, there were any such exceptional circumstances. It has been suggested that the Union 's Secretary Fateh Singh himself had made the complaint against the appellant which resulted in the order of dismissal. it has to be observed however that in spite of everything, the Union did take up this appellant 's case against his dismissal as its own. At that time also, Fateh Singh was the Secretary of the Union. If are Union had not taken up his cause, there would not have been any reference. In view of all the circumstances, we are of opinion, that it cannot be said that the Tribunal committed any error in refusing the appellant 's prayer for representation through representatives of his own choice in preference to Fateh Singh, the Secretary of the Union. As a last resort, learned counsel for the appellant wanted to urge that the Secretary of the Union had no authority to enter into any compromise on behalf of the Union. We find that no such plea was taken either in the appellants application before the Tribunal or in his application under articles 226 and 227 of the Constitution to the High Court. Whether in fact the Secretary had any authority to compromise is a question of fact which cannot be allowed to be raised at this stage. 203 In the application before the High Court a statement was also made that the compromise was collusive and mala fide. The terms of the compromise of the dispute regarding the appellant 's dismissal were that he would not get reemployment, but by way of "humanitarian considerations the company agreed without prejudice to pay an ex gratia amount of Rs. 1,000/ (Rupees one thousand) only" to him. There is no material on the record to justify a conclusion that this compromise was not entered in what was considered to be the best interests of the workman himself In our opinion, there is nothing that would justify us in interfering with the order of the High Court rejecting the appellant 's application for a writ. The appeal is accordingly dismissed. There will be no order as to costs. During the hearing Mr. Chakravarty, learned counsel for the company, made a statement on behalf of the company that in addition to the sum of Rs. 1,000 which the company had agreed to pay to the appellant as a term of settlement the company will pay a further sum of Rs. 500 (Rupees five hundred) only ex gratia and without prejudice. We trust that this statement by the counsel will be honoured by the company.

IN-Abs

On the termination of the appellant 's services by his employer an industrial dispute was raised by his union and the question of his dismissal along with a number of other disputes was referred to the Industrial Tribunal. After several adjournments of the case the management and the union filed a joint petition of compromise settling all the points in dispute out of Court. Prior to this the appellant filed an application praying that he might be allowed to be represented by two of his co workers instead of the Secretary of the Union in whom he had no faith and who had no authority to enter into the compromise on his behalf. This prayer was not allowed by the Tribunal which made an award in terms of the compromise. The appellant, thereupon, made an application to the High Court praying for a writ quashing the order of the Tribunal disallowing him to be represented by a person of his own choice and 197 also for a direction to the Tribunal not to record the compromise. The High Court summarily dismissed the Writ Petition. , On appeal by special leave, Held, that the appellant was Dot entitled to separate repre sentation when already being represented by the Secretary of the union which espoused his cause. A dispute between an individual workman and an employer cannot be an industrial dispute as defined in section 2(k) of the Industrial Disputes Act unless it is taken up by a Union of workmen or by a considerable number of workmen. When an individual workman becomes a party to a dispute under the Industrial Disputes Act be is a party, not independently of the Union which has espoused his cause. Central Provinces Transport Service Ltd. vs Raghunath Gopal Palwardhan, , followed. Although no general rule can be laid down in the matter, the ordinary rule should be that representation by an officer of the trade union should continue throughout the proceedings in the absence of exceptional circumstances justifying other representation of the workman concerned.

minal Appeal No. 119 of 1958. Appeal by special leave from the judgment and order dated July 29, 1957, of the Rajasthan High Court, Jodhpur, in Criminal Appeal No. 42 of 1954. 16 122 B. L. Kohli and C. L. Sareen, for the appellants. section K. Kapur and D. Gupta, for the respondent. December 9. The Judgment of the Court was delivered by SUBBA RAO, J. This is an appeal by special leave against the conviction and sentence by the High Court of Judicature for Rajasthan at Jodhpur of the 9 appellants under section 304, read with section 149, and section 148 of the Indian Penal Code. The 9 appellants, along with 34 other persons, were accused before the Sessions Judge, Merta. Briefly stated the case of the prosecution was as follows: There were two factions in village Harnawa one consisting of Rajputs and other of the cultivators of the village. Admittedly there were disputes between these two factions in respect of certain fields. At about 3 30 p.m. on October 31, 1951, the day after Diwali, popularly known as Ram Ram day, both the groups went to a temple called Baiji kathan. The cultivators went first to the temple and sat in the place which was usually occupied by the Rajputs. Subsequently when the Rajputs went there, they found their usual sitting place occupied by the cultivators and took that as an insult to them. Though they were invited by the pujari to sit in some other place, they refused to do so and went to a banyan tree which was at a short distance from the temple. There they held a brief conference and then returned to the temple armed with guns, swords and lathies. The Rajputs fired a few shots at the cultivators and also beat them with swords and lathies. As a result, 16 of the cultivators received injuries and of these 6 received gun shot injuries, of which two persons, namely, Deena and Deva, succumbed to the injuries. Out of the remaining 14 injured persons, 3 received grievous injuries and the rest simple ones. Forty three persons, alleged to have taken part in the rioting, were put up for trial before the Sessions Judge,, Merta, for having committed offences under section 302, read with section 149, and section 148 of the Indian Penal Code. Five of the accused admitted their presence at the scene of 123 occurrence but pleaded that after they had made their customary offerings at the temple and when they were returning they were attacked by the cultivators. Others pleaded alibi. The learned Sessions Judge held that it had not been established that the accused had a common object to kill the cultivators and that it had also not been proved beyond any reasonable doubt that any of the accused was guilty of a particular offence. On these findings, he acquitted all the accused. On appeal the learned Judges of the High Court found that the accused were members of an unlawful assembly, that they were animated by a common object of beating the cultivators and that further out of the 43 accused it had been clearly established that the appellants, who are 9 in number, took part in the activities of the unlawful assembly. On that finding they held that the accused were guilty of culpable homicide not amounting to murder under section 304, read with section 149, Indian Penal Code; they also held that appellants 1, 2, 3 and 4 were also guilty under section 148 of the Indian Penal Code, as they were armed with deadly weapons, and the rest under section 147, Indian Penal Code. For the offence under section 304, read with section 149, the appellants were sentenced to ten years ' rigorous imprisonment, and for the offence under section 148, appellants 1 to 4 were further sentenced to one year 's rigorous imprisonment and the rest under section 147, to six months ' rigorous imprisonment. Having examined the entire evidence, they agreed with the learned Sessions Judge that no case had been made out against the other accused beyond any reasonable doubt. The appeal was, therefore, allowed in respect of the nine appellants and dismissed in respect of the others Learned counsel for the appellants contended that the Sessions Judge came to a reasonable conclusion on the evidence and that the. High Court had no substantial and compelling reasons to take a different view. In recent years the words "compelling reasons" have become words of magic incantation in every 124 appeal against acquittal. The words are so elastic that they are not capable of easy definition; with the result, their interpretation varied between two extreme views one holding that if a trial court acquitted an accused, an appellate court shall not take a different view unless the finding is such that no reasonable person will come to that conclusion, and the other accepting only the conscience of the appellate court as the yardstick to ascertain whether there are reasons to compel its interference. In the circumstances we think it necessary to clarify the point. The scope of the powers of an appellate court in an appeal against acquittal has been elucidated by the Privy Council in Sheo Swarup vs King Emperor There Lord Russell observed at p. 404 thus: ". . the High Court should and will always give proper weight and consideration to such matters as (1) the views of the trial Judge as to the credibility of the witnesses, (2) the presumption of innocence in favour of the accused, a presumption certainly not weakened by the fact that he has been acquit ted at his trial, (3) the right of the accused to the benefit of any doubt, and (4) the slowness of an appellate court in disturbing a finding of fact arrived at by a Judge who had the advantage of seeing the witnesses Adverting to the facts of the case, the Privy Council proceeded to state, ". . They have no reason to think that the High Court failed to take all proper matters into consideration in arriving at their conclusions of fact. " These two passages indicate the principles to be followed by an appellate court in disposing of an appeal against acquittal and also the proper care it should take in re evaluating the evidence. The Privy Council explained its earlier observations in Nur Mohammad vs Emperor (2) thus at p. 152: "Their Lordships do not think it necessary to read it all again, but would like to observe that there really is only one principle, in the strict use of the word, laid down there; that is that the High (1) (1934) L.R. 61 I.A. 398. (2) A.I.R. 1945 P.C. 151. 125 Court has full power to review at large all the evidence upon which the order of acquittal was founded, and to reach the conclusion that upon that evidence the order of acquittal should be reversed. " These two decisions establish that the power of an appellate court in an appeal against acquittal is not different from that it has in an appeal against conviction; the difference lies more in the manner of approach and perspective rather than in the content of the power. These decisions defining the scope of the power of an appellate court had been followed by all the courts in India till the year 1951 when, it is said, this Court in Surajpal Singh vs The State (1) laid down a different principle. But a perusal of that judgment does not bear out the construction which is very often placed thereon. The passage relied upon is found at p. 201 and it reads thus: "It is well established that in an appeal under section 417 of the Criminal Procedure Code, the High Court has full power to review the evidence upon which the order of acquittal was founded, but it is equally well settled that the presumption of innocence of the accused is further reinforced by his acquittal by the trial court, and the findings of the trial court which had the advantage of seeing the witnesses and hearing their evidence can be reversed only for very substantial and compelling reasons. " On the facts of that case this Court held, "we are inclined to hold that the Sessions Judge had taken a reasonable view of the facts of the case, and in our opinion there were no good reasons for reversing that view". We think that these observations are nothing more than a restatement of the law laid down by the Privy Council and the application of the same to the facts of the case before the Court. Though in one paragraph the learned Judges used the words "substantial and compelling reasons" and in the next paragraph the words "good reasons", these observations were not intended to record any disagreement (1)[1952] S.C.R. 193. 126 with the observations of Lord Russell in Sheo Swarup 's case (1) as to matters a High Court would keep in view when exercising its power under section 417 of the Criminal Procedure Code. If it had been so intended, this Court would have at least referred to Sheo Swarup 's case (1), which it did not. The same words were again repeated by this Court in Ajmer Singh vs The State of Punjab (2). In that case the appellate court set aside an order of acquittal on the ground that the accused had failed to explain the circumstances appearing against him. This court held that as the presumption of innocence of an accused is reinforced by the order of acquittal, the appellate court could have interfered only for substantial and compelling reasons. The observations made in respect of the earlier decisions applied to this case also. Mahajan, J., as he then was, delivering the judgment of the court in Puran vs State of Punjab (3) again used the words "very substantial and compelling reasons", but immediately thereafter the learned Judge referred to the decision of Sheo Swarup 's case(1) and narrated the circumstances which an appellate court should bear in mind in interfering with an order of acquittal. This juxtaposition of the so called formula and the circumstances narrated in Sheo Swarup 's case (1) indicate that the learned Judge used those words only to comprehend the statement of law made by the Privy Council. Mukherjea, J., as he then was, in C. M. Narayan vs State of Travancore Cochin (4) again referred to thePrivy Council decision and affirmed the wide powerof an appellate court and also the proper approach in an appeal against acquittal. The learned Judge did not introduce any further limitation on the power of the appellate court. But it was observed that the High Court had not clearly kept before it the well settled principles and reversed the decision of the trial court 'without noticing or giving due weight and consideration to important matters relied upon by that court '. In Tulsiram Kanu vs The State (5) this (1) (1934) L.R. 61 I.A. 398. (2) ; (3) A I.R. (4) (5) A.I.R. 1954 8.C. I. 127 Court used a different phraseology to describe the approach of an appellate court against an order of acquittal. There the Sessions Court expressed that there was clearly reasonable doubt in respect of the guilt of the accused on the evidence put before it. Kania, C. J., observed that it required good and sufficiently cogent reasons to overcome such reasonable doubt before the appellate court came to a different conclusion. This observation was made in connection with a High Court 's judgment which had not taken into consideration the different detailed reasons given by the Sessions Judge. In Madan Mohan Singh 's case (1), on appeal by special leave, this Court said that the High Court 'had not kept the rules and principles of administration of criminal justice clearly before it and that therefore the judgment was vitiated by non advertence to and misapprehension of various material facts transpiring in evidence and the consequent failure to give true weight and consideration to the findings upon which the trial court based its decision '. In Zwinglee Ariel vs State of M. P. (2) this Court again cited the passage from the decision of the Privy Council extracted above and applied it to the facts of that case. In Rao Shiv Bahadur Singh vs State of Vindhya Pradesh(1), Bhagwati, J., speaking for the Court, after referring to an earlier decision of this Court, accepted the principle laid down by the Privy Council and, indeed, restated the observations of the Privy Council in four propositions. It may be noticed that the learned Judge did not use the words cc substantial and compelling reasons". In section A. A. Biyabani vs The State of Madras (4), Jagannadhadas, J., after referring to the earlier decisions, observed at p. 647 thus: "While no doubt on such an appeal the High Court was entitled to go into the facts and arrive at its own estimate of the evidence, it is also settled law that, where the case turns on oral evidence of witnesses, the estimate of such evidence by the trial court is not to be lightly set aside. " (1) A.I.R. 1954 S.C. 637. (2) A.I.R. 1954 S.C. 15. (3) A I.R. (4) A.I.R. 1954 S.C. 645. 128 The learned Judge did not repeat the so called formula but in effect accepted the approach of the Privy Council. The question was again raised prominently in the Supreme Court in Aher Raja Khima ,"v. The State of Saurashtra(1). Bose, J., expressing the majority view, stated at p. 1287 thus: "It is, in our opinion, well settled that it is not enough for the High Court to take a different view of the evidence; there must also be substantial and compelling reasons for holding that the trial court was wrong: Ajmer Singh vs State of Punjab (2); and if the trial Court takes a reasonable view of the facts of the case, interference under section 417 is not justifiable unless there are really strong reasons for reversing that view. " It may be noticed that the learned Judge equated "substantial and compelling reasons" with "strong reasons". Kapur, J., in bhagwan Das V. State of Rajasthan(1) referred to the earlier decisions and observed that the High Court should not set aside an acquittal unless there are " substantial and compelling reasons" for doing so. In Balbir Singh vs State of Punjab (4), this Court observed much to the same effect thus at p. 222: "It is now well settled that though the High Court has full power to review the evidence upon which an order of acquittal is founded, it is equally well settled that the presumption of innocence of the accused person is further reinforced by his acquittal by the trial Court and the views of the trial Judge as to the credibility of the witnesses must be given proper weight and consideration; and the slowness of an appellate Court in disturbing a finding of fact arrived at by a Judge who had the advantage of seeing the witnesses must also be kept in mind and there must be substantial and compelling reasons for the appellate Court to come to a conclusion different from that of the trial Judge. " These observations only restate the principles laid down by this Court in earlier decisions. There are (1) ; (2) [1953] S.C.P. 418, 423. (3) A.I. R. (4) A.I.R. 1957 S.C. 216. 129 other decisions of this Court where, without discussion, this Court affirmed the judgments of the High Courts where they interfered with an order of acquittal without violating the principles laid down by the Privy Council. There is no difficulty in applying the principles laid down by the Privy Council, and accepted by this Court, to the facts of each case. But appellate courts are finding considerable difficulty in understanding the scope of the words "substantial and compelling reasons" used by this Court in the decisions cited above. This Court obviously did not and could not add a condition to section 417 of the Criminal Procedure Code. The words were intended to convey the idea that an appellate court not only shall bear in mind the principles laid down by the Privy Council but also must give its clear reasons for coming to the conclusion that the order of acquittal was wrong. The foregoing discussion yields the following results: (1) an appellate court has full power to review the evidence upon which the order of acquittal is founded; (2) the principles laid down in Sheo Swarup 's case(1) afford a correct guide for the appellate court 's approach to a case in disposing of such an appeal; and (3) the different phraseology used in the judgments of this Court, such as, (i) "substantial and compelling reasons", (ii) "good and sufficiently cogent reasons", and (iii) "strong reasons" are not intended to curtail the undoubted power of an appellate court in an appeal against acquittal to review the entire evidence and to come to its own conclusion; but in doing so it should not only consider every matter on record having a bearing on the questions of fact and the reasons given by the court below in support of its order of acquittal in its arriving at a conclusion on those facts, but should also express those reasons in its judgment, which lead it to hold that the acquittal was not justified. With this background we shall now look at the judgment of the Sessions Judge and that of the High (1) (1934) L.R. 61 I.A. 398. 17 130 Court to ascertain whether the High Court anywhere departed from the principles laid down by the Privy Council. The framework of the judgment of the learned Sessions Judge may be shortly stated thus: The first question was whether the case of the prosecution that the Rajputs met. under a banyan tree, conspired to beat the Jats and came back to the temple armed with weapons was true. This fact was spoken to by several eve witnesses, including Goga (P.W. 1), Chandra (P.W. 2) and Doongar Singh (P.W. 21). This fact was also mentioned in the First Information Report lodged by Doongar Singh (P.W. 21). There were 20 eyewitnesses who spoke about the conspiracy; and, out of them, P.Ws. 5, 8, 9, 11, 12, 15, 16, 17, 18. 24 and 25 received injuries during the riot. The learned Sessions Judge considered the evidence of P.Ws. 1 and 2 and rejected it on unsubstantial grounds and on the basis of insignificant discrepancies. Therefter, he noticed that all the other eye witnesses, with slight and inconsequential variations, spoke to the fact of their returning from the banyan tree with lathies, swords and guns ' but he did not give a definite finding whether he accepted that evidence or not, though at the fag end of the judgment he found that he could not hold that the assembly of Rajputs had any common object of killing anybody. Then the learned Sessions Judge proceeded to consider whether any of the Rajputs were recognized by any of the witnesses. He divided the accused into three groups, namely, (i) those accused who were amongst the Rajputs when they had come for darshan of Baiji, (ii) those accused who were amongst the Rajputs when they returned from the banyan tree but for whom the evidence of taking part in the actual rioting is divided, and (iii) those accused for whom most of the eye witnesses have stated that they had committed rioting and inflicted injuries on the assembly of cultivators. Taking the first group, the learned Sessions Judge, for the reasons given by him earlier, rejected the evidence of Goga and Chandra, pointed out that 28 accused had not been named unanimously by all the eye witnesses, 131 noticed that there was long standing enmity between the Rajputs and the cultivators, and laid down a criterion that, for determining the presence of any particular accused, there should be an allegation against him about doing any overt act in the unlawful, assembly. By applying the said yardstick he held that none of the accused falling in the first group, which included appellants 7, 8 and 9, was guilty of the offences with which they were charged. Coming to the second category, with which we are not concerned in this appeal, the learned Sessions Judge again applied the test that an overt act should be proved against each of the accused and held that no case had been made out against them. Adverting to the third group, after noticing that 12 of the eye witnesses were those who received injuries, the learned Sessions Judge applied another test for accepting their evidence. In effect and substance the test adopted by him was that an accused identified only by one witness and not proved to have done any overt act should be acquitted by giving him the benefit of doubt. Applying this test to the said witnesses he held that the said accused were not guilty. After considering the evidence in the aforesaid manner, he came to the following final conclusion: "I cannot hold that the assembly of Rajputs had any common object of killing anybody. All happened at the spur of the moment. Those Rajputs who took part in the rioting have not been truthfully named. Innocent persons have been implicated and the cases of those persons who are alleged to have committed any overt acts are also full of doubts. " On appeal the learned Judges of the High Court, as already stated, allowed the appeal in respect of the 9 appellants and dismissed it in regard to the others. The learned Judges of the High Court observed that it had not the slightest hesitation in holding that the case put forward by the prosecution, by and large, represented the substantial truth and that the incidents at the banyan tree were true. They pointed out that the reasons given by the Sessions Judge for not believing the evidence of the main witnesses, Goga 132 and Chandra, who spoke as to what happened at the banyan tree, could not be sustained and that the alleged discrepancies and contradictions in their evidence were not such as to detract from truthfulness. We have also gone through the evidence of Goga and Chandra and we entirely agree with the observations of the learned Judges of the High Court that their evidence was natural and consistent and that the alleged discrepancies pointed out by the Ses sions Judge were not either contradictions at all or, even if they were so, they were so trivial as to affect in any way their veracity. The learned Judges further pointed out that the evidence of Goga and Chandra was supported by the evidence of Doongar Singh (P. W. 21), a police constable, who gave the First Information Report at the earliest point of time. The recitals in the First Information Report corroborate his evidence. The learned Judges then indicated that this version was practically supported by other eve witnesses and that they did not see any reason why it should have been invented, if it was not true. Having regard to the said evidence, they found themselves entirely unable to accept the conclusion of the learned trial Judge that this was a case where a stray beating was given by some individuals on the side of the Rajputs to some individuals on the Bide of the Jats. They found that the Rajputs were members of an unlawful assembly and that they were all animated by a common object of beating the cultivators. Having held that the learned Sessions Judge was clearly wrong on the question of unlawful assembly, the learned Judges proceeded to consider the case of each accused. They adopted the following principle, based upon the decision of this Court in Abdul Gani vs State of M. P. (1): "We quite recognise that in a case of rioting where two inimical factions are involved, exaggerations are bound to be made, and some innocent persons are likely to be falsely implicated; but all the same, it is the duty of the courts not to throw out the whole case by following the easy method of (1) A.I.R. 1954 S.C. 31. 133 relying on discrepancies, and, where the case for the prosecution is substantially true, to find out if any of the accused participated, in the offence, and if their presence is established beyond all reasonable doubt, punish them for the offences committed by them. " They found, on the evidence, that appellant 1, Sanwat Singh, who was present on the spot was a member of the unlawful assembly and had actually struck Sheonath with his sword as a result of which his three fingers were cut; that appellant 2, Dhan Singh, was one of the persons who took a leading part in the beating; that appellant 3, Mangej Singh, was undoubtedly one of the participants in the unlawful assembly; that appellant 4, Kalu Singh, was armed with a sword and attacked the Jats and that his version that he had been first attacked by the Jats was not true; that appellant 5, Narain Singh, was one of the members of the unlawful assembly and that he had given beatings to P.W. 25; that appellant 6, Gulab Singh, struck Sheokaran Jat with lathies; and that appellant 7, Sabal Singh, appellant 8, Baney Singh, and appellant 9, Inder Singh, who admitted their presence at the spot but stated that they were attacked by the Jats, were clearly participators in the beating. As regards the other accused, the learned Judges, having examined the entire evidence, agreed with the Sessions Judge in holding that no case had been made out against those accused beyond all reasonable doubt. So far as these accused are concerned there is no evidence to show that any of them had a weapon or that they had taken any active part in assaulting one or other of the Jats. In the result, the learned Judges of the High Court found that the appellants formed an unlawful assembly to beat the Jats and that they must have known that murders were likely to be committed in prosecution of that common object. On that finding, they convicted and senten ced the appellants as stated earlier in the judgment. Now, can it be said that, as learned counsel for the appellants argues, the Judges of the High Court had ignored any of the principles laid down by the Privy 134 Council and subsequently accepted by this Court? We think not. The foregoing analysis of the findings of the two courts discloses the following facts: The Sessions judge, on the general case of the prosecution that the Rajputs, chagrined by the attitude of the Jats in occupying their usual place in the temple, went to the banyan tree, conferred for a short time and came back to the temple to attack the Jats, rejected the evidence of the main witnesses for the prosecution, namely, Goga, Chandra and Doongar Singh, on grounds which do not stand a moment 's scrutiny and ignored the voluminous evidence, which corroborated the evidence of the said three witnesses, without giving valid or acceptable reasons for the same. The learned Sessions Judge did not even give a definite finding on this version of the prosecution case, though impliedly he must be deemed to have rejected it. In regard to the individual cases he divided the witnesses into three categories, and, applying mechanical tests, refused to act upon their evidence. The High Court rightly pointed out that there was no reason why the voluminous evidence in support of the general case and why the evidence of the three witnesses, Goga, Chandra and Doongar Singh, should be rejected. The learned Judges of the High Court accepted their evidence, which conclusively established that the general case was true and that the appellants actually took active part in attacking the Jats with swords and lathies. In doing so, the learned Judges did not depart from any of the principles laid down by the Privy Council. Indeed, they interfered with the judgment of the Sessions Judge, as they came to the conclusion that, the said judgment, in so far as the appellants were concerned, was clearly wrong and contrary to the overwhelming and reliable evidence adduced in the case. The learned Judges of the High Court, in our opinion, approached the case from a correct perspective and gave definite findings on a consideration of the entire evidence. The question now is, whether the appellants have made out any case for interference with the judgment of the High Court under article 136 of the Constitution. 135 Article 136 of the Constitution confers a wide discretionary power on this Court to entertain appeals in suitable cases not otherwise provided for by the Constitution. It is implicit in the reserve power that it cannot be exhaustively defined, but decided cases , do not permit interference unless "by disregard to the forms of legal process or some violation of the principles of natural justice or otherwise, substantial and grave injustice has been done". Though article 136 is couched in widest terms, the practice of this Court is not to interfere on questions of fact except in excep tional cases when the finding is such that it shocks the conscience of the court. In the present case, the High Court has not contravened any of the principles laid down in Sheo Swarup 's case (1) and has also given reasons which led it to hold that the acquittal was not justified. In the circumstances, no case has been made out for our not accepting the said findings. In the result, the appeal fails and is dismissed. Appeal dismissed.

IN-Abs

There were two rival factions in a certain village one con sisting of Rajputs and the other of cultivators. On a particular festival day both the groups went to a temple for worship and cultivators who reached the temple first occupied a place therein which was usually occupied by Rajputs. Subsequently Rajputs arrived and resented the occupation of the sitting place by the cultivators. They shifted to a short distance and after holding a brief conference came back to the temple and attacked the cultivators with guns, swords and lathis as a result of which several persons were injured and two were killed. 43 persons alleged to have taken part in the rioting were put up for trial before the Sessions judge for having committed offences under section 302 read with section 149 and section 148 of the Indian Penal Code. The Sessions judge held that a common object on the part of the accused to kill the cultivators had not been established and that it had also not been proved beyond reasonable doubt that the accused were guilty of a particular offence. On these findings the Sessions judge acquitted all the accused. On appeal the High Court after examining the entire evidence found some of the accused guilty of culpable homicide not amounting to murder under section 304 read with section 149 and section 148 of the Indian Penal Code and sentenced them to various terms of imprisonment. The appeal in respect of some other accused was dismissed as no case had been made out against them beyond any reasonable doubt On appeal by special leave against the conviction and sentence by the High Court, Held, that the words "substantial and compelling reasons" for setting aside an order of acquittal used by this Court in its decisions were intended to convey the idea that an appellate court shall not only bear in mind the principles laid down by the Privy Council in Sheo Swarup 's case but must also give its clear reasons for coming to the conclusion that the order of acquittal was wrong. The following results emanate from a discussion of the case law on appeals against acquittal: (1)an appellate court has full power to review the evidence upon which the order of acquittal is founded; (2) the principles 121 laid down in Sheo Swarup 's case afford a correct guide for the appellate court 's approach to a case disposing of such an appeal; (3) the different phraseology used in the judgments of this Court, such as (1) "substantial and compelling reasons", (II) "good and sufficiently cogent reasons", and (III) "strong reasons", are not intended to curtail the undoubted power of an appellate Court in an appeal against acquittal to review the entire evidence and to come to its own conclusion, but in doing so it should not only consider every matter on record having a bearing on the questions of fact and the reasons given by the Court below in support of its order of acquittal in arriving at a conclusion on those facts, but should express the reasons in its judgment, which led it to hold that the acquittal was not justified. Sheo Swarup vs King Emperor, (1934) L. R. 61 I. A. 398, con sidered and followed. Nur Mohammad vs Emperoy, A.I.R. 1945 P.C. 151, Surajpal Singh vs The State, ; , Ajmer Singh vs The State of Punjab, ; , Puran vs State of Punjab, A.I.R. 1953 S.C. 459, C. M. narayan vs State of Travancore Cochin, , Tulsiram Kanu vs The State, A.I.R. 1954 S.C. 1, Madan Mohan Singh 's case, A.I.R. 1954 S.C. 637, Zwinglee Ariel vs State of U. P., A.I.R. 1954 S.C. 15, Rao Shiv Bahadur Singh vs State of Vixdhya Pradesh, ; , section A. A. Biyabani vs The State of Madras, A.I. R. , Aher Raja Khima vs The State of Saurashtra, ; , Bhagwan Das vs The State of Rajasthan, ; and Balbir Singh vs State of Punjab, A.I.R. 1957 S.C. 216, discussed. The High Court approached the instant case from a correct perspective and gave definite findings on a consideration of the entire evidence, and in so doing it did not depart from any of the principles laid down by the Privy Council in Sheo Swarup 's case and also gave reasons for holding that the acquittal was not justified. Abdul Gani vs State of M. P., A.I.R. 1954 S.C. 31, referred to. Although the powers of this Court under article 136 of the Constitution are very wide, interference is not permitted unless "by disregard to the forms of legal process or some violation of the principles of natural justice or otherwise, substantial and grave injustice has been done," on questions of fact the practice of this Court is not to interfere except in exceptional cases when the finding is such that it shocks the conscience of this Court,

o. 160 of 1952) under article 32 of the Constitution of India for the enforcement of fundamental rights. The facts of the case and arguments of the counsel are stated fully in the judgment. Petitioner No. I (Aswini Kumar Ghosh) in person. B. Sen for the respondents. N. C. Chatterjee (S.N. Mukherjee and B. Sen, with him) for the Incorporated Law Society, Calcutta High Court (Intervener No. 1) Dr. N. C. Sen Gupta (A. K. Dutt and V. N. Sethi, with him) for the Secretary, Bar Association, Calcutta High Court (Intervener No. 2). N. C. Chatterjee (B. Sen, with him) for Secretary, Bar Library, Calcutta High Court (Intervener No. 3). C. K. Daphtary, Solicitor General for India (G. N. Joshi and J. B. Dadachanji, with him) for the Secretary, Bar Association, Bombay High Court (Intervener No. 4). K. B. Naidu for Secretarv, Advocates ' AssociationMadras High Court (Intervener No. 5). M. C. Setalvad, Attoney General for India (Intervener No. 6). October 27. The The judgment of Patanjali Sastri C.J. and Vivian Bose and Ghulam Hasan JJ. was delivered by Patanjali Sastri C. J. Mukherjea and, Das JJ. delivered separate judgments. 5 PATANJALI SASTRI C. J. This is an application under article 32 of the Constitution for relief in respect of an alleged infringement of the fundamental right of the petitioners under article 19 (1) (g) or, alternatively, under article 136 for special leave to appeal from a judgment of the High Court of Judicature at Calcutta rejecting their application for the same relief under article 226. As the petitioners would clearly be entitled to relief under the one or the other form of remedy if their claim was well founded, no objection was taken to the maintainability of the present proceeding, and we desire to guard ourselves against being taken to have decided that a proceeding under article 32 would lie after an application under article 226 for the same relief the same facts had been rejected after due enquiry by a High Court. We express no opinion that point. The facts leading to this proceeding are not in dispute and may be briefly stated. The first petitioner is an Advocate of this Court and his name is also the roll of Advocates of the High Court of Calcutta. As an Advocate of the latter Court he is entitled, under the relevant rules there in force, both to act and to plead the Appellate Side but not to act or to appear, unless instructed by an Attorney, the Original Side. 18th July, 1951, he filed in the Registry the Original Side a warrant of authority executed in his favour by the second petitioner to defend the latter in a pending suit. The warrant was returned 27th July, 195 1, with the endorsement that it "must be filed by an Attorney of this Court under the High Court Rules and Orders, Original Side, and not by an Advocate". The return was made by an Assistant in charge of Suit Registry Department, who is called as the first respondent to this petition. The second respondent is the Registrar, Original Side, who is alleged to have refused the same ground to accept a warrant filed earlier in a company matter. It is conceded that the action of the respondent would be 6 valid apart from the right claimed by the first petitioner as an Advocate of this Court under the Supreme Court Advocates (Practice in High Courts) Act, 1951, (hereinafter referred to as the new Act) which provides that such Advocates are " entitled as of right to practise" in any High Court in India. The petitioners, however, claimed that the right to practise thus conferred included also the right to act as well as to appear without the intervention of an Attorney the Original Side, and moved the High Court under article 226 for issue of appropriate writs orders or directions to the respondent for enforcement of the right denied to them. A Special Bench consisting of Trevor Harries C.J., Chakravartti and Banerjee JJ. heard the motion and dismissed it, holding that the first petitioner did not, being enrolled as an Advocate of the Supreme Court, become entitled to act the Original Side of the Court. The second petitioner has since dropped out of these proceedings, and the first petitioner, who appeared in person and argued his case before us, is hereinafter referred to as the petitioner. I As the issues involved are of far reaching importance to certain sections of the Bar at Calcutta and at Bombay, this Court directed notice of the proceeding to be served the Incorporated Law Society, Secretary Bar Association, and Secretary, Advocates ' Association, Calcutta High Court, and Secretary, Bar Association, Bombay High Court, and all of them appeared by their learned counsel, while the Attorney General appeared in person as intervener. We have thus had the advantage of a full argument from all points of view. A brief historical survey of the functions, rights and duties of legal practitioners in this country may facilitate appreciation of the contentions of the parties. Before the Indian High Courts Act of 1861 (24 and 25 Vic. 104) was enacted, there were, in the territories subject to the British rule in India, Supreme Courts exercising jurisdiction mainly in the 7 Presidency Towns and Sudder Courts exercising jurisdiction over the mofussil. Though the Supreme Courts were given, by the Charter Acts and the Letters Patent establishing them, power to enroll Advocates who could be authorised by the rules to act as well as to plead in the Supreme Courts, rules were made empowering Advocates only to appear and plead and not to act, while Attorneys were enrolled and authorised to act and not to plead. In the Sudder Courts and the Courts subordinate thereto, pleaders who obtained a certificate from those Courts were allowed both to act and plead. When the Supreme Courts and the Sudder Courts were abolished and their jurisdictions were transferred to High Courts under the statute of 1861, this differentiation in the functions of legal practitioners was continued in the High Courts under the notion, apparently, that the High Court, in the exercise of its Ordinary Original Jurisdiction, was the successor of the Supreme Court, and that, the Appellate Side, it inherited the jurisdiction and powers of the Sudder Courts, with the result that Advocates were allowed only to appear and plead instructed by Attorneys empowered to act the Original Side as in the Supreme Court, while the Appellate Side, they were allowed both to act and plead as in the Sudder Courts. There was also another class of practitioners known as Vakils who were neither allowed to act nor to plead the Original Side, but were allowed both to act and plead the Appellate Side. Within a short time, however, the Vakils at Madras were permitted by a rule made by the High Court to appear, plead and act the Original Side as wel1 vide In the Matter of the Petition of the Attorneys(1) but the cleavage between the two jurisdictions, Original and Appellate, was maintained in the Calcutta and Bombay High Courts with modi fications by means of rules framed by the respective High Courts from time to time. While this was the position in the High Courts in the three Presidency Towns of Calcutta, Bombay and Madras, no distinction (1) (1876 78) I.L.R. I Mad. 24. 8 was drawn between Advocates and Vakils (except in the matter of authorisation by their clients) as regards their right to appear, plead and act in the other High Courts subsequently established in British India without original jurisdiction. The position in these Courts was correctly stated by a Full Bench of the Allahabad High Court thus: " Not only by the Letters Patent but by the Civil Procedure Code, an Advocate may act for his client in this Court in the manner in that statute set forth and do all things that a Pleader, that is, a Vakil, may do, provided always that he. be upon the Roll of the Court 's Advocates": Bakhtawar Singh vs Sant Lal(1). In this situation, the , (Act XVIII of 1879) which consolidated and amended the law relating to Legal Practitioners was passed. By section 4 it empowered the Advocates and Vakils enrolled in any High Court to "practise" in all subordinate courts and in any other High Court with the "permission" of the latter Court. No Vakil or 'Pleader, however, was to be entitled to "practise" in a High Court exercising jurisdiction in a Presidency Town. By section 5 all persons enrolled as Attorneys in any High Court became "entitled to practise" in all courts .subordinate to such High Court and in any court in British India other than a High Court established by Royal Charter the roll of which he is not entered. It is worthy of note that the right to practise thus conferred included the right to plead a,; well as to act in all the courts referred to above. Then came the , which was enacted in response to a demand by the legal profession for unification and autonomy of the Bar, and it achieved a certain measure of both, eliminating the two grades of practitioners, the Vakils and the Pleaders, by merging them in the class of Advocates who, were "entitled as of right to practise" in the High Courts in which they were enrolled and in any other court in British India, subject to certain (1) (1887) 9 All. 617, 621. 9 exceptions. It also provided for the constitution of Bar Councils for the High Courts with power to regulate the admission of Advocates, to prescribe their qualifications and to inquire into any case of miscouduct that may be referred to them. But the right to practise and the power to make rules were not to limit or in any way affect the unlimited powers of the High Courts at Calcutta and Bombay to make rules allowing or disallowing Advocates to practise their Original Side: (vide section 9 (4) and section 14). While such was the position of Advocates in the courts in what used to be known as British India, it is not a matter of dispute that Advocates practising in the courts of what were known as Indian States were allowed to appear, plead and act behalf of suitors. It will thus be seen that legal practitioners, by whatever name called, practising in all the High Courts in India, except the Original Side of the Calcutta and Bombay High Courts, and in the innumerable subordinate courts all over India were always entitled to plead as well as to act. In the Original Side of the Calcutta and Bombay High Courts alone, where the cleavage between the Original and Appellate jurisdictions continued to be marked, due, as we have seen, to historical reasons, the functions of pleading and acting, which a legal practitioner normally combines in his own person, were bifurcated and assigned, following "the usage and the peculiar constitution of the English Bar" (per Lord Watson in the case cited below), to Advocates and Attorneys respectively. In this situation, the establishment of the Supreme Court of India, exercising appellate jurisdiction over all the High Courts naturally stimulated the demand for the unification of the Bar in India, and Parliament enacted the new Act as a step towards that end. It is a brief enactment intituled "an Act to authorise Advocates of the Supreme Court to practise as of right in any High Court" and consists of only two 10 sections. Section I describes the short title of the Act and section 2 enacts (so far as material here : "Notwithstanding anything contained in the , or in any other law regulating the conditions subject to which a person not entered in the roll of Advocates of a High Court may, be permitted to practise in that High Court every Advocate of the Supreme Court shall be entitled as of right to practise in any High Court whether or not he is an Advocate of that High Court: Provided that nothing in this section shall be deemed to entitle any person, merely by reason of his being an Advocate of the Supreme Court, to practise in any High Court of which he was at any time a judge, if he bad given an undertaking not to practice therein after ceasing to hold office as such judge. " According to the petitioner 's contention, an Advocate of the Supreme Court becomes entitled as of right to appear and plead as well as to act in all the High Courts including the High Court in which he is already enrolled, without any differentiation being made for this purpose between the various jurisdictions exercised by those courts. The word "practise" as applied to an Advocate in India includes both the functions of acting and pleading, and there is nothing in section 2 to warrant the cutting down of that statutory right to pleading only the Original Side of the Calcutta High Court as the respondents seek to do. the other hand, the respondents contend that the non obstante clause in the first part of the section furnishes the key to the proper interpretation of its scope, and inasmuch as that clause supersedes only those pro visions of the Bar Councils Act, and of any other law which exclude persons not entered in the roll of Advocates of a High Court from the right to practise in that Court, the enacting clause must be construed as conferring only a right co extensive with the disability removed by the opening clause; that is to say, the section is designed only to enable Advocates of the Supreme Court who are not enrolled as 11 Advocates of any High Court to practise nevertheless in that High Court. The petitioner, who is already an Advocate of the Calcutta High Court, could derive no additional right from the section in relation to that Court, as he does not fall within the purview of the section. Alternatively, even if the provision is read as conferring Advocates of the Supreme Court the right to practise in relation to all the High Courts in India, including the High Courts in which they are already enrolled, the section does no more than entitle them to practise in conformity with the conditions subject to which advocates are permitted to practise in those Courts, for the word "practise" is a term of indefinite import and, as applied to an Advocate, it may mean pleading or acting or both, according to the conditions under which the profession of an Advocate is exercised in the court concerned. Both branches of this contention have found favour with the learned Judges of the court below. A third view was also suggested in the course of the debate before us. An Advocate of the Supreme Court is entitled under the Rules of that Court only to appear and plead and not to act, while Agents who are enrolled as such are entitled only to act but not to appear and plead. In dealing with the right of Advocates of the Supreme Court to "practise" in the High Courts, Parliament must therefore be taken to have used that word in the sense only of appearing and pleading, the object of section 2 being only to confer the Supreme Court Advocates the right to appear and plead in all the High Courts and no further or other right. Having given the matter our most careful and anxious consideration, we have come to the conclusion that the petitioner 's contention is correct and must prevail. As we have already seen, there are in this country more than 20 High Courts (including the Judicial Commissioners ' Courts which are treated as High Courts for this purpose), and in all these 12 High Courts excepting the original jurisdiction of the Calcutta and Bombay High Courts and in all the numerous subordinate courts, both civil and criminal, existing all over the country, an Advocate combines in himself both the functions of acting and pleading which constitute the. normal activities of all legal practitioners except members of the English Bar whose "usage and peculiar constitution" allow them only to appear and plead and not to act. It would seem that this peculiar British system of division of functions between Barristers and Attorneys is not in vogue even in all the British Dominions and Colonies. For instance, in the report of the case Queen vs Doutre(1), we find counsel for the respondent stating in the course of his argument that "In all the Provinces of Canada the functions of Barristers and Solicitors are united in the same person and the rules of the English Bar do not apply there". In upholding in that case the right of counsel to sue for and recover a quantum meruit in respect of professional services rendered by him, the Judicial Committee remarked: "Their Lordships entertain serious doubts whether in an English Colony where the common law of England is in force, they (i.e., general considerations of public policy) could have any application to the case of a lawyer who is not a more advocate or pleader and who combines in his own person various functions which are exercised by legal practitioners of every class in England all of whom, the Bar alone excepted, can recover their fees by an action at law. " It seems reasonable, therefore, to assume that the practice of law in this country generally involves the exercise of both the functions of acting and pleading, behalf of a litigant party; in other words, the Bar in India, generally speaking, is organised as a single agency. Accordingly, when the Legislature confers upon an Advocate "the right to practise" in a Court, it is legitimate to understand that expression as authorising him to appear and plead as well as to (1)(1883) 9 App. 13 act behalf of suitors in that Court. It is true that the word "practice" used in relation to a given profession means simply the pursuit of that profession and involves the exercise of the functions which are cordinarily exercised by the members of the pro fession. But it seems to be fallacious to relate that expression, as applied to an Advocate, either, the one, hand, to the Court in which the Advocate is enrolled or, the other, to the Court in which he seeks to exercise the statutory right conferred him. It must, in our opinion, be related to the general constitution of the Bar in India as a single agency in dealing with the litigant public, a system which prevails all over this vast country except in two small pockets where adual agency imported from England was maintained, owing, as we have seen, to historical reasons. We are accordingly unable to accept the suggestion that because the Advocates of the Supreme Court are not, under the Rules of that Court, entitled to act, the word "practise" as used by Parliament in section 2 must be understood in the restricted sense of appearing and pleading only. Parliament was, of course, aware that the right of the Advocates of the Supreme Court to practise in that Court was confined only to appearing and pleading, but the object of section 2 was to confer upon a designated body of persons, namely, the Advocates of the Supreme Court, a right to practise in other courts, viz., the various High Courts in India, whether or not they were already enrolled in such courts. This statutory right, which is conferred the Supreme Court Advocates in relation to other courts and which they did not have before) cannot, as a matter of construction, be taken to be, controlled by reference to what they are allowed or not allowed to do in the Supreme Court under the Rules of that Court. Such Rules are liable to be altered at any time in exercise of the rule making power conferred by article 145 of the Constitution. The scope and 14 content of the new statutory right conferred in relation to the High Courts could not have been intended to depend the varying scope of the functions which the Supreme Court Advocates are allowed to, exercise in that Court from time to time. Besides, the consequences of such a construction would be somewhat startling. For instance, if an Advocate of the Supreme Court not entered the Roll of the Allahabad High Court desired to practise in the latter Court where there are no Attorneys or Agents, he would find himself in a difficult situation. It was said that a, local Advocate could be engaged to instruct him, acting for the client. Even if it were permissible to substitute a local Advocate for an "Agent" to overcome the disability imposed by Order IV, Rule 11, of the Supreme Court Rules which prohibits an Advocate from appearing "unless he is instructed by an Agent", it would be tantamount to introducing a new type of dual agency where it does not exist at present, an innovation which, we think, could hardly have been contemplated. Such an interpretation would also render the right conferred by the new Act largely illusory in practice. The construction adopted by the learned Judges of the High Court, which relates the word "practise" in section 2 to the High Court in which the Supreme Court Advocate seeks to exercise his right, seems to us to be equally open to objections. In their view, that word as applied to the same Advocate should be understood in a wider or narrower sense in relation to different High Courts, and indeed, to different jurisdictions of the same High Court, according to the rules there in force. They say: "Since the section applies to a number of different High Courts where different conditions of practice prevail, the word 'practice ' has no one particular and invariable meaning in the section but its meaning must vary according as the section is applied to one High Court or another. In its application to each High Court it will have the meaning which an Advocate 's right to practise bears in that Court at 15 the time under the local rules and regulations. This meaning may be wider in relation to one High Court and narrower in relation to another, and even in relation to the same High Court it may not always remain the same, for a High Court may enlarge the professional rights of its Advocates and if it does so, Advocates of the Supreme Court will, thereafter, have the enlarged rights in that Court. But at any given point of time the rights of an Advocate of the Supreme Court to practise in any particular High Court in exercise of the power conferred him by section 2 can at most be co extensive with but no greater than the right which Advocates of that Court themselves possess at the time. " We are unable to agree with this ambulatory inter pretation of section 2. It may be that the full sense of the word "practise" as including. , both acting and pleading may be out down by the context in which it is used in a particular statute. But we do not find any such context in the language of the new Act or in its object as we conceive it. The construction which the learned Judges have placed section 2 was supported before us by attributing to the word ((practise" the "dictionary meaning", as it was called, of exercising a profession and postulating the exercise by the Advocate of the Supreme Court of different professions in different High Courts in which he may seek to appear. Thus, he exercises the profession of a Madras Advocate while appearing in Madras; the profession of an. Appellate Side Advocate or of an Original Side Advocate, as the case may be, while appearing those sides of the Calcutta and the Bombay High Courts, and so . The object of this curious differentiation is to read the different conditions under which. an Advocate exercises his professsion in each of those Courts or jurisdictions into the word "practise" itself as the necessary implication of its dictionary meaning so as to bring in the exclusion of acting the Original Side as part of its connotation. We find it difficult to appreciate this view. The Advocate of the Supreme Court in all the cases 16 referred to above seeks to practise only one profession, namely, the profession of an Advocate. As such he would be bound to observe the rules of practice of each Court, that is, the prescribed procedure for conducting legal proceedings in the Court concerned; but a rule which denies to him the right to exercise an essential part of his function by insisting a dual agency the Original Side is much more than a rule of practice and the power of making such a rule, unless expressly reserved by the new Act, as it was reserved in section 9 (4) and section 14(3) of the Bar Councils Act, would be repugnant to the right conferred by section 2. In this connection, it may be pertinent to point out that the power of the High Courts to make rules of practice regulating the procedure to be followed in the conduct of proceedings before them and the power to frame rules regulating the admission and conduct of legal practi tioners were always derived from distinct sources originally under different clauses of the Letters Patent establishing them and later from the Civil Procedure Code and the Bar Councils Act. The learned Judges have also overlooked an important distinction between the position of an Advocate of the Calcutta or the Bombay High Court in relation to his Court and that of an Advocate of the Supreme Court in relation to those Courts. The former is not entitled to practise "as of right" the Original Side of his High Court as his right to practise is made under section 14(1) (a) expressly subject to section 9(4) which reserves the power of those Courts to exclude him from such right so far as the Original Side is concerned. In other words,the local Advocate is not entitled "as of right" to practise the Original Side of those two High Courts, whereas it is open to argument and indeed is now argued that the Advocate of the Supreme Court becomes under the new Act entitled to practise "as of right" in all High Courts without any distinction in the matter of the jurisdictions exercised by them, because no, such power is preserved and continued in the new Act. In view of this 17 difference, which is vital to the petitioner 's contention, it is not correct to say that the right conferred the Supreme Court Advocate "can at most be co extensive with but no greater than the right which Advocates of that Court themselves possess at the time". Here, indeed, we reach the crux of the whole case. Now, section 14(1) (a) of the Bar Councils Act enacts 14.(1) An Advocate shall be entitled as of right to practise (a) subject to the provisions of subsection (4) of section 9, in the High Court of which he is an Advocate," and Section 9(4) provides: "Nothing in this section or in any other, provision of this Act shall be deemed to limit or in any way affect the powers of the High Courts of Judicature at Fort William in Bengal and at Bombay to prescribe the qualifications to be possessed by persons applying to practise in those High Courts respectively in the exercise of their original jurisdiction or the powers of those High Courts to grant or refuse, as they think fit, any such application, or to prescribe the conditions under which such persons shall be entitled to practise or plead." Section 14(3) reads "Nothing in this section shall be deemed to limit or in anyway affect the power of the High Court of Judicature at Fort William in Bengal or of the High Court of Judicature at Bombay to make rules determining the persons who shall be entitled respectively to lead and to act in the High Court in the exercise of its original jurisdiction. " It is to be noted that by virtue of the last two provisions to which the right of local Advocates is made expressly subject, the High Courts of Calcutta and Bombay have the power to "grant or refuse as they think fit" the application of any person applying to practise in the Original Side of those Courts, and the power to make rules laying down who shall plead and 18 who shall act that side. It is in exercise of these powers that the High Courts have framed the rules, to which reference has been made, cutting down the right of the Advocates of those Courts to practise the Original Side to appearing and pleading only and otherwise imposing restrictions that right, such as, that they shall not appear unless instructed by an Attorney. That is to say, the Advocates of those Courts are not entitled to practise as of right the Original Side. As the powers thus reserved are exercisable only in regard to the Original Side, the Advocates of these Courts are under section 14(1) (a) entitled as of right to practise in the appellate and other jurisdictions exercised by those Courts. Similarly, under section 2 of the new Act every Advocate of the Supreme Court is entitled as of right to practise in any High Court. But it is significant that no power is reserved, to the Calcutta or the Bombay High Courts to cut down this statutory right and confine it to pleading alone the Original Side. Why were the reservations which the Legislature took care to insert in the Bar Councils Act in conferring a statutory right of practice Advocates of the High Courts omitted in the new Act in conferring a similar right in similar terms the Advocates of the Supreme Court in relation to the High Courts? Why this departure from the pattern of what is, in this respect, a closely analogous piece of legislation? The respondents made two,answers to this question neither of which seems to us satisfactory. One was that the word "practise" itself connoted, in relation to the Original Side of the Calcutta and Bombay High Courts, only pleading and not acting, as Advocates of those Courts practising that side had long been only appearing and pleading instructed by Attorneys who acted for the suitors. This argument we have already rejected. But, even so, why insert section 9(4) in the Bar Councils Act and make the right under section 14(1) (a) subject to the overriding powers under section 9(4)? If the argument were valid, such provisions would have been wholly unnecessary, for, 19 even in their absence, the word "practise" would con . note only pleading and not acting. This indeed is an additional ground for rejecting that construction. It is legitimate, therefore, to conclude that the Legiglature used the word "practise" both in the Bar Councils Act and in the new Act in its full sense of acting and pleading, but while in the case of Advocates of the Calcutta and Bombay High Courts it has expressly preserved and continued the power of those courts to restrict or exclude the right of practice the Original Side, it has reserved no such overriding power under the new Act with the result that any restrictive rule cutting down the statutory right would be repugnant to section 2 and therefore void and inoperative. A similar view of the effect of section 14(1) (a) of the Bar Councils Act was expressed by a Full Bench of the Madras High Court in Powers of Advocates, In re (1), where it was held that a rule made by that Court excluding the Advocates enrolled there from acting the Insolvency Side became invalid and inoperative after the enactment of that Act, and we entirely agree with that decision. The learned Judges below attempted to distinguish that case, as Mr. Chatterjee for the respondents did before us, by observing that because the Bar Councils Act made no distinction between the different jurisdictions of the Madras High Court and the rules of that Court allowed the Advocates to act and plead the Original as well as the Appellate jurisdiction thereof, the learned Judges construed the word "practise" in section 14 to mean both acting and pleading. That is not a correct view of the reasoning employed by the Full Bench. The learned Judges failed to see that such reasoning would indeed lead to the opposite conclusion. As a matter of, fact, there was a rule under which the local Advocates were prevented from acting and they had accordingly not acted in the insolvency jurisdiction of that Court, so that if "practise" in section 14(1) (a) were to be construed (1) Mad. 92, 20 in the light of what the Advocates bad been doing in the past under the rules of that Court, the Court would have had to hold that the Advocates acquired no new right by virtue of section 14(1) (a) But the Full Bench held that they did and the gist of their reasoning was thus put by Kumaraswami Sastri J. who delivered the leading judgment: "The word 'practise ' ordinarily means 'appear, act and plead, unless there is anything in the subject or context to limit its meaning. I am of opinion that where an Act confers rights to a party in general terms and entitles him to perform more than one function, the cutting down of those rights by a rule would make that rule repugnant to the provisions of the Act. " It was next suggested that no support for the petitioner 's contention could be derived from the absence in the new Act of reservations like those contained in sections 9 (4) and 14 (1) (a) of the Bar Councils Act because the power of framing rules regarding legal practitioners given to the Chartered High Courts under their respective Letters Patent could be exercised only in respect of the Advocates enrolled in those Courts, and the reservation of a power so limited would be meaningless in the new Act which deals with the rights of the Supreme Court Advocates. This argument overlooks that those High Courts had unfettered discretion to admit or to refuse admission to any person to practise as an Advocate, Vakil or Attorney. Clause 9 of the Letters Patent of the Calcutta High Court, for instance, empowers that Court "to approve, admit and enroll such. . Advocates, Vakils and Attorneys as to the said High Court shall seem meet". The Bar Councils Act also assumed that a power to exclude any person from practising the Original Side existed in the High Courts, as is shown by section 9 (4) which provides that nothing contained in that Act shall be deemed to affect the power of the Calcutta and the Bombay High Courts to grant or refuse the application of "persons " applying to practise the Original Side of 21 those Courts or their power to prescribe the conditions under which " such persons" could practise that side. Be it noted that the word used is not " Advocates " which, in view of the definition in section 2 (1) (a), would indicate a power confined to the Advocates of those Courts. And when that Act proceeded to empower by section 14 (1) (a) an Advocate enrolled in a High Court to practise as of right in that Court, it took care to make it clear that the right so conferred was subject to the exercise of the power reserved under section 9 (4). But, as pointed out already, it is significant that Parliament, in conferring a similar right under the new Act the Supreme Court Advocates, did not reserve any such overriding power. In the absence of such reservation, the statutory right of a Supreme Court Advocate to plead as well as to act in the High Courts of Calcutta, and Bombay in the exercise of their original jurisdiction cannot be taken away or curtailed by those Courts, and any rules which they may have made in the past purporting to. exclude any Advocate from acting their Original Side, or from appearing and pleading unless he is instructed by an Attorney cannot affect such right. Turning now to the non obstante clause in section 2 of the new Act, which appears, to have furnished the whole basis for the reasoning of the Court belowand the argument before us closely, followed 'that reasoning we find the learned Judges begin by inquiring what are the provisions which that clause seek , to supersede and then place upon the enacting clause such Construction as would make the right conferred by it co extensive with the disability im posed by the superseded provisions. The meaning of the section will become clear", they, obser, "if we examine a little more closely what the, section in fact supersedes or repeals. The disability which the section removes and the right which it confers are coextensive. " This is not, in our judgments a correct approach, to the construction of section 2. It should 4 22 first be ascertained what the enacting part of the section provides, a fair construction of the words used according to, their natural and ordinary meaning, and the non obstante clause is to be understood as operating to set aside as no longer valid anything contained in relevant existing laws which is inconsistent with the new enactment. We will revert to this clause again presently. Following their line of approach, the learned Judges reached two conclusions: first, that section 2 confers no new right an Advocate of the Supreme Court in relation to the High Court in which he is already enrolled, but gives him the right to practise in the High Courts in: the roll of which he was not entered as, an Advocate. The petitioner was accordingly not within the purview of the section in relation to the Calcutta High Court of which. he was already an Advocate; and secondly, that the only pro visions superseded by the non obstante clause are section 8 (1) and section 14 (2) of the Bar Councils Act and Rule 38 of Ch. V of the Original Side Rules of the Calcutta High Court and a similar rule framed under section,15 (b) of the Bar Councils Act by the Calcutta Bar, Council, which prescribe the conditions subject to which Advocates of other High Courts are permitted to practise the Original and Appellate Sides of. that Court and the corresponding rules then in force in, the Bombay High Court. These provisions alone, it was said fell within the description " regulating the conditions subject to which a person not eptered in the roll of Advocates of a High Court may be. permitted to practise in that High Court. " All other provisions of the Bar Councils Act,, including sections 9 (4) and 14 (3), as well as other rules of the Original. Side of both Calcutta and Bombay High Courts have not been superseded or repealed by section 2 of the new, Act but continue in force. We now proceed to examine whether these conclusions are well founded. Much ado was made an both sides ;about the comina occurring just before the word " or " in the 23 non obstante clause, the petitioner stressing its importance as showing that the adjectival clause " regulating the conditions etc. " does not qualify the words " " which are separated by the comma and that, therefore, the whole of that Act is superseded, while 'learned counsel for the respondents insisted that in construing a statute punctuation marks should be left out of consideration. Nothing much we think, turns the comma, as it seems I grammatically more correct to take the adjectival clause as qualifying " law ". Having 'regard to the words anything contained" and the preposition "in" used after the disjunctive "or", the qualifying clause cannot reach back to the words " Bar Councils Act ". But, whichever way we take it, it must be admitted that, in framing the non obstante clause, the draftsman had primarily in, mind those Provisions which stood in the way of an Advocate not enrolled in any particular High Court practising in that Court. It does not, however, necessarily follow that section 2 is concerned only with the right of Advocates of the Supreme Court to practise in the High Courts in which they are not enrolled. The true scope of the enacting clause must, as we have observed, be determined a fair reading of the words used in their natural and ordinary meaning, and in the present case, there is not much room for doubt the point. The words " every Advocate " and " whether or not he is an Advocate of that High Court" make it plain that the section was designed to apply to the Advo cates of the Supreme Court not only in relation. to the High Courts of which they are not Advocates but also in relation to those High Courts in which they have been already enrolled. The learned Judges below dismissed the words " whether or not etc. " with the remark that " they are not very apposite ",,as " no one who is an Advocate of a particular High Court requires to be an Advocate of the Supreme Court in order to practise in that Court". While it may be true to say that section 2 does not give Advocates of many of the High Courts any additional right 24 in relation to their own Courts, it would, according to the petitioner 's contention, give at least to the Advocates of the Calcutta and Bombay High Courts some additional right in the Original Side of those Courts, and that may well have been the purpose of using those words. It is not a sound principle of construction to brush aside words in a statute as being inapposite surplusage, if they can have appropriate application in circumstances conceivably within the contemplation of the statute. Nor can we read the non obstante clause as specifically repealing only the particular provisions which the learned Judges below have been at pains to pick out from the Bar Councils Act and the Original Side Rules of the Calcutta and Bombay High Courts. If, as we, have pointed out, the enacting part of section 2 covers all Advocates of the Supreme Court, the non obstante clause can reasonably be read as overriding " anything contained" in any relevant existing law which is inconsistent with the new enactment, although the draftsman appears to have had primarily in his mind a particular type of law as conflicting with the new Act. The enacting part of a statute must, where it is clear, be taken to control the non obstante clause where both cannot be read harmoniously; for, even apart from such clause, a later law abrogates earlier laws clearly inconsistent with it. Posteriores leges priores contrarias abrogant (Broome 's Legal Maxims, 10th Edn., p. 347). Here, section 2 entitles every Advocate of the Supreme Court as of right to practise in any High Court in India. The phrase " entitled as of right " has evidently been adopted from the Bar Councils, Act, and we have already indicated our view that; the word "Practise as applied to a legal practitioner in,,, India includes, in the absence of any limiting or restrictive; context, both the functions of acting and pleading. The phrase " entitled as of right to practise " is an emphatic affirmation of a right to plead, and to act independently,of the will or discretion of any other person. Could it be said that sections 9 (4)and 14 (3) 25 of the Bar Councils Act are consistent with the existence of such a right ? As we have seen already, section 9 (4) preserves the powers of the High Courts at Calcutta and Bombay, among other things, " to grant or refuse, as they think fit " the applications of persons to practise in those High Courts in the exercise of their original jurisdiction How could a person be said to be entitled as of right to practise in a High Court if that Court has unfettered power to reject his application to practise an important side of its jurisdiction ? Similarly, bow Could a person be said to be entitled as of right to pleadin a High Court if that Court has the power to frame a rule which pre cludes him from pleading in the original jurisdiction of ;that Court unless he is instructed by an Attorney? Obviously, sections 9 (4) and 14 (3) of the Bar Councils Act and section 2 of the new Act entitling an Advocate of the. Supreme Court as of right to practise in any High Court cannot stand together. Whether by force of the non obstante clause liberally construed as indicated above or of the wellestablished maxim of construction already referred to, the new Act must have the effect of abrogating the powers reserved and continued in the High Courts by the aforesaid provisions of the Bar Councils Act. We cannot, therefore, agree with the learned Judges below that the said two provisions have not been superseded or repealed by section 2. As we have already observed, if such reservations bad also been inserted in the new Act, the analogy with section 14 (1) (a) of the Bar Councils Act would have been complete and the petitioner as an Advocate of the Supreme Court could be prevented by rules made in appropriate terms from acting the Original Side of the Calcutta and the Bombay High Courts. But, in the absence of such reservations in the new Act, his claim in these proceedings must succeed. It has been said in the course of the argument that, notwithstanding the absence of such reservations in the new Act, it must be assumed that the Advocates of the Suprme Court have become entitled to practise 26 in any High Court only subject to the rules and regulations of that Court or, as the High Court put it " section 2 does not confer Ian uncharted freedom the Advocates of the Supreme Court to practise in any High Court in any way they like, but only puts them, in each different High Court, a par with the; Advocates of that Court, where they must submit to the same terms and conditions as bind those Advocates". Otherwise, it was said, the Supreme Court Advocates would be "let loose" to practise in all Courts freed of all obligations to observe the rule and regulations of those Courts and the result would be confusion and chaos. Therefore, it was urged, the rules of the Calcutta and Bombay High Courts, which preclude Advocates of those Courts from acting the Original Side of their jurisdiction or from pleading without the intervention of an Attorney, are binding upon Supreme Court Advocates as well. We see no force in the argument which seems to proceed a misconception. The right of an Advocate to practise, as we have seen, normally Comprises the exercise of his two fold function ' of acting and pleading without the intervention of anybody else. Any rule or condition that prevents him from exercising one of those functions is plainly a cutting down of his right to practise and, affecting as it does the sub stance of his right, is in its operation, quite unlike the rules and conditions of practice under which all Advocates normally carry their business in courts. No one suggests that a Supreme Court Advocate is, by becoming entitled to practise in the High Courts, freed from all. obligation to conform to the ruler, of practice and regulations as, to costume and Such other matters, according to which the profession of law must be exercised in the various High Courts. There is a vital distinction between such rules and regulations and the rules which seek to out down the sub stance of an Advocate 's right to act and to plead by excluding him from the exercise of the one or the other of those two functions. The Bar Councils Act recognises this distinction by expressly reserving the 27 power of the High Courts of Calcutta and Bombay to exclude or impose restrictions upon the right of Advocates to plead and to act the Original Side, whereas no similar reservation has been considered necessary in respect of the power to make rules and regulations of the former type, because they were not regarded as derogating from the substance of the statutory right to practise. Suppose, for instance, the Calcutta, High Court made a rule that no person other than those mentioned in Rule 2 (1), Chapter I of the Original Side Rules (i.e., practising Barristers in England, N. Ireland, etc.) will be entitled to appear and plead its Original Side, could it reasonably be suggested that such a rule was only a matter of "internal administration" and, as such, would bind all Advocates practising in that Court even apart, from section 9 (4) ? Any rules which prevent an Advocate from acting the Original Side or appearing that side without the intervention of an Attorney constitute a serious invasion of his statutory right to practise, and unless the power to make such rules is reserved in the statute which confers the right they cannot prevail against that right. Reference was also made in this connection to the difficulty of exercising disciplinary control over the Supreme Court Advocates practising in the High Courts in which they are not enrolled but such difficulty, if any, may arise under both the interpretations contended for before us. It is not denied that a Supreme Court Advocate is entitled to, appear and plead and act the Appellate Side of all the High Courts and the question as to how disciplinary jurisdiction is to be exercised over him in relation to his activities the Original Side will have to be determined the same lines as in relation to his activities the Appellate Side and the possibility of any such difficulty arising cannot be more of an objection to the one construction than to the other. There was much argument before us as to the ob ject which Parliament had in view in passing, the; new, Act, each side suggesting an object which would 28 support the construction which it sought to place upon section 2. Each side relied upon the "statement of objects and reasons" annexed to the Bill in support of its own contentions. Reference was also made to speeches made the floor of the House by members during the debate the Bill. Our attention was also called to the form of the Bill as originally introduced in the House and its amendment by omitting part (a) of the proviso to clause (2) thereof. As regards the speeches made by the members of the House in the course of the debate, this Court has recently held that they are not admissible as extrinsic aids to the interpretation of statutory provisions: The State of Travancore Cochin & Another vs The Bombay Co. Ltd. etc.(1). As regards the propriety of the reference to the statement of objects and reasons, it must be remembered that it seeks only to explain what reasons induced the mover to introduce the Bill in the House and what objects he sought to achieve. But those objects and reasons may or may not correspond to the objective which the majority of members had in view when they passed it into law. The Bill may have undergone radical changes during its passage through the House or Houses, and there is no guarantee that the reasons which led to its introduction and the objects thereby sought to be achieved have remained the same throughout till the Bill emerges from the House as an Act of the Legislature for they do not form part,of the Bill and are not voted upon by the members. We, therefore, consider that the statement of objectsand reasons appended to the Bill should be, ruled out as an aid to the construction of a statute. The omission of part (a) of the proviso to clause (2) of the Bill seems to us to stand no higher footing. It sought to exclude from the purview of the Bill the right of an Advocate of the Supreme Court to plead or to act in any, High Court in the exercise of its original jurisdiction,. Its omissions was strongly relied by the petitioner as indicating the intension of (1) ; 29 Parliament that the right of a Supreme Court Advocate to plead and to act should prevail also the Original Side of a High Court. It was urged that acceptance or rejection of amendments to a Bill in the course of Parliamentary proceedings forms part of the pre enactment history of a statute and as such might throw valuable light the intention of the legislature when the language used in the statute admitted of more than one construction. We are unable to assent to this proposition. The reason why a particular amendment was proposed or 'accepted or rejected is often a matter of controversy, as it happened to be in this case, and without the speeches bearing upon the motion, it cannot be ascertained with any reasonable degree of certainty. And where the legislature happens to be bicameral, the second Chamber may or may not have known of such reason when it dealt with the measure. We hold accordingly that all the three forms of extrinsic aid sought to be resorted to by the parties in this case must be excluded from consideration in ascertaining the true object and intention of the Legislature. In the result, treating this proceeding as an appeal from the judgment of the High Court, we set aside the order of that Court and direct the respondents to receive any warrant of authority which the first; petitioner may produce from the legal representative of the second petitioner who is reported to have died in the course of the proceeding. We make no order as to costs. MUKHERJEA J. This case has been argued before us with elaborate fulness by the 'petitioner No. 1, Mr. Aswini Kumar Ghosh, who appeared in person, as well as by a number of eminent counsel representing the Barristers ' and Advocates ' Associations in the three principal High Courts in India. Having given their learned arguments the best consideration that I am capable of, I have come to the conclusion that this application cannot succeed. 30 The matter in controversy is a very short one. The petitioner No. I is an Advocate of the Calcutta High Court entitled to practise both its Original and Appellate Sides. This means, that he can both plead and act the Appellate Side of the Court and plead only its Original Side. Mr. Ghosh later got himself enrolled as an Advocate of the Supreme Court and after the passing of the Supreme Court Advocates (Practice in High Courts) Act, 1951, he asserted his right, the strength of the provision of that enactment, to " or act" also the Original Side of the Calcutta High Court. He actually filed "a warrant of power and appearance" behalf of the petitioner No. 2 in a suit pending in the Original Side of that Court in which the latter figures 'as the defendant. The warrant was returned to him by the Suit Registrar, Original Side, with an endorsement it, that it must be filed by an Attorney of the Court under the rules and orders of the Original Side of the High Court, and not by an Advocate. Being aggrieved by this refusal, the petitioners presented an application before the Calcutta High Court under article 226 of the Constitution, complaining of infraction of the right conferred upon the first petitioner by Act XVIII of 1951 and praying for an appropriate writ or order to enforce the same. A rule was granted this application by Bose J. sitting singly; and eventually, having regard to the importance of the question involved in the application, the rule was heard by a Special Bench of three Judges, con sisting of Trevor Harries C.J. and Chakravartti and Banerjee JJ. By the judgment, which was delivered by Mr. Justice Chakravartti 21st December, 1951, the rule was discharged and the application of the petitioner was dismissed. The petitioners have now come up to this court a substantive petition under article 32 of the Constitution and have also prayed for special leave to appeal against the judgment of the Calcutta High Court. We admitted the petition and issued notices to the Attorney General of India as well as to the Barristers ' and Advocates "Associations in those High Courts in India which are likely, 31 to be affected by the decision in the case. A number of them, as said above, appeared before us through counsel and we had also the advantage of hearing the learned Attorney General the points that were raised in course of hearing. The sole point for consideration in this case is, whether the petitioner No. 1, who is an Advocate of the Supreme Court ' can, in addition to exercising his right of pleading the Original Side of the Calcutta High Court which is not challenged by anybody, claim, by virtue of the provision of section 2 of Act XVIII of 1951, the right to "act" the Original Side of that Court, although according to the rules framed under the Letters Patent an Advocate of the Calcutta High Court may not appear in the Original Side unless instructed by an Attorney: (vide Chapter 1, Rule 37, of the Original Side Rules). To decide this question we will have to investigate the precise extent of the right that has been conferred upon the Supreme Court Advocates by section 2 of the Act mentioned above and ascertain what exactly is the meaning of the word "practise '. ' as used in that section '. The Act is a very short one and consists only of two sections. The first section gives the name and description of the Act which is intituled "The Supreme Court Advocates (Practice in High Courts) Act" and the object, as stated at the, outset before the enacting clause commences, is to "authorise Advocates of the Supreme Court to practise as of right in any High Court". The entire provision of the Act is contained in section 2 which runs thus "Notwithstanding anything contained in the (XXXVIII of 1926) or in any other law regulating the conditions subject to which a person not entered in the roll of Advocates of a High Court, may be permitted to practise in that High Court every Advocate of the Supreme Court shall be entitled as of right to ' practise in any High Court whether or not he is an Advocate of that High Court". 32 Upon this,aproviso is engrafted to the following effect that"nothing in this section shall be deemed to entitle any person merely by reason of his being an Advocate of the Supreme Court to practise in a High Court of which he was at any time a Judge, if he had given an undertaking not to practise therein after ceasing to hold office as such Judge". Then follows a short explanation which simply lays down that the expression "High Court" in the section includes the Court of a Judicial Commissioner and the statute ends there. It may be mentioned at the outset that the Supreme Court was established in the year 1950 and article 145(1) of the Constitution empowered the Court to make rules "for regulating generally the practice and procedure of the court" including (a) rules as to the persons practising before the Court '. The Supreme Court Advocates were not entitled to practise as of right in any of the High Courts/in India. The rules made by the different High Courts impose considerable restrictions and disabilities upon the Advocates of other High Courts who wanted to appear and conduct cases before them. The power to grant or withhold permission to these outside Advocates lay for the most part in the exercise of an unfettered discretion by the Chief Justice of the Court, and that too in individual cases, and instances were not rare of such permission being refused to lawyers of acknowledged eminence belonging to other High Courts. After the establishment of the Supreme Court in India and with the prospect of a united Bar looming in the minds of the people, this was felt to be extremely unjust and anomalous. It was primarily to remedy this defect in the existing law, that this particular enactment was passed by the legislature and the legislative purpose, as is disclosed in the language of the enactment, is to allow the Supreme Court Advocates access to the other High Courts in India as of right, untrammelled by any restriction or condition that the High Courts themselves might lay down in respect to the "Outside 33 Advocates. So far there is little room for any controversy. The dispute centers round the point as to the extent of right that the legislature conferred upon the Supreme Court Advocates in achieving this legislative purpose. The question is, what meaning is to be attributed to the word "practise" as used in the section ? Mr. Ghosh argues that the word "practise" in its ordinary and literal sense would mean the right to appear, plead and to act 'as well; and it is an established rule of construction that a literal interpreta tion should not be departed from unless there are adequate grounds for such departure. It is said next that the literal meaning of the word "practise" cannot be out down or controlled in any way by the language of the opening clause in section 2 of the Act; and that clause which maybe described as a non obstante clause is not confined in its operation to removal of the disabling provisions affecting those whose names are not entered as Advocates the roll of a particular High Court, but has the effect of excluding all the provisions of the Bar Councils Act for purposes of this enactment. It is further argued that the words "whether or not he is an Advocate of that High Court" occurring in section 2 unmistakably indicate that the legislature had not in mind the removal of disabilities attaching to outside Advocates merely, but that it intended to confer certain privileges domestic Advocates as well who happened to be enrolled as Advocates of the Supreme Court. All these matters require to be examined carefully. The word "practise" when used with reference to a profession means "to follow, pursue, work at, or exercise such profession". The profession Of an Advocate may contemplate both acting and pleading; under certain circumstances it may mean pleading alone without acting, but it can never mean acting simply, for those who are entitled to act only and have no right to plead do not come within the description of Advocates at all. There are other classes of nonAdvocate lawyers who like Solicitors and Agents can 34 act only but cannot plead, and to the carrying of their profession also the same expression practise" is applied. What is to be remembered in this connection is that the profession of an Advocate can be carried only in a court of law and within the framework of the rules and regulations that obtain in such court. The word "practise" when used with reference ,to an Advocate is an elastic expression, having no rigid or fixed connotation and the precise ambit of its contents can be ascertained only by reference to the rules of the particular forum in which the profession is exercised. Thus in the Supreme Court Rules the expression "Advocate" has been defined to mean "a person entitled to appear and plead before the Supreme Court". He has no right of acting at all. In Order IV, Rule 31, of the Rules, this right of an Advocate to 'appear and plead has been spoken of as the right of "practising"; while in the rule that follows, the function of an Agent, who can only act and not plead, has also been spoken of as "practice" before the Court. In the Bar Councils Act the right of practice as an Advocate has been defined in section 14 (1) which lays down that "an Advocate shall be entitled as of right to practise (a) subject to the provisions of subsection (4) of section 9, in the High Court of which he is an Advocate". The word "practise" has apparently been used here in the general sense of both pleading and acting and these rights have been limited by and made subject to the rules which the High Courts of Calcutta and Bombay may make, determining the persons who shall be entitled to plead and to act in these High Courts in the exercise of their original jurisdiction. Sections 9 (4) and 14 (3) of the Bar Councils Act expressly reserve to the Calcutta and the Bombay High Courts the power to make rules in this respect and under the rules framed by them an Advocate is not permitted to appear the Original Side unless he is instructed by an Attorney 35 The words "entitled to practise as of right" which occur in section 14 (1) mentioned above have also been used in other parts of the Bar Councils Act, to wit, in sections 4 (2), 5 (1) and 8 (1) of the Act; but the word "practise" in all these provisions does not mean pleading find acting in an unlimited sense. It connotes the same rights and the same limitations which are prescribed in section 14 of the Act. The same expression has been used in section 2 of the Supreme Court Advocates Act apparently in the same sense and with the same implications and it cannot be argued that it connotes an unrestricted right of pleading and acting because the reservations mentioned in section 14 (1) of the Bar Councils Act have not been repeated there. Mr. Ghosh has in this connection drawn our attention to two reported cases, one of which is a pronouncement of the Patna High Court and the other of the Madras High Court. In the Patna case(1) the question &rose as to whether an Advocate or Vakil whose name appeared the roll of any High Court could "act" behalf of his client by presenting an application for review of a judgment in a case which was tried by a court subordinate to the High Court. The question was answered in the affirmative and reliance was placed upon section 4 of the which lays down that "an Advocate or Vakil enrolled any High Court 'shall be entitled to practise in all courts subordinate to the court the roll of which he is entered". This case, it is to be noted, deals with Advocates ' right to practise in subordinate courts where no distinction at all exists between pleading and acting. Consequently, the word "practise" in this context does include both pleading and acting. In the Madras case(1) the point for consideration was, whether an Advocate enrolled in the High Court of Madras 'under the was entitled not only to appear and plead (1) Laurentius Ekka vs Dhuki, Pat 766. (2) In re the Powers of the Advocates, [1928] I.L.R.52 Mad. 92, 36 but also to "act" in the insolvency jurisdiction of the court, in spite of the provision in Rule 128 of the Insolvency Rules of the High Court, which gave such right only to the Attorneys. It was held that the Advocate had the right to "act" by reason of the provision contained in section 14 (1) of the Bar Councils Act which entitled an Advocate to practise as of right in the High Court in which he is an Advocate; and because so far as the Madras High Court was concerned the Bar Councils Act made no distinction between different jurisdictions of the court and did not save the powers of the court to frame rules in respect of the original and insolvency jurisdictions. In these circumstances, a rule which cut down the right conferred by sections 8 and 14 of the Bar Councils Act would be deemed to be repealed under section 19 (2) of the Act as being repugnant to its provisions. It was expressly stated in the judgment that the position was different in regard to the Bombay and Calcutta High Courts and so far as these courts were concerned, their powers were expressly saved by the Bar Councils Act. This decision clearly shows that the 'expression " practise" would not include "acting" if with regard to particular jurisdictions of a High Court there are valid rules to the contrary. The question for our consideration really is, what exactly is the position of a Supreme Court Advocate who wants to avail himself of the right of practising in any High Court in India in terms of section 2 of the Supreme Court Advocates Act? Is he to exercise the right only as a Supreme Court Advocate and in accordance with the rules which the Supreme Court itself has laid down in this respect, or is his position, when he appears before a High Court, the same as that of an Advocate enrolled in the said court and he has the same rights and disabilities which attach to such persons under its rules? The only other alternative that is or can be suggested and has been put forward behalf of the petitioner is that he is not ' fettered by any rules either of the Supreme Court or of the particular High Courtr in,which he appears; 37 and as the extent of his right depends upon the language of the section itself, the legislature by using the word "practise" has conferred upon him the righ of both pleading and acting in any High Court he chooses, irrespective of the rules of practice which obtain in such court. The first view does not appear to me to be tenable. 'I If it is held, that what the section contemplates is that a Supreme Court Advocate in exercising his right of practice in any High Court should be governed by the Supreme Court Rules, the Act itself would be altogether unworkable. It is laid down in Order IV, Rule 12, of the Supreme Court Rules that "no person shall appear as Advocate in any case unless he is instructed by an Agent. By "Agent" is meant an Agent of the Supreme Court and under no provision of law is such Agent entitled to act in any High Court in India. The result, therefore, is that if the Supreme Court Rules are applied, no Advocate would be entitled to appear in any High Court at all. It cannot be argued that even though the rules of the Supreme Court may not be strictly applicable, the intention of the legislature is that a Supreme Court Advocate in appearing before a High Court either the Original or the Appellate Side shall have only the right of pleading and he has to be instructed by an Attorney or a local Advocate who is competent to act. Whatever the merits of this view might otherwise be, the language of the section does not at all warrant such a construction and it cannot seriously be suggested that the word " practise ",.must in all cases be confined to pleading only. The result of such a construction would be to extend the dual system which is at present confined to the Original Sides of the Calcutta and the Bombay High Courts to all the High Courts in India, in all their jurisdictions and to the subordinate courts as well a possibility which the legislature could never have contemplated. To me it seems that when section 2 speaks of a Supreme Court Advocate being entitled as of right to practise in any High Court, what it actually means is 38 that he would, be clothed by reason of this statutory provision with all the rights which are enjoyed by an Advocate of that Court and his right to plead or to act would depend upon. the provisions of the Bar Councils Act and the rules validly framed by the said Court, subject to this that no rule or provision of law would be binding, which would affect in any way his statutory right to practise in that Court solely by reason of his being enrolled as an Advocate of the Supreme Court. It is suggested that if this was the intention of the legislature, nothing could have been easier for it than to state explicitly that a Supreme Court Advocate would have the right to practise in any High Court in the same way as an Advocate of that Court. In my opinion, that is the implication of the general word It practise " that has been used. As said already, the practice of an Advocate must always have reference to a court and it must imply the carrying of the profession according to the rules which. are binding that court, except to the extent that the rules themselves are invalidated expressly or by necessary implication. If the legislature had expressly stated that an Advocate qualified under section 2 of the Act would have the right of both pleading and acting in any High Court in India or if that was the clear intendment. and implication of the language used, any rule conflicting with that provision could certainly have been held to be invalid; but I am unable to say that the use of the word " practise " which has only a general import, by itself, would have that effect. Looked at from this standpoint, the third view indicated above, which has been pressed vehemently behalf of the petitioner, cannot certainly be supported. So long as the rules relating to pleading and acting in particular jurisdictions of specified High Courts are allowed to remain valid and binding, no intention can be imputed to the legislature, without clear words to that effect, of abrogating these rules with regard to the few persons who happen to be enrolled as Advocatess of the Supreme Court. Far 39 from achieving uniformity in any sense of the word, such step would lead to serious anomaly and practical difficulties of an enormous character. the original jurisdictions of the Calcutta and the Bombay High Courts, where the dual system subsists, there are elaborate rules regarding the functions of the Solicitors who alone are competent to act that side, both in 'relation to the courts and to the litigants. The whole procedure is of a different type, dissimilar in many respects to that which is laid down in the Civil Procedure Code. It would be difficult, if not impossible, for an Advocate of the Supreme Court, who chooses to act the Original Side of the Calcutta or the Bombay High Court, to fit himself within the framework of these rules. He cannot possibly carry unless a fresh set of rules is prepared and the framing of new rules, which must exist side by side with the old rules, would lead to further complications and diversities. The position would certainly have been understandable if it could be held that the legislature wanted to do away with the dual system altogether and introduce one set of rules which would apply uniformly to all classes of lawyers. Speaking for myself, I would consider that to be an extremely desirable change; but I look in vain for expression of any such legislative intent either in the enactment itself or even in its historical background. The object of the legislation is quite simple. It is only to allow Advocates of the Supreme Court the right to practise in all the High Courts in India irrespective of the rules framed by them imposing restrictions the right of Advocates whose names do not appear their rolls. From the mere use of the word it practise ", the connotation of which is not at all definite, I am unable to hold that it was the intention of the legislature to introduce such sweeping changes in the existing rules which the acceptance of this view would imply. This leads me to an examination of the other parts of section 2 of the Act to discover, what light, if any, they throw upon the present question. 40 It is one of the settled rules of construction that to ascertain the legislative intent, all the constituent parts of a statute are to be taken together and each word, phrase or sentence is to be considered in the light of the general purpose and object of the Act itself. Mr. Justice Chakravartti of the Calcutta High Court laid very great stress the opening clause of section 2 of the Act which excludes the operation of certain statutory provisions, and this negative part of the section constitutes, according to the learned Judge, the measure and criterion of the right which the positive part formulates. The first question is, to what extent the provisions of any existing law have been eliminated by the opening clause of section 2 The language of the clause is as follows: " Notwithstanding anything contained in the Bar Councils Act (XXXVIII of 1926), or in any other law regulating the conditions subject to which a person not entered in the roll of Advocates of a High Court may be permitted to practise in that High Court. . . . ." Mr. Justice Chakravartti is of opinion that this clause purports to remove all those provisions of the Bar Councils Act or of any other law which imposed restrictions upon persons not enrolled as Advocates of a particular court in the matter of practising in that court. The exclusion is to this extent and no further; and consequently all the other provisions contained in the Bar Councils Act or other statutes which lay down the conditions 'under which an Ad vocate enrolled in a High Court is entitled to practise in the Original Side of that Court, stand unaffected by that clause. If these provisions remain valid and effective, it is quite reasonable to hold that the word "practise " in the section must mean " practise " in accordance with these rules and not in supersession of them. The contention of Mr. Ghosh is that a proper construction of the language of the claue the whole of the Bar Councils Act and not merely those provisions in it, which relate to disabilities attaching to 41 Advocates of other High Courts, must be deemed to be eliminated, so that the right of practising that is conferred by the section is to be exercised without the restrictions or limitations flowing from any of the provisions of the Bar Councils Act. In support of his contention that the whole of the Bar Councils Act is excluded by the opening clause, Mr. Ghosh lays great stress a comma, which separated the Bar Councils Act and the figures and words that follow, from the expression " or in any other law " which comes immediately after that. He says further that under the ordinary rules of interpretation the adjectival phrase " regarding the conditions etc." should be taken to apply to the word or phrase immediately preceding it and not to the remoter antecedent term or expression. These arguments, though they have an air of plausibility about them, do not impress me much, Punctuation is after all a minor element in the construction of a statute, and very little attention is paid to it by English, courts. Cockburn C.J. said. in Stephenson vs Taylor (1) : " the Parliament Roll there is no punctuation and we therefore are not bound by that in the printed copies". It seems, however, that in the Vellum copies printed since 1850 there are some cases of punctuation, and when they occur they can be looked upon as a sort of contemporanea expositio(2). When a statute is carefully punctuated and there is doubt about its meaning, a weight should undoubtedly be given to the punctuation(1). I need not deny that punctuation may have its uses in some cases, but it cannot certainly be regarded as a controlling element and cannot be allowed to control the plain meaning of a text(4). Similarly, although a relative or a qualifying phrase is normally taken with the immediately. preceding term or expression, yet this rule has got to be discarded if it is against common sense and natural (i) (i861) 1 B. & section page 101. (2) See Craies Statute Law, page 185. (3) Vide Crawford Statutory Construction, Page 343. (4) lbid. 42 meaning of the words and the expressions used. I find considerable force in the opinion expressed by Chakravartti J. that in the present case the effect. of the position of the comma or the particular array of ,words in the sentence has been completely neutralised I by the use of the word " other " occurring in the #phrase " or in any other law ". The result is, as the learned Judge has said, that the Bar Councils Act has been posited as an alternative to other laws and both have been subjected to the qualification contained in the qualifying clause. Assuming, however, for argument 's sake that Mr. Ghosh is right and that the whole of the Bar Councils Act is eliminated by the opening clause of the section, I do not think that even then it really improves his position. The Bar Councils Act itself does not make any provision relating to the rights of pleading and acting in the Original Side of any High Court. Sections 9(4) and 14(3) of the Act save only the rights of the High Courts of Calcutta and Bombay to make rules in relation thereto ; and these rules are made by these courts in the exercise of their powers under the Letters Patent. Section 19(2) of the Bar Councils Act lays down as follows: " When sections 8 to 16 come into force in respect of any High Court of Judicature established by Letters Patent, this Act shall have effect in respect of such Court notwithstanding anything contained in such Letters Patent, and such Letters Patent shall, in so far as they are inconsistent with this Act or any rules made there under, be deemed to have been repealed. " If the entire Bar Councils Act is excluded for purposes of section 2 of Act XVIII of 1951, the rules framed by the High Courts of Calcutta and Bombay under the Letters Patent would remain valid and effective of their own force even without the saving provision contained in the above mentioned section of the Bar Councils Act, and section 19(2) of the Act being out of the picture, the Letters Patent would 43 also remain fully alive. The result will be that Rule 37, Chapter I, of the Original Side Rules of the Calcutta High Court or Rule 40(2) of Chapter II of the Bombay High Court Rules, under which no Advocate can appear in the Original Side of these courts unless instructed by an Attorney, would not come within the purview of the opening clause of Section 2, as they do not relate to matters regulating the conditions of outside Advocates. Rule 6, Chapter I, of the Bombay High Court Rules, to which our attention was drawn by the learned Attorney General, lays down that an Advocate of any other High Court may appear in a particular case, with the permission of the Chief Justice, the Original Side of the Court, provided he is instructed by an Attorney, and an Advocate of the Bombay High Court appears along with him. In my opinion, the whole of this provision must be deemed to be invalid for purposes of section 2 of Act XVIII of 1951, and a Supreme Court Advocate,, who wants to appear and plead in a case in the Original Side of the Bombay High Court, has neither to take the permission of the Chief Justice nor is it necessary that he should have along with him an Advocate of that court. He should certainly be instructed by an Attorney, but that is because of the other provisions, which I have already mentioned, and which apply to the Advocates of the Bombay High Court itself. I would be quite prepared to hold that what has been excluded by the opening clause of section 2 of the Act may not be the exact measure of the new right that the section purports to create. In my opinion, the section its negative side eliminates so far as the Supreme, Court Advocates are concerned, all disabling provisions existing under any law in regard to persons who are not enrolled as .Advocates of any particular High Court. the positive Side, the section confers Supreme Court Advocates the statutory privilege of practising as of right, in any High Court in India, no matter whether he is enrolled as an Advocate of that court or not. 44 It is this positive aspect that has been emphasised by the words "whether or not he is an Advocate of that court" which occur at the conclusion of the section. It may not be strictly correct to say that these words are altogether inappropriate, for the section aims at conferring, though indirectly, ' certain privileges those who are enrolled as Advocates of the particular High Court as well. Section 9 (4) of the Bar Councils Act lays down: "Nothing in this section or in any other provision of this Act shall be deemed to limit or, in any way affect the powers of the High Courts of Judicature at Fort William in Bengal and at Bombay to prescribe the qualifications to be possessed by persons applying to practise in those High Courts respectively in the exercise of their original jurisdiction or the powers of those High Courts to grant or refuse, as they think fit, any such application (or to prescribe the conditions under which such persons shall be entitled to practise or plead). " Provisions of this type are to be found in the Rules of both the Bombay and the Calcutta High Courts. Under Rule 1, Chapter I, of the Calcutta, Original Side Rules, even an Advocate of that court has to make an application for being entitled to appear and plead the Original Side and he can exercise that right only after that permission is granted. Such rules would have no effect after the passing of Act XVIII of 1951 and an Advocate of the Supreme Court will be entitled to plead in the Original Side of the Calcutta High Court as a matter of right and without complying with any of the formalities that may be prescribed by the rules of that court. Mr. Justice Chakravartti expressed doubt as to whether an Advocate of the Supreme Court, who presumably is not an Advocate of the Calcutta High Court, can, as such, plead in the Original Side of the Calcutta High Court. In my opinion, there is no room for doubt this point at all. He is entitled to appear and plead as a matter of right under the express provision of section 2 of the, Act, 45 Mr. Ghose finally attempts to support his Contention that the intention of the legislature was to confer upon the Supreme Court Advocates the right to plead as well as to act in all High Courts in India by calling in aid three other facts. It is said first of all that in the statement of objects and reasons which accompanied the original bill, the right to practise was expressly stated to include both pleading and acting. In the second place it is pointed out that proviso (a) to section 2 which occurred in the original bill and which excluded the right of both pleading and act ing in the Original Side of the High Courts from the operation of section 2 was dropped altogether and the Act was passed without that proviso. Lastly it is urged that the expression "practise", which has been employed in the existing proviso to the section, obviously means both pleading and acting, and it is against sound rules of construction to attach different meanings to the same word used in, two parts of the same section. There are weighty pronouncements of English courts as well as of the Judicial Committee of the Privy Council which lay down that in construing a statute all negotiation previous to the Act or the original form of the bill must be dismissed from consideration. "We cannot interpret the Act" said Lord Halsbury, "by any reference to the bill, nor can we determine its construction by any reference to its original form"(1). It is not permissible to ascertain the meaning of the word used in an Act by reference to the proceedings in the Legislative Council, and the language of a "Minister of the Crown" in proposing a measure in Parliament which eventually becomes law is inadmissible(2). In a, Calcutta case the learned Judges refused to look into the statement of objects and reasons accompanying an enactment as an aid to its construction(3). The (i)Vida Herron V. Rathmins (1802] A.C. 492 at 5o2. (2)Vida Krishna Ayyangar vs Nellaperumal[1920] 47 I.A 33; Assam. Railway & Trading Co. Ltd. vs Inland Revenue Commissioners (1935] A.C, 443; Administrator General of Bengal vs Premlal [1895] 12 I.A. 107 (3) Vida Debendra vs Jogendru, A.I.R. 1936 Cal. 46 judicial opinion this point is certainly not quite uniform and there are American decisions to the effect that the general history of a statute, and the various steps leading up to an enactment including amendments or modifications of the original bill and reports of Legislative Committees can be, looked at for ascertaining the intention, of the legislature where it is in doubt; but they hold definitely that the legislative history is inadmissible when there is no obscurity in the meaning of the statute(1). Even assuming that the latter view is correct, it does not appear to me that the first and the second contentions of the petitioner indicated above are really of any assistance to him. It is true that in the statement of, objects and reasons which was circulated ' along with the original bill, the word "practise" was said to include both Pleading and acting; but at the same time the original bill did not purport to confer at all upon the Supreme Court Advocates, the ' right either of pleading or of acting in any High Court in the exercise of its original jurisdiction. This was expressly laid down in the original proviso (a) to section 2 and the concluding portion of the statement of objects and reasons stood thus: "The present bill is intended to achieve such unanimity by providing that every Advocate of the Supreme Court shall be entitled to practise as of right, in any High Court otherwise than its Original Side." Conceding that Mr. Ghosh is entitled to rely the fact that the first; proviso, which excluded the original jurisdiction of the High Courts from the purview of section 2 was subsequently dropped the dropping of the proviso by itself proves nothing. What the proviso intended was to confine the right of practising which section 2 of the Act conferred Supreme Court ' Advocates exclusively to the appellate jurisdiction of the High Courts. A Supreme Court Advocate as such was not entitled under the proviso to act or plead in the Original Side of any (1) Vide Crawford Oil statutory Construction page 383 47 High Court in India. It is to be noted that this prohi bition had nothing to do with the dual system that exists in the original jurisdiction of the Calcutta and the Bombay High Courts and it was totally unconnected with the provisions of the Bar Councils Act, or the rules of the Calcutta and the Bombay High it Courts in relation thereto. the other hand, if, as I have already stated, section 2 of the Act purported to confer the Supreme Court Advocates the right of practice in the different High Courts in India in the same way as the Advocates enrolled in those, courts are entitled to do, the original proviso (a) purported to cut down that right to a considerable extent. Under this proviso the, Supreme Court Advocates were denied the right of pleading the Original Side of the Calcutta and the Bombay High Courts and they could neither act nor plead the Original Side of the Madras High Court, although they would have those rights under the Bar Councils Act. The dropping of the proviso might mean nothing else than this that this restriction was withdrawn and the rights created by the section without the proviso stood intact. Be that as it may, it is, in my opinion, a most risky thing to attempt to construe the meaning of a word in a statute with the aid of a nonexistent provision. We do not know the reasons why the legislature deleted this clause and it is not permissible for us to speculate these matters. A reference to the legislative debates or the speeches that were actually delivered in the floor of the House is, in my opinion, inadmissible to ascertain the meaning of the words used in the enactment. The use of the word "practise" in the, proviso to section 2, as it now stands, is also a matter of no im portance. Section 2 confers certain additional rights upon the Supreme Court Advocates and they have the right of practising in all the High Courts in India subject, as I have said, to the rules and regulations binding the Advocates in each one of them. The proviso makes an exception to this rule, and in case 48 an Advocate of an particular High Court, who became a Judge of that court, gave an undertaking at the time when he assumed his office that he would not practise in that court after he ceased to be a Judge, the provision in the section could not be availed of by him in the face of his undertaking. This is the plain meaning of the proviso. Apparently the legislature was not in the least concerned when it enacted this proviso with the extent of right which such Advocate possessed when be became a Judge; and the extent of the right would certainly depend upon the rules and regulations of the High Court in which he carried his practice. My conclusion is that the view taken by the Calcutta High Court is the right and proper view to take and this application must fail. I make no order as to costs. DAS J. The present proceedings before us have been initiated a petition by two petitioners. The first petitioner is 'Sri Aswini ' Kumar Ghosh who is an advocate of the Calcutta High Court enrolled the Original Side as well as the Appellate Side of that Court. As such advocate of the Calcutta High Court, he is entitled to act and plead the Appellate Side, but only to plead the Original Side. He has since been enrolled also in this Court as an advocate which term is defined in Order ' 1, rule 2, of the Rules of this Court as meaning a person entitled to appear and plead before the Supreme Court. May 26, 1951, petitioner Aswini Kumar Ghosh served notices the Registrars of the Original Side as well as of the Appellate Side of the Calcutta High Court intimating that, in exercise of the right conferred by the Supreme Court Advocates (Practice in the High Courts) Act, 1951, he, would thenceforth "practise, i.e., act and plead", in the said High Court at Calcutta also as a Supreme Court advocate. July 14, 1951, petitioner Aswini Kumar Ghosh, as a Supreme Court advocate, tendered what he calls a warrant of appearance under rule 58 of the Indian Companies Rules framed by the Calcutta High "Court in the matter of 49 a winding up petition regarding a company. That "warrant of appearance" was returned by the Registrar evidently because rule 58 requires a person who intends to appear the hearing of the winding up petition to leave with or sent to the petitioner or to his attorney a notice of such intention signed 'by him or by his attorney" and does not authorise the filing of a notice signed by an advocate. The second petitioner is one Sri Jnanendra Nath Chatterjee who is the defendant in Suit No. 2270 of 1951 pending the Original Side of the Calcutta High Court. July 18, 1951, petitioner Jnanendra Nath Chatterjee as defendant in the said Suit No. 2770 of 1951 executed a "warrant of appearance and power" in the said suit in favour of the petitioner Aswini Kumar Ghosh. The petitioner Aswini Kumar Ghosh as advocate for the petitioner Jnanendra Nath Chatterjee 'filed the warrant with the Assistant in charge of the Suit Registry Department of the Original Side. This was, clearly done in purported compliance with the provi sions of Chapter 8, rule 15, of the Original Side Rules. That rule, however, requires the defendant to enter his appearance to a writ of summons by filing a memorandum in writing containing the name and place of business of the defendant 's attorney or stating that the defendant defends in person and containing his name and place of business. That rule does not in terms contemplate an advocate acting for a defendant. It is, therefore, not surprising at all that July 27, '1951, the "warrant of appearance" was returned by the respondent Arabinda Bose, the Assistant in the Suit Registry ]Department of the Original Side of the Calcutta High Court, with the endorsament that "the warrant must be filed by an attorney of this Court under High Court Rules and Orders, Original Side, and not by an Advocate". The petitioner Jnanendra Nath Chatterjee thereupon entered appearance in person July 30, 1951, and has been defending the suit in person. The two petitioners, however, moved the Calcutta High Court under article 226 of the Constitution 50 and obtained a Rule calling upon the two respondents Sri Arabinda Bose, the Departmental Assistant, and Sri section N. Banerjee, the Registrar of the Original Side, to show cause why an order or direction in the nature of an appropriate writ should not be issued for the enforcement of the fundamental right of the petitioner Aswini Kumar Ghosh "to practise, i.e., to act and plead the Original Side of this Court", as conferred him by Act XVIII of 1951 and guaranteed by article 19 (1) (g) of the Constitution of India and why consequential orders therein mentioned should not be made. The Rule was heard by a Special Bench of the Calcutta High Court consisting of Harries C.J. and Chakravartti and Banerjee JJ. who discharged the Rule December 21, 1961, and dismissed the petition. As will appear from the judgment of the High Court ' the argument addressed to it "made no reference to the alleged fundamental right and that the petitioner confined his argument to the provisions of the Supreme Court Advocates ( Practice in the High Courts) Act, 1951. " The powers of the High Court under article 226 not being confined to the enforcement of fundamental rights it was possible for the petitioner to rely the rights under the last mentioned Act. The petitioners did not apply for or obtain the leave of the High Court to appeal to this Court. Long after the time fixed by the rules for applying for special, leave to apppal to this Court had expired the petitioners filed the present petition against the same respondents. The. petition is intituled as an application under articles 22 (1), 32 (1) and (2), 135 and 136 (1) of the Constitution of India. In the prayer portion of the petition, the petitioners ask for directions, orders or appropriate writs the respondents for the enforcement of their fundamental rights guaranteed under articles 19 (1) (g) and 22 (1) of the Constitution, an order declaring the right of the petitioner Aswini Kumar, Ghosh act behalf of his clients the Original Side of all, High Courts in India including Calcutta, an order upholding the 51 right of the petitioner Jnanendra Nath Chatterjee to be defended in the said suit by the petitioner Aswini Kumar Ghosh and other consequential reliefs. There is an alternative prayer asking this Court to treat the petition as an application, under article 136, for special leave to appeal against the judgment and order of, the Special, Bench of the Calcutta High Court dismissing the petitioners ' application, under article 226 of the Constitution and for condonation of the delay in presenting the present petition. At the hearing before us it has not been seriously suggested that the rights of the petitioner Jnanendra Nath Chatterjee, fundamental or otherwise, have in any way been infringed. Nor was the petition presented before us as one for the enforcement of any fundamental right of the petitioner Aswini Kumar Ghosh guaranteed by article 19 of the Constitution. What Was pressed before us by the petitioner Aswini Kumar Ghosh, who appeared in, person, was the right said to have been conferred him as an advocate of this Court by section 2 of the Supreme Court Advocates (Practice in the High Courts) Act (Act XVII of 1951) hereinafter in this judgment referred to as "the Act". In the circumstances the petition has not seriously been presented before us as one under article 32 of the Constitution and it is not necessary for me to express any opinion as to whether a petitioner whose application for enforcement of an alleged fundamental right under article 226 has been rejected by the High Court can maintain an application under article 32 to this Court for the same relief based precisely the same facts and grounds. The petition, however,. has been presented before us as an application under article 136 of the Constitution for special leave to appeal from the judgment of the Special Bench of the Calcutta High Court. We have been pressed to proceed with the matter the footing as if special leave to appeal has been given and the delay in the presentation thereof has been condoned by this Court. I deprecate this suggestion ' for I do not desire to encourage the belief that an intending 52 appellant who has not applied for or obtained, the ,leave of the High Court and who does not say a word by way of explanation in the petition as to why be did not apply to the High Court and as to why there ' has been such delay in applying to this Court should nevertheless get special leave from this Court for the mere asking. As, however, the matter has been proceeded with as an appeal, I express my views the questions that have been canvassed before us. There is no dispute that the Act has conferred some new rights the Supreme Court Advocates. The controversy is as to the ambit and scope of the. right so conferred and it has centred round the expression "to practise" used in section 2 of the Act. In order to resolve that controversy we have to ascertain the true meaning of that expression as used in the Act. The provisions of the Act quite clearly apply to and affect all High Courts in India. It is, therefore, necessary to bear in mind the status and position of advocates as they prevail in the different High Courts. The Indian High Courts Act, 1861 (24 & 25 Vic. C. 104) by section I authorised Her Majesty, by Letters Patent, to erect and establish High Courts for the three Presidencies of Bengal, Madras and Bombay. Section 9 of that statute provided that each of the High Courts to be so established should have and exercise civil, criminal and other jurisdiction, original and appellate, as therein mentioned and all such powers and authority for and in relation to the administration of justice in the presidency for which it is established, "as Her Majesty may by such Letters Patent as aforesaid grant and direct. " Section 16 of that statute also empowered Her Majesty to establish a High Court in and for any portion of the territories within Her Majesty 's dominions in India, not included within the limits of the local jurisdiction of another High Court. Pursuant to this authority High Courts were established by Letters Patent at Fort William in Bengal, Madras and Bombay. Clause 9 of the Letters Patent of each of the three Presidency High 53 Courts authorised and empowered each of the said High Courts: "to approve, admit, and enrol such and so many Advocates, Vakils, and Attorneys as to the said High Court shall seem meet; and such Advocates, Vakils and Attorneys shall be and are here by authorised to appear for the suitors of the said High Court, and to plead or to act, or to plead and act, for the said suitors, according as the said High Court may by its rules and directions determine, and subject to such rules and directions. Subsequently other, High Courts were established from time to time by Letters Patent at different places, e.g. Allahabad, Patna,, Lahore and Nagpur, and similar power was, by clause 7 of the respective Letters Patent, conferred each of the said High Courts to make similar,rules. It is well known that each of the High Courts actually framed rules for the admission of advocates, vakils and attorneys. The High Courts of Calcutta, Madras and Bombay divided their jurisdictions into two broad categories, namely, ,original jurisdiction and appellate jurisdiction, and by their Rules made an 'internal classification of the advocates, vakils and attorneys. Thus the advocates or vakils enrolled the Appellate Side were empowered "to appear, act and plead" but the advocates enrolled the Original Side were permitted only "to appear and plead", the "acting" the Original Side being reserved for the attorneys for whom a separate roll was maintained. The, Madras High Court has, however, done away with this internal classification and advocates of that High Court may now appear, act and plead/ the Original Side as well as the Appellate Side. The Calcutta and Bombay High Courts, however, maintained the distinction. Chapter I , rule 37, of the Rules of the Original Side of the Cal cutta High Court provides that persons to whom the rules contained in that chapter are applicable may not appear unless instructed by an attorney. Chapter I. rule 40, of the Rules of the Original Side :of the 54 Bombay High Court is the same lines. Although the remaining Letters Patent High Courts in India have extraordinary original jurisdiction, both civil and criminal, they did not make any distinction between original and appellate jurisdiction as in Calcutta and Bombay and the advocates enrolled in those High Courts were and are permitted "to appear, act and plead" in all their jurisdictions. Apart from the several Letters Patent High Courts other High Courts, e.g., the High Courts of Assam and Orissa, and the High Courts of Part B States, also have framed rules of their own for admission of advocates and according to those rules the advocates of all these High Courts can ((appear, act and plead". The position, therefore, was that, at the date of the Act, all advocates of all High Courts including those of the Appellate Side of Calcutta and Bombay High Courts but excluding only the Original Side advocates of Calcutta and Bombay could "appear, act and plead" in their own High Courts in all jurisdictions but the advocates of the Original Side of those two High Courts could only "appear and plead" the Original Side. Apart from the bar against acting imposed by the High Courts of Calcutta and Bombay their own Original Side advocates, all the High Courts, by their respective rules, prescribed certain conditions subject to which alone an advocate who was not their rolls could "appear and plead" in such High Courts. Chapter I, rule 38, of the Original Side of the Calcutta High Court provides as follows: "An Advocate of any other High Court or Chief Court may with the permission of the Chief Justice appear and plead for parties in matters arising in or out of the original jurisdiction, or in or out of appeals therefrom, provided he is a member of the Bar of England or of Northern Ireland, or a member of the Faculty of Advocates in Scotland, or a person entitled to appear and plead the Original Side of the High Court of Judicature at Bombay, and that he is properly instructed by an Attorney " 55 There is also a rule framed under section 15 (b) of the which applies to the Appellate Side of the Calcutta High Court prescribing that an advocate of another High Court can "appear and plead" the Appellate Side of the Calcutta High Court in a particular case or cases only with the previous permission of the Chief Justice. Reference may in this connection be made to Chapter I, rule 6, of the Bombay Rules applicable to the Original Side and the rule framed under the which applies to the Appellate Side of Bombay High Court and is set out in Schedule II of of the Appellate Side Rules. There is no dispute that each of the other High Courts have rules in pari materia imposing conditions advocates not its roll in the matter of their appearing and pleading in such High Court. Thus it is clear that an advocate not the rolls of a particular High Court could not as of right "appear and plead" in that High Court. He had to satisfy the conditions laid down by that High Court before he could "appear and plead" in that High Court. It should be particularly noticed that under these rules foreign advocates who satisfied the conditions were permitted only to "appear and plead". There never was any question or claim of a foreign advocate being permitted to "act" in a High Court of which, he was not an advocate. The legislature which enacted the Act now under our consideration had full knowledge of the internal classification of the advocates of the Calcutta and Bombay High Courts into Original Side advocates and Appellate Side advocates, the disability of the Original Side advocates of those two High Courts, namely, that they were not permitted "to act" the Original Side and could only ', 'appear and plead", the instruction of an attorney and that the attorneys alone were permitted "to act" that side of those two High Courts. Further the legislature was well aware of the bar imposed foreign advocates, i.e., advocates not the roll of a High Court in the matter of their appearing and pleading in that High 56 Court and the fact that eminent advocates of one High Court were not, many occasions in the past, given permission "to a ' pear and plead" in another High Court. The legislature knew that under Order I, rule 2, of the Supreme Court Rules an advocate had been defined as a person entitled "to appear and plead" before the Supreme Court and that Order IV, rule 30, precluded an advocate from acting as agent and an agent as advocate in any circumstances whatsoever. Finally, the legislature was cognisant of the fact that a Supreme Court advocate was a, foreign advocate in all High Courts other than the one, where he was enrolled and as such was not entitled as of right "to appear and plead" in those High Courts. With knowledge of all these facts and circumstances the legislature proceeded to enact this Act and, therefore, the provisions of the Act have to be considered in the light of these prevailing circumstances which undoubtedly form the background ' of this enactment and which cannot be overlooked or ignored. Turning now to the text of the Act, one cannot but be impressed at once with 'the wording of the full title of the Act. Although there are observations in earlier English cases that the title is not a part of the statute and is, therefore, to be excluded from consideration in construing the statute, it is now settled law that the title of a statute is an important part of the Act and may be referred to for the purpose of ascertaining its general scope and of throwing light its construction, although it cannot override the clear meaning of the enactment. (See Maxwell the Interpretation of Statutes, 9th Edn. P. 44 and the cases cited therein). The full title 'of the Act now under consideration runs thus: "An Act to authorise Advocates of the Supreme Court to practise as of right in any High Court. " One cannot fail to note the words " as of right and the words " in any High Court " which follow immediately. Those two sets of words at once convey 57 to my mind that the act is directly and intimately concerned with the disability imposed by a High Court advocates not its roll in the way of their appearing and pleading in such High Court without the permission of the Chief Justice and without satisfying other conditions if any, and that their purpose is to remove and supersede that disability, so far as the Supreme Court advocates are concerned, by authorising them to do so as of right. The words " as of right " are quite clearly indicative of an independent statutory right as opposed to the conditional right dependent the sweet will of the Chief Justice concerned. Those words are used byway of antithesis and bring out prominently the object of the Act. In view of that well known disability which naturally was irksome, those words cannot fail to convey to one 's mind the conviction that the purpose of the Act, as indicated by its title, is to confer the advocates of the Supreme Court a right which was denied to them by the Rules of the High Courts referred to above. The language in which the title of the Act has been, expressed appears to me to be a good and cogent means of finding out the true meaning and import of the Act, and, as it were, a key to the understanding of it. The matter, however, does not rest the title of the Act alone and I pass to section 2 of the Act which is expressed in the following terms: " Notwithstanding anything contained in the ' (XXXVIII of 1926), or in any other,law regulating the conditions subject to which a person not entered in the roll of Advocates of a High Court may be permitted to practise in that High Court every Advocate. of the Supreme Court shall be entitled as of right to practise in any High Court whether or not he is an Advocate of that High Court. Provided that nothing in this section shall be deemed to entitle 'any person merely by reason of his being all Advocate of the Supreme Court to practise 58 in a High Court of which he was at any time a Judge, if he had given an undertaking not 'to practise therein after ceasing to hold office as such Judge. " It will be noticed that the main body of the section consists of two parts, namely, a non obstante clause beginning with the words " Notwithstanding anything" and ending with the words "permitted to practise in that High Court " and a positive part beginning with the words " every Advocate of the Supreme Court " and ending with the words " of that High Court. " To clear the ground it will be useful, at the outset, to ascertain the 'scope and ambit of the non obstante clause. The controversy this clause has raged round the question whether the adjectival clause, namely, "regulating the conditions subject to which a person not entered in the roll of Advocates of a High Court may be permitted. to practise in that High Court " governs the words " the " as well as the words "any other law" which immediately precede that clause. If that clause also attaches to and qualifies the words "the " then there can remain no manner of doubt that the ambit, scope and purpose of the non obstante clause are to supersede, not the whole of the but, only that part of it which regulates the conditions subject to which a person not entered in the roll of Advocates of a High Court may be permitted to practise in that High Court, that is to say, that the supersession of the Indian Bar Councils. Act is only to the same extent to which that adjectival clause supersedes "any other law". Conscious that such a construction will run counter to his contention, it has been the endeavour of the petitioner Aswini Kumar Ghosh to keep the adjectival clause separated from the words "". For this purpose he fastens the comma appearing after the bracket and before the word "or" and contends that the comma indicates that the qualifying clause does not govern the . 59 The High Court has rejected the contention of the petitioner Aswini Kumar Ghosh two grounds. In the first place it has been said that the comma was no part of the Act. That the orthodox view of earlier English Judges was that punctuation formed no part of the statute appears quite clearly from the observations of Willes J. in Claydon vs Green(1). Vigorous expression was given to this view also by Lord Esher, M. R. in Duke of Devonshire vs Connor(1) where he said In an Act of Parliament there are no such things as brackets any more than there are such things as stops. " This view was also adopted by the Privy Council in the matter of interpretation of Indian statutes as will appear from the observations of Lord Hobhouse in Maharani of Burdwan vs Murtunjoy Singh(1), namely, that " it is an error to rely punctuation in construing Acts of the Legislature. " Same opinion was expressed by the Privy Council in Pugh vs Ashutosh Sen(4). If, however, the rule regarding the rejection of punctuation for the purposes of interpretation is to be regarded as of imperfect obligation and punctuation is to be taken at least as contemporanea expositio, it will nevertheless have to be disregarded if it is contrary to the plain meaning of the statute. If punctuation is without sense or conflicts with the plain meaning of the words, the Court will not allow it to cause a meaning to be placed upon the words which they otherwise would not have. This leads me to the second ground which mainly the High Court rejected the plea of the petitioner Aswini Kumar Ghosh, namely, that the Word "other" in the phrase "any other law" quite clearly connects the with other laws as alternatives and subjects both to the qualification contained in the adjectival clause. I find myself in complete (1) at P. 522. (2) (1890) L.R.Q.13.D 468. (3) (1886) L.R. 14 I.A. 30 at P. 35. (4) (1928) L.R. 56 I.A. 93 at p. zoo, 60 agreement with the High Court this point. If the intention wag that the adjectival clause should not qualify the , then the use of the word "other" was wholly inapposite and unnecessary. The use of that word 'unmistakably leads to the conclusion that the adjectival clause also qualifles something other than "other law". If the intention were that the should remain unaffected by the qualifying phrase and should be superseded in toto for the purposes of this Act the legislature would have said "or in any law regulating the conditions etc. " It would have been yet simpler not to refer to the at all and to drop the adjectival clause and to simply say "Not withstanding anything contained in any law". In the light of the true meaning of the title of the Act as I have explained above and having regard to the use of the word " other " I have, no hesitation in holding, in agreement with the High Court, that what the non obstante clause intended to exclude or supersede was not the whole of the Indian Bar, Councils Act but to exclude or supersede that Act and any other law only in so far as they or either of them purported to regulate the conditions subject to which a person not entered in the roll of advocates of a High Court might be permitted to practise in that High Court and that the comma, if it may at all be looked at,, must be disregarded as being contrary to this plain meaning of the statute. Assuming, however, that the qualifying clause does not attach to the words "", that circumstance will, nevertheless, make no difference in the legal position. 'Section 8(1) of the Indian. Bar Councils A et provides as follows: "No person shall be entitled as of right to practise in auy HighCourt,unless his name is entered in the roll of the advocates of the High Court maintained under this Act: Provided that nothing in this sub section shall apply to any attorney of the High Court. " 61 Section 14(2) runs thus: "Where rules have been made by any High Court within the meaning of clause (24) of section 3 of the , or in the case of a High Court for which a Bar Council has been constituted under this Act, by such Bar Council under section 15, regulating the conditions subject to which advocates of other High Courts may be permitted to practise in the High Court, such advocates shall no be entitled to practise therein otherwise than subject to such conditions." Section 15(b) authorises the Bar Council, with the previous sanction of the High Court, to make rules to provide for and regulate "the conditions subject to which advocates of other High Courts may be permitted to practise in the High Court". As already stated, a rule has been framed under this section by the Calcutta Bar Council as well as by the Bombay Bar Council. These three provisions are the only provisions of the or the rules thereunder which place a bar against an advocate, not the roll of a Hiah Court, from practising in such High Court. It is interesting to note that the nonobstante clause in section 2 of the Act we are construing is couched in language which has unmistakably been taken from sections 14 (2) and 15 (b). There can be no question that a supersession of the will supersede those provisions of that Act and the rules thereunder which " 'regulate the conditions subject to which advocates of other High Courts may be permitted to practise in the High Court". Apart from this I find nothing in the which has any direct bearing section 2 of the Act we are construing or whose supersession is necessary to give effect to it. It is said that the rules of the Calcutta and Bombay High Courts do prescribe the qualifications to be possessed by persona applying to practise in those Courts and the conditions under which such persons will be entitled to practise and reserve to those Courts the right to grant. ' 62 or refuse any application for enrolment. It is also pointed out that the rules of the Original Sides of ' those two High Courts do determine the persons who shall respectively plead and act in those High Courts in the exercise of their original jurisdictions. It is next pointed out that sections 9 (4) and 14 (3) of the preserve these rules and it is contended that a supersession of the in its entirety will do away with sections 9(4) and 14(3) and the protection of those sections having been withdrawn, those rules will con sequently stand abrogated, so as to facilitate the operation of the provisions of section 2 of the Act under review. I am unable to accept, this argument as sound. Sections 9(4) and 14(3) do not purport to give any fresh validity to the rules of the Calcutta and Bombay High Courts. All that those sections do is to declare that nothing in the shall be deemed to limit or affect the powers of those two High Courts which exist in dependently of those two. sections and flow from their respective Letters Patent. Therefore, if the whole of the including sections 9(4) and 14(3) stand abrogated such abrogation will not affect the existence or validity of the rules of those High Courts which will, nevertheless, continue in full force the strength of the Letters Patent of those High Courts. It is clear, therefore, that even if the adjectival clause does not qualify the and if, consequently, the nonobstante clause under review is taken to supersede the whole of the , the effect of such supersession will, for the purposes of section 2, be only to do away with the provisions of sections 8(1) and 14(2) and the rule made under section 16(b) of the in so far as they "regulate the conditions subject to which advocates of other High Courts may be permitted to practise in the High Court" just as it will abrogate all other laws in so far as they regulate those very conditions. The supersession of the whole of the Indian Bar Councils 63 Act will not, therefore, affect the validity of the rules framed by the High Courts under their respective Letters Patent determining the persons who will act and who will plead or who will act and plead and those rules will prevail their own strength and efficacy, although the rules regulating the conditions subject to which foreign advocates can be permitted to appear and plead will stand abrogated by reason of the non obstante clause. In the premises, the result of the construction sought to be founded by the petitioner Aswini Kumar, Ghosh the existence of the comma in the non obstante clause will be precisely the same as it would have been if the comma had not been there and the adjectival clause "regulating the conditions etc." also attached to and qualified the words "Indian Bar, Councils Act. " In short, there is no escape from the, conclusion that the ambit, scope and effect of the non obstante clause are, to supersede the and any other Act only in so far as they regulate the conditions referred to therein. I again emphasise that the rules of the different High Courts regulated the conditions subject to which a foreign advocate would be permitted "to appear and plead. " There was no question of the foreign advocate "acting" in a High Court of which he was not an advocate. The purpose of the non obstante clause is to supersede only the provisions of the and the rules which regulated those, identical conditions. It is not seriously disputed that the legislature in passing the non obstante clause had only those conditions in mind. There can be no manner of doubt, therefore, that the words "to practise" in the non obstante clause mean, in the context, "to appear and plead". The petitioner Aswini Kumar Ghosh then falls back on a second line of reasoning. He urges that whatever may be the meaning, scope and effect of the non obstante clause, it cannot possibly cut down the meaning of the positive words in the operative part of the section. His contention is that the High Court war, wrong in holding that the non obstante clause was 64 coextensive with the operative part. While it may be true that the non obstante clause need not necessarily be coextensive with the operative part, there can be no doubt and the petitioner and Dr. N. C. Sen Gupta appearing for the Calcutta Bar Association and supporting the petitioner do not dispute that ordinarily there should be a close approximation between the two. What he urges is that the Court should not create an ambiguity in the operative part and then use the non obstante clause to cut down the meaning of the plain words used in the operative part of the section. The argument is that the words "to practise" cover both acting and pleading and that, therefore, the operative part of the section authorises the advocate of the Supreme Court as of right "to practise", that is, "to act and plead", in any High Court. The whole case of the petitioner is founded this plea. It is necessary, therefore, to consider whether the critical words have that invariable and fixed meaning when used in relation to an advocate. The verb "practise" according to the Oxford English Dictionary, Vol. VIII, p. 1220, means : to work at, exercise, pursue (an occupation, pro fession or art) ; to exercise the profession of law or of medicine. Similar meaning is to be found assigned to the word in Dr. Annandale 's New Gresham Dictionary. According to this meaning doctors "practise", consulting architects "practise" as well as lawyers "practise" but we know that each of them does different things. Coming to lawyers we find that there are different categories of lawyers all of whom "practise", although all of them do not do the same thing. Thus attorneys "practise" in the Original Sides of the High Courts of Calcutta and Bombay and the agents "practise" in the Supreme Court but we know that under the rules of those Courts the attorneys, and agents only "act". The advocates also, "Practise" but we know that all of them do not perform the same functions. The advocates of all High Courts including those of the Appellate Sides of the Calcutta and 65 Bombay High Courts , under the rules of their respective High Courts, "act and plead" and, as the ambit of the profession of such advocates extends to acting and pleading, the words "to practise" in their application to those advocates undoubtedly mean "to act and plead". The advocates of the Original Sides of those two High Courts can, under the rules, 'only " plead". the Original Side and the ambit and scope of the profession of these Original Side advocates being limited only to pleading, the words "to practise" used in reference to these advocates must mean "to plead" only. There are thus different species of lawyers, some of whom, e.g., attorneys of the Original Sides of Calcutta and Bombay High Courts and agents of this Court, only "act", some others of whom, e.g., the Original Side advocates of those two High Courts and of this Court, only "plead" and all the remaining advocates of all the High Courts both "act and plead". The scope of the professional activities of the different categories of lawyers thus varies but, nevertheless, they are all said "to practise". These words, therefore, connote the general idea of exercising the legal profession, which is their dictionary meaning, and in that general sense apply to all lawyers as a class or genus but at the same time they are capable, in their application to particular species or categories of lawyers, to connote the different professional attributes of those different categories or species. Turning to the we find that the expression "to practise" has been used in various sections in the generic sense I have mentioned. Let me illustrate my meaning by reference to a few sections. Section 4 of that Act deals with the composition of Bar Councils. Sub section (1) provides that every Bar Council shall consist of 15 members, of which 10 shall be elected by the advocates. Sub section (2) then provides : "(2) , Of the elected members of every Bar Council not less than five shall be persons who have for not less than ton years been entitled as of right to 66 practise in the High Court for which the Bar Council has been constituted . " If we give the general dictionary meaning to the words "to practise" used in this sub section then this sub section becomes easily intelligible, but if we say that they mean "to act and plead" then the eligibility will be confined to the advocates who, under the rules, can "act and plead", i.e., to the Appellate Side advocates, and the result of that construction will be that the advocates of the Original Sides of Calcutta and Bombay High Courts even though they are of ten years ' standing will not be eligible for election, for, such advocates do not and indeed cannot, under the rules, "act and plead". Such surely cannot be the case. It follows, therefore, that the words "to practise" in this sub section have been used in their generic sense although they connote different things when applied to different categories of advocates all of whom are within the subsection. Sub section (3) rung thus: (3). Of the elected members of the Bar Councils to be constituted for the High Courts of Judicature at Fort William in Bengal and at Bombay such proportion as the High Court may direct in each case shall be persons who have for such minimum. period as the High Court may determine, been entitled to practice in the High Court in the exercise of its original jurisdiction, and such number as may be fixed by the High Court out of the said proportion shall be barristers of England or Ireland or members of the Faculty of Advocates in Scotland. " If we give the words "to practise" their ordinary dictionary meaning,then the sub section will be quite easy of comprehension but if we say that those words mean "to act and plead " then the sub section will become meaningless, for those words in that sub section refer to the practice of the Original Side advocates only who do not and indeed under the rules cannot at all act on the Original side. It is, there 'fore, clear that the words " to practise " have been used in both sub sections in their generic meaning which is also their dictionary meaning, namely, " to 67 exercise their profession", although in their application to the different species who are within the sub , sections they mean different professional attributes. Thus, in sub section (3) which applies to Original Side advocates only they must mean "to plead" whereas in sub section (2) which applies to all categories of advocates the words have different meanings, that is to say, in relation to advocates other than Original Side advocates they mean "to act and plead" and in relation to the Original Side advocates they mean only "to plead". Same remarks apply to section 5 (1). It will be futile to refer to the principle that the same word should be given the same meaning wherever it occurs in the Act, for the context excludes the application of that principle. Take section 8 (2) of the which provides: "8. (1). . . . (2) The High Court shall prepare and maintain a roll of advocates of the High Court in which shall be entered the names of ' (a) all persons who were, as advocates, vakils or pleaders, entitled as of right to practise in the High Court immediately before the date which this section comes into force in respect thereof;. . . It we do not give to the words "to practise ' in clause (a) their dictionary meaning but read them as meaning "to act and plead" the advocates practising, i.e., only pleading the Original Sides of the Calcutta and Bombay High Courts, will not find their names in the rolls maintained by their respective High Courts under this section. That exclusion is certainly not the purpose of this subsection. Therefore, in this sub section also the words "to practise", means "to exercise their profession". Same remarks apply to the proviso to section 8 (3) (b). I come next to section 14 which provides inter alia: "14. (1) An Advocate shall be entitled as of right to practise (9) subject to the provisions of sub section (4) of section 9, in the High Court of which he is an Advocate;. . 68 By sub section (3) nothing in this section shall be deemed to limit or affect the power of the Calcutta and Bombay High Courts to make rules determining the persons who are respectively to plead and to act the Original Sides of those High Courts. Both those High Courts have made rules under which an Original Side advocate can only "plead", the acting having been reserved exclusively for the attorneys. In the light of the context what is the meaning of the words "to practise" in sub section (1) above ? If we put the ordinary dictionary meaning the words "to practise", namely, "to exercise his profession", the section will be found to be quite intelligible and workable; but if we take them to mean only "to act and plead" then the Original Side advocates who do not "act" but only "plead" will not, strictly speaking, be within the section and consequently will not be able to avail themselves of the protection of section 14 (1) (a). Can it, for a moment, be said that the section gives protection and security to all advocates other than the Original Side advocates and that the latter are not entitled as of right "to practise", i.e., "to plead", in the High Court of which he is an advocate? That cannot be so. The very fact that the right is subject to the provisions of section 9 (4) and that the rule making power of the two High Courts is not affected by virtue of section 14 (3) quite clearly show that the Original Side advocates who cannot act the Original Side are intended also to be included in the term advocate used in sub section (1). If, therefore, this section is to give any security ' to the Original Side advocates, as it does to the Appellate Side advocates, then we must read the words "to practise" in their ordinary dictionary meaning, namely "to exercise his profession". It is thus clear that the words "to practise" have been used throughout the in their general dictionary meaning mentioned above except at the end of section 9 (4). In the same way the word "practising" has been used in Order IV, rule 31, of the Supreme Court Rules in the same generic sense and being used in relation to 69 advocates of this Court it must mean appearing and pleading". In the next following rule the same word has been used in its dictionary meaning although having been used in relation to agents of this Court it must mean "acting". The same ' generic meaning given to the words to practise" will make, section 4 of the easily intelligible and workable The petitioner Aswini Kumar Ghosh, the other hand, relies article 220 of the Constitution and points out that while the words used in the body of the article forbid judges "to plead or act" the marginal note to the article describes the subject matter of the article as "prohibition of practising" and concludes that " to practise " means "to act and plead". In agreement with the High Court I am unable to accept this reasoning., Even assuming that the marginal note may by looked at in considering the article it only means that the draftsman of the marginal note considered that the single word " practise " would be a compendious one. Nobody disputes that the words "to practise" may, in a particular context, mean "to plead or act" but it does not follow that it invariably has that meaning. Further it is clear, as the High Court points out, that what the draftsman did was to find a word which would cover both acting and pleading without attempting to bring out the technical distinction between the two. Nor do I think, for reasons stated by the High Court, that entry 78 of List I in the Seventh Schedule lends any support to the petitioner 's contentions The petitioner then refers us to the decision in Laurentius Ekka vs Dhuk Koeri(1) in support of his contention that the judicial accepted meaning of words "to practise" is "to appear, act and plead" In that case the question was whether an advocate the roll.of the Patna High Court, could present and move a review petition in a subordinate court unless he filed 'a Vakalatnama or was instructed by a pleader (1) (1925) I.L.R. 4 Pat. 766 19 70 of the subordinate court. It was held that an advocate of the High Court, unlike a pleader, aid not need to be appointed in writing to act behalf of his client and even when verbally appointed he could under Order III, rule 1, of the Code of Civil Procedure appear, plead and act behalf of his client and, therefore, when section 4 of the , provided that every person entered as an advocate or vakil the role of any High Court under the Letters Patent should be entitled to "practise" in all Courts subordinate to such High Court, the word " practise" as applied to an advocate of the Patna High Court meant "appear, plead and act". The ratio of the decision is obvious. The scope and ambit of the Patna High Court advocate 's profession covered acting and pleading, and when such an advocate was given the right to practise" in the subordinate court be was authorised to exercise his profession in full, i.e., to act and plead in the subordinate court. In short, the advocate carried the attributes of his profession with him even when he went to exercise his profesSion in the lower court. This decision is no authority for the proposition that the words "to practise" have a fixed and invariable meaning comprising acting and pleading in all cases. The petitioner Aswini Kumar Ghosh then referred us to the case of In re Powers of Advocates(1). , In Madras the High Court in exercise of its powers under clause 9 of the Letters Patent framed a rule empowering advocates to appear, act and plead the Original Side. That rule was held to have been validly made in two earlier decisions. But Rules 128 and 129 of the Insolvency Rules permitted an advocate only to " appear and plead" in 'the Insolvency Jurisdiction and the attorney to act there. In these circumstances the question arose in the Madras case whether advocates enrolled under the , were entitled to "act" in the Insolvency jurisdiction of the Madras High Court,notwithstanding that under the rules framed by the High Court they were (2) Mad. 71 only entitled to "plead" and the Full Bench answered the question in the affirmative. The reasoning underlying this decision, as I understand it, was that the general ambit and scope of the profession of a Madras High Court advocate being, according to its rule, "to appear, act and plead" in the Original Side, the words "to practise" used in section 8 (1) and section 14(1) of the must, in relation to him, mean "to appear, act and plead". Rules 128 and 129, however, said that he could only appear and plead but not act. There being no saving of the power of the Madras High Court as there was of that of the Calcutta and Bombay High Courts by section 9 (4) and section 14 (3) and those insolvency rules being inconsistent with the provisions of sections 8(1) and 14(1) as construed by the Full Bench, that rule should, under sections 19(2) be deemed to have been repealed. I am unable to accept the correctness of this reasoning. The combined effect of the two sets of rules was that & Madras advocate was entitled to act and plead throughout the Original Side except in Insolvency Court which was also a part of the Original Side. It was, therefore, not correct to say that the Madras advocate was entitled to act and plead in the Original Side. The passage in the judgment of Kumaraswami Sastri J. at p. 103, namely that "the word 'practise ' ordinarily means 'appear, act and plead ', unless there is anything in the subject or context to limit its meaning" is not supported by any authority and appears ,to me to be too wide. Indeed, the learned Judge himself recognised this, for throughout the judgment it was emphasised that the word "practise", when applied to a Madras Advocate, meant "to appear, act and plead". It is clear from, that judgment that, according to the learned ' Judge, the words had not that wide meaning in their application to the Original Side Advocates of the Calcutta and Bombay High Courts. In any event, that passage should, in the context,, be limited in its application to the Madras High Court advocates and all advocates of all other High Courts who, by their rule6, are permitted to act 72 Pand plead, for it cannot possibly have that meaning in relation to an Original Side,advocate who is permittad only to plead. This passage in the Madras decision could not have been intended as an enumeration of the professional activities of an advocate as forming the invariable contents of the words "to practise" or as an enunciation of a fixed meaning of general application. In this country where there exists, as a historical fact, a clear division of legal practitioners into three separate classes, namely, those who act only, those who only plead and those who do both act and plead such a definition will be wholly inaccurate. It is necessary, therefore, to give to those words their generic meaning I have mentioned. In this view of the matter, I agree with the High Court that the ,petitioner can derive no support for his contention from either of these two decisions. My attention has also been drawn to the case of The Queen Doutre(1) where it was held that in Canada ,where. the functions of Barristers, and Solicitors are united in the same person, the rules of English law which precludes a Barrister to sue for his fees do not apply and that a Quebec advocate could sue for his remuneration a quantum meruit basis. I do not see how that case throws any light the problem before us. In Queen all advocates "act and plead" and as regards Quebec advocates the critical words may cover both acting and pleading, but how can that circumstance assist us in ascertaining the meaning of those words in enactments of our country where we bave a clear division, of the legal practitioners into three categories I have, mentioned ? The result of the foregoing discussion as to the meaning of the words "to practise" appears to me to be that in relation to lawyers as a class they mean "to exercise their profession" which is their dictionary meaning and which is wide enongh, to cover the activities of the entire genus of lawyers. They are words of indeterminate import and have no fixed connotation or content. In their application to particular (1) 73 species of lawyers their meaning varies according to the scope and ambit of the profession of that particular species in relation to whom they may be used, and such meaning has to be ascertained by reference to the subject or context. Further, the Legislative technique, as is evident from the , the and the Rules of the Supreme Court to which reference has been made, is to use these neuter words in a generic sense although in their application to specific categories or species of lawyers they have different connotations which are to. be ascertained from the context in which they are used. The question, therefore, at once arises: What in the context and a true construction of the Act we are considering, is the meaning of the words "to practise"? The petitioner Aswini Kumar Ghosh urges that the words "to practise," in relation to all advocates of all the 20 High Courts, except the Original Side advocates of the Calcutta and Bombay High Courts only, mean "to act and plead" and seeing that this is the meaning applicable to the vast majority of advocates, those words must be given that meaning. Am I to apply the rule of majority in construing a statute? Am I to assume that the Legislature had forgotten or deliberately ignored the hard historical fact that there exists a large body of advocates,of not inconsiderable importance who "practise", that is only "plead" the Original Side of two premier High Courts in India? Or am I to assume that the Legislature intended, by the use of a dubious expression of indefinite import, to swamp one whole class of legal practitioners, namely, the Attorneys of those two High Courts? I find not the slightest indication of such intention anywhere in this Act. the contrary, the title of the Act and the non obstante clause of section 2 itself run counter to such contention. I have already pointed out that the words "to practise" have been used in the non obstante clause in the sense of "appearing and pleading" only and that nobody can for a moment doubt that in 'the non obstante clause the 74 Legislature had in mind the provisions of the and the rules of the High Courts regulating the conditions subject to which a foreign advocate was permitted "to appear and plead" in a High Court of which he was not an advocate. If that be so, it is legitimate to infer that the Legislature in the operative part of the section gave expression and effect to what it had in its mind when enacting the non obstante clause. If the intention of the legislature were otherwise, why did not the Legislature say openly and in a straightforward way that it gave the Supreme Court advocate the right "to act and plead" in any High Court ? Why did it use the dubious words "to practise" ? It is not correct to say that those words have been used in the only in the sense of "acting and pleading". As already explained, those words have been used in their ordinary dictionary meaning, namely, "to exercise his or their profession" so as to cover the entire genus or class of Advocates, although in their application to different categories or species they have different connotations as explained above. Seeing that the legislative practice is to use those words in their general dictionary meaning, there is no reason to suppose that the Legislature intended to depart from this practice while enacting this piece of legislation. It is asked: why did not the Legislature then insert in this Act a saving clause like sections 9(4) and 14(3) of the ? The argument is that the absence of such a saving clause in this Act constitutes a departure from the legislative practice followed in the and, therefore, the words "to practise" in the operative part of section 2 must have their widest meaning. A little reflection will show that this argument is not sound. The rule making power of the High Courts under clause 9 of the Letters Patent was and is with respect to advocates, vakils and attorneys admitted and enrolled by the, High Courts. The dealt with advocates enrolled by the High Courts and, ' therefore, it was 75 considered safer to provide that nothing in th a Act should affect or limit the rule making powers of the High Court. Indeed, if the critical words were, as I think, used in a generic sense, the saving clauses must have been inserted ex abundanti cautela. Be that as it may, as the High Courts ' power to make rules under clause 9 extended only to the advocates, vakils and attorneys enrolled by them and as the also dealt with advocates enrolled by the High Courts, the insertion of the saving clauses in the last mentioned Act is intelligible. But a saving of the rule making powers of High Courts over their own advocates etc., is entirely out of place ' in an Act which is concerned not with High Court advocates but with Supreme Court advocates only ' The High Courts have no power under clause 9 of the Letters Patent to make any rule to govern the conduct and activities of the Supreme Court advoCates and this Act only deals with Supreme Court advocate and confers a new right them. Therefore a saving of the High Courts ' rule making power over their advocates would have been wholly meaningless and inappropriate, for such saving clause would not have given the High Courts any power to make any rules with respect to the Supreme Court advocates There was, therefore, no necessity or occasion for inserting any saving clause the lines of sections 9 (4) and 14 (3) of the . NO , thing can, therefore, be founded the absence of a saving clause the lines of that Act. The petitioner Aswini Kumar Ghosh argues that the text of the original Bill, the statement of objects and reasons over the signature of the Law Minister attached thereto and the debates in the Legislature resulting in the deletion of what was clause (a) of the proviso as it existed in the original Bill will clearly show what the intention of the Legislature was. In the original Bill as introduced in the Legislature there was a proviso to section 2 which ran thus: "Provided that nothing in this section shall be deemed to entitle any person, merely by reason of his being an Advocate of the Supreme Court 76 (a) to plead or to act in any High Court in the exercise of its original jurisdiction ; or (b) to practise in a High Court of which he was at any time a Judge, if he had given an undertaking not to practise therein after ceasing to hold office as such Judge. " The argument is that the objects and reasons clearly show that the intention was that section 2 should not affect the Original Sides of the two High Courts, and clause (a) was inserted in the proviso in order to achieve that purpose. This shows that if clause (a) was not there, section 2 would have, entitled the Supreme Court advocate "to practise", i.e., "to appear, act and plead" in all High Courts in all their several jurisdictions. This conclusively shows that the words 'to practise" were used in that larger sense. Indeed in the objects and reasons those words were expressly stated to be synonymous with "to act and plead". The argument is apparently formidable but reflecttion will be found to be devoid of any substance. There is authority for the proposition that the proceedings of the Legislative Council are to be excluded from consideration in the judicial construction of an Act and that the debates in the Legislative Council, reports of select committees and statements of objects and reasons annexed to a Bill may not be referred to: Administrator General of Bengal vs Prom Lal(1). When construing section 68 of the Indian Companies Act, 1,882, the Privy Council in Krishna Ayyangar vs Nella Perumal(2) observed that no statement made the introduction of the measure or its discussion can be looked at as affording any guidance is to the meaning of the words. It is neither necessary nor profitable to go into the numerous decisions all of which it may be difficult to reconcile but it is quite clear from the decision of this Court in the case of A. E. Gopalan vs The State of Madras(3) that the debates and speeches in the Legislature which, reflect the individual opinion of the speaker cannot (1) (1895) 22 I.A. 107. (3) ; , (1920) 17 33. 77 be referred to for the purpose of construing the Act as it finally emerged from the Legislature and so the debates must be left out of consideration. The statement of objects and reasons attached to the Bill only depicts the object which the sponsor of the Bill had in mind, but it throws no light the object which the Legislature as a body had in mind when passing the Bill into an Act. If I may borrow and adapt the felicitous language used by my Lord the present Chief Justice in that case those objects and reasons may at best be indicative of the subjective intention of the Law Minister who sponsored the Bill but they could not reflect the inarticulate mental processes lying behind the majority vote which carried the Bill. Nor is it reasonable to assume that the minds of all those legislators were in accord. The first Privy Council decision referred to above rejected any reference to the debates or the objects and reasons. So did M. N. Mukherji J. in Debendra Narain Roy vs Jogendra Narain Deb(1). Reference may also be made to Craies Interpretation of Statutes, 5th Edn., at p. 123, regarding the memoranda attached to the Bill. In my opinion it is safer to follow the orthodox English view and leave the objects and reasons out of consideration. The petitioner Aswini Kumar Ghosh points out that in Gopalan 's case (supra) this Court did look at the original draft of what eventually became article 21 of the Constitution as throwing some light the construction of that article and urges that we should look at the original Bill and draw appropriate inferences from the fact of the omission of clause (a) of the proviso from the Act. What was looked at in that case was the Report of the Drafting Committee appointed by the Constituent Assembly. That Report was akin to a Report of a Select Committee made after consideration of a Bill referred to it by the Legislature for consideration. In that Report the Drafting Committee recommended the substitution of the expression "except according to procedure established (1936) A.I. R. at p. 619. 78 by law" taken from the Japanese Constitution for the words "without due process of law" which occurred in the original draft "as the former is more specific." The Drafting Committee further explained that they had attempted to make the fundamental rights conferred by the article in question and the limitations to which they must necessarily be subject as definite as possible since the Courts may have to pronounce upon them. The Constitution as it was finally adopted showed that the Constituent Assembly had accepted the amendment suggested by the Drafting Committee. The fact that the Drafting Committee was, in a sense, the agent of the Constituent Assembly, and that the amendment proposed by the Drafting Committee was in fact adopted by the Constituent Assembly, may conceivably lead to the inference that the reasons given by the Drafting Committee were also accepted by the Constituent Assembly and that the intention of the agent, the Drafting Committee, reflected the intention of the principal, the Constituent Assembly. This, I apprehend, was the underlying reason why the majority of this Court expressed the view that the Report of the Drafting Committee could be looked at as historical material throwing some light the question of construction of the article 21. That underlying reasoning does not, however, apply to the present case. This Court, consistently with the principles laid down in numerous judicial decisions, some of which I have cited above, held that recourse could not be had to the debates in the Legislature in construing the Act. ' To keep out the debates which may, in some degree, have disclosed the considerations operating the minds of the vocal section of the Legislature and the intention with which they moved the amendment and then to refer to the text of the original Bill and the fact that some words or clauses thereof do not find a place in the Act as eventually passed in order to ascertain the state of mind of the members of the Legislature who passed the Act will, to my mind, be indicative of a mental process which can hardly be 79 for my learned colleagues who had pronounced upon the admissibility of the Report of the Drafting Committee, I feel pressed to adhere to and abide by the views expressed by them that point, I am certainly not prepared to go further and to extend the principle of that decision that question by permitting a reference to the original Bill. Assuming that the reasoning of the decision in Gopalan 's case(1) regarding admissibility of the Report as an aid to construction may, in certain circumstances, be applicable to the original Bill, we have yet to consider whether in the case now before us the original Bill should be referred to. In Gopalan 's case(1) Kania C. J. said at p. 110: " The report may be read not to control the meaning of the articles, but may be seen in case of ambiguity." Again at p. 111 the learned Chief Justice stated:"Resort may be had to these sources with great cautiou and only when latent ambiguities are to be resolved." In point of fact the learned Chief Justice did not find the words of article 21 to be ambiguous so as to require recourse to the Report of the Drafting Committee to ascertain the intention of the Constituent Assembly. My Lord the present Chief Justice and Fazl Ali J. and Mukherjea J. did refer to the Report. In the view taken by Mahajan J. it was not necessary for him to express any opinion this instant problem. I did not refer to the debates or to the Report of the Drafting Committee and stated at p. 297 and at p. 323 that I would express no opinion as to the admissibility of the Report or the debates. It is, however, clear from the passages I have quoted, from the judgment of the late Chief Justice that the Report of the Drafting Committee could be looked at only to resolve ambiguity and not to control the meaning of the article if it was otherwise plain, for the intention of the Constituent Assembly was to be gathered primarily ' from (1) ; 80 the words used in the Constitution. The question at once arises: is there any ambiguity in section 2 as it now stands which requires a reference to the original Bill for its solution ? Having regard to the state of the law as it existed before this Act was passed, namely, that by the rules of all High Courts an advocate of one High Court could only "appear and plead" in another High Court if he could obtain the permission of the Chief Justice ' of the latter Court the mischief that followed from these rules and was unprovided for, namely, that even eminent advocates were. not accorded such permission for no apparent reason and. the fact that the object of this Act, as indicated in the full title and the non obstante clause in section 2 was undoubtedly to remedy this defect. So far as the Supreme Court advocates were concerned all which circumstances are to be taken into consideration in construing an Act as stated in Heydon 's case (1) and finally the legislative practice of using the words "to practise" in their ordinary dictionary meaning, as I have explained already, I find no ambiguity whatever in the operative part of section 2. The meaning and intent of the section appear to me reasonably plain and I do not consider it necessary to have recourse to the original Bill at all to ascertain the meaning and intent of the words used in the section. It is wrong to imagine or create ambiguity and then to call in aid the original Bill and to speculate as to the intention of the Legislature. Again, assuming that the original Bill has to be looked at in ascertaining the meaning of section 2, I do not derive any assistance from the mere circumstance that clause (a) of the proviso which appeared in the original Bill does not find a place in the Act as it finally emerged from the legislative anvil. The mere fact that that proviso was omitted from the Act as finally passed does not by any means lead us to the conclusion that the construction put upon the section by the petitioner Aswini Kumar Ghosh must be correct. There is no reason to assume that the (1) ; 81 legislators read the words"to Practise" as meaning "to appear, act and plead" If they read the words to mean " to appear and plead only, which is the ambit and scope of the profession of Supreme Court advocates under the rules of this Court and of the Original Side advocates of those two High Courts then, in so far as the proviso purported not to extend the application of the section to " 'acting" the Original Side it was wholly unnecessary and may have accordingly been deleted as not being necessary. Further, if the intention was to give the Supreme Court advocates a right to appear and plead only in any High Court in any of its jurisdictions, then the proviso, in so far as it purported not to extend the section to pleading the Original Side of those two High Courts, could not be retained. If, therefore, the intention of the operative part of the section was that the Supreme Court advocate would have the right only "to appear and plead", which is consonant with the functions of a Supreme Court advocate and also co extensive with the rights of the Original Side advocates of the Calcutta and Bombay High Courts under the rules, the proviso had to be deleted in full and, therefore, no argument can be founded the fact of such deletion. We have, therefore, to construe the operative part of the section by reference to the intention we can gather primarily from the language used in the section and other parts of the Act itself. The Legislature which enacted the statute was well aware of the state of the law as embodied in the rules of different High Courts preventing an advocate of one High Court from, as of right, " appearing and pleading " in another High Court of which he Was not an advocate. The mischief of withholding of the permission by the Chief Justices no better ground than the absence of reciprocity between the High Courts was notorious. The Act set out to remedy that mischief as is obvious from the full title and the non obstante clause in section 2 of the Act as I have herein before explained. It was known to the Legislature that an advocate was by Order 1, rule 2, of the Supreme 82 Court Rules defined as a person entitled only "to appear and plead" before the Supreme Court, that under Order IV,rule 11, no person could appear as an advocate unless instructed by an agent and that under Order IV, rule 30, such an advocate could in no circumstances "act" as an agent, In short, the Legislature knew that the scope or ambit of the Supreme Court advocate 's profession was only "to appear and plead". With all this knowledge the Legislature enacted section 2 authorising every advocate of the Supreme Court "to practise as of right in any High Court". Applying the dictionary meaning to the word "practise," the section authorises every Supreme Court advocate "to exercise his profession as of right in any High Court". The scope and ambit of the Supreme Court advocate 's profession being only "to appear and plead" there can be no escape from the conclusion that the section authorises the Supreme Court advocate only "to appear and plead" in any High Court. The reasoning is the same as that adopted or involved in the Patna case referred to above. An advocate of the Patna High Court was, under its rules, entitled "to appear, act and plead" in that High Court. When section 4 of the authorised such advocate "to practise" in the subordinate Court it was held in the Patna case to mean that the advocate could do all that he could do in the High Court, namely, "appear, act and plead". The words "to practise" were held to cover all these activities not because those words had that invariable ,meaning but because those words had that meaning only in relation to advocates who by the rule of the High Courts were entitled "to appear, act and plead In short, the content of those words varies with the ambit and scope of the profession of the advocate with regard to whom they are use a parity of reasoning, the Supreme Court advocate being entitled only "to appear and plead", when section 2 authorised him "to practise" in any High Court, it must be taken to have meant that he was authorised to do in the High Courts all that he was entitled to do in the 83 Supreme Court, namely, "to appear and plead" only. This construction appears to me to be quite logical and calculated to give effect to the object of the Act. It brings about a close approximation between the non obstante clause and the operative part of the section which should be the aim of every well drawn statute. It is asked: bow can a Supreme Court advocate who can only "appear and plead" when he is instructed by an agent, "appear and plead" in any High Court where there are no Supreme Court agents to instruct him ? This, in my opinion, is taking an extremely narrow view of the matter. The Supreme Court advocate 's profession being confined only to appearing and pleading, when he is authorised "to practise", i.e., to exercise his profession in any High Court, he must carry with him his professional limitations but must be governed by those rules of High Courts which regulate the practice of advocates who can only " appear and plead" ' in the High Courts, for he cannot practise in vacuo. Seeing that there are persons authorised "to act" in every High Court who may instruct another advocate, no practical difficulty can arise in the way of the Supreme Court advocate appearing and pleading in the High Court. Under Ch. I, rule 38, of the Calcutta Original Side Rules a Barrister advocate of any other High Court or an Original Side advocate of Bombay is permitted to "appear and plead" in the Original Side of the Calcutta High Court with the permission of the Chief Justice. Surely, nobody has ever suggested that such a foreign advocate must carry with him an instructing advocate or attorney of his own court who is competent to act in order to instruct him when he appears and pleads in the Calcutta High Court. He is instructed by an attorney of the Original Side of the Calcutta High Court without any difficulty. Same remarks apply when an Original Side advocate of Calcutta goes to appear and plead the Original Side of Bombay under Ch. I, rule 6, of the Bombay rules, for surely such an advocate does not carry a Calcutta attorney with him but is quite satisfactorily 84 instructed by a Bombay attorney. An Original Side advocate of the Calcutta or Bombay High Court who cannot appear the Original Side unless instructed by an attorney can and frequently does appear and plead the Appellate Side the instruction of an advocate of the Appellate Side who being entitled to act can instruct the Original Side advocate to appear and plead. If we adopt this construction, the Act becomes workable, but if we adopt the construction suggested by the petitioner, then the Supreme Court advocates practising in High Courts by virtue of the Act will become freelances creating chaos and confusion as I shall hereinafter more fully explain. In my opinion there is no substance at all in this objection of the petitioners. It is next pointed out that the result of this construction will be to make the new right illusory in that a Supreme Court advocate will not be entitled to "act" even the Appellate Side of a High Court where he is not enrolled and such a resuIt will militate against the principle of the unification of the Indian Bar. This objection is obviously based the assumption that the object of this Act is to bring about such a drastic and far reaching result. There is no warrant which I can see for any such assumption. I have already mentioned that the point of controversy this subject was that an advocate the roll of one High Court could not as of right "appear and plead" in other High Courts but had to depend the good graces of the Chief Justices of such other High Courts who frequently. withheld the requisite permission even to very. eminent advocates. There was hardly ever any claim made by an advocate of one High Court "to act" as an advocate of another High Court of which he was not an advocate. The limited object of this Act appearing from its full title and the non obstante clause as explained above was to remedy only this particular defect by providing that an advocate of the Supreme Court would be entitled as of right "to practise", i.e., exercise his profession, i.e., "to appear and plead", in any High Court even though 85 he was not ' the roll of that High Court. This certainly was an important step in the process of bringing about uniformity in the Indian Bar, for it did bring into,: being a category of advocates who might "appear and plead" in all Court 's throughout India and form the nucleus of an all India Bar. More than this was not within the scope and object of this Act as I apprehend it. To adopt a construction which will permit a Supreme Court advocate who is also enrolled in the High Court of, say Travancore Cochin in the south or off the State popularly called Pepsu in the north, to go and "act" in the Original Sides of the High Court of Calcutta or Bombay which the advocates of those High Courts cannot do, will lead to no end of confusion as will be explained more fully hereafter and that consideration alone should induice me to discard the petitioners ' construction and adopt a construction which will not give rise to practical inconvenience. It is pointed out that while this construction may bring about a perfect approximation between the non obstante clause and the operative part of section 2 by entitling only foreign Supreme Court advocates "to appear and plead" in any High Court as of right,, it runs counter to the concluding words of the operative part of section 2, namely, "whether or not he is an Advocate of that High Court", for, it is urged, those words clearly indicate that the section purports to confer a Supreme Court advocate the right to practise not only in a High Court of which he is not an advocate, but also to give him some right in rela tion to his own High Court. The Court below has held that the words "whether or not" are not quite apposite and that what was meant was that a right was given to every Supreme Court advocate "to practise" in any High Court even if he was not an advocate of that High Court. In other words, the Act itself gives a right to the Supreme Court advocate to practise as of right in any High Court and that being so it was immaterial to consider whether he was an advocate of a particular High Court or not, i.e., 86 irrespective of his being or not being an advocate of that High Court. I am inclined to agree with this view. Let me, however, test the soundness of the view propounded by the petitioner the strength of the words "whether or not etc. " Take the case of an advocate of the Madras High Court. Under the rules of the Madras High Court be is entitled "to appear, act and plead" in all its jurisdictions. When such an advocate is enrolled as an advocate of the Supreme Court, section 2 of the Act, as construed by the petitioner, really gives him no additional right in relation to his own High Court, for already he is entitled "to appear, act and plead" there. That is the position also with regard to the advocates of all High Courts, other than the High Courts of Calcutta and Bombay in the matter of their right to practise in their respective High Courts. Seeing that the advocates of 18 High Courts did not in fact get any new right in their respective High Courts, it cannot reasonably be said that the object of the Act was to give any right to an advocate of a particular High Court in respect of his own High Court. It is pointed out that an advocate enrolled the Appellate Sides of the Bombay and Calcutta High Courts is not, as of right, entitled to appear, act and plead the Original Side and the object of the Act was to give those Appellate Side advocates of the Calcutta and Bombay High Courts some additional rights in the Original Side of their own High Courts. In view of the fact that the Act gives no additional right to the advocates of any of the 18 High Courts in relation to their respective High ' Courts it is difficult to imagine that the object of the Act was to bestow some special favours only the. advocates of the Appellate Sides of the Calcutta and Bombay High Courts. Therefore, it appears to me that the words "whether or not etc." read in the light of the purpose of the Act appearing from the full title and the non obstante clause only emphasise that the object was to give the Supreme Court advocate a statutory right to practise in any High Court 87 of which he was not an advocate, irrespective of his other rights, if any. It is a new right given by the Act proprio vigore to a class of foreign advocates. Further, if the use of the words "whether or not etc." must necessarily mean that the object of the Act was to give a special right to an Appellate Side advocate of the Calcutta and Bombay High Courts in relation to his own High Court it does not necessarily follow ' that the words "to practise" must be given such a wide meaning as would also cover acting, for if the words ' "to practise" are read as extending only to appearing and pleading, even then the Appellate Side advocates of the Calcutta and Bombay High Courts would get some additional right in their own High Courts in that they become entitled by virtue of their position as Supreme Court advocates "to appear and plead" the Original Side without having to take steps under the respective rules of those High Courts to entitle them to appear and plead the Original Side. In this view of the matter also the con cluding words "whether or not etc. " cannot affect the construction put by me the operative part of the section. Even if I am wrong in adopting the foregoing line of reasoning, the petitioner will yet have to meet an alternative construction which has commended itself to the learned Judges of the High Court and my learned brother Mukherjea, and which I am also prepared to accept as a cogent alternative. The Act authorises every advocate of the Supreme Court as of right " to practise " in any High Court. The use of the words "to practise " in relation to an advocate clearly indicates that he is to exercise the profession of an advocate. To exercise the profession of an advocate in a High Court must involve the observance of the rules of practice of 'that High Court. It is urged that this construction amounts, in reality, to adding words to the section, namely, as an advocate of that Court" or "according to the rules of that Court. " This contention is founded a clear misaprehension, for I am really not adding anything at 88 all but I am only stating what is implicit in the section as it stands. , In other words, I am construing the words of the section and ascertaining its true meaning and import. The necessary implication of the fact that the Supreme Court advocate is to exercise his profession in any High Court may well be that he becomes entitled to do whatever an advocate (if that particular High Court can do under the, rules of practice of that High Court. Thus when the Supreme Court advocate goes to practise in the, Appellate Side be will be entitled to act and plead as an Appellate Side advocate does and when he goes to practise in the Original Side he will only plead as an Original Side advocate does and in either case be must abide by the relevant rules, for he must practise. as an advocate of the particular High Court does, namely, under and subject to the rules. Nobody has ever suggested that an advocate or vakil authorised to practise in subordinate courts or in any other High Court under section 4 of the was not bound by the rules of the Court where he went to practise. It is argued that the rules of the High Courts of which the Supreme Court advocate is not an advocate cannot in terms apply to him when he chooses to exercise the right given to him by the Act, for those rules apply to the advocates of those High Courts. This again, I conceive, is taking a narrow view of the matter. The rules of the High Court certainly apply to the advocates entitled to practise in that High Court and when an Act invests an advocate, who is not an advocate of a particular High Court, with the right to practise in that High Court, for all intents and purposes such an advocate becomes, as it were, a statutory advocate of that High Court and as such becomes invested with the rights as well as the obligations of an advocate of that, Court. In other words, the Act proprio vigore makes him a person entitled to practise in that Court and as such amenable to and governed by all the rules applicable to and regulating the practice of persons entitled 'to 89 practise in that Court, except, of course, such of the rules as are contrary to, i.e., destructive of this new statutory right and which must, therefore, as regards him, be deemed to be inoperative. Surely the Supreme Court advocate cannot practise in vacuo. To accede to the contention of the petitioner is to say that a body of professional men, namely, the Supreme Court advocates, have been let loose "to practise", i.e., to "act and plead" ' in all High Courts in all their jurisdictions untramelled by any rules of practice a proposition which, in my opinion, ha , only to be stated to be rejected. It is fraught with grave dangers and, at any rate, will inevitably lead to practical inconvenience and to no end of utter confusion. If that view were accepted the Supreme Court advocate will be entitled to walk in and walk out of the High Court in any costume that his fancy may choose. He may throw to the winds the rules of precedence of advocates including that of the Advocate General. According to the rules of the Original Side of Calcutta an attorney is authorised to cause service of notice of motion and chamber summons but the opposite party will not be bound to accept service from the Supreme Court advocate who is not so authorised. According to the Calcutta Original Side rules an attorney is personally responsible for the requisition fees, deposition fees etc. , but a Supreme Court advocate acting in the Original Side will not be so responsible at all. Nor will the High Court be able to get at the Supreme Court advocate to realise the fees if he is not to be governed by the rules governing the conduct of persons who act the Original Side. ' The attorneys acting in the Original Side cannot charge the client with a pice over and above the fees prescribed in the rules of taxation as between attorney and client but a Supreme Court advocate acting in the Original Side, not being in terms bound by the taxation rules, will be free to fleece the client to any extent he can. The attorneys being officers of the Court are under the rules and the Letters Patent amenable to the disciplinary jurisdiction of the High 90 Court but a Supreme Court advocate may with impunity snap his fingers at the High Court, for under no provision of law as it exists except section 2 of the Act can the High Court exercise disciplinary jurisdiction such advocates. It is unnecessary to multiply instances of confusion. This one consideration of inconvenience and confusion is enough to discard the construction sponsored by the petitioners ' for the true rule of construction is that if two constructions are possible, that which leads to absurdity and brings about practical inconvenience and encourages confusion and chaos must be eschewed. Neither of the two constructions suggested by me will have any such consequence and either of them will make the section workable in practice and at the same time accomplish a considerable measure of unification of the Indian Bar. The petitioners see the difficulty and to get over it suggest that the Supreme Court advocate practising in a High Court will and can be bound by the existing ordinary rules of practice except those that prevent him from acting and pleading or that the High Court may frame separate rules for the Supreme Court advocates practising before them. This very concession at once gives away the whole case of the petitioners. As I have already stated clause 9 of the Letters Patent empowers the High Courts to approve, admit and enrol advocates, vakils and attorneys and such advocates, vakils and attorneys I emphasise the word " such "are authorised to appear in the High Courts and to plead or to act or to do both according to the rules made by the High Courts. The High Courts ' rule making power as to enrolment of advocates, vakils and attorneys and their respective functions and powers is thus quite clearly confined to advocates, vakils and attorneys admitted and enrolled by them and does not and cannot extend to Supreme Court advocates who are not their rolls. Section 119 of the Code of Civil Procedure excludes the application of the rules of practice relating to advocates and pleaders from Original Side of High Courts unless adopted by them by rules framed 91 under the Letters Patent which,as already stated, governs only their own advocates. The Supreme Court of India, under article 145, can only make rules for regulating generally the practice and procedure of the Supreme Court including rules as to the persons practising before it. That article does not authorise the Supreme Court to make rules regulat ing the practice and procedure of High Courts or the conditions subject to which the Supreme Court advocates may practise before the High Courts. The Act we are considering does not confer any power the High Courts to frame rules subject to which the Supreme Court advocates shall exercise in the High Court their newly acquired statutory right under this Act. The Bar Councils ' rule making power under section 15 is limited only to High Court advocates, clause (b) having been superseded by, section 2 of this Act. There is, therefore, no provision of law except section 2 itself which will enable the High Courts to prescribe any rules of conduct 'for the Supreme Court advocates or to oblige them to conform to any rule of practice when they go to practise in any High Court. Therefore, if we accept either of the two constructions suggested by me it will prevent this absurd and undesirable result, for then the Supreme Court advocates when they go 'to practise in any High Court will appear and plead or, alternatively, do what an. advocate of the High Court can do, and in either case be subject to the relevant rules by which the advocates of the particular High Court are bound. If that were not the meaning of section 2, then the Supreme Court advocates will be untrammelled by any rule of practice at all. Further, the petitioners ' construction, even if the High Courts have power to make rules with regard to Supreme Court advocates practising before them, any the least obligation or restriction imposed by such rules the Supreme Court advocates by way of making them personally liable for any fees etc., or bringing them under the disciplinary jurisdiction or the High Courts will certainly be 92 challenged as a fetter placed their statutory right to practise, in the High Court and as such not binding ton them. Finally there will be two sets of rules, namely, the existing rules governing the attorneys who act the original Side and some new rules to be made for the supreme Court advocates who may choose to act the Original Side. The resulting creation of a now and distinct class of actors in the Original Sides of the two High Courts will indeed be a sad commentary the supposed intention of the Legislature to achieve uniformity and unification of the Indian Bar. The petitioners ' construction must, therefore, be rejected. It is next said that this alternative construction the rights of a Supreme Court advocate will vary from High Court to High Court and that will not be con sistent with the policy of uniformity underlying the Act. In the first place it is an assumption, without any warrant, that the Act was out to achieve perfect symmetry and uniformity of the kind which we may consider desirable. Secondly,no serious inconvenience will follow if the rights of a Supreme Court advocate vary from High Court to High Court. The status and rights of advocates of different High Courts do vary under their respective rules and such variation has existed of or long time without any inconvenience. This Act does not at all purport to eliminate those differences amongst the advocates of the different High Courts which will yet continue. The construction sought to be put the section by the petitioner Aswini Kumar Ghosh will, therefore, only create fresh differences by bringing into being a new variety of practitioners who will have yet different rights in all the High Courts. the other hand, the construction suggested above will cause the least possible inconvenience and at the same time remedy the long , standing grievance of advocates of High Courts account of the bar against their " appearing and pleading" in High Courts of which they are not advocates by authorising them, after being enrolled as Supreme Court advocates to do so as of right and 93 without the necessity of their obtaining the sanction of the Chief Justices of the High Courts concerned. The Act permits a well defined body of professional men, namely, the Supreme Court advocates, to exercise the profession of an advocate in any High Court. That this certainly was a forward step in achieving uniformity cannot possibly be denied. Nothing more was within the purview of the Act as expressed in its full title and the non obstante clause. Finally, reference is made to the proviso as it now appears in section 2 and it is claimed that the word "practise" in the operative part of the section must mean "appear, act and plead" because that word as appearing in the proviso obviously has that meaning, and reliance is placed the rule of construction that the same word should be given the same meaning wherever it occurs in the Act. All that this proviso says is that nothing in this section shall be deemed to entitle a post Constitution Judge who might be an advocate of the Supreme Court to practise in a High Court of which he was at any time a Judge, if he had given an undertaking not to practise there after ceasing to hold office as such Judge. In other words, all that the proviso does is to say that the right created by the section shall not extend to a Tudge if he had given an undertaking not to practise in that Court. In the first place this proviso was wholly redundant in view of the constitutional prohibition contained in article 220. Further, the language of the proviso is inept in that it seems to suggest that if such a Judge had not given an undertaking he would be free to practise which certainly is contrary to article 220. Finally there is no difficulty in giving to the word "practise" occurring in the proviso the same general meaning given to that word in the operative part of the section, namely, "to exercise the profession". It is said that if the words "to practise" mean only "to plead", then a post Constitution Judge after his retirement would be entitled "to act" in the High Court of which he was at any time a Judge. There is no force in this argument because such lb Judge 94 will be prevented from acting and pleading anywhere by virtue of the provisions of article 220 of the Constitution. It is, therefore, not necessary to give the word "practise" the wider meaning contended for by the petitioner Aswini Kumar Ghosh. We must also remember that the general rule relied upon may be excluded by the subject,or context. For reasons stated above, whether we adopt one or the other method of construction suggested above, in my opinion,, this petition cannot succeed and must be dismissed. Appeal allowed. Agent for Intervener No. 1 : P. K. Mukherjee. Agent for Intervener No. 2: Sukumar Ghose. Agent for Intervener No. 3: I N. Shroff, for P. K. Bose. Agent for Intervener No 4: Bajinder Narain.

IN-Abs

Section 2 of the Supreme Court Advocates (Practice in High Courts) Act, 1951, provided that "notwithstanding anything contained in the (XXVIII of 1926), or any other law regulating the conditions subject to which a person not entered in the roll of advocates of a High Court may be permitted to practise in that High Court every advocate of the Supreme Court shall be entitled as of right to practise in any High Court whether or not he is an advocate of that High Court " : Held by the Court (PATANJALI SASTRI C.J., VlvIAN BosE, and GHULAM HASAN JJ. MUKHERJEA and DAS JJ. dissenting) The practice of law in India generally involves the exercise of both the functions of acting and pleading behalf of litigant parties, and when section 2 of the abovesaid Act conferred upon an advocate of the Supreme Court the right to " practise " in any High Court, it is legitimate to understand that expression as authorising him to appear and plead as well as to act behalf of suitors in all the High Courts including the Original Side thereof. It is fallacious to relate that expression as applied to an advocate either, the one band, to the court in which the advocate is enrolled, or,, the other, to the court in which he seeks to exercise the statutory right conferred him. It must be related to the general constitution of the Bar in India as a single agency in dealing with the litigant public. A rule made by a High Court which denies to an ' advocate the right; to exercise an essential part of his function by insisting a dual agency the Original Side is much more than, a rule of practice and constitutes a serious invasion of his statutory right to practise, and the power of making such a rule, Unless expressly reserved (as it 'was reserved by the Bar Councils Act) would be repugnant, to the right conferred by section 2; and as the, Act does not reserve any such power, the statutory right, of a Supreme Court advocate under section 2 to plead as well as 'to act in the High Courts of Calcutta, and Bombay in the exercise 2 of their Original Jurisdiction can not be taken away or curtailed by the rules of those courts, and any rule which the Calcutta High Court may have made in the past purporting to exclude any advocate from practising the Original Side or from appearing and pleading unless he is instructed by an attorney cannot affect such right. MUKHERJEA J. The word " practise" when used with reference to an advocate is an elastic expression having no rigid or fixed connotation and the precise ambit of its contents can be ascertained only by reference to the rules of the particular forum in which the profession is exercised. When a. 2 of the Supreme Court Advocates (Practice in High Courts) Act, 1951, speaks of a Supreme Court advocate being entitled as of right to practise in any High Court, what it actually means is that he would be clothed by reason of this statutory provision with all the rights which are enjoyed by an advocate of that court, and his right to plead and to act would depend the Bar Councils Act and the rules validly framed by that court, subject to this that no rule or provision of law would be binding which would affect in any way his statutory right to practise in that court solely by reason of his being enrolled as an advocate of the Supreme Court. DAS J. The words "to practise", used in relation to lawyers as a class, mean "to exercise their profession" which is their dictionary meaning and which is wide enough to cover the activities of the entire genus of lawyers. They are words of indeterminate import and have no fixed connotation or content. In their application to particular species of lawyers their meaning varies according to the scope and ambit of the profession of the particular species in relation to whom they may be used and such meaning has to be ascertained by reference to the subject or context. A Supreme Court advocate being entitled only,"to appear and plead" in that court, when section 2 autborised him to practise" in any High Court it must be taken, to have meant that he was authorised to do in the High Courts all that he was entitled to do in the Supreme Court, namely, to appear and plead only. Alternatively the section must be taken to authorise every Supreme Court advocate to practise as of right in any High Court as advocates of that High Court do and the exercise of the profession of an advocate in a High Court by a Supreme Court advocate must involve the observance of the rules of practice of that High Court except to the extent they are abrogated by section 2. That sec tion has made the Supreme Court advocate a statutory advocate ' of the High Court where he goes to practise and as such he is bound by the rules of such High Court except, such of them as are contrary to this new statutory right. Whichever of the two constructions is adopted, a Supreme Court advocate cannot appear in the Original Side of the Calcutta or Bombay High Courts unless he is instructed by an attorney. Queen vs Doutre (L.R. 9 App. Cas. 745), Powers of Advocates, ln re (I.L.R. and Laurentius Ekka vs Dukhi Koeri (I.L.R. 4 Pat. 766) referred to. 3 Per PATANJALI SASTRI C.J., VIVIAN BOSE, and GHULAM HASAN JJ. The non obstante clause in section 2 can reasonably be read as overriding "anything contained" in any relevant existing law which is inconsistent with the new enactment. Sections 9(4) and 14(3) of the Bar Councils Act and section 2 of the new Act cannot stand together. Whether by force of the non obstante clause liberally construed or of the well established maxim of construction that the enacting part of an Act must, when it is clear, control the non obstante clause when both cannot be read harmoniously, the new Act must have the effect of abrogating the powers reserved and continued in the High Courts by sections 9(4) and 14(3) of the Bar Councils Act . MUKHERJEA and DAS JJ. The non obstante clause in section 2 of the said Act removes only those provisions contained in the Bar Councils Act, 1926, and in any other law, which regulate the conditions subject to which a person not entered in the roll of advocates of a High Court may be permitted to practise in that High Court. Other provisions contained in the Bar Councils Act or other statutes, which lay down the conditions under which an advocate enrolled in the High Court is entitled to practise in the Original Side of that court stand unaffected by the Act. Even if the entire Bar Councils Act is excluded for the purpose of section 2, the rules framed by the Calcutta and Bombay High Courts under their Letters Patent would remain valid and effective of their own force even without the saving provision contained in the Bar Councils Act and the Letters Patent would also remain in full force. Per PATANJALI SASTRI C. J., MUKHERJEA, DAB, VIVIAN BosE, and GHULAM HASAN JJ. Speeches made by members of the House of Parliament the floor of the House are not admissible as extrinsic aids to the interpretation of statutory provisions. State of Travancore Cochin and Another vs Bombay Co. Ltd. etc, ([1952] S.C.R. 1112), Administrator General of Bengal vs Prem Lal ( [1895] 22 I.A. 107), Krishna Aiyangar vs Nella Perumal ( [1920] 47 I.A. 33), A.K. Go`alan vs The State of Madras ( ; and Debendra Narain Roy vs Jogesh Chandra Deb (A.I.R. referred to. Held per PATANJALI SASTRI C.J., DAs, VIVIAN BOSE and GHULAM HASAN JJ. The statement of objects and reasons annexed to a Bill, the form of the original Bill and the fact that certain words: or phrases were added to or omitted from the original Bill are also not admissible as aids to the construction of a, statute. MUKHERJEA J. Judicial opinion the point whether in construing a statute the, statement of objects and reasons or the original form of the Bill or reports of committees can be referred to is not uniform. English Courts and the Privy Council have laid down that such extrinsic aids must be dismissed from consideration. But there are American decisions to the effect that the general history of a statute and the various steps leading up to an enactment including amendments or modifications of the original Bill and reports of Legislative Committees can, be looked I at for 4 ascertaining the intention of the legislature where it is in doubt. The legislative history is, however, clearly inadmissible where there is no obscurity in the meaning of a statute. Per MUKHERJEA and DAS JJ. Punctuation is after all a minor element in the construction of a statute, and even if the orthodox view that it forms no part of the statute is to be regarded as of imperfect obligation and it can be looked at as contemporanea, expositio, it is clear that it cannot be allowed to control the plain meaning of a text. Stephenson vs Taylor ( [1861] 1 B.S. 101), Clawdon V. Green , Duke of Devonsshire vs Conor (L.R. , Maharani of Burdwan vs Murtanjoy Singh ([1886] 14 I.A. 30), Pugh vs Ashutosh Sen ( (1928]55 I.A. 63) referred to. Judgment of the Calcutta High Court reversed.

Appeal No. 243 of 1959. Appeal by special leave from the judgment and order dated April 24, 1958, of the Bombay High Court in Special Civil Application No. 874 of 1958. M. C. Setalvad, Attorney General for India, G. P. Vyas and I. N. Shroff, for the appellant Vithalbhai Patel, section section Shukla, C. T. Daru and E. Udayarathnam, for the respondent No. 1. 1960. December 12. The Judgment of the Court was delivered by GAJENDRAGADKAR, J. The principal question which this appeal by special leave raises for our decision relates to the nature and extent of the jurisdiction conferred on the authority by section 15 of the 223 (Act 4 of 1936) (hereafter called the Act). This question arises in this way. The appellant Shri Ambica Mills Co. Ltd., is a textile mill ' working at Ahmedabad. Three of its employees named Punamchand, Shamaldas and Vishnuprasad made an application to the authority under section 16 of the Act and prayed for an order against the appellant to pay them their delayed wages. In order to appreciate the( contentions raised by the appellant disputing the validity of the respondents ' claim it is necessary to set out the background of the dispute in some detail. It appears that an award called the Standardisation Award which covered the mill industry in Ahmedabad was pronounced by the Industrial Tribunal on April 21, 1948, in Industrial Reference No. 18 of 1947. This award fixed the wages for different categories of workers working in the textile mills at Ahmedabad, but left over the question of clerks for future decision. Amongst the operatives whose wages were determined by the award the case of hand folders was specifically argued before the Industrial Tribunal. The Labour Association urged that the rate of Rs. 36 9 0 awarded to them was too low and it was pointed out on their behalf that they did the same work as cut lookers did in Bombay where a head cut looker was given Rs. 52 and a cut looker Rs. 42 4 0. On the other hand the mill owners contended that the rate should have been fixed at Rs. 34 2 0 instead of Rs. 36 9 0. The Tribunal found it difficult to decide the point because enough evidence had not been produced before it to show the kind of work that hand folders were doing at Ahmedabad; that is why the Tribunal was unable to raise the wage of hand folders to that of out lookers in Bombay. However, it made a significant direction in that behalf in these words: "At the same time", it was observed, "we desire to make it clear that if there are persons who are doing cut looking as well as folding, they should be paid the rate earned by the out lookers in Bombay". This question has been considered by the Tribunal in paragraph 16 of its award. The question of clerks, the decision of which had been adjourned by the Tribunal was later considered 224 by it and an award pronounced in that behalf. However, the said award was later terminated by the clerks in 1949, and that led to an agreement between the Ahmedabad Mill Owners ' Association and the Textile Labour Association in the matter of wages payable to clerks. This agreement was reached on June 22, 1949. Clauses 2 and 5 of this agreement are material for the purpose of this appeal. Let us therefore read the two clauses: "2. That this agreement shall apply to all the Clerks employed in the local mills, i.e., persons doing clerical work, that is those who do routine work of writing, copying or making calculations and shall also include compounders and assistant compounders who are qualified and who are employed in the local mills. A separate scale for those of the employees who occupy the position lower than that of a full fledged Clerk but higher than that of an operative will be provided as under: Rs. 40 3 70 EB 4 90 5 105. This scale will be applicable in case of ticket boy, ticket checker, coupons seller, talley boy, scale boy, production checker, thread counter, cloth measurer or yard counter, fine reporter, cloth/yarn examiner, department store man, cut looker and those others who have not been included above but who can properly fall under the above category." After this agreement was thus reached persons doing the work of cut lookers began to feel that they were entitled to the benefit of cl. 5 and some claims were put forth on that basis against the employers. Vishnuprasad and Punamchand applied before the authority (Applications Nos. 39 and 40 of 1954) and claimed delayed wages against the appellant on the ground that they were entitled to higher wages under paragraph 16 of the award in Reference No. 18 of 1947. This claim was resisted by the appellant. The appellant urged that the applications were not maintainable under the Act, that they were barred in view of an arbitration award which was then in operation and that on the merits the applicants were not doing 225 the work of cut looking. All these contentions were rejected by the authority. It examined the duties performed by the applicants, and it came to the conclusion that both the applicants were folders doing cut looking, and consequently they were entitled each to Rs. 42 4 0 per month; in other words, the authority came to the conclusion that the applicants properly, fell under the category specified in paragraph 16 of the award referred to above and as such they were entitled to recover the difference between Rs. 36 9 0 per month which was paid to each one of them and Rs. 42 4 0 which was due to each one of them. This decision was announced on September 2, 1954. On July 11, 1955, the present respondents moved the authority under section 16 of the Act. They urged that they were semi clerks and occupied a position lower than that of a full fledged clerk and higher than that of an operative, and as such they were governed by cl. 5 of the agreement and were entitled to increment provided by the said clause. This claim was resisted by the appellant on several grounds. It was urged that the present applications were barred by res judicata, that the authority had no jurisdiction to entertain the applications, and that on the merits the respondents were not semi clerks as contemplated by cl. 5 of the agreement. On these contentions the authority raised four issues. It held against the respondents and in favour of the appellant on issues 1 and 2 which related to the plea of res judicata and the status of the respondents. In view of the said findings it thought it unnecessary to decide the two remaining issues which dealt with the quantum of amount claimed by the respondents. It appears that the question of jurisdiction, though urged in its pleading by the appellant, was not raised as an issue and has not been considered by the authority. The finding of res judicata was recorded against Punamchand and Vishnuprasad. Shamaldas had not made any previous application and so no question of res judicata arose against his application. His application was dismissed only on the ground that he could not claim the status of a 29 226 semi clerk. The same finding was recorded against the two other respondents. It appears that at the trial before the authority the parties filed a joint Pursis which enumerated the duties performed by the respondents in paragraphs 2 to 7. The authority took the view that "the duties performed by them cannot be said to be the duties of persons doing the routine work of writing, copying and making calculations". In the result it was held that the respondents were governed by the Standardisation Award and did not fall under the subsequent agreement. This decision was challenged by the respondents before the District Judge who was the appellate authority under the Act. The appellate authority also was asked to consider the question of jurisdiction. It examined the relevant provisions of the Act and held that the authority had jurisdiction to entertain the applications made before it by the respondents. On the question of res judicata it agreed with the finding of the authority, and held that the claims made by Punamchand and Vishnuprasad were barred by res judicata. Similarly, on the question of the status of the respondents it agreed that they were not semi clerks. It is clear from the judgment of the appellate authority that in determining the status of the respondents, the appellate authority applied the same test as was invoked by the authority, and it considered the question as to whether the duties performed by the respondents were similar to the duties performed by clerks. It is obvious that the tests applied are tests relevant to the employees falling under cl. 2 of the agreement, and since the application of the said tests led to the conclusion that the respondents did not fall under el. 2 the appellate authority held that el. 5 was inapplicable to them; in other words, the judgments of both the authority and the appellate authority clearly show that they took the view that el. 2 was wholly determinative of the issue, and that unless an. employee fell under cl. 2 he cannot claim to be covered by any part of the agreement including el. 5. That is why the appeals preferred by 227 the respondents were dismissed by the appellate authority on September 2, 1954. These appellate decisions were challenged by the respondents by filing a writ petition under articles 226 and 227 of the Constitution before the Bombay High Court. The Bombay High Court has held that the decision of the appellate authority was patently erroneous in law in that it proceeded on the assumption that unless cl. 2 of the agreement was satisfied cl. 5 would be inapplicable. It also held that the finding concurrently recorded by the authorities below on the question of res judicata against two of the respondents was manifestly erroneous. On these findings the High Court allowed the writ petition filed by the respondents, set aside the orders of the authorities below and sent the case back to the authority for dealing with it in accordance with law in the light of the judgment delivered by the High Court. It is against this decision that the appellant has preferred the present appeal by special leave. The first contention which the learned Attorney General has raised before us on behalf of the appellant is that the High Court has exceeded its jurisdiction under articles 226 and 227 in interfering with the decision of the appellate authority. He 'contends that at the highest the error committed by the appellate authority is one of law but it is not an error apparent on the face of the record, and he argues that it was not within the competence of the High Court to sit in appeal over the judgment of the appellate authority and examine meticulously the correctness or the propriety of the conclusions reached by it. The question about the nature and extent of the jurisdiction of the High Courts in issuing a writ of certiorari under article 226 has been the subject matter of several decisions of this Court. It is now well settled that the said writ can be issued not only in case,% of illegal exercise of jurisdiction but also to correct errors of law apparent on the face of the record. In this connection it may be pertinent to refer to the observations made by Denning, L.J., in Rex vs Northumberland Compensation Appeal Tribunal The (1) ; 228 writ has been supposed to be confined to the correction of excess of jurisdiction", observed Lord Justice Denning, "and not to extend to the correction of errors of law; and several judges have said as much. But the Lord Chief Justice has, in the present case, restored certiorari to its rightful position and shown that it can be used to correct errors of law which appear on the face of the record even though they do not go to jurisdiction". There is no doubt that it is only errors of law which are apparent on the face of the record that can be corrected, and errors of fact, though they may be apparent on the face of the record, cannot be corrected [Vide: Nagendra Nath Bora vs The Commissioner of Hills Division and Appeals, Assam (1)]. It is unnecessary for us to consider in the present appeal whether or not a certiorari can issue to correct an error of fact on the ground that the impugned finding of fact is not supported by any legal evidence. Thus it would be seen that the true legal position in regard to the extent of the Court 's jurisdiction to issue a writ of certiorari can be stated without much difficulty. Difficulty, however, arises when it is attempted to lay down tests for determining when an error of law can be said to be an error apparent on the face of the record. Sometimes it is said that it is only errors which are self evident, that is to say, which are evident without any elaborate examination of the merits that can be corrected, and not those which can be discovered only after an elaborate argument. In a sense it would be correct to say that an error of law which can be corrected by a writ of certiorari must be self evident; that is what is meant by saying it is an error apparent on the face of the record, and from that point of view, the test that the error should be self evident and should not need an elaborate examination of the record may be satisfactory as a working test in a large majority of cases; but,, as observed by Venkatarama Ayyar, J., in Hari Vishnu Kamath vs Syed Ahmad Ishaque, (2) "there must be cases in which even this test might break down because judicial opinions also differ, and an error that may be considered by one (1) ; (2) ; , 1123. 229 judge as self evident might not be so considered by another". Judicial experience, however, shows that, though it cannot be easy to lay down an unfailing test of general application it is usually not difficult to decide whether the impugned error of law is apparent. on the face of the record or not. What then is the error apparent on the face of the( record which the High Court has corrected by issuing a writ of certiorari in the present case? According to the High Court the construction placed by the appellate authority on cls. 2 and 5 of the agreement is patently and manifestly erroneous. The appellate authority held on a construction of the said two clauses that cl. 2 was the determinative clause, and that unless an employee satisfied the requirements of the said clause he could not claim the benefit of cl. 5. In deciding whether the High Court should have issued the writ or not it is necessary to examine the said two clauses. On looking at the two clauses it seems to us that the conclusion is inescapable that the error committed by the appellate authority is manifest and obvious. Clause 2 applies to clerks employed in the local mills, and as such it describes the nature of the work which is required to be done by persons falling under that clause. Clause 5, on the other hand, obviously provides for a separate scale for those employees who are not clerks nor operatives; these em ployees occupied a position higher than that of an operative and below that of a full fledged clerk. Therefore there is no doubt that persons falling under cl. 5 cannot fall under el. 2, and should not therefore be expected to satisfy the test prescribed by the said clause. A bare perusal of the list of employees specified by designation as falling under el. 5 will show that the application of the test which is relevant under el. 2 would in their case be wholly inappropriate and irrelevant. Therefore, in our opinion, the error committed by the appellate authority was of such a manifest character that the High Court was justified in correcting the said error by the issue of a writ of certiorari. The question involved in the decision of the dispute is not so much of construction of the document as of giving effect to the plain terms of the 230 document. If el. 5 expressly provides for employees ,,not falling under el. 2, and if that intention is clarified by the list of designations which fall under el. 5 and yet the appellate authority reads that clause as subject to cl. 2, that must be regarded as an error patent on the face of the record. It is not a case where two alternative conclusions are possible; it is a case of plain misreading of the two provisions ignoring altogether the very object with which the two separate provisions were made. In our opinion, therefore, the contention raised by the learned Attorney General that by issuing the writ the High Court has exceeded its jurisdiction is not well founded. That takes us to the second, and in fact the principal, contention which has been seriously argued before us by the learned Attorney General. He urged that the applications made by the respondents ' Union on behalf of the three employees were incompetent under section 15 of the Act and the authority exceeded its jurisdiction in entertaining them. It is true that this point was not specifically urged before the authority, but it appears to have been argued before the appellate authority and the High Court, and it is this contention which raises the problem of construing section 15 of the Act. The case for the appellant is that the jurisdiction conferred on the authority under section 15 is a limited jurisdiction, and it would be unreasonable to extend it on any inferential ground or by implication. The scheme of the Act is clear. The Act was intended to regulate the payment of wages to certain classes of persons employed in industry, and its object is to provide for a speedy and effective remedy to the employees in respect of their claims arising out. of illegal deductions or unjustified delay made in paying wages to them. With that object section 2(vi) of the Act has defined wages. Section 4 fixes the wage period. Section 5 prescribes the time of payment of wages; and section 7 allows certain specified deductions to be made. Section 15 confers jurisdiction on the authority appointed under the said section to hear and decide for any specified area claims arising out of deductions 231 from wages, or delay in payment of wages, of persons employed or paid in that area. It is thus clear that the only claims which can be entertained by the authority are claims arising out of deductions or delay made in payment of wages. The jurisdiction thus conferred on the authority to deal with these two categories of claims is exclusive; for section 22 of the Act provides that matters which lie within the jurisdiction ' of the authority are excluded from the jurisdiction of ordinary civil courts. Thus in one sense the jurisdiction conferred on the authority is limited by section 15, and in another sense it is exclusive as prescribed by section 22. In dealing with claims arising out of deductions or delay made in payment of wages the authority inevitably would have to consider questions incidental to the said matters. In determining the scope of these incidental questions care must be taken to see that under the guise of deciding incidental matters the limited jurisdiction is not unreasonably or unduly extended. Care must also be taken to see that the scope of these incidental questions is not unduly limited so as to affect or impair the limited jurisdiction conferred on the authority. While considering the question as to what could be reasonably regarded as incidental questions let us revert to the definition of wages prescribed by section 2(vi). Section 2(vi) as it then stood provided, inter alia, that 'wages ' means all remuneration capable of being expressed in terms of money which would, if the terms of the contract of employment, express or implied, were fulfilled, be payable to a person employed in respect of his employment or of work done in such employment, and it includes any bonus or other additional remuneration of the nature aforesaid which would be so payable and any sum payable to such person by reason of the termination of his employment. It also provided that the word "wages" did not include five kinds of payments specified in clauses (a) to (e). Now, if a claim is made by an employee on the ground of alleged illegal deduction or alleged delay in payment of wages several relevant facts would fall to be considered. Is the applicant an employee of the opponent?; 232 and that refers to the subsistence of the relation between the employer and the employee. If the said fact is admitted, then the next question would be: what are the terms of employment? Is there any contract of employment in writing or is the contract oral? If that is not a point of dispute between the parties then it would be necessary to enquire what are the terms of the admitted contract. In some cases a question may arise whether the contract which was subsisting at one time had ceased to subsist and the relationship of employer and employee had come to an end at the relevant period. In regard to an illegal deduction a question may arise whether the lock out declared by the employer is legal or illegal. In regard to contracts of service some times parties may be at variance and may set up rival contracts, and in such a case it may be necessary to enquire which contract was in existence at the relevant time. Some of these questions have in fact been the subject matter of judicial decisions. (Vide: A. R. Sarin vs B. C. Patil (1), Vishwanath Tukaram vs The General Manager, Central Railway, V. T. Bombay (2); and Maharaja Sri Umaid Mills, Ltd. vs Collector of Pali (5)); but we do not propose to consider these possible questions in the present appeal, because, in our opinion, it would be inexpedient to lay down any hard and fast or general rule which would afford a determining test to demarcate the field of incidental facts which can be legitimately considered by the authority and those which cannot be so considered. We propose to confine our decision to the facts in the present case. What are the facts in the present case? The relationship of employer and employee is not in dispute. It is admitted that the three workmen are employed by the appellant, and do the work of bleach folders. These folders are classified into Uttarnars and Chadhavnars. Indeed, the items of work assigned to these categories of folders are admitted. The appellant contends that the employment of the three workmen is governed by the Award which is in operation, (1) (2) (3) 233 whereas the respondent Union contends that they are governed by cl. 5 of the subsequent agreement. It is common ground that both the Award and the agreement are in operation in respect of the persons governed respectively by them, so that it is not disputed by the appellant that the persons who are specified by their designation under cl. 5 would be entitled to, the benefit of the said clause and would not be governed by the Award. If an employee is called a cut looker by any mill he would naturally fall under cl. 5; in other words, all the specified categories of employees named by designation in that clause would not be governed by the Award though at one stage they were treated as operatives but they would be governed by cl. 5 of the agreement; and if a person bearing that designation applied under section 15 of the Act his application would be competent. The appellant 's argument, however, is that when the last part of el. 5 refers to other employees "who have not been included above but who can properly fall under the above category" no designation is attached to that class, and in such a case it would be necessary to enquire whether a particular employee can properly fall under the said category, and that, it is urged, means that such an employee cannot apply under section 15 but must go to the industrial court under the ordinary industrial law. Thus the controversy between the parties lies within a very narrow compass. An employee designated as a cut looker can apply under section 15 and obtain relief from the authority; an employee not so designated but falling under the said category by virtue of the work assigned to him, it is said, cannot apply under section 15 because the authority cannot deal with the question as to whether the said employee properly falls under the said category or not. In our opinion, on these facts, the question as to whether a particular employee is an operative falling under the Award or one who is above an operative and below the clerk falling under cl. 5 is a question which is so intimately and integrally connected with the problem of wages as defined under section 2(vi) that it would be unreasonable 30 234 to exclude the decision of such a question from the jurisdiction of the authority under section 15. If a contract of employment is admitted and there is a dispute about the construction of its terms, that obviously falls within section 15 of the Act. If that is so, what is the difference in principle where a contract is admitted, its terms are not in dispute, and the only point in dispute is which of the two subsisting contracts applies to the particular employee in question. If the appellant 's argument were to prevail it would lead to this anomalous position that if a general contract of employment provides for payment of wages to different categories of employees and describes the said categories by reference to the duties discharged by them, none of the employees can ever avail himself of the speedy remedy provided by section 15 of the Act. In such a case every time a dispute may arise about the duties assigned to a particular employee before his wages are determined. In our opinion, to place such an artificial limitation on the limits of the jurisdiction conferred on the authority by section 15 is wholly unreasonable. That is the view taken by the High Court in the present case and we see no reason to differ from it. The question about the nature and scope of the limited jurisdiction conferred on the authority under section 15 has been considered by this Court in the case of A. V. D 'Costa vs B. C. Patel (1). In that case the scheme of the Act has been examined by Sinha, J., as he then was, who spoke for the majority view, and it has been held that "if an employee were to say that his wages were Rs. 100 per month which he actually received as and when they fell due but that he would be entitled to higher wages if his claims to be placed on the higher wages scheme had been recognised and given effect to, that would not be a matter within the ambit of the authority 's jurisdiction. The authority has the jurisdiction to decide what actually the terms of the contract between the parties were, that is to say, to determine the actual wages; but the authority has no jurisdiction to determine the question of potential wages". The Court took the view that the employee 's (1) ; 235 complaint in that case fell within the latter illustration. It would thus be seen that according to this, decision the authority has jurisdiction to determine what the terms of contract between the parties are, and if the terms of the contract are, admitted and the only dispute is whether or not a particular employee falls within one category or another, that would be( incidental to the decision of the main question as to what the terms of the contract are, and that precisely is the nature of the dispute between the parties in the present case. The learned Attorney General has relied very strongly on the decision of the Bombay High Court in Anthony Sabastin Almeda vs R. M. T. Taylor(1). In that case the employer and the employee went before the Court on the basis of different contracts and the Court held that it was not within the jurisdiction of the authority to decide which of the two contracts held the field, which of them was subsisting, and under which of them the employer was liable to pay wages. It would be clear from the facts in that case that two rival contract,% were pleaded by the parties, according to whom only one contract was subsisting and not the other, and so the question for decision was which contract was really subsisting. We do not propose to express any opinion on the correctness of the view taken by the Bombay High Court on this question. All we are concerned to point out is that in the present appeal the dispute is substantially different. Both contracts admittedly are subsisting. The only point of dispute is: do the three workmen fall within the category of cut lookers or do they not If they do then cl. 5 applies; if they do not the Award will come into operation. That being so, we do not see how the decision in Almeda 's case (1) can really assist the appellant. In this connection we may point out that it is common ground that in Ahmedabad textile mills do not have a class of employees called cut lookers as in Bombay. The work of cut looking along with other kind of work is done by bleach folders and other (1) 236 folders. That was the finding made by the authority on an earlier occasion when Punamchand and Vishnuprasad had moved the authority under section 15 of the Act. The learned Attorney General has strenuously contended that it is unfair to give the same pay to the three workmen who are doing the work of cut lookers only for a part of the time and were substantially doing the work of bleach folders; that, however, has no relevance in determining the present dispute. The only point which calls for decision is whether or not the work done by the three respondents takes them within the category of cut lookers specified under cl. 5, and as we have already pointed out, on an earlier occasion the authority has found in favour of two of the three respondents when it held that they were folders doing cut looking. If the said finding amounts to res judicata it is in favour of the two respondents and not in favour of the appellant; that is why the learned Attorney General did not seriously dispute the correctness of the decision of the High Court on the question of res judicata. In the result the appeal fails and is dismissed with costs. Appeal dismissed.

IN-Abs

An award, called the Standardisation Award, fixing the wages for different categories of workers in the textile mills at Ahmedabad was made by the Industrial Tribunal. The wages of clerks were, however, settled by a subsequent agreement bet ween the Ahmedabad Mill Owners ' Association and the Textile 221 Labour Association. Clauses 2 and 5 of the said agreement were as follows, " 2. That this agreement shall apply to all the Clerks employed in the local mills, i. e., persons doing clerical work, that is those who do routine work of writing, copying or making calculations and shall also include compounders and assistant compounders who are qualified and who are employed in the local mills. A separate scale for those of the employees who occupy the position lower than that of a full fledged Clerk but higher than that of an operative will be provided as under: Rs. 40 3 70 EB 4 90 5 105 This scale will be applicable in case of ticket checker, coupons seller, tally boy, scale boy, production checker, third counter, cloth measurer or yard counter, fine reporter, cloth/ yarn examiner, department store man, cut looker and those others who have not been included above but who can properly fall under the above category. " The respondents moved the Authority under section 16 of the (4 of 1936), for an order against the appellant for payment of. their delayed wages. They claimed to be semi clerks, lower than full fledged clerks but higher than operatives, and as such governed by cl. 5 of the agreement. The Authority held against them and the appellate Authority affirmed its decision holding that Cl. 2 Of the agreement determined the applicability of cl. 5 and since the respondents did not come within Cl. 2 they could not maintain their claim under cl. 5. The High Court, on an application under article 226 and article 227 of the Constitution, took a contrary view and set aside the orders of the Authorities and directed a rehearing. In this Court the appellant mills urged that (1) the High Court had exceeded its jurisdiction under articles 226 and 227 in setting aside the order of the appellate Authority and (2) the Authority had itself exceeded its jurisdiction under section 15 of the Act in entertaining the applications of the respondents made under section 16 of the Act. Held, that both the contentions must be negatived. The High Court has power under article 226 of the Constitution to issue a writ of certiorari not only in cases of illegal exercise of jurisdiction but also to correct errors of law apparent on the face of the record, although not errors of fact even though so apparent. No unfailing test can, however, be laid down when an error of law is an error apparent on the face of the record and the rule that it must be self evident, requiring no elaborate examination of the record, is a satisfactory practical test in a large majority of cases. Rex vs Northumberland Compensation Appeal Tribunal, ; and Nagendra Nath Bora V. Commissioner of Hills Division and Appeals, Assam, ; , referred to. 222 Viswanath Tukaram vs The General Manager, Central Railway, V. T., Bombay, , considered. A look at the two clauses is enough to show that the appel late Authority in construing them in the way it did committed an obvious and manifest error of law. It was clear that the two clauses applied to two distinct categories of persons and persons falling under cl. 5 could not be governed by cl. 2 and were not expected to satisfy the test prescribed by it. Under section 15 of the , the Authority in exercising its jurisdiction, made exclusive by section 22 of the Act, has necessarily to consider various questions incidental to the claims falling thereunder and, although it would be inexpedient to lay down any hard and fast rule for determining the scope of such questions, care should be taken not to unduly extend or curtail its jurisdiction. Whether a particular employee was an operative or one above the rank of an operative and below that of clerk arid, therefore within cl. 5 of the agreement, was a question intimately and integrally connected with wages as defined by the Act and as such fell within the jurisdiction of the Authority under section 15 of the Act. There could, therefore, be no substance in the contention that an employee falling within the category of those others mentioned in the last part of cl. 5, to whom no designation was attached, could not apply under section 15 of the Act. A. V. D 'Costa vs B. C. Patel, ; , referred to. Anthony Sabastin Almeda vs R. M. T. Taylor, (1956) 58 Bom. L.R. 899, distinguished.

Appeal No. 279 of 1959. Appeal by special leave from the judgment and order dated November 18, 1957, of the Kerala High Court in O. P. No. 87 of 1956. A. V. Sayed Muhammad, for the appellants. The respondents did not appear. 182 1960. December 12. The Judgment of the Court was delivered by HIDAYATULLAH, J. This is an appeal with the special leave of this Court against the judgment of the High Court of Kerala dated November 18, 1957, passed in a petition for writ of prohibition under article 226 of the Constitution. The State of Kerala and the Tahsildars of Kottayam and Kanjirappally Taluks are the appellants, and C.M. Francis & Co., a partnership firm, is the first respondent, and the partners of the firm are the remaining respondents. The respondents were doing business in hill produce like pepper, ginger, betelnuts etc., and were assessed to sales tax under the Travancore Cochin General Sales Tax Act XI of 1125 (referred to as the Act), for the years 1950 to 1954. The respondents have to pay a sum of Rs. 1,01,716 4 3 as tax. In 1954, proceedings were started against them under section 13 of the Act, which provides that if the tax is not paid as laid down in that section, the whole of the amount or such part thereof as remains due, may be recovered as if it were an arrears of land revenue. It appears that the pro ceedings were not fruitful, and a prosecution under section 19 of the Act was instituted against the partners in the Court of the First Class Magistrate, Ponkunnam. Respondents 2 to 5 pleaded guilty, and the Magistrate passed an order on October 18, 1955 as follows: "The sentence or other final order: A 1 to 4 sentenced to pay a fine of Rs. 50/ each and in default to undergo section 1. for one month each. A 1 to 4 admit that they failed to pay on demand by the competent authority, a sum of Rs. 1,01,716 4 3 due from them as sales tax for the years 1950 to 1954. This amount will be realised from A 1 to 4, jointly or severally, individually or collectively under the provisions of the Cr. P.C. for realisation of criminal fines, as if it were a fine imposed by this court on each accused individually and all of them together. Take steps for the realisation. " Warrants under section 386 (1) (b) of the Code of Criminal Procedure were issued to the Collector of Kottayam District for recovery of the arrears of sales tax. 183 The authorities, however, started proceedings again under section 13 of the Act read with the provisions of the Travancore Cochin Revenue Recovery Act, 1951 (VII of 1951), to recover the amount as arrears of land revenue, and attached some properties belonging to the respondents within the jurisdiction of the second and third appellants, the Tahsildars of Kottayam and Kanjirappally Taluks. The firm thereupon filed the petition under article 226 of the Constitution for a writ of prohibition or other order or direction to the effect that the proceedings for realisation of the arrears under the Revenue Recovery Act be quashed. In the petition, the respondents urged that inasmuch as they were prosecuted under section 19 of the Act and the Magistrate had issued warrants, the procedure for recovery under section 13 was not available. They contended that under section 386 of the Code of Criminal Procedure the warrant is to be deemed to be a decree and has to be executed according to civil process applicable to the execution of decrees under the Code of Civil Procedure. They, therefore, submitted that the procedure under section 19 of the Act was no longer open, and could not be proceeded with. Section 19 of the Act, so far as it is material, reads as follows: "Any person who. . . . (b) fails to pay within the time allowed, any tax assessed on him under this Act, or (d)fraudulently evades the payment of any tax assessed on him. . shall on conviction by a Magistrate of the first class, be liable to a fine which may extend to one thousand rupees and in the case of a conviction under clause (b), (d) the Magistrate shall specify in the order the tax which the person convicted has failed or evaded to pay and the tax so specified shall be recoverable as if it were a fine under the Code of Criminal Procedure for the timebeing in force. " In dealing with the question, the learned Judges of the High Court felt that section 13 of the Act was in the 184 nature of a general law, over which the special procedure prescribed by section 19 of the Act read with section 386 of the Code of Criminal Procedure was to prevail. They, however, thought that, since all the processes available under section 19 of the Act were also available under section 386 of the Code of Criminal Procedure, it was not necessary to decide what would happen if the proceedings under section 386 came to nothing. They observed that if the question arose, they would consider it. The writ of prohibition was granted by the High Court. The respondents did not appear in this Court. We have heard learned counsel for the appellants, who has drawn our attention to all the relevant provisions of the law. The question which arises is whether section 19 must be taken to prevail over section 13 of the Act. Both the sections lay down the mode for recovery of arrears of tax, and, as has already been noticed by the High Court, lead to the application of the process for recovery by attachment and sale of movable and immovable properties, belonging to the tax evader. It cannot be said that one proceeding is more general than the other, because there is much that is common between them, in so far as the mode of recovery is concerned. Section 19, in addition to recovery of the amount, gives the power to the Magistrate to convict and sentence the offender to fine or in default of payment of fine, to imprisonment. In our opinion, neither of the remedies for recovery is destructive of the other, because if two remedies are open, both can be resorted to, at the option of the authorities recovering the amount. It was observed by Mahmood, J. in Shankar Sahai vs Din Dial (1) that where the law provides two or more remedies, there is no reason to think that one debars the other and therefore both must be understood to remain open to him, who claims a remedy. Unless the statute in express words or by necessary implication laid down that one remedy was to the exclusion of the other, the observations of Mahmood, J. quoted above must apply. In our opinion, in the absence of any such provision in the (1) I.L.R. (1889) 12 All 409 (F.B.), 418. 185 Act,, both the remedies were open to the authorities, and they could resort to any one of them at their option. The appeal is allowed, and the judgment of the High Court set aside. Though the respondents did not appear, in the circumstances of the case we think we should make an order that the costs shall be paid by them both here and in the High Court. Appeal allowed.

IN-Abs

The respondents were assessed to sales tax under the Travancore Cochin General Sales Tax Act and proceedings were started against them under section 13 of the Act for the recovery of the arrears of Sales Tax as if they were arrears of land revenue. The proceedings were not fruitful. Thereafter a prosecution under section 19 of the Act was instituted against the partners who pleaded guilty and the magistrate issued warrants under section 386(1)(b) of the Code of Criminal Procedure to the Collector of the District for the recovery of the arrears of sales tax as if they were a fine imposed by that court. The authorities again started proceedings under section 13 of the Act read with Travancore Cochin Revenue Recovery Act, 1951, and certain properties were attached. The respondents urged that in as much as they were prosecuted under section 19 of the Act and the magistrate had issued warrants, the procedure for recovery under section 13 of the Act was not available. The question was whether section 19 was to be taken to prevail over section 13 of the Act. Held, that neither of the remedies for recovery of arrears of tax as laid down by sections 13 and 19 of the Travancore Cochin General Sales Tax Act was destructive of each other and unless the statute laid down in express words or by necessary implication that one remedy was to the exclusion of the other, both the remedies were open to the authorities and they could resort to any one of them at their option. Shankar Sabai vs Din Dial, I.L.R. [1889] 12 All. 409 (F.B.), 418,approved.

13 to 24, 42 and 46 to 54 of 1958. Petitions under Article 32 of the Constitution of India for enforcement of Fundamental Rights. M.C. Setalvad, Attorney General for India, Syed Mahmud, J. B. Dadachanji, section N. Andley, Rameshwar Nath and P. L. Vohra, for the petitioners in petitions Nos. 13 18, and 46 54 of 1958. C.K. Daphtary, Solicitor General of India, Syed Mahmud, J. B. Dadachanji, section N. Andley, Rameshwar Nath and P. L. Vohra, for the petitioners in Petitions Nos. 19 24 of 1958. S.N. Andley, Rameshwar Nath, J. B. Dadachanji and P. L. Vohra, for the petitioner in petition No. 42 of 1958. K.V. Suryanarayana Iyer, Advocate General of Kerala and Sardar Bahadur, for the respondents. December, 9. The Judgment of Sinha, C.J., Jafer Imam, Subba Rao and Shah, JJ., was delivered 81 by Sinha, C. J. Sarkar, J., delivered a separate Judgment. SINHA, C. J. In this batch of 22 petitions under article 32 of the Constitution, the petitioners impugn the constitutionality of the Travancore Cochin Land Tax Act, XV of 1955, as amended by the Travancore Cochin Land Tax (Amendment) Act, X of 1957, which hereinafter will be referred to as the Act. The Act came into force on June 21, 1955, and the Amending Act on August 6, 1957. The petitioners are owners of forest areas in certain parts of the State of Kerala, which, before the reorganisation of States, formed part of the State of Madras. The respondents to the petitions are: (1) the State of Kerala and (2) the District Collector, Palghat: These petitions are based on allegations, which are, more or less, similar, and the following allegations made in Writ Petition No. 42 of 1958 may be taken as typical and an extreme case, which was placed before us in detail to bring into bold relief the full significance and effect of the legislation impugned in these cases. The petitioner in Petition 42 of 1958 is a citizen of India, who owns forests in certain parts of Palghat Taluk in Palghat District, which was part of the State of Madras before the reorganisation of States. These forests are now in the State of Kerala. Up to the time that these forests were in the State of Madras, as it then was, the Madras Preservation of Private Forests Act, Madras Act XXVII of 1949, governed these forests. Even after these areas were transferred to the State of Kerala, the said Madras Act, XXVII of 1949, continued to apply to these forests. Under the said Madras Act the owners of forests, like the petitioner, could not sell, mortgage, lease or otherwise alienate any portion of their forests without the previous sanction of the District Collector; nor could they, without similar permission, cut trees or do any act likely to denude the forest or diminish its utility, as such. The District Collector, in exercise of the powers under the Act, does not ordinarily permit the cutting of more than a small 82 number of trees in the forest. Thus the petitioner has not the right fully to exploit the forest wealth in his forest area and has to depend upon the previous permission of the Collector. In exercise of the powers given to the Collector under the Madras Act aforesaid, the petitioner 's lessee was given permission to cut certain trees in his forest, which brings to the petitioner by way of income from. the forest, a sum of Rs. 3,100 per year. Under the Act, a tax called land tax at a flat rate of Rs. 2 per acre has been imposed on the petitioner. In pursuance of the provisions of the Act, as amended as aforesaid, the District Collector of Palghat, purporting to act under the provisions of section 5A of the Act, issued a notice to the petitioner provisionally assessing the petitioner 's forest under the said Act to a sum of fifty thousand rupees per annum and informing the petitioner that, if no representation was made within thirty days, the said provisional assessment would be confirmed and a demand notice would be issued. As there has been no survey of the area of forest land in the petitioner 's possession, the District Collector has conjectured the said area to be twenty five thousand acres. The Petitioner had made an application to the District Collector under the Madras Preservation of Private Forests Act for felling trees in an area of one thousand acres, but the Collector was pleased to grant permission to out trees from 450 acres only in the course of five years at the rate of 90 acres a year. The petitioner has leased out that right to another person, who made the highest bid of Rs. 3,100 per year, as the landlord 's fee for the right to cut and remove the trees, and other minor produce. Besides the demand aforesaid, the revenue authorities have levied about four thousand rupees as tax on the surveyed portions of the forest. The petitioner 's forest has large areas of and rocks, rivulets and gorges. The petitioner, in those circumstances, questions the constitutional validity of the Act, the provisions of which will be examined hereinafter. These petitions have been opposed on behalf of the first respondent and the allegations and submissions 83 made in the petitions are sought to be controverted by a counter affidavit sworn to by an Assistant Secretary of the Kerala Gover nment in the Revenue Department. It is in similar terms, as a matter of fact printed in most of these cases. It is contended therein on behalf of the respondent that the petitions are not maintainable in as much as no fundamental rights of the petitioners have been infringed; that the allegations about the income, from the forest lands are not admi tted; and by way of submission, it is added, they are irrelevant for the purposes of these petitions. It is stated that the Act was passed with a view to unifying the system of land tax in the whole of the State of Kerala. It is submitted that the validity of the Act has to be determined in the light of article 265 of the Constitution and that articles 19 and 31 were wholly out of the way. It is denied that the tax imposed was harsh or arbitrary, or has the effect of violating the petitioner 's right of holding property; and it was asserted that the allegations in respect of income from the forests are entirely irrelevant, as the tax was not a tax on income, but was an "impost on land". It is equally irrelevant whether the land is productive or not. It is also contended that, in view of the provisions of article 31(5)(b)(i) of the Constitution, article 31(2) could not be relied upon by the petitioners. The allegation of the petitioners that the Act is a device to confiscate private forests is denied. It is admitted that, except in certain cases, the entire area is unsurveyed and that steps are being taken for surveying those areas. It is also stated that the areas shown in the notices served on the petitioners are based on information available to the Collector of the District; and lastly, it is stated that only notice has been issued calling upon the petitioners to make their representations, if any, to the proposed provisional assessments. The assessments have not yet been made, and, therefore, there is no question of demand of tax being enforced by coercive processes. Finally, it is suggested that the Act has been enacted for the legitimate revenue purposes of the State. Before entering upon a discussion of the points in 84 controversy, it is convenient at this stage to indicate briefly the relevant provisions of the Act which is impugned by the petitioners as ultra vires the State Legislature. The preamble of the Act is in these terms: "Whereas it is deemed necessary to provide for the levy of a low and uniform rate of basic tax on all lands in the State of Travancore Cochin. " Basic tax has been defined as "the tax imposed under the provisions of this Act". Section 3 lays down that the arrangement made under the Act for the levy of the basic tax shall be deemed inter alia to be a general revenue settlement of the State, notwithstanding anything in any statute, grant, deed or other transaction subject to certain provisos not material for our present purposes. The charging section is section 4, which is in these terms: "Subject to the provisions of this Act, there shall be charged and levied in respect of all lands in the State, of whatever description and held under whatever tenure, a uniform rate of tax to be called the basic tax. " Section 5 lays down the rate of the tax which, by the Amendment, has been raised to Rs. 2 per acre (two pies per cent. of land per annum) and the basic tax charged and levied at that rate shall be the tax payable to the Government in lieu of any existing tax in respect of land. Section 6 lays down that any stipulation in any contract or agreement or lease or other transaction to pay land revenue assessment of any land shall be construed as stipulation for the payment of the amount. of basic tax, as charged and levied under the Act. Section 7 is in these terms: "This Act is not applicable to lands held or leased by the Government or any land or class of lands which the Government may, by notification in the Gazette, either wholly or partially exempt from the provisions of this Act." Sections 8 and 9 provide for the continuance of the liability to pay certain dues in respect of existing tenures in addition to the basic tax in respect of lands covered by those tenures. Section 10 abolishes the 85 irrigation assessment charged on certain tank beds and other water reservoirs named and described therein. Section 11 preserves the right of the Government to levy certain irrigation and water cesses and lays down that the Act shall not affect the power of the Government to levy any rate or alter any existing rate of irrigation or water cess on any land, as they deem fit. Cesses, other than those mentioned in section 11, are also abolished by section 12. Section 13 authorises the Government to appoint such officers as they deem necessary for the purpose of the Act. Section 14 lays down the bar of suits against the Government in respect of anything done or any order passed under the Act. Section 15 saves the right of the Government which accrued to it before the Act came into force as also the conditions of any agreement. grant or deed relating to any land, except to the extent indicated in the Act. Section 16 vests the Government with the power to make rules for carrying into effect the provisions of the Act, with particular reference to the power to make rules for the apportionment of the basic tax charged on certain kinds of holdings, for defining the powers and duties of the officers appointed under the Act and for determining the kist instalments and the due date for the payment thereof. These in short are the provisions of the Act. The Act, as indicated above, was amended by Act X of 1957 which substituted the words "State of Kerala" for the words "State of Travancore Cochin" and made certain other consequential changes. The Amending Act introduced section 5A, which has been very much assailed in the course of the argument before us and it is, therefore, necessary to set it out in full. It is in these terms: "section 5A. Provisional assessment of basic tax in the case of unsurveyed land8. (1) It shall be competent for the Government to make a provisional assessment of the basic tax payable by a person in respect of the lands held by him and which have not been surveyed by the Government, and upon such assessment such person shall be liable to pay the amount covered in the provisional assessment. 86 (2)The Government after conducting a survey of the lands referred to in sub section (1) shall make a regular assessment of the basic tax payable in respect of such lands. After a regular assessment has been made, any amount paid towards the provisional assessment made under sub section (1) shall be deemed to have been paid towards the regular assessment and when the amount paid towards the provisional assessment exceeds, the amount payable under the regular assessment, the excess shall be refunded to the person assessed. " By section 9, section 3 of the Madras Revenue Recovery Act, 1864, has been substituted in these terms: "3. Landholder when and to whom to pay kist. Every landholder shall pay to the Collector or other officer empowered by 'him in this behalf the land tax due from him on or before the day fixed for payment under the rules framed under section 16 of the Land Tax Act, 1955. " From a review of the provisions of the Act, as amended as aforesaid, it will be clear that the provisions of the Act lay down in barest outline the policy to impose a uniform and, what is asserted to be, a low rate of land tax on all lands in the State of Kerala. Unlike other taxing statutes, it does not make any provision for issue of notice to the assessee, nor is there any provision for submission of a return by the assessee. By section 5A, it authorises the Government to make a "provisional assessment" in respect of land, which has not been surveyed, and such provisional assessment is made payable by the person made liable under the Act. It does not make any provision for any appeals in cases where the assessee may feel dissatisfied with the assessment. The Act does contemplate the making of "a regular assessment of the basic tax". But it does not indicate as to when the regular assessment would be made, except indicating that it can be made only after a survey has been made in respect of the land assessed. The Act could not have been cast in more general terms and the proceedings under the Act could not have been more summary. It has thus the merit of brevity as also of simplicity, derived 87 from the fact that a tax is levied at a flat rate, irres pective of the quality of the land and consequently of its productive capacity. Under the Act, the charge has to be levied, whether or not any income has been derived from the land. The Legislature was so much in earnest about levying and realising the tax that it could not even wait for a regular survey of the lands to be assessed with a view to determining the extent and character of the land. Such are the provisions and the effect of the Act, which has been assailed on a number of grounds on behalf of the petitioners. It is contended, in the first instance, that inequality is writ large in the provisions of the Act, which is clearly discriminatory in character and effect and thus infringes article 14 of the Constitution. As the Act does not have any regard to the quality of the land or its productive capacity, and a tax at a flat rate of Rs. 2 per acre is proposed to be levied under the Act, it is further contended, it imposes very unreasonable restrictions on the right to hold property and is thus an invasion on the rights guaranteed to the petitioners under article 19(1)(f) of the Constitution. The Act does not lay down any provision calling for a return from the assessee, for any enquiry or investigation of facts before the provisional assessment is made or for any right of appeal to any higher authority from the order of provisional assessment; in fact, there is no provision for hearing the assessee at any stage. The Act is of an arbitrary character and is thus wholly repugnant to the guaranteed rights of the petitioners. Section 7 quoted above gives uncanalised, unlimited and arbitrary power to the Government to pick and choose in the matter of grant of total or partial exemption from the provisions of the Act. It also suffers from the vice of discrimination. It has also been vehemently argued that the Act, though it purports to be a tax on land, is really a law relating to forests in possession of the petitioners and would not come within the purview of entry 18 read by itself or in conjunction with entry 45 of List II, but is law relating to forests under entry 19. If we tear the veil in which the real 88 purpose and effect of the Act has been shrouded, 'it will I appear that the true character and effect of the Act is not to levy a tax on land, but to expropriate the private owners of the forests without payment of any compensation whatsoever. Lastly, it has been urged that the whole Act has been conceived with a view to confiscating private property, there being no question of any compensation being paid to those who may be expropriated as a result of the, working of the Act. This last argument is based on the assertion that the tax proposed to be levied on private property in the State of Kerala has absolutely no relation to the paying capacity of the persons sought to be taxed, with reference to the income they could derive, or actually did derive from the property. On behalf of the State of Kerala, the learned Advocate General has argued that, though in most of the cases, that is to say, except in seven petitions (Petitions 21, 22, 47, 49, 50, 51 and 54) the lands have not been surveyed, the areas mentioned in the notices proposing provisional assessment have been ascertained through the local agencies of the Government. It was further contended that the State had only declared the liability to the payment of the tax at a flat rate of Rs. 2 per acre in respect of land, irrespective of the income to be derived therefrom. Hence there was no necessity for making provision for a detailed enquiry or investigation. The rate of the tax being known, and the area of the land to be taxed having been locally ascertained, even though without any regular survey, what remained was merely quantifying the tax, which was of a purely administrative character. The local agencies estimated the land in possession of particular persons. Those persons were called upon to pay provisionally at the rate fixed by the statute. The State has, by executive action, appointed authorities who are expected to act in accordance with the principle of natural justice. There was, therefore, no need for laying down any elaborate procedure as in other instances of taxing statutes. There is a presumption that the authority appointed by the Government would act bona fide and in a 89 proper manner. If there was any case of unfair dealings, the matter could be brought to the Court. It was greatly emphasised that as a flat rate of taxation had been envisaged by the Act and as ultimately the tax at that rate would be realised from land found to be in possession of particular persons after a regular survey, the regular survey to be ultimately made would automatically determine the amount of tax to be paid and the adjustment of the taxes already paid could be made on that basis. On the legal aspect of the controversy raised on behalf of the petitioners, it was argued that the Act has its justification in article 265 of the Constitution, which was not subject to the provisions of Part III of the Constitution and that, therefore, articles 14, 19, 31 could not be pressed in aid of the petitioners. It was also contended that even if the Act is, in effect, confiscatory, it cannot be questioned, being a taxing statute. Finally, it was urged that the question of the amount of income derived by the petitioners from the property sought to be taxed is wholly irrelevant, because the Act was not a tax on income but it was a tax on the property itself. The most important question that arises for consideration in these cases, in view of the stand taken by the State of Kerala, is whether article 265 of the Constitution is a complete answer to the attack against the constitutionality of the Act. It is, therefore, necessary to consider the scope and effect of that Article. Article 265 imposes a limitation on the taxing power of the State in so far as it provides that the State shall not levy or collect a tax, except by authority of law, that is to say, a tax cannot be levied or collected by a mere executive fiat. It has to be done by authority of law, which must mean valid law. In order that the law may be valid, the tax proposed to be levied must be within the legislative competence of the Legislature imposing a tax and authorising the collection thereof and, secondly, the tax must be subject to the conditions laid down in article 13 of the Constitution. One of such conditions envisaged by article 13(2) is that the Legislature shall not make any law which 90 takes away or abridges the equality clause in article 14, which enjoins the State not to deny to any person equality before the law or the equal protection of the laws of the country. It cannot be disputed that if the Act infringes the provisions of article 14 of the Constitution, it must be struck down as unconstitutional. For the purpose of these cases, we shall assume that the State Legislature had the necessary competence to enact the law, though the petitioners have seriously challenged such a competence. The guarantee of equal protection of the laws must extend even to taxing statutes. It has not been contended otherwise. It does not mean that every person should be taxed equally. But it does mean that if property of the same character has to be taxed, the taxation must be by the same standard, so that the burden of taxation may fall equally on all persons holding that kind and extent of property. If the taxation, generally speaking, imposes a similar burden on every one with reference to that particular kind and extent of property, on the same basis of taxation, the law shall not be, open to attack on the ground of inequality, even though the result of the taxation may be that the total burden on different persons may be unequal. Hence, if the Legislature has classified persons or properties into different categories, which are subjected to different rates of taxation with reference to income or property, such a classification would not be open to the attack of inequality on the ground that the total burden resulting from such a classification is unequal. Similarly, different kinds of property may be subjected to different rates of taxation, but so long as there is a rational basis for the classification, article 14 will not be in the way of such a classification resulting in unequal burdens on different classes of properties. But if the same class of property similarly situated is subjected to an incidence of taxation, which results in inequality, the law may be struck down as creating an inequality amongst holders of the same kind of property. It must, therefore, be held that a taxing statute is not wholly immune from attack on the ground that it infringes the equality clause ill 91 article 14, though the Courts are not concerned with the policy underlying a taxing statute or whether a particular tax could not have been imposed in a different way or in a way that the Court might think more just and equitable. The Act has, therefore, to be examined with reference to the attack based on article 14 of the Constitution. It is common ground that the tax, assuming that the Act is really a taxing statute and not a confiscatory measure, as contended on behalf of the petitioners, has no reference to income, either actual or potential, from the property sought to be taxed. Hence, it may be rightly remarked that the Act obliges every person who holds land to pay the tax at the flat rate prescribed, whether or not he makes any income out of the property, or whether or not the property is capable of yielding any income. The Act, in terms, claims to be "a general revenue settlement of the State" (section 3). Ordinarily, a tax on land or land revenue is assessed on the actual or the potential productivity of the land sought to be taxed. In other words, the tax has reference to the income actually made, or which could have been made, with due diligence, and, therefore, is levied with due regard to the incidence of the taxation. Under the Act in question we shall take a hypothetical case of a number of persons owning and possessing the same area of land. One makes nothing out of the land, because it is arid desert. The second one does not make any income, but could raise some crop after a disproportionately large investment of labour and capital. A third one, in due course of husbandry, is making the land yield just enough to pay for the incidental expenses and labour charges besides land tax or revenue. The fourth is making large profits, because the land is very fertile and capable of yielding good crops. Under the Act, it is manifest that the fourth category, in our illustration, would easily be able to bear the burden of the tax. The third one may be able to bear the tax. The first and the second one will have to pay from their own pockets, if they could afford the tax. If they cannot afford the tax, the property is 92 liable to be sold, in due process of law, for realisation of the public demand. It is clear, therefore, that inequality is writ large on the Act and is. inherent in the very provisions of the taxing section. It is also clear that there is no attempt at classification in the provisions of the Act. Hence, no more need be said as to what could have been the basis for a valid classification. It is one of those cases where the lack of classification creates inequality. It is,, therefore, clearly hit by the prohibition to deny equality before the law contained in article 14 of the Constitution. Furthermore, sec. 7 of the Act, quoted above, particularly the latter part, which vests the Government with the power wholly or partially to exempt any land from the provisions of the Act, is clearly discriminatory in its effect and, therefore, infringes article 14 of the Constitution. The Act does not lay down any principle or policy for the guidance of the exercise of discretion by the Government in respect of the selection contemplated by a. 7. This Court has examined the cases decided by it with reference to the provisions of article 14 of the Constitution, in the case of Shri Ram Krishna Dalmia vs Shri Justice section B. Tendolkar and others (1). section R. Das, C. J., speaking for the Court has deduced a number of propositions from those decisions. The present case is within the mischief of the third proposition laid down at pages 299 and 300 of the Report, the relevant portion of which is in these terms: "A statute may not make any classification of the persons or things for the purpose of applying its provisions but may leave it to the discretion of the Government to select and classify persons or things to whom its provisions are to apply. In determining the question of the validity or otherwise of such a statute the Court will not strike down the law out of hand only because no classification appears on its face or because a discretion is given to the Government to make the selection or classification but will go on to examine and ascertain if the statute has laid down any principle or policy for the guidance of the exercise of discretion by the Government in the matter of the selection or classification. 93 After such scrutiny the Court will strike down the statute if it does not lay down any principle or policy for guiding the exercise of discretion by the Government in the matter of selection or classification, on the ground that the statute provides for the delegation of arbitrary and uncontrolled power to the Government so as to enable it to discriminate between persons or things similarly situate and that, therefore, the discrimination is inherent in the statute itself" (p. 299 of the Report). The observations quoted above from the unanimous judgment of this Court apply with full force to the provisions of the Act. It has, therefore, to be struck down as unconstitutional. There is no question of severability arising in this case, because both the charging sections, section 4 and section 7, authorising the Government to grant exemptions from the provisions of the Act, are the main provisions of the Statute, which has to be declared unconstitutional. The provisions of the Act are unconstitutional viewed from the angle of the provisions of article 19(1)(f) of the Constitution, also. Apart from the provisions of sections 4 and 7 discussed above, with reference to the test under article 14 of the Constitution, we find that section 5(A) is also equally objectionable because it imposes unreasonable restrictions on the rights to hold property, safeguarded by article 19(1)(f) of the Constitution. Section 5(A) declares that the Government is competent to make a provisional assessment of the basic tax payable by the holder of unsurveyed land. Ordinarily, a taxing statute lays down a regular machinery for making assessment of the tax proposed to be imposed by the statute. It lays down detailed procedure as to notice to the proposed assessee to make a return in respect of property proposed to be taxed, prescribes the authority and the procedure for hearing any objections to the liability for taxation or as to the extent of the tax proposed to be levied, and finally, as to the right to challenge the regularity of assessment made, by recourse to proceedings in a higher Civil Court. The Act merely declares the competence of the Government to make 94 a provisional assessment, and by virtue of section 3 of the Madras Revenue Recovery Act, 1864, the land holders may be liable to pay the tax. The Act being silent as to the machinery and procedure to be followed in making the assessment leaves it to the Executive to evolve the requisite machinery and procedure. The whole thing, from beginning to end, is treated as of a purely administrative character, completely ignoring the legal position that the assessment of a tax on person or property is at least of a quasi judicial character. Again, the Act does not impose an obligation on the Government to undertake survey proceedings within any prescribed or ascertainable period, with the result that a land holder may be subjected to repeated annual provisional assessments on more or less conjectural basis and liable to pay the tax thus assessed. Though the Act was passed about five years ago, we were informed at the Bar that survey proceedings had not even commenced. The Act thus proposes to impose a liability on land holders to pay a tax which is not to be levied on a judicial basis, because (1) the procedure to be adopted does not require a notice to be given to the proposed assessee; (2) there is no procedure for rectification of mistakes committed by the Assessing Authority; (3) there is no procedure prescribed for obtaining the opinion of a superior Civil Court on questions of law, as is generally found in all taxing statutes, and (4) no duty is cast upon the Assessing Authority to act judicially in the matter of assessment proceedings. Nor is there any right of appeal provided to such assessees as may feel aggrieved by the order of assessment. That the provisions aforesaid of the impugned Act are in their effect confiscatory is clear on their face. Taking the extreme case, the facts of which we have stated in the early part of this judgment, it can be illustrated that the provisions of the Act, without proposing to acquire the privately owned forests in the State of Kerala after satisfying the conditions laid down in article 31 of the Constitution, have the effect of eliminating the private owners through the machinery of the Act. The petitioner in petition 42 95 of 1958 has been assumed to own 25 thousand acres of forest land. The liability under the Act would thus amount to Rs. 50,000 a year, as already demanded from the petitioner on the basis of the provisional assessment under the provisions of section 5(A). The petitioner is making an income of Rs. 3,100 per year out of the forests. Besides, the liability of Rs. 50,000 as aforesaid, the petitioner has to pay a levy of Rs. 4,000 on the surveyed portions of the said forest. Hence, his liability for taxation in respect of his forest land amounts to Rs. 54,000 whereas his annual income for the time being is only Rs. 3,100 without making any deductions for expenses of management. Unless the petitioner is very enamoured of the property and of the right to hold it may be assumed that he will not be in a position to pay the deficit of about Rs. 51,000 every year in respect of the forests in his possession. The legal consequences of his making a default in the payment of the aforesaid sum of money will be that the money will be realised by the coercive processes of law. One can, easily imagine that the property may be sold at auction and may not fetch even the amount for the realisation of which it may be proposed to be sold at public auction. In the absence of a bidder forthcoming to bid for the offset amount, the State ordinarily becomes the auction purchaser for the realisation of the outstanding taxes. It is clear, therefore, that apart from being discriminatory and imposing unreasonable restrictions on holding property, the Act is clearly confiscatory in character and effect. It is not even necessary to tear the veil, as was suggested in the course of the argument, to arrive at the conclusion that the Act has that unconstitutional effect. For these reasons, as also for the reasons for which the provisions of sections 4 and 7 have been declared to be unconstitutional, in view of the provisions of article 14 of the Constitution, all these operative sections of the Act, namely 4, 5A and 7, must be held to offend article 19(1)(f) of the Constitution also. The petitions are accordingly allowed with costs against the contesting respondent, the State of Kerala. 96 SARKAR,J. These petitions were filed under Art.32 of the Constitution, challenging the validity of the Travancore Cochin Land Tax Act, 1955, as amended by Act X of 1957. The principal Act was passed by the legislature of the State of Travancore Cochin and the Amending Act, by the legislature of the State of Kerala, in which the State of Travancore Cochin had been merged. The petitioners are owners of lands in the State of Kerala. The Act as amended and hereafter referred to as the Act, levied a certain basic tax on all lands in the State of Kerala. The petitioners say that the levy is illegal and violates their fundamental rights. It appears from the preamble that the Act was passed as it was deemed necessary to provide for the levy of a low and uniform rate of basic tax on all lands in the State. The Act provides that the arrangement made by it for the levy of the basic tax is to be deemed to be a general revenue settlement of the State. Section 4 of the Act is the charging section and it lays down that there shall be charged and levied in respect of all lands in the State, of whatever description and held under whatever tenure, a uniform rate of tax to be called the basic tax. Section 5 fixes the rate of the tax at 2 n. P. per cent which works out at Rs. 2 per acre per annum. This section also provides that the basic tax shall be the tax payable to the Government in lieu of any other existing tax in respect of land. Section 12 abolishes all cesses on land except irrigation cess. The first ground on which the validity of the Act is challenged is that it offends the provision as to the equal protection of the laws contained in article 14 of the Constitution. The Act applies to all lands in the State and it imposes an uniform rate of tax, namely, Rs. 2 per acre. It is said that all lands in the State have not the same productive quality; that some are waste lands and others, lands of varying degrees of fertility. The contention is that the tax weighs more heavily on owners of waste lands than on owners of fertile lands. It is said that it is bound to happen that some owners make no income out of their lands 97 or make a small income and they would have to pay the tax out of their pocket while the owners of better classes of lands yielding larger income would be able to pay the tax out of the income from the lands. It is contended that the Act therefore discriminates between several classes of owners of lands in the State and is void as infringing the equality clause in the Constitution. It may be conceded that all lands in the State are not of the same degree of fertility. I am however unable to see that because of that, the Act can be said to discriminate between the owners of them. What is really said appears to be that the Act makes a classification of the owners of lands according to areas. Assume that the Act does so. The question then is, is such a classification illegal? The equal protection clause in the Constitution does not mean that there shall be no classification for the purpose of any law. It has been said by this Court in Budhan Choudhury vs The State of Bihar(1): "It is now well established that while article 14 forbids class legislation, it does not forbid reasonable classification for the purposes of legislation. In order, however, to pass the test of permissible classification two conditions must be fulfilled, namely, (i) that the classification must be founded on an intelligible differential which distinguishes persons or things that are grouped together from others left out of the group and (ii) that differential must have a rational relation to the object. Bought to be achieved by the statute in question". On the argument of the petitioners, the Act makes a classification between owners of lands using as the differentia, the area of the land held by them. The question then, is, is that differentia intelligible and has that differentia a rational relation to the object of the Act? Now it seems to me that both the tests are satisfied in the present case. The tax payers are classified according to the area of lands held by them. That is quite an intelligible basis on which to make a classification; holders of varying areas of land can (1) ; 1049. 13 98 quite understandably be placed in different classes. Next, has such a basis of classification, a rational relation to the object of the Act? The Act is a taxing statute. It is intended to collect revenue for the governmental business of the State. It says that one of its objects is to provide a low and uniform rate of basic tax. Another object mentioned is to replace all other dues payable to the Government in respect of the ownership of the land by a uniform basic tax. Why is it to be said that the use of the area of land held as the basis of classification has no rational relation to these objects. I find no reason. The object is to tax land held in the State for raising revenues. It is the holding of the land in the State that makes the owner liable to pay tax. It would follow that the quantum of the tax can be reasonably linked with the quantum of the holding. Why is it said that the classification on the basis of area is bad? It is only because it imposes unequal burden of the tax on the owners of land; because owners of less productive land would have a larger burden put on them. Now if this argument is right, then tax on land can be imposed only according to its productivity. I have not been shown any authority which goes to this length. I am further unable to see how productivity as the basis of classification could be said to have a more rational relation to the object of a statute collecting revenue by taxing land held in the State. The tax is not levied because the land is productive but because the land is held in the State. Again if the tax which could be imposed on land had to be correlated to its productivity, then the State would have no power to tax unproductive land and the provision in the Constitution that it would have power to tax land would, to that extent, be futile. It seems to me that a contention leading to such a result cannot be accepted. Reliance was placed for the petitioners on Cumberland Coal Company vs Board of Revision on Tax Assessments (1) in support of the contention that a tax on land not based on its productivity, violates article 14. (1) ; 99 I am unable to hold that this case supports the contention. What had happened there was that a certain statute had imposed a tax ad valorem on all coal situated in a certain area and in assessing the tax, the coal of the Cumberland Coal Company had been assessed by the authorities concerned at its full value while the coal of the rest of the class liable to the tax had been assessed at a lower value. Thereupon it was held that "the intentional systematic undervaluation by State Officials of taxable property of the same class belonging to other owners contravenes the con stitutional right of one taxed on the full value of his property. " On this view of the matter the Supreme Court of America directed readjustment of the assessments. The statute with which this case was concerned had levied the tax ad valorem which, it may be, is the same thing as a tax correlated to productivity. The case had therefore nothing to do with the question that a tax on coal otherwise than ad valorem would be unconstitutional. In fact this case did not declare any statute invalid. Then it seems to me that if the contention of the petitioners is right, and land could be taxed only on its productivity, for the same reason, taxes on all other things would have to be correlated to the income to be derived from them. The result would be far reaching. I am not prepared to accept a contention producing such a result and no authority has been cited to lead me to accept it. It may be that as lands are not of equal productivity, some tax payers may be able to pay the tax out of the income of the land taxed while others may have to find the money from another source. To this extent the Act may be more hard on some than on others. But I am unable to see that for that reason it is unconstitutional. All class legislation puts some in a more disadvantageous position than others. If the classification made by the law is good, as I think is the case with the present Act, the resultant hardship alone cannot make it bad. It was said in Magonn vs Illinois Trust and Savings Bank(1), "It is hardly (1) ; , 1043. 100 necessary to say that hardship, impolicy, or injustice of state laws is not necessarily an objection to their constitutional validity. " It is then said that sub sec. (1) of section 5A, which was introduced into the Act by the Amending Act, offends article 14. The impugned provision is in these terms: S.5A. (1) It shall be competent for the Government to make a provisional assessment of the basic tax payable by a person in respect of the lands held by him and which have not been surveyed by the Government, and upon such assessment such person shall be liable to pay the amount covered in the provisional assessment. This section was enacted as at the date of the Act, all lands had not been surveyed and so the areas of all holdings were not known. In the absence of such knowledge the tax which was payable on the basis of the areas of the holdings could not be assessed on unsurveyed lands, so the section provides that pending the survey, the Government will have power to make a provisional assessment on unsurveyed lands. This provision was necessary as the survey was bound to take time. The contention is that a. 5A(1) gives arbitrary power to the Government to make a provisional assessment on any person it chooses, leaving out others from the provisional assessment. I am unable to read the sub section in that way. It may be that it leaves it to the Government to make a provisional assessment if it chooses. This does not result in any illegal classification. The surveyed lands and unsurveyed lands are distinct classes of properties and may be differently treated. Again, all unsurveyed lands would on survey have to pay tax from the beginning. It would follow that the holders of both classes of lands are eventually subjected to the same burden. As to the contention that under this section the Government has the right to levy the provisional assessment at its choice on some and not on all holders of unsurveyed lands, I am unable to agree that this is a proper reading of the section. In my view, the 101 expression "a person" in the section does not lead to that conclusion. That expression should be read as "all persons" and it is easily capable of being so read. The section says, "It shall ' be competent for the ' Government to make a provisional assessment of the basic tax payable by a person". Now the basic tax is payable by all persons holding land. So the provisional assessment, if made, has to be on all persons holding lands whose lands have not been surveyed. The Government cannot, therefore, pick and choose. A statute is intended to be legal and it has therefore to be read in a manner which makes it legal rather than in a manner which makes it illegal. If the Government did not make the provisional assessment in the case of all liable to such assessment, then the Government 's action could be legitimately questioned. It has however not in fact been said in these petitions that in deciding to make the provisional assessment the Government has made any discrimination between the persons liable to such assessment. Section 5A(1) is also attacked on the ground that it is against rules of natural justice in that it does not say that in making the provisional assessment, any hearing would be given to the person sought to be assessed or requiring a return from him or giving him a right of appeal in respect of the provisional assessment made. It is true that the ' section does not expressly provide for a hearing being given. It seems to me however that if according to the rules of natural justice the assessee was entitled to a hearing, an assessment made without giving him such a hearing would be bad. The Act must be read so as to imply a provision requiring compliance with the rules of natural justice. Such a reading is not impossible in the present case as there is nothing in the Act indicating that the rules of natural justice need not be observed. It was said in Spack man vs Plumstead Board of Works (1) where a statute requiring an architect to give a certain certificate which did not provide the procedure as to how the architect was to conduct himself, came up for consideration that, "No doubt, in the (1) 10 A.C. 229, 240. 102 absence of special provisions as to how the person who is to decide is to proceed, the law will imply no more than that the substantial requirements of justice shall not be violated." Again in Maxwell on Statutes (10th ed.) p. 370 it has been said, "In giving judicial powers to affect prejudicially the rights of person or property, a statute is understood as silently implying, when it does not expressly provide, the condition or qualification that the power is to be exercised in accordance with the fundamental rules of judicial procedure, such, for instance, as that which requires that before its exercise, the person sought to be prejudicially affected shall have an opportunity of defend ing himself." In so far as this Act confers a power on the Government to discharge the judicial duty of making a provisional assessment, which the petitioners say, it does, it must imply that the judicial process has to be observed. As regards the return, that seems to me not to be of much consequence. If the assessee is entitled to be heard, the fact that he is not asked to make a return, would not constitute a departure from the rules of natural justice. Likewise, the absence of a right of appeal is not something on which the petitioners can rely. Rules of natural justice do not require that there must always be a right of appeal. Under the Act it is the Government which makes the assess ment and it would not be unreasonable to hold that in view of the high authority of the person assessing, the absence of a right of appeal is not likely to cause any miscarriage of justice. I am therefore unable to hold that in the absence of express provisions laying down the procedure according to which the provisional assessment is to be made, the Act has to be held invalid. It may here be stated that in those instances where, in the present cases, provisional assessments had been made, the, assessees had either themselves supplied the area of the lands held by them or the area had been determined after giving them a hearing. After the area has been determine , the amount of the tax payable is decided by a simple calculation at the rate 103 of Rs. 2 per acre of land held and with regard to this, no hearing is required. Then again sub see. (2) of section 5A provides that the Government after conducting a survey of the lands mentioned in sub sec. (1) under which provisional assessment is to be made, shall make a regular assessment and adjustments would have to be made in regard to tax already paid on the basis of the regular assessment. A point is made that there is no time limit fixed within which the regular assessment is to be made and so the Act leaves it to the arbitrary decision of the Government when to make the regular assessment. I do not think that this contention is correct. Properly read, the section in the absence of any indication as to time, means that regular assessment would have to be made as soon after the survey, as is reasonably possible. It is also said that section 7 of the Act offends article 14. This section gives power to the Government to exempt from the operation of the Act such lands or class of lands as the Government may by notification decide. This section does not indicate on what grounds the exemption is to be granted. It therefore seems to me that it gives arbitrary power to the Government and offends article 14. But the section is clearly severable from the rest of the Act. If the section is taken out of the Act, the operation of the rest of the Act will not in the least be affected. The only effect will then be that the Government will have no power to exempt any land from the tax. That will not in any way affect the other provisions of the Act. The invalidity of this section is therefore no reason for declaring the entire Act illegal. It may be pointed out that it is not alleged in the petitions that the Government has exempted any lands or class of lands from the operation of the Act. It is contended that section 8 of the amending Act also shows the arbitrary nature of the Act. That section provides that if any difficulty arises in giving effect to the provisions of this Act, the Government may by order do anything not inconsistent with such provisions which appears to it to be necessary or expedient 104 for removing the difficulty. This is a common form of provision now found in many Acts. The power given under it cannot be said to be uncontrolled for it must be exercised consistently with the Act and to remove difficulties arising in giving effect to the Act. In any event, this provision is contained in the amending Act only. Even if the section be held to be invalid that would not affect, the rest of the amending Act or any question that arises on these petitions. The validity of the Act is also challenged on the ground that it infringes article 19, cl. (1), sub cls. (f ) & (g). This challenge seems to me to be wholly untenable. Apart from the question whether a taxing statute can become invalid as offending article 19, as to which the position on the authorities does not seem to be very clear, it is plain that article 19 permits reasonable restrictions to be put on the rights mentioned in subcls. (f ) & (g). Now there is no dispute that the rate of tax fixed by the Act is a very low rate. It has not been said that the rate fixed is unreasonable. It clearly is not so. The restrictions on these rights under article 19(1), (f) & (g) put by the Act, if any, are clearly reasonable. These rights cannot therefore be said to have been infringed by the Act. The lands of the petitioners are lands on which stand forests. It is said that under the Madras Preservation of Private Forests Act, (Act XXVII of 1949), which applies to the lands with which we are concerned as they are situated in an area which previously formed part of the State of Madras, the owners of the forests can work them only with the permission of the officer mentioned in that Act. It is said that the control imposed by the officer has been such that the income received from the forest is much less than the tax payable under the Act in respect of the land on which the forest stands. Taking by way of illustration Petition No. 13, it is pointed out that the income from the forest with which that petition is concerned was Rs. 8,477 for the year 1956 57 while the tax payable under the Act for more or less the same period was Rs. 1,51,000. I am unable to hold that because of this the Act offends article 19(1), (f) and (g). 105 It is not stated that the land is not capable of producing any income other than the income from the forest standing on it. There is nothing to show that in all times to come the income from the land including the income from the forest, will be less than the tax imposed on it by the Act. The area of the land concerned in Petition No. 13 is enormous being about 75,500 acres. I am further unable to hold the impugned ' Act to be invalid because of action that may be taken under another Act, namely, the Madras Act XXVII of 1949. The validity of the Act is challenged also on the ground that it offends article 31 of the Constitution. I am unable to see any force in this contention. If the statute is otherwise valid, as I have found the present Act to be, it cannot, even if it deprives any person of property, be said to offend article 31(1). It has been held by this Court in Ramjilal vs Income tax Officer,. Mohindargarh (1) that "clause (1) of article 31 must be regarded as concerned with deprivation of property otherwise than by the imposition or collection of tax, for otherwise article 265 becomes wholly redundant." No question of cl. (2) of article 31 being violated arises here for the Act does not deal with any acquisition of property. It is also said that the Act is a colourable piece of legislation, namely, that though in form a taxing statute it, in effect, is intended to expropriate lands, held by the citizens in the State by imposing a tax too heavy for the land to bear. As was said in Raja Bhairebendra Narayan Bhup vs The State of Assam (2) "The doctrine of colourable legislation is relevant only in connection with the question of legislative competency". In the present case, there being in my view, no want of legislative competency in the legislature which passed the Act in question, the Act cannot be assailed as a piece of colourable legislation. I may add that I do not accept the argument that the Act is in its nature expropriatary or that the tax imposed by it is really excessive. (1)[1951] S.C.R. 127, 136. (2) [1956] S.C.R. 303. 14 106 I come now to the last argument advanced by the petitioners. It is said that the Act was beyond the legislature competence of the State Legislature. It is conceded that the State Legislature has power to impose a tax on land under entry 49 of List 2 in the Seventh Schedule to the Constitution, but it is said that land as mentioned in that entry does not include lands on which forests stand. It is contended that the State Legislature has power to legislate about forests under entry 19 of that List and also as to land under entry 18. There is however no power to impose a axon forests while there is power under entry 49 of that list to tax land. Therefore, it is said, that there is no power to impose tax on lands on which forests stand and the Act in so far as it imposes tax on lands covered by forests, which the lands of the petitioners are, is hence incompetent. It is not in dispute that a State Legislature has no power to impose a tax on a matter with regard to which it has the power to legislate but has been given no express power to impose a tax. Therefore, I agree, that a State Legislature cannot impose tax on forests. I am however not convinced that "land" in entry 49 is not intended to include land on which a forest stands. No doubt, a forest must stand on some land. In Shorter Oxford Dictionary, one of the mean ings of "forest" is given as an extensive tract of land covered by trees and undergrowth, sometimes intermingled with pastures. The concepts of forest and land however are entirely different. The principal idea conveyed by the word "forest" is the trees and other growth on the land. Under entry 19 there may no doubt be legislation with regard to land in so far it is necessary for the purpose of the forest growing on it. It is well known that entries in the legislative lists have to be read as widely as possible. It is not necessary to cut down the plain meaning of the word ,"land" in entry 49 to give full effect to the word "forest" in entry 19. In my view, the two entries namely, entry 49 and entry 18 deal with entirely different matters. Therefore, under entry 49 taxation 107 on land on which a forest stands is permissible and legal. For these reasons I would dismiss these petitions. BY COURT: In accordance with the opinion of the majority of the Court, these Petitions are allowed with costs against the contesting Respondent, the State of Kerala. Petitions allowed.

IN-Abs

The Travancore Cochin Land Tax Act, 1955 was passed by the legislature of the State of Travancore Cochin and was amended by Act 10 of 057, by the State of Kerala. By section 4 Of the Act all lands in the State of whatever description and held under whatever tenure were to be charged and levied a uniform rate of tax to be called the basic tax. Section 7 gave power to the Government to exempt from the operation of the Act such 78 lands or class of lands which the Government may, by notification, decide. Section 5A which was introduced into the Act by the Amending Act enabled the Government to make a provisional assessment of the basic tax in respect of the lands which had not been surveyed by the Government and provided that the Government after conducting the survey shall make a regular assessment and make the necessary adjustments in respect of the amounts paid already. There was, however, no time fixed for the conduct of the survey. The petitioners who owned forest in the State, challenged the constitutional validity of the Act on the grounds that the provisions of the Act contravened articles 14, 19(i)(f) and 31(1) of the Constitution of India inasmuch as (1) the Act did not have any regard to the quality of the land or its productive capacity and the levy of a tax at a flat rate of RS. 2 per acre imposed very unreasonable restrictions on the right to hold property, (2) the. Act did not lay down any provision calling for a return from the assessee for an enquiry or investigation of facts before the provisional assessment was made or any right of appeal to any higher authority and, in fact, did not make any provision for hearing the assessee at any stage, (3) section 7 gave arbitrary power to the Government to pick and choose in the matter of grant of total or partial exemption from the provisions of the Act, and (4) the tax proposed to be levied had absolutely no relation to the production capacity of the land sought to be taxed or to the income they could derive, and therefore the Act had been conceived with a view to confiscating private property, there being no question of any compensation being paid to those who may be expropriated as a result of the working of the Act. The petitioners also challenged the legislative competence of the legislature of the State to levy a tax on lands on which forests stood. The case on behalf of the State of Kerala, inter alia, was that the Act had its justification in article 265 Of the Constitution of India, which was not subject to the provisions of Part III of the Constitution and that, therefore, articles 14, 19 and 31 could not be pressed in aid of the petitioners. , Held, (Sarkar, J., dissenting), that the Travancore Cochin Land Tax Act, 1955, infringed the provisions of article 14 Of the Constitution of India. The Act obliged every person who held land to pay the tax at the flat rate prescribed, whether or not he made any income out of the property, or whether or not the property was capable of yielding any income. Consequently, there was no attempt at classification in the provisions of the Act and it was one of those cases where the lack of classification created inequality. It was therefore hit by the prohibition to deny equality before the law contained in article 14. Section 5A of the Act which enabled the Government to make a provisional assessment of the basic tax payable by the 79 holder of unsurveyed land imposed unreasonable restrictions on the rights to hold property safeguarded by article 19(1)(f) of the Constitution, inasmuch as (1) the Act did not impose an obligation on the Government to undertake survey proceedings within any prescribed or ascertainable period, with the result that a landholder might be subjected to repeated annual provisional assessments on more or less conjectural basis and liable to pay the tax assessed, and (2) the Act being silent as to the machinery and procedure to be followed in making the assessment left it to the Executive, completely ignoring the legal position that the assessment of a tax on a person or property was at least of a quasijudicial character. Section 7 of the Act which vested the Government with the power wholly or partially to exempt any land from the provi sions of the Act did not lay down any principle or policy for the guidance of the exercise of discretion by the Government in respect of the selection contemplated by the section, and was, therefore, discriminatory in effect and offended article 14. The section was not severable from the rest of the Act as both the charging sections, section 4 and section 7, authorising the Government to grant exemptions from the provisions of the Act were the main provisions of the statute. Shri Ram Krishna Dalmia vs Sri justice section R. Tendolkar; , , relied on. The Act was also confiscatory in character inasmuch as the provisions of the Act had the effect of eliminating the private owners through the machinery of the Act, without proposing to acquire the privately owned forests in the State after satisfying the conditions laid down in article 31 of the Constitution. Per Sinha, C.J., Imam, Subba Rao and Shah, JJ. Article 265 of the Constitution which provided that the State shall not levy or collect a tax except by authority of law referred to a valid law, and in order that the law might be valid, the tax proposed to be levied must be within the legislative competence of the Legislature imposing a tax and authorising the collection thereof and, secondly, the tax must be subject to the conditions laid down in article 13, by which all laws inconsistent with or in derogation of the fundamental rights in Part III shall be void. Per Sarkar, J. (1) The object of the Act was to tax land in the State for raising revenues by providing for a low and uniform rate of basic tax replacing all other dues payable to the Government and the tax payers were classified according to the area of lands held by them. Such a classification had an intelligible basis and had a rational relation to the object of the Act. As tax was to be levied not because the land was productive but because the land was held in the State, the classification did not offend article 14 Of the Constitution, even though it might impose unequal burden of the tax on the owners of land on account of owners of less productive land being put on a larger burden. 80 (2)Section 5A did not offend article 14 and in the absence of express provisions laying down the procedure according to which the provisional assessment was to be made, the Act could not be held invalid on the ground that it was against the rules of natural justice. (3)Section 7, even if it were considered invalid on the ground that it gave arbitrary power to the Government and offended article 14, was severable from the rest of the Act and would not affect the other provisions of the Act. (4)The Act did not infringe the fundamental rights in article 19(1)(f) as the rate of tax fixed by the Act was a very low rate and the restrictions on those rights were reasonable. (5) The Act was not in its nature expropriatary and did not offend article 31. As there was no want of legislative competence, theAct could not be assailed as a piece of colourable legislation on the ground that though in form a taxing statute it, in effect, was intended to expropriate lands by imposing a tax too heavy for the land to bear. (6)The word "land" in Entry 49 of List II, Sch. 7, of the Constitution, included "land on which a forest stands" and, therefore, under that Entry taxation on land on which forests stood was permissible and legal. The Act, therefore, could not be challenged as being beyond the legislative competence of the State Legislature.

Appeal No. 35 of 1959. Appeal from the judgment and decree dated October 29, 1956, of the Allahabad High Court in Writ Petition No. 327 of 1956. H. N. Sanyal, Additional Solicitor General of India, J. B. Dadachanji, section N. Andley, Rameshwar Nath and P. L. Vohra, for the appellants. G. C. Mathur and C. P. Lal, for the respondents. 1960, December 13. The Judgment of Imam, Kapur, Das Gupta and Dayal, JJ. was delivered by Das Gupta, J. Ayyangar, J. delivered a separate judgment. DAS GUPTA, J. This appeal is against an order of the High Court of Judicature at Allahabad rejecting the appellants ' application under article 226 of the Constitution. The first appellant is the Diamond Sugar Mills Ltd., a public limited company owning and operating a sugar factory at Pipraich in the District Gorakhpur, for the manufacture of sugar from 244 sugarcane. The second appellant is the Director of the company. By this application the appellants challenged the imposition of cess on the entry of sugarcane into their factory. On February 24, 1956, when the application was made the U. P. Sugarcane (Regulation of Supply and Purchase) Act, 1953 (U. P. XXIV of 1953), was in force. Section 20 of this Act gave to the Governor of U. P. the power to impose by notification "a cess not exceeding 4 annas per maund on the entry of sugarcane into an area specified in such notification for consumption, use or sale therein". This Act it may be mentioned had taken the place of an earlier Act, the U. P. Sugar Factories Control Act, 1938, section 29 of which authorised the Governor of U. P. to impose by a notification after consultation with the Sugar Control Board under the Act "a cess not exceeding 10 per cent of the minimum price, if any, fixed under section 21 or 4 annas per maund whichever was higher on the entry of sugarcane into a local area specified in such notification for consumption, use or sale therein". Notifications were issued under this provision for different crushing seasons starting from 1938 39, the last notification issued thereunder being for the crushing season of 1952 53. These notifications set out a number of factories in a schedule and provided that during 1952 53 crushing season cess at a rate of three annas per maund shall be levied on the entry of all sugarcane into the local areas comprised in factories mentioned in the schedule for consumption, use or sale therein. Act No. XXIV of 1953 repealed the 1938 Act. The first notification under the provisions of section 20 of the 1953 Act was in these terms: "In exercise of the powers conferred by sub section (1) of section 20 of Uttar Pradesh Sugarcane (Regulation of Supply and Purchase) Act, 1953; (U. P. Act No. XXIV of 1953) the Governor is pleased to declare that during the 1954 55 crushing season, a cess at a rate of three annas per maund shall be levied on the entry of all sugar cane into the local areas comprised in the factories mentioned in the Schedule, for the consumption, use or sale therein". 245 Similar notifications were also issued on October 23, 1954, for the crushing season 1954 55 and on November 9, 1955, for the crushing season 1955 56. The appellants ' factory was one of the factories mentioned in the schedule of all these notifications. On the date of the application, i.e., February 24, 1956, a sum. of Rs. 2,59,644 9 0 was due from the first appellant and a further sum of Rs. 2,41,416 3 0 as liability on account of cess up to the end of January, 1956, also remained unpaid. The appellant contended on various grounds that section 20 of Act XXIV of 1953 was unconstitutional and invalid and prayed for the issue of appropriate writs directing the respondents the State of U. P. and the Collector of Gorakhpur not to levy and collect cess on account of the arrears of cess for the crushing season 1954 55 and in respect of the crushing season 1955 56 and successive crushing seasons and to withdraw the notifications dated October 23, 1954, and November 9, 1955 , which have been mentioned above. During the pendency of this application under article 226 before the Allahabad High Court the U. P. Legislature enacted the U. P. Sugarcane Cess Act, 1956 (U. P. XXII of 1956), repealing the 1953 Act. Section 3 of this Act as originally enacted was in these words: "The State Government may by notification in the official gazette impose a cess not exceeding four annas per maund on the entry of the cane into the premises of a factory for use, consumption or sale therein: Provided that the State Government may like. wise remit in whole or in part such cess in respect of cane used or to be used in factory for any limited purpose specified in the notification. Explanation: If the State Government, in the case of any factory situate outside Uttar Pradesh, so declare, any place in Uttar Pradesh set apart for the purchase 'of cane intended or required for use. consumption or sale in such factory shall be deemed to be the premises of the factory. (2) The cess imposed under sub section (1) shall 246 be payable by the owner of the factory and shall be paid on such date and at such place as may be prescribed. (3) Any arrear of cess not paid on the date prescribed under sub section (2) shall carry interest at 6 per cent. per annum from such date to date of payment. " There is a later amendment by which the words "four annas" have been altered to "twenty five naye paise" and the words "Gur, Rab or Khandsari Sugar Manufacturing Unit" have been added after the words "factory" in sub section (1). These amendments are however not relevant for the purpose of this appeal. Section 9 of this Act repealed section 20 of the Sugar Cane (Regulation of Supply and Purchase) Act, 1953. Sub sections 2 and 3 of section 9 are important. They are in these words: "2. Without prejudice to the general application of section 24 of the U.P. General Clauses Act, 1904, every notification imposing cess issued and every assessment made (including the amount of cess collected) under or in pursuance of any such notification, shall be deemed a notification issued, assess ment made and cess collected under this Act as if sections 2, 3 and 5 to 8 had been in force at all material dates. Subject as provided in clause (1) of Article 20 of the Constitution every notification issued cess imposed and act or thing done or omitted between the 26th January, 1950, and the Appointed date in exercise or the purported exercise of a power under section 29 of the U. P. Sugar Factories Control Act, 1938, or of section 20 of the U. P. Sugarcane (Regulation of Supply and Purchase) Act, 1953, which would have been validly and properly issued, imposed, done or omitted if the said sections had been as section 3 of this Act, shall in law be deemed to be and to have been validly and properly imposed and done, any judgment, decree or order, of any court notwithstanding. " The position after the enactment of the U. P. 247 Sugarcane Cess Act, 1956, was that the imposition and assessment of cess that had already been made under the 1953 Act would operate as if made under the 1956 Act. In view of this the first appellant, the Diamond Sugar Mills Ltd., prayed to the High Court for permission to raise the question of constitutionality and validity of the 1956 Act. It also prayed for the issue of a writ in the nature of mandamus directing the respondents not to levy cess upon the petitioners appellants under this new Act, the U. P. Sugarcane Cess Act, 1956. This application was allowed and the High Court considered the question whether section 3 of the U. P. Sugarcane Cess Act, 1956, 'empowering the State Government to impose a cess not exceeding four annas per maund on the entry of the cane into the premises of a factory for the consumption, use or sale therein was a valid law. The principal ground urged in support of the appellants ' case was that the law as enacted in section 3 was invalid and that it was beyond the legislative competence of the State Legislature. Several other grounds including one that the provisions of the section went beyond the permissible limits of delegated legislation were also raised. All the grounds were negatived by the High Court which accordingly rejected the appellants ' petition. The High Court however gave a certificate under Article 132(1) and also under article 133(1)(c) of the Constitution and on the basis of that certificate the present appeal has been filed. Of the several grounds urged before the High Court only two are urged before us in appeal. One is that the law was invalid, being beyond the legislative competence of the State legislature; the other is that in any case the provision giving the Governor power to levy any cess not exceeding 4 annas without providing for any guidance as to the fixation of the particular rate, amounted to excessive delegation, and was accordingly invalid. The answer to the question whether the impugned law was within or beyond the legislative competence of the State legislature depends on whether the law falls under Entry 52 of the State List 248 List II of the Seventh Schedule to the Constitution. It is quite clear that there is no other entry in either the State List or the Concurrent List under which the legislation could have been made. Entry 52 is in these words: "Tax on the entry of goods into a local area for consumption, use or sale therein". Section 3 of the impugned Act which has already been set out provides for imposition of a cess on the entry of sugarcane into the premises of a factory for use, consumption or sale therein. Is the "premises of a factory" a local area within the meaning of the words used in Entry 52? If it is the legislation was clearly within the competence of the State legislature; if it is not, the law was beyond the State legislature 's competence and must be struck down as invalid. In considering the meaning of the words "local area" in entry 52 we have, on the one hand to bear in mind the salutary rule that words conferring the right of legislation should be interpreted liberally and the powers conferred should be given the widest amplitude; on the other hand we have to guard ourselves against extending the meaning of the words beyond their reasonable connotation, in. an anxiety to preserve the power of the legislature. In Re the Central Provinces & Berar Act No. XI V of 1938 (1) Sir Maurice Gwyer, C. J., observed: "I conceive that a broad and liberal spirit should inspire those whose duty it is to interpret it; but I do not imply by this that they are free to stretch or pervert the language of the enactment in the interests of any legal or constitutional theory, or even for the purpose of correcting any supposed errors". Again, in Navinchandra Mafatlal vs The Commissioner of Income Tax, Bombay City (2) Das, J. (as he then was) delivering the judgment of this Court observed: ". . . The cardinal rule of interpretation however, is that words should be read in their ordinary, natural and grammatical meaning subject to this rider that in construing words in a constitutional enactment conferring legislative power the most (1) , 37. (2) [1955] 1 S.C.R. 829. 249 liberal construction should be put upon the words so that the same may have effect in their widest amplitude. " Our task being to ascertain the limits of the powers granted by the Constitution, we cannot extend these limits by way of interpretation. But if there is any difficulty in ascertaining the limits, the difficulty must be resolved so far as possible in favour of the legislative body. The presumption in favour of constitutionality which was stressed by the learned counsel for the respondents does not take us beyond this. On behalf of the appellants it has been urged that the word "local area" in its ordinary grammatical meaning is never used in respect of a single house or a single factory or a single plot of land. It is urged that in ordinary use the words "local area" always mean an area covering a specified region of the country as distinguished from the general area. While it may not be possible to say that the words "local area" have acquired a definite and precise meaning and the phrase may have different connotations in different contexts, it seems correct to say that it is seldom, if ever, used to denote a single house or a single factory. The phrase appears in several statutes, some passed by the Central Legislature and some by the Provincial or State Legislatures; but in many of these the words have been defined. These definitions being for the peculiar purpose of the particular statute cannot be applied to the interpretation of the words "local area" as used in the Constitution. Nor can we derive any assistance from the judicial interpretation of the words "local area" as used in the Code of Criminal Procedure or other Acts like Bengal Tenancy Act as these interpretations were made with reference to the scope of the legislation in which the phrase occurs. Researches into dictionaries and law lexicons are also of 'no avail as none of these give the meaning of the phrase "local area". What they say as regards the meaning of the word "local" offers no guidance except that it is clear that the word "local" has different meanings in different contexts. 32 250 The etymological meaning of the word "local" is "relating to" or "pertaining to" a place. It may be first observed that whether or not the whole of the State can be a "local area", for the purpose of Entry 52, it is clear that to be a "local area" for this purpose must be an area within the State. On behalf of the respondents it is argued that "local area" in Entry 52 should therefore be taken to mean "any part of the State in any place therein". So, the argument runs, a single factory being a part of the State in a place in the State is a "local area". In other words, "local area" mean "any specified area inside the State". The obvious fallacy of this argument is that it draws no distinction between the word "area" standing by itself and the phrase "local area". If the Entry had been " entry of goods into any area of the State. . . some area would be specified for the purpose of the law levying the cess on entry. If the Constitutions were empowering the State Legislatures to levy a cess on entry of goods into any specified area inside the state the proper words to use would have been "entry of goods into any area. . . " it would be meaningless and indeed incorrect to use the words they did use "entry of goods into a local area". The use of the words "local area" instead of the word "area" cannot but be due to the intention of the Constitution makers to make sure that the power to make laws relating to levy on entry of goods would not extend to cases of entry of goods into any and every part of the state from outside that part but only to entry from outside into such portions of the state as satisfied the description of "local area". Something definite was sought to be expressed by the use of the word "local" before the word "area": The question is: what exactly was sought to be expressed? In finding an answer to the question it is legitimate to turn to the previous history of constitutional legislation in the country on this subject of giving power to legislature to levy tax on the entry of goods. In the State of Madras vs Gannon Dunkerley & Co., Ltd.(1) (1) ; 251 this Court referred with approval to the statement of law in Halsbury 's Laws of England, Vol. II, para. 157, p. 93, that the existing state of English law in 1867 is relevant for consideration in determining the meaning of the terms used in the British North America Act in conferring power and the extent of that power. This has necessarily to be so as in the words of Mr. Justice Brewer in South Carolina vs United States (1) "to determine the extent of the grants of power, we must, therefore place ourselves in the position of the men who framed and adopted the Constitution, and inquire what they must have understood to be the meaning and scope of those grants. " Turning now to the previous legislative history we find that in the Government of India Act, 1935, Entry 49 of the Legislative List (List II of the 7th Schedule) was in the same words as Entry 52 of the Constitution except that instead of the words "taxes" as in Entry 52 of List II of the Constitution, Entry 49 List II of the Government of India Act, used the word "cess". In Government of India Act, 1915, the powers of the provincial legislatures were defined in section 80A. 'Under clause (a) of the third sub section of this section the local legislature of any province has with the previous sanction of the Governor General power to make or take into consideration any law imposing or authorising the imposition of any new tax unless the tax was a tax scheduled as exempted from this provision by rules made under the Act. The third of the Rules that were made in this matter under Notification No. 311/8 dated December 18, 1920, provided that the legislative council of a province may without the previous sanction of the Governor General make and take into consideration any law imposing or authorising a local authority to impose for the purpose of such local authority any tax included in Schedule II of the Rules. Schedule II contained 11 items of which items 7 and 8 were in these words: 7. An octroi 8. A terminal tax on goods imported into a local (1) ; 252 area in which an octroi was levied on or before 6th July, 1917. Item 8 was slightly modified in the year 1924 by another notification as a result of which it stood thus: 8. A terminal tax on goods imported into or exported from a local area save where such tax is first imposed in a local area in which an octroi was levied on or before July 6, 1917. Octroi is an old and well known term describing a tax on the entry of goods into a town or a city or a similar area for consumption, sale or use therein. According to the Encyclopedia Britannica octroi is an indirect or consumption tax levied by a local political unit, normally the commune or municipal authority, on certain categories of goods on their entry into its area. The Encyclopedia Britannica describes the octroi tax system in France (abolished in 1949) and states that commodities were prescribed by law and were divided into six classes and for all the separate commodities within these six groups maximum rates of tariff were promulgated by presidential decree, specific rates being fixed for the three separate sorts of octroi area, established on the basis of population, namely, communes having (1) less than 10,000 inhabitants, (2) from 10,000 to 50,000 and (3) more than 50,000. While we are not concerned here with other features of the octroi tax system, it is important to note that the tax was with regard to the entry of goods into the areas of the communes which were local political units. According to the Shorter Oxford English Dictionary "commune" in France is a small territorial division governed by a maire and municipal council and is used to denote any similar division elsewhere. The characteristic feature of an octroi tax then was that it was on the entry of goods into an area administered by a local body. Bearing in mind this characteristic of octroi duty we find on an examination of items 7 and 8 of the Schedule Rules mentioned above that under the Government of India Act, 1919, the local legislature of a Province could without the previous sanction of the Governor General impose a 253 tax octroi for entry of goods into an area administered by a local body, that is, a local government authority and the area in respect of which such tax could be imposed was mentioned in item 8 as local area. It is in the background of this history that we have to examine the use of the word "local area" in item 49 of List II of the Government of India Act, 1935. Here the word "octroi" has given place to the longer phrase "cesses on the entry of goods into a local area for consumption, use or sale therein. " It was with the knowledge of the previous history of the legislation that the Constitution makers set about their task in preparing the lists in the seventh schedule. There can bring title doubt therefore that in using the words "tax on the entry of goods into a local area for consumption, use or sale therein", they wanted to express by the words "local area" primarily area in respect of which an octroi was leviable under item 7 of the schedule tax rules, 1920 that is, the area administered by a local authority such as a municipality, a district Board, a local Board or a Union Board, a Panchayat or some body constituted under the law for the governance of the local affairs of any part of the State. Whether the entire area of the State, as an area administered by the State Government, was also intended to be included in the phrase "local area", we need not consider in the present case. The only other part of the Constitution where the word "local area" appears is in article 277. That Article is in these words: "Any taxes, duties, cesses or fees which, immediately before the commencement of this Constitution, were being lawfully levied by the Government of any State or by any municipality or other local authority or body for the purposes of the State, municipality, district, or other local area may, notwithstanding that these taxes, duties, cesses or fees are mentioned in the Union List, continue to be levied and to be applied to the same purposes until provision to the contrary is made by Parliament by law. " 254 There can be little doubt that "local area" in this Article has been used to indicate an area in respect of which there is an authority administering it. While the scope of Article 277 is different from the scope of entry 52 so that no direct assistance can be obtained in the interpretation of the words "local area" in entry 52 from this meaning of the words in article 277 it is satisfactory to find that the meaning of "local area" in entry 52 which appears reasonable on a consideration of the legislative history of the matter is also appropriate to this phrase in its only other use in the Constitution. Reliance was sought to be placed by the respondents on a decision of the Allahabad High Court in Emperor vs Munnalal (1) where the word "local area" as used in section 29 of the U. P. Sugar Factories Control Act, 1938, fell to be considered. That section, as we have already mentioned, authorised the Governor of U. P. to impose by a notification, after consulting the Sugar Control Board under the Act, a cess on the entry of sugarcane into a local area specified in such notification for consumption, use or sale therein. The notifications which were issued under this provision set out a number of factories for the levy of a cess at the rate of three annas per maund on entry of all sugarcane into the local area comprised in the factories mentioned in the schedule for consumption, use or sale therein. Section 29 was clearly within the words of entry 49 of List 11. The question that arose before the Court was whether the specification of certain factories as local areas was valid law. The learned Judge appears to have proceeded on the basis that the Governor had notified the area comprised in 74 factories as one "local area" and held that once this was 'done the entire area covered by all these factories should be considered as one statutory local area. It appears to us that the learned Judge was not right in thinking that the area comprised in 74 factories was notified as one local area. What appears to have been done was that the area of each factory was being notified as a local area for the purpose of the Act. Proceeding on (1) I.L.R. 1942 All. 302. 255 the basis that the area comprised in the 74 factories was notified as one local area the learned Judge addressed himself to the question whether this entire area was a local area within the meaning of the Act. He appears to have accepted the contention that the word local area was used in the sense of an administrative unit, but, says he, the administration need not be political, it may be industrial and educational or it may take any other form of governmental activity. "I cannot see," the learned Judge observed, "why it is not open to the provincial government or the provincial legislature to make an industrial survey of the province and to divide up the entire province into industrial areas or factory areas or mill areas or in any other kind of areas, and each one of these areas may be notified and be treated as a local area. And once such areas come into existence and remain in operation they can be regarded as local areas within the meaning of entry No. 49 of List II in which a cess may be levied". Even if this view were correct it would be of no assistance to the respondents. It is no authority for the proposition that the area of one single factory is a local area within the meaning of entry 49. We think however that the view taken by the learned Judge is not correct. It is true that when words and phrases previously interpreted by the courts are used by the Legislature in a later enactment replacing the previous statute, there is a presumption that the Legislature intended to convey by their use the same meaning which the courts had already given to them. This presumption can however only be used as an aid to the interpretation of the later Statute and should not be considered to be conclusive. As Mr. Justice Frankfurter observed in Federal Commissioner vs Columbia B. System (1) when considering this doctrine, the persuasion that lies behind the doctrine is merely one factor in the total effort to give fair meaning to language. The presumption will be strong where the words of the previous statute have received a settled meaning by a (1) 311 U.S. 131. 256 series of decisions in the different courts of the country; and particularly strong when such interpretation has been made or affirmed by the highest court in the land. We think it reasonable to say however that the presumption will naturally be much weaker when the interpretation was given in one solitary case and was not tested in appeal. After giving careful consideration ' to the view taken by the learned Judge of the Allahabad High Court in Emperor vs Munnalal (supra) about the meaning of the words "local area" and proper weight to the rule of interpretation mentioned above, we are of opinion that the Constitution makers did not use the words "local area" in the meaning which the learned Judge attached to it. We are of opinion that the proper meaning to be attached to the words "local area" in Entry 52 of the Constitution, (when the area is a part of the State imposing the law) is an area administered by a local body like a municipality, a district board, a local board, a union board, a Panchayat or the like. The premises of a factory is therefore not a "local area". It must therefore be held that section 3 of the U. P. Sugarcane Cess Act, 1956, empowering the Governor to impose a cess on the entry of sugarcane into the premises of a factory did not fall within Entry 52 of the State List. As there is no other Entry in either State List or Concurrent List in which the impugned law could fall there is no escape from the conclusion that this law was beyond the legislative competence of the State Legislature. The law as enacted in section 3 of the U. P. Sugarcane Cess Act, 1956, must therefore be struck down as invalid. It may be mentioned that this is not a case where the law is in two parts and one part can be severed from the other and saved as valid while striking down the other portion which is invalid. Indeed, that was not even suggested by the learned counsel for the respondents. It is unnecessary for us to consider whether if section 3 had instead of authorising levy of cess for entry of sugarcane into the premises of a factory for use, consumption or sale therein had authorised the imposition of a cess on entry of cane into a local area for 257 consumption, sale or use in a factory that would have been within Entry 52. It is sufficient to say that we cannot re write the law for the purpose of saving a portion of it. Nor is it for the Court to offer any suggestion as to how the law should be drafted in order to keep it within the limits of legislative competence. As the law enacted by the Legislature stands there is no escape from the conclusion that this entire law must be struck down as invalid. In view of this conclusion on the first ground raised on behalf of the appellant it is unnecessary to consider the other ground raised in the appeal that section 3 has gone beyond the permissible limits of delegated legislation. As we have held that the impugned legislation was beyond the legislative competence of the State Legislature the appellants are entitled to the relief asked for. We accordingly allow the appeal, set aside the order passed by the High Court and order the issue of a writ directing that the respondents do forbear from levying and collecting cess from the appellants on account of arrears of cess for the crushing season 1954 55 and in respect of the crushing season 1955 56 and successive crushing seasons under the U. P. Sugarcane Cess Act, 1956. The appellants will get their costs here and below. AYYANGAR, J. I have had the privilege of perusing the judgment just now pronounced, but with the utmost respect regret my inability to agree with the order proposed. The learned Judges of the High Court held that the impugned enactment was within the scope of Entry 52 of the State Legislative List in Schedule 7 to the Constitution, by placing reliance on the following passage in the Judgment of Das, J. in Emperor vs Munna Lal (1) where the learned Judge said: "Indeed I cannot see why it is not open to Provincial Government or Provincial Legislature to make an industrial survey of the Province and to divide up the entire province into industrial areas (1) I.L.R. [1942] All. 302, 328. 33 258 or factory areas or mill areas or in any other kind of areas, and each one of these areas may be notified and be treated as a local area. And once such areas come into existence and remain in operation they can be regarded as local areas within the meaning of Entry No. 45 of List II in which a cess may be levied. " In other words, the view which they favoured was to read the expression "local area". practically to mean any "area" entry into which was by the relevant fiscal statute, made the subject of taxation. In my opinion that is not a correct interpretation of the entry and agree with my learned brethren that having regard to the historical material, which has been exhaustively set out and discussed in their judgment, the word "local area" can in the entry designate only a predetermined local unit a unit demarcated by statutes pertaining to local self government and placed under the control and administration of a local authority such as a municipality, a cantonment, a district or a local board, an union or a panchayat etc. and not any region, place or building within the State which might be defined, described or demarcated by the State 's taxing enactment as an area entry into which is made taxable. But there my agreement stops and we diverge. In my opinion, this construction of the expression "local area" in entry 52 does not automatically result in the invalidity of the impugned enactment and of the levy under it, but the extent to which, if any the charging section exceeds the power conferred by the entry would depend on matters which have not been the subject of investigation, and it is this point that I shall elaborate in the rest of this judgment. It is unnecessary for the purposes of this case and possibly even irrelevant, to determine the precise scope, content and incidents of an "octroi" duty except that in the context in which it appeared in the Scheduled Taxes Rules framed tinder the Government of India Act, 1919, the expression signified a tax levied on entry into an area of an unit of local administration. It is unprofitable to canvass the question 259 whether a local authority empowered at that date to levy an 'octroi ' might or might not lawfully confine the levy to entry for consumption alone, to use alone or for sale alone. But when that entry was refashioned and enacted as item 49 of the Provincial Legislative List under the Government of India Act, 1935 (in terms practically identical with Entry 52 in the State Legislative List under the Constitution), the matter was no longer left in doubt. The new item ran: "Cesses on the entry of goods into a local area for consumption, use or sale therein". In connection with the use of the words "for consumption, use or sale therein" in the item three matters deserve notice: (1) Where the entry into the "local area" was not for one of the purposes set out in it, viz., for consumption, use or sale therein, but the entry was, for instance in the course of transit or for warehousing during transit, the power was not available; in other words, a mere entry could not per se be made a taxable event. (2) It was sufficient if the entry was for any one of the three purposes; the use of the disjunctive 'or ' making this clear. (3) The passage of goods from one portion of a local area to another portion in the same local area, would not enable a tax to be levied, but the entry has to be "into the local area", i.e., from outside the local area. It is the second and the third of the above features that call for a more detailed examination in the context of the points requiring decision in the present case. With this background I shall analyse the terms of section 3(1) of the Act (United Provinces Act XXII of 1956) to ascertain where precisely the provision departs from the scope or content of entry 52. I will read that section which runs: "3. The State Government may by notification in the official gazette impose a cess not exceeding four annas per maund on the entry of the cane into the premises of a factory for use, consumption or sale therein: Provided that the State Government may likewise remit in whole or in part such cess in respect 260 of cane used or to be used in factory for any limited purpose specified in the notification. Explanation: If the State Government, in the case of any factory situate outside Uttar Pradesh, so declare, any place in Uttar Pradesh set apart for the purchase of cane intended or required for use, consumption or sale in such factory shall be deemed to be the premises of the factory. " Leaving the Explanation for the present, there are two matters which require advertence: (1) The first was the point emphasised by Mr. Sanyal for the appellant, that entry into the premises of a factory "for the purpose of consumption, use or sale therein" is fastened on as the taxable event treating the factory premises as if that were itself a "local area". (2) Apart from entry into factory premises for use, consumption or sale therein, entry of the cane into other places within the local area, i.e., into "unit for local administration" is not made the subject of tax levy. The second of the above matters cannot invalidate the legislation, because a power to tax is merely enabling, and apart from any question of discrimination under article 14 which does not arise for consideration before us the State is not bound to tax every entry of goods into "a local area". Again, the tax could undoubtedly be confined to entry of goods into a "local area" for consumption or use in particular modes; in other words, there could be no legal objection to the tax levy on the ground that it does not extend to entry of goods into "a local area" for every type of consumption or use. In my judgment the real vice of the charging section 3(1) lies not in that it Confines the levy to cases where the entry is for purposes of consumption etc. in a factory but 'in equating the premises of a factory with "a local area" entry of goods into which, occasions the tax. Another way of expressing this same idea would be to say that whereas under Entry 52 the movement of goods from within the same local. area in which the factory is situated into the premises of the factory, could not be the subject of tax liability, because there 261 would in such cases be no entry of the goods "into a local area" under section 3(1) of the Act, not merely is the movement of goods into the factory from outside the 'local area ' in which the factory is situate made the subject of tax, but the words used are capable of imposing the tax even in those cases where the entry into the factory is from within the same local area. What I have in mind may be thus illustrated: If factory A situated in Panchayat area B gets its supply of cane from outside the Panchayat area, the levy of the tax on the entry of the cane into the Panchayat area would clearly be covered by entry 52. The State is not bound to tax every entry of the cane into the area but might confine the levy to the entry of the cane for the purpose of consumption in a factory. The tax might be levied and collected at the border of the Panchayat area but there is no legal obligation to do so, and the place at which the entry of the goods is checked and the duty realised is a matter of administrative machinery which does not touch on the validity of the tax imposition. It would thus not detract from the validity of the tax if by reason of convenience for effecting collection, the tax was levied at the stage of entry into the premises of a factory. So long, therefore, as the cane which enters a factory for the purpose of consumption therein comes from outside that local unit of administration in which the factory is situated, in my opinion it would be covered by the words of entry 52 and well within the legislative competence of the State Government. The language of section 3, as it stands appears, however, also to extend to cases where the supply of cane to a factory is from within the same local unit of administration; in other words, where there is no entry of the cane into the local area as explained earlier. If this were the true position, the enactment cannot be invalidated as a whole. It would be valid to the extent to which the tax is levied on cane entering a factory for the purpose of consumption etc. therein from outside the local area, within which the factory premises are situated, and only invalid where it out steps this limitation. 262 The next question is whether this is a case where the valid and invalid portions are so inextricably interwoven as to leave the Court no option but to strike down the entire enactment as invalid as beyond the legislative competence of the State, or whether the charging provision could be so read down as to leave the valid portion to operate. In my opinion, what is involved in the case before us is not any problem of severance, but only of reading down. Before taking up this question for discussion two objections to the latter course have to be considered. The first is that this aspect of the matter was not argued before us by learned Counsel for the State as a ground for sustaining the validity of the legislation. In my judgment this is not an objection that should stand in the way of the Court giving effect to a view of the law if that should appear to be the correct one. In making this observation one has necessarily to take into account the fact that legislation in nearly this form, has been in force in the State for over twenty years, and though its vires was once questioned in 1942, that challenge was repelled and the tax levy was held valid and was being collected during all this period. The sugar cane cess has been a prime source of State Revenue for this length of time and this Court should not pronounce such a legislation invalid unless it could not be sustained on any reasonable ground and to any extent. The second ground of objection which has appealed to my learned brethren but with which, I regret, I cannot concur is that it would require a rewriting of the Act to sustain it. Now if the first paragraph of sub section (1) of section 3 bad read: "The State Government may by notification in the official gazette impose a cess not exceeding four annas per maund on the entry of the cane into the premises of a factory (from outside the local area in which the factory premises were situate) for use, consumption or sale therein:" (The words in brackets added by me) 263 the levy would be entirely within entry 52 even according to my learned brethren. The question is whether the implication of these words would be a rewriting of the provision or whether it would be merely reading the existing provision so as to confine it to the powers conferred upon the State Legislature by the relevant legislative entry. In view of the strong opinion entertained by my learned brethren, I have given the matter the utmost consideration, but I feel that the words which I have suggested are a permissible mode of construction of a statute by which wide words of an enactment which would cover an event, contingency or matter within legislative power as well as matters not within it, are read as confined to those which the law making only had authority to enact. In my judgment the opinion of the Federal Court in In re Hindu Women 's Rights to Property Act, 1937 (1), affords a useful analogy to the present case. The enactment there impugned provided for the devolution or succession to "property" in general terms which would have included both agricultural as well as nonagricultural property, whereas the Central Legislature which enacted the law had no power to deal with succession to agricultural property. The contention urged before the Court was that by the use of the expression "property", the legislature had evinced an intention to deal with property of every type and that it would be rewriting the enactment and not carrying out the legislative intent if the reference to "property" in the statute were read as "property other than agricultural property". Dealing with this contention, Sir Maurice Gwyer, delivering the opinion of the Court said: "No doubt if the Act does affect agricultural land in the Governors 'Provinces, it was beyond the competence of the Legislature to enact it: and whether or not it does so must depend upon the meaning which is to be given to the word "property" in the Act. If that word necessarily and inevitably comprises all forms of property, including agricultural land, then clearly the Act went beyond the powers (1) 264 of the Legislature; but when a Legislature with limited and restricted powers makes use of a word of such wide and general import, the presumption must surely be that it is using it with reference 'to that kind of property with respect to which it is competent to legislate and to no other. The question is thus one of construction, and unless the Act is to be regarded as wholly meaningless and ineffec tive, the Court is bound to construe the word "property" as referring only to those forms of property with respect to which the Legislature which enacted the Act was competent to legislate; that is to say, property other than agricultural land. . . The Court does not seek to divide the Act into two parts, viz., the part which the Legislature was competent, and the part it was incompetent, to enact. It holds that, on the true construction of the Act and especially of the word "property" as used in it, no part of the Act was beyond the Legislature 's powers. " The Court accordingly held that the Hindu Women 's Rights to Property Act, 1937, applied to non agricultural property and so was valid. In this connection it might be interesting to refer to the decision in Blackwood vs Queen (1) which Sir Maurice Gwyer, C.J., referred to with approval. That case related to the validity of a duty imposed by the Legislature of Victoria (Australia) on the personal estates of deceased person. The learned Chief Justice observed "The Judicial Committee construed the expression "personal estate" occurring in the statute to refer only to: "such personal estate as the colonial grant of probate conferred jurisdiction on the personal representatives to administer, whatever the domicile of the testator might be, that is to say, personal estate situate within the Colony, in respect of which alone the Supreme Court of Victoria had power to grant probate: Their Lordships thought that "in imposing a duty of this nature the Victorian Legislature also was contemplating the property which was under its own hand, and did not intend to levy a tax in respect of property (1) 265 beyond its jurisdiction". And they held that "the general expressions which import the contrary ought to receive the qualification for which the appellant contends, and that the statement of personal property to be made by the executor under section 7(2) of the Act should be confined to that property which the probate enables him to administer" (1). To confine the tax to the limitations subject to which it could, under the Constitution, be levied is, in my opinion, not an improper method of construing the statute. The manner in which the word "property" was read down by the Federal Court in In re Hindu Women 's Rights to Property Act, 1937 (1) and the word "personal property" construed by the Privy Council in Blackwood vs Queen (2) make in my opinion less change in the text of the impugned provision than the addition of the words I have set out above, which after all are words implicit in the power conferred on the State Legislature. I would, therefore, hold that the charging section would be invalid and beyond the legislative competence of the State of Uttar Pradesh only in so far as it seeks to levy a tax on cane entering a factory from within the same local area in which the factory is situate and that in all other cases the tax is properly levied; and that the impugned section could and ought to be so read down. The matter not having been considered from this aspect at earlier stages, we have necessarily no material before us for adjudicating upon whether tax levied or demanded from the appellant is due and if so to what extent. We have nothing before us to indicate as to how far the cane, the entry of which into the factory of the appellant is the subject of the impugned levy, has moved into the factory from outside the local unit in which the factory is situated or originated from within the same local area. I consider that without these matters being investigated it would not be possible to adjudicate upon the validity of the tax demanded from the appellants. There is one matter to which it is necessary to (1) Per Sir Maurice Gwyer, C. J. , 23, (2) 34 266 advert which I have reserved for later consideration, viz., the validity of the Explanation to section 3(1)of the Act. It would be apparent that the Explanation was necessitated by the terms of sub section (1) of section 3 which equated "factory premises" with "local areas", or rather rendering factory premises the sole local areas entry into which occasioned the tax. So far as the purchasing centres which are dealt with in the Explanation are concerned, the cane that moves into them from outside the "local area" where these centres are would clearly be covered by Entry 52, since the purpose of the movement into the centre is on the terms of the provision for effecting a sale therein. In other words, the same tests which I have discussed earlier in relation to entry into factory premises, would apply mutates mutandis to these purchasing centres and in so far as a tax is levied on the movement of the cane from outside the local area the levy would be legal and in order. I would read down the Explanation in the same manner, as I have read down the main charging provision so as to confine the levy to entry from outside 'that "local area" local area being understood in the sense already explained. I would accordingly allow the appeal, and remand it to the High Court for investigating the material facts which I have mentioned earlier with a direction to pass judgment in accordance with the law as above explained. BY COURT. In accordance with the opinion of the majority the appeal is allowed, the order passed by the High Court is set aside and a writ be issued directing that the respondents do forbear from levying and collecting cess from the appellants on account of arrears of cess for the crushing season 1954 55 and successive crushing seasons under the Uttar Pradesh Sugarcane Cess Act, 1956. The appellants will get their costs here and below. Appeal allowed.

IN-Abs

Entry 52 of List II of the Seventh Schedule to the Consti tution empowered State Legislatures to make a law relating to "taxes on the entry of goods into a local area for consumption, use or sale therein". The U. P. Legislature passed the U. P. Sugarcane Cess Act, 1956, which authorised the State Government to impose a cess on the entry of cane into the premises of a factory for use, consumption or sale therein. The appellant contended that the premises of a factory was not a 'local area ' within the meaning of Entry 52 and the Act was beyond the competence of the legislature. 243 Held, (per Imam, Kapur, Das Gupta and Raghubar Dayal, jj.) that the impugned Act was beyond the competence of the legislature and was invalid. The premises of a factory was not a "local area" within the meaning of Entry 52. The proper meaning to be attached to the words "local area" in Entry 52 was an area administered by a local body like a municipality, a district board, a local board, a union board, a Panchayat or the like. In re: the Central Provinces & Beray Act No. XIV of 1938, , Navinchandra Mafatlal vs The Commissioner of Income tax, Bombay City, [1955] 1 S.C.R. 829, State of Madras vs Gannon Dunkerley & Co., Ltd., ; and South Carolina vs United States, , referred to. Emperor vs Munnalal, I.L.R. 1942 All. 302, disapproved. Per Ayyangar, J. The Act was invalid only in so far as it sought to levy a tax on cane entering a factory from within the same local area in which the factory was situate and was valid in other cases. It was permissible to read the Act so as to confine the tax to the limitations subject to which it could be constitutionally levied and to strike down that portion which out stepped the limitations. In re Hindu Women 's Rights to Property Act, 1937, and Blackwood vs Queen, , applied.

Appeal No. 516 of 1959. Appeal from the judgment and order dated September 3, 1957, of the Bombay High Court in Income tax Reference No. 49 of 1957. J.M. Thakar, section N. Andley, J. B. Dadachanji, Rameshwar Nath and P. L. Vohra, for the appellants. A. N. Kripal and D. Gupta, for the respondent. December 12. The Judgment of the Court was delivered by HIDAYATULLAH, J. The three appellants appeal against the judgment and order of the High Court of Bombay answering, in the affirmative, the following question: "Whether the share income of the assessees from the unregistered firm (which is separately taxed), namely, Rs. 26,110 can be set off against their share loss from registered firms, namely, Rs. 13,167?" The facts are as follows: Two of the appellants are 176 brothers, and the third appellant is the widow of a third brother, who died during the pendency of the appeal after certificate had been granted by the High Court. The three brothers were partners in two registered firms and one other firm, which was unregistered. The assessment years for the purposes of the appeal are 1948 49 and 1949 50. For the assessment year 1948 49, the income of the three brothers was the same, and it was as follows: From registered firms . Rs. 11,902 loss 1,265 loss Total loss Rs. 13,167 Income from the unregistered firm Rs. 26,110 profit Other income Rs. 262 The income of the unregistered firm was taxed on the firm and not in the hands of the partners, as was possible under the provisions of cl. (b) of sub section (5) of section 23. In assessing the amount of Rs. 262, the Income tax Officer first determined the total income of each of the appellants by setting off their share of the profits of the unregistered firm against their share of the loss of the registered firms. The appellants contended that, inasmuch as tax had already been assessed on the unregistered firm, this could not be done, and that as there was loss in the business of the registered firms, no tax was demandable on Rs. 262. They also contended that they were entitled to carry forward the, loss amounting to Rs. 12,905 to the succeeding year under section 24(2) of the Income tax Act. These contentions were not accepted by the Income tax Officer, to whose order it is not necessary to refer in detail. The assessment for the assessment year 1949 50 was also done on similar lines. The appeal to the Appellate Assistant Commissioner was unsuccessful, and six appeals were taken to the Tribunal by the three appellants three for each assessment year. These appeals were disposed of by a common order. The Tribunal held, relying upon the second proviso to section 24(1), that just as loss in an unregistered firm could not be set off against profits 177 from a registered firm under that proviso, the profits in an unregistered firm could not be set off against the loss from a registered firm. It relied upon a decision of the Madras High Court in Commissioner of Income tax vs Ratanshi Bhavanji (1), which it purported to follow in preference to a decision of the Punjab High Court in Banka Mal Niranjandas vs Commissioner of Income tax (2). The same reasoning was applied to the assessment year 1949 50, and in the result, all the six appeals were allowed. The order of the Tribunal involved, in addition to the point set out above, certain other questions, which were asked by the assessees to be referred to the High Court for decision under section 66(1). The Commissioner also asked for a reference in respect of the decision, substance whereof has been set out above. The Tribunal referred two questions at the instance of the assessees and one question, which we have already quoted, at the instance of the Commissioner. In the High Court, the assessees abandoned the two questions, and the High Court accordingly expressed its opinion in the judgment and order under appeal, on the remaining question. The High Court differed from the decision of the Tribunal, and held that the profit from the unregistered firm could be set off against the losses from the registered firms to find out the rate applicable to Rs. 262, which was other income of the assessees. The High Court also held that the assessees could not carry forward the loss of the registered firms to the following year, because such loss must be deemed to have been absorbed in the profits of the unregistered firm. It, however, certified the case as fit for appeal to this Court, and the present appeal has been filed. In our opinion, the High Court correctly answered the question referred to it, but was in error in holding that the losses of the registered firms could not be carried forward, because they must be deemed to have been absorbed in the profits of the unregistered firm. Inasmuch as we substantially agree with the High (1) (2) 23 178 Court on the first part of the case, it is not necessary to examine closely or in detail the reasons on which the decision of the High Court proceeds. In our opinion, the matter is simple, and can be stated within a narrow compass. Under section 3 of the Income tax Act, income tax is chargeable for an assessment year at rate or rates prescribed by an annual Act in respect of the total income of the previous year. Section 14 (2)(a), before its amendment in 1956, provided that the tax shall not be payable by an assessee, if a partner of an unregistered firm in respect of any portion of his share in the profits and gains of the firm, computed in the manner laid down in cl. (b) of sub section (1) of section 16 on which the tax had already been paid by the firm. The section thus gave immunity from tax to the share of the assessee as a partner in an unregistered firm in respect of the share of profits received by him from the unregistered firm and on which the unregistered firm had already been taxed. Section 16(1)(a), however, provided that in computing the total income of an assessee, any sum exempted under sub section (2) of section 14 shall be included. The combined effect of those two sections was stated by the High Court to be, "that although the share of a partner in the profits of an unregistered firm is exempt from tax, it is included in his total income for the purpose of rate only. " We agree that this is a correct analysis. The Tribunal relied upon the second proviso to section 24(1), which read as follows: "Provided further that where the assessee is an unregistered firm which has not been assessed under the provisions of clause (b) of sub section (5) of section 23 . any such loss shall be set off only against the income, profits and gains of the firm and not against the income, profits and gains of any of the partners of the said firm; and where the assessee is a registered firm, any loss which cannot be set off against other income, profits and gains of the firm shall be apportioned between the partners of the firm and they alone shall be entitled to have the amount of the loss set off under this section. " 179 The Tribunal came to the conclusion that, ". just as a partner in an unregistered firm which has suffered loss will not be allowed to set off his share loss in the unregistered firm against his income from any other source, so it stands to reason that his loss from other sources cannot also be set off against his share income from an unregistered firm. " The decision of the Tribunal was not based upon any specific provision of the Income tax Act but upon a parity of reasoning, by which a specific provision about loss was held to apply the other way round also. The High Court correctly pointed out that all that section 14, subs. (2), did was to save the profits of an unregistered firm from liability to tax in the hands of the partners. It did not affect the computation of the total income to determine the rate applicable under section 3, in the light of section 16(1)(a). Indeed, section 16(1)(a) clearly provided that any sum exempt under section 14(2) was to be included in computing the total income of an assessee, and in view of this specific provision, the converse of the second proviso to section 24(1) which we have quoted above, hardly applied. To this extent, the order of the Tribunal was incorrect. The error was pointed out by the High Court, and the question thus raised was properly decided. We see no reason to differ from the High Court on this part of the case. The question, however, arose before the High Court as to whether in view of this decision, the assessees could carry forward loss from the registered firms in the subsequent year or years. The High Court came to the conclusion that they could not carry forward the loss. Indeed, the Tribunal had earlier stated that if the profits from the unregistered firm were to be set off against the losses of the registered firms, such losses would not be carried forward to the following year, and that would be contrary to section 24. The High Court rejected this ground in dealing with the question as to the rate applicable to the other income, and pointed out and in our view, rightly, that under sections 14(2) and 16(1)(a) the profits and losses had to be set off against each other, to find out the total income. 180 The High Court, however, held that once losses were set off against profits, they were to that extent absorbed, and that there was nothing to carry forward. This conclusion does not follow. Section 24 provides for a different situation altogether; it provides for the carrying forward of a loss in business to the subsequent year or years till the loss is absorbed in profits, or till it cannot be carried forward any further. That has little to do with the manner in which the total income of an assessee has to be determined for the purpose of finding out the rate applicable to his income, taxable in the year of assessment. To read the provisions of sections 14(2) and 16(1)(a) in this extended manner would be to nullify in certain cases section 24 altogether. Neither is such an intention expressed; nor can it be implied. In our opinion, though the decision of the High Court on the main issue and on one aspect of the question posed for its opinion was correct, it was in error in deciding that the losses of ,the registered firms could not be carried forward because they had been absorbed by the profits of the unregistered firm. To this extent, the judgment and order of the High Court will stand modified. Subject to that modification, the appeal will be dismissed. In the circumstances of the case, there will be no order as to costs. Appeal dismissed with modification.

IN-Abs

The appellants were partners of two registered firms and another firm which was unregistered. Their profit and loss for the assessment year 1948 49 were as follows: From registered firms Rs. 11,902 loss, 1,265 loss, total loss Rs. 13,167. Income from the unregistered firm Rs. 26,110 profit, other income Rs. 262. The income of the unregistered firm was taxed on the firm. In assessing the amount of Rs. 262 the Income tax Officer first determined the total income of each of the appellants by setting off their share of the profits of the unregistered firm against their share of the loss of the registered firm. The appeal to the Appellate Assistant Commissioner being unsuccessful appeals 175 were taken to the Tribunal which relying on the decisions in Commissioner of Income tax vs Ratanshi Bhavanji, [1952]22 I.T.R. 82, held that just as loss in an unregistered firm could not be set off against profits from a registered firm, the profits in an unregistered firm could not be set off against the loss from a registered firm. On a reference being made to it the High Court differed from the decision of the Tribunal, and held that the profit from the unregistered firm could be set off against the loss from the registered firms to find out the rate applicable to Rs. 262 which was other income of the assessees. The High Court further held that the assessees could not carry forward the loss of the registered firms to the following year, because such loss must be deemed to have been absorbed in the profits of the unregistered firm. On appeal with a certificate of the High Court, Held, that the view of the High Court that under sections 14(2) and 16(1)(a) the profit and loss had to be set off against each other to find out the total income, and that although the share of a partner in the profits of an unregistered firm is exempt from tax, it is included in his total income for the purpose of rate only, was correct but the High Court erred in holding that the losses suffered by the registered firms could not be carried forward because they had been absorbed by the profits of the unregistered firm.

Appeals Nos. 32 and 33 of 1960. Appeals by special leave from the Award dated February 24, 1959, of the Industrial Tribunal, Bihar, Patna, in Reference nos. 10 of 1959 and 1 of 1955. M. C. Setalvad, Attorney General for India, Nooni Coomar Chakravarti and B. P. Maheshwari, for the appellant. B. C. Ghose and P. K. Chatterjee, for the respondents. December 15. The Judgment of the Court was delivered by WANCHOO, J. These are two connected appeals by special leave in an industrial matter and relate to the dismissal of sixty workmen of the appellant company. The dispute was referred by two references; 310 one relates to 31 workmen and the other to 29 workmen. They have been disposed of by a common award, though, as the references were two, there are two appeals before us. The brief facts necessary for present purposes are these: On November 10, 1953, a general meeting was held by the workmen of the appellant and a no confidence motion was passed against the executives of the workmen 's union and Shri Shahabuddin Bari was elected as the new president of the union. On February 6, 1954, the newly elected president served a strike notice on the management. On February 18, 1954, a settlement was arrived at between the management and Shri Fateh Narain Singh, the general secretary of the old executive committees. On February 23, 1954, the strike was launched in accordance with the notice served by Shri Bari and the strike continued for about a month. The strike was called off on March 19 and 20, 1954. The case of the appellant was that the strike which began on February 23,1954, was an illegal strike as it took place during the currency of a settlement arrived at in the course of conciliation proceedings with the assistance of the Labour Commissioner who acted as conciliation officer. Conse quently, the appellant took steps to serve charge sheets on the workmen, who had joined the illegal strike, on March 4, 1954. This was followed by the dismissal of these sixty workmen after a managerial inquiry. It is said that thereafter there were conciliation proceedings which failed and consequently the two references were made. The main findings of the tribunal are that the settlement of February 18, 1954, was a bona fide settlement arrived at during the course of conciliation proceedings and was therefore binding on the workmen; and consequently the strike which began on February 23, 1954, was in breach of the terms of the settlement and was therefore illegal. The tribunal further held that the strike was staged in hot haste and no reasonable opportunity was given to the management to reply to the demands made before launching the strike. It also held that the trouble arose because of the election of 311 Shri Bari and the new office bearers. This matter was referred to the Registrar of Trade Unions and he held that the meeting at which Shri Bari and the new office bearers were elected was irregular and in consequence the old office bearers of the union continued to remain validly elected executives of the union. This decision was given on February 22, 1954, and the strike was launched on February 23 immediately thereafter. The tribunal was not sure whether this decision had been communicated to Shri Bari before the strike was launched; but in any case it was of the opinion that there was no reason to stage the strike in such hot haste after the settlement of February 18, 1954. Having thus held that the strike was illegal and there was no reason why it should have been launched in such hot haste, the tribunal went on to consider the case of these sixty workmen who were dismissed. It held that no charge of violence was brought home to these workmen and even the charge sheets which were originally issued to the workmen did not contain any charge of violence. The tribunal then divided the sixty workmen into three batches of 47, 11 and 2. In the case of 47 workmen, it held that they must be assumed to have been served with charge sheets as they refused to accept them and that proper inquiry was held into the charges, though in their absence. In the case of 11 workmen, it was of opinion that charge sheets had not been served on them and therefore any inquiry held in their absence was of no avail. In the case of two workmen, it held that no attempt was made to serve any charge sheet on them. Further, it set aside the order of dismissal with respect to 13 of the workmen on the ground that they were either not served with any charge sheet or no charge sheet was issued to them; as for the remaining 47, though it found that charge sheets had been issued to them and they had refused to accept them and proper inquiry had been held in their case, it set aside the order of dismissal on the ground that they had not been shown to have taken part in violence and there were extenuating circumstances in their case inasmuch as they were misled to join the strike in order to oust the old office 312 bearers of the union so that others might be elected in their place. It further pointed out that though a much larger number of workmen had taken part in the illegal strike and the union took up their case, only these sixty were eventually dismissed while the rest were reinstated. It was of the view that there was no reason for the appellant to make any distinction between these workmen and the others who were reinstated. It therefore ordered reinstatement of these 47 workmen also. Finally, it held that the workmen were sufficiently penalised, they being out of employment from March 1954 to February 1959 when it made the award and that there was no reason in the circumstances to maintain their dismissal. It awarded 50% of the back basic wages to the two workmen in whose case charge sheets were not even issued and 25 per cent of the back basic wages to the 11 workmen who were not served with charge sheets; no back wages were allowed to the forty seven workmen who had refused to accept the charge sheets sent to them. Three points have been raised on behalf of the appellant before us; namely, (i) as a settlement had been arrived at during the course of conciliation proceedings on September 2, 1954, which specifically dealt with the case of these sixty workmen, the references were incompetent; (ii) the references were incompetent because what was referred was not an industrial dispute but a dispute between the employer and its individual workman; and (iii) the tribunal 's order of reinstatement was in any case unjustified. It appears that after the dismissal of a large number of workmen consequent on the illegal strike that took place on February 23, 1954, there were conciliation proceedings before the Labour Commissioner, Bihar, with respect to these dismissals and other matters. These conciliation proceedings appear to have begun some time before May 1, 1954, for we find that on that day the Labour Commissioner wrote to the appellant that its objection that conciliation proceedings were illegal and without jurisdiction was baseless. It seems 313 that efforts at conciliation continued right up to the end of August 1954, for we find another letter of August 31, 1954, from the Labour Commissioner to the appellant saying that he had heard that mutual negotiations were going on between the appellant and its workmen for the settlement of their dispute and September 2 had been fixed for that purpose. The Labour Commissioner therefore gave notice to the appellant that he would hold conciliation proceedings on September 3 at 3 p.m. in his office in case the disputes were not mutually settled before that date. It seems that an agreement was arrived at between the appellant and the union on September 2. In this agreement it was Doted that 76 dismissed workmen had already been employed; it was further provided that 110 workmen would also be employed in the same manner as the seventy six. Further 31 dismissed workmen were to remain dismissed and would not be considered for further employment or for any other benefit. 30 other dismissed workmen would for the time being remain dismissed and it would be decided later on between the union and the appellant whether their dismissal should be confirmed like those of 31 mentioned above or whether they should be given the option to wait for employment as and when vacancies arose or should be treated as retired on the date of dismissal in order to enable them to receive the benefits of gratuity and refund of provident fund. It may be added that the present references are with respect to sixty workmen out of these sixty one. It seems that the Labour Commissioner was apprised of this settlement. Consequently he wrote on September 3, 1954, to the appellant that the conciliation proceedings proposed to be held on that date were cancelled. The Labour Commissioner further pointed out that the union was opposing reinstatement of certain workmen; he therefore proposed to hold further conciliation proceedings in the case of such workmen on September 6, 1954, at 3 p.m. before making his final recommendations to government in this matter. The appellant protested to the Labour Commissioner 40 314 against the holding of any further conciliation proceedings after the agreement of September 2 and apparently did not attend the meeting fixed for September 6. Nothing further therefore seems to have taken place in the conciliation proceedings. Presumably the Labour Commissioner must have reported thereafter to the government under section 12(4) of the , No. XIV of 1947 (hereinafter called the Act). Then followed the two references by the government; the first on October 8, 1954, relating to 31 workmen and the other on January 15, 1955, relating to 29 workmen. On these facts the contention on behalf of the appellant is that the references were incompetent because of the agreement made on September 2, 1954. Reliance in this connection is placed on sections 18 and 19 of the Act, as they were at the relevant time. 18 provided that a settlement arrived at in the course of conciliation proceedings would be binding on all parties to the industrial dispute and others indicated therein and section 19 provided that such settlement would come into force on such date as was agreed upon between the parties and if no date was agreed upon then on the date on which the memorandum of the settlement was signed by the parties. Such settlement would be binding for such period as was agreed upon by the parties and if no such period was agreed upon, for a period of six months and would continue to be binding upon the parties thereafter until the expiry of two months from the date on which a notice in writing to terminate the settlement was given by one of the parties to the other party or parties to the settlement. The contention on behalf of the appellant is that the agreement of September 2, 1954, arrived at during the course of conciliation proceedings between the appellant and the union was binding on all workmen and therefore it was not open to the government to make these references within six months of it. The question thus posed raises the question as to what is meant by the words "in the course of conciliation proceedings " appearing in section 18 of the Act. One thing is clear that these words refer to the duration 315 when the conciliation proceedings are pending and it may be accepted that the conciliation proceedings with respect to these dismissals, which began sometime before May 1, 1954, were certainly pending upto September 6, 1954, and may be a little later, as is clear from the two letters of the Labour Commissioner. But do these words mean that any agreement arrived at between the parties during this period would be binding under section 18 of the Act ? Or do they mean that a settlement arrived at in the course of conciliation proceedings postulates that that settlement should have been arrived at between the parties with the concurrence of the conciliation officer? As we read this provision we feel that the legislature when it made a settlement reached during the course of conciliation proceedings binding not only on the parties thereto but also on all present and future workmen intended that such settlement was arrived at with the assistance of the conciliation officer and was considered by him to be reasonable and therefore had his concurrence. 12 of the Act prescribes duties of the conciliation officer and provides that the conciliation officer shall for the purpose of bringing about settlement of the dispute without delay investigate the dispute and all matters affecting the merits and the right settlement thereof and may do all such things as he may think fit for the purpose of inducing the parties to come to a fair and amicable settlement of the dispute: (vide section 12(2) ). Then comes section 12(3), which provides, "If a settlement of the dispute or of any of the matters in dispute is arrived at in the course of the conciliation proceedings the conciliation officer shall send a report thereof to the appropriate Government together with a memorandum of the settlement signed by the parties to the dispute". Reading these two provisions along with section 18 of the Act, it seems to us clear beyond doubt that a settlement which is made binding under section 18 on the ground that it is arrived at in the course of conciliation proceedings is a settlement arrived at with the assistance and concurrence of the conciliation officer, for it is the duty of the conciliation officer to promote 316 a right settlement and to do everything he can to induce the parties to come to a fair and amicable settlement of the dispute. It is only such a settlement which is arrived at while conciliation proceedings are pending that can be binding under section 18. In the present case it is obvious that the Labour Commissioner took no steps to promote the actual agreement which was arrived at between the appellant and the union on September 2. The letter of August 31 made it clear that the Labour Commissioner would take action under section 12(2) on September 3 if no mutual agreement was arrived at between the appellant and the union. It seems that a mutual agreement was arrived at between the appellant and the union without the assistance of the Labour Commissioner and it did not receive his concurrence even later; on the contrary evidence shows that the Labour Commissioner did not approve of the settlement which excluded the reinstatement of a large group of workmen and so he did not act under section 12(3). In the circumstances such a mutual agreement could not be called a settlement arrived at in the course of conciliation proceedings even though it may be accepted that it was arrived at a time when conciliation proceedings were pending. A settlement which can be said to be arrived at in the course of conciliation proceedings is not only to be arrived at during the time the conciliation proceedings are pending but also to be arrived at with the assistance of the conciliation officer and his concurrence; such a settlement would be reported to the appropriate government under section 12(3). In the present case the agreement of September 2, 1954 was not arrived at with the assistance and concurrence of the conciliation officer, namely, the Labour Commissioner, which will be clear from his letter of September 3, 1954. In the circumstances it is not a settlement which is binding under section 18 of the Act and therefore will not bar a reference by the Government with respect to these sixty workmen. Re (ii). The next point that is urged is that it is not an industrial dispute but a dispute between the employer 317 and its individual workmen, even though their number may be large and therefore the Government had no jurisdiction to make the references. We are of opinion that there is no force in this contention. We have already set out the history of the conciliation proceedings in this case. It is obvious from the letter of the Labour Commissioner dated September 3, 1954, that he must have made a report to the Government under section 12(4) and it must be on that report that these references must have been made under section 12(5) read with section 10(1). It is not in dispute that originally the case of dismissal of a much larger number of workmen was under consideration during the conciliation proceedings but on September 2,1954, a mutual agreement was arrived at between the appellant and the union, which in a sense excluded the case of these sixty workmen. The Labour Commissioner apparently was not prepared to concur with this action of the parties as appears from his letter of September 3 and must therefore have made a report to the Government under section 12(4) which was followed by references under section 10. In the circumstances we fail to understand how what began as an industrial dispute and was sponsored by the union, related to the dismissal of a much larger number of workmen (including these sixty) and as such became the subject matter of conciliation proceedings under section 12(1) would turn into an individual dispute because a mutual agreement was arrived at between the appellant and the union with which the Labour Commissioner was not in entire agreement and in consequence of which he apparently made a report to the Government under section 12(4) which was followed by the two references under section 10(1). In these circumstances we are satisfied that the references are not bad on the ground that an individual dispute had been referred to the tribunal for adjudication. Re (iii) We now come to the merits of the case. We shall deal with the sixty workmen in three batches in the same manner as the tribunal did. We shall first take the case of 47 workmen. In the case of these workmen, the tribunal held that they were guilty of 318 taking part in an illegal strike and that there was no reason for staging such an illegal strike in hot haste. It also held that they were sent charge sheets which they refused to take. The Standing Orders provide that a workman who refuses to accept a charge sheet or to submit an explanation on being charged with an offence will be deemed to have admitted the charge against him. It also provides that a workman who refuses to accept any communication addressed to him by the company will be liable to disciplinary action for insubordination. The tribunal also held that in the case of these workmen, a proper inquiry was held, though in the circumstances in their absence. It further held that such misconduct as merited dismissal under the Standing Orders was committed by these 47 workmen. On these findings we should have thought that the tribunal would not have interfered with the order of dismissal, for the case would be clearly covered by the principles governing the limits of the tribunal 's power of interference with the findings of the managerial inquiry laid down by this Court in Indian Iron and Steel Co. Ltd. and another vs Their Workmen (1). Learned counsel for the respondent workmen in this connection relies on Indian General Navigation and Railway Co. Ltd. vs Their Workmen (2). In that case it was laid down that "to determine the question of punishment, a clear distinction has to be made between those workmen who not only joined in such a strike but also took part in obstructing the loyal workmen from carrying on their work, or took part in violent demonstrations, or acted in defiance of law and order, on the one hand and those workmen who were more or less silent participators in such a strike on the other hand. " These observations have however to be read in the context of that case, which was (i) that it was not shown in that case that an employee merely taking part in an illegal strike was liable to be punished with dismissal under the Standing Orders and (ii) that there was no (1) ; (2) ; 319 proper managerial inquiry. In these circumstances the quantum of punishment was also within the jurisdiction of the industrial tribunal. In the present case, however, the finding of the tribunal is that there was misconduct which merited dismissal under the Standing Orders and that the managerial inquiry was proper. In these circumstances those observations torn from their context cannot be applied to the facts of this case. The reasoning of the tribunal therefore that as these 47 workmen had not taken part in violence the appellant was not justified in dismissing them cannot be accepted on the facts of this case. The other reason given by the tribunal for setting aside the dismissal is that the appellant had taken back a large number of other employees who had taken similar part in the illegal strike and had absented themselves and there was no reason to discriminate between those employees and these 47 workmen. It is clear from the award of the tribunal that no discri mination was made when taking back the workmen on the ground that these workmen supported Shri Bari, for the award shows that a number of other workmen who supported Shri Bari were taken back. Reliance in this connection is placed on Messrs. Burn and Co. Ltd. vs Their Workmen (1), where, it was observed when dealing with the workmen involved in that case that it could not be said that mere participation in the illegal strike would justify the suspension or dismissal particularly when no clear distinction could be made between those persons and the very large number of workmen who had been taken back into service although they had participated in the strike. There is no doubt that if an employer makes an unreasonable discrimination in the matter of taking back employees there may in certain circumstances be reason for the industrial tribunal to interfere; but the circumstances of each case have to be examined before the tribunal can interfere with the order of the employer in a properly held managerial inquiry on the ground of discrimination. In Burn & Co. 's case (1) there was apparently no reason whatsoever for (1) A.I.R. 1959 S.C. 529. 320 making the discrimination. In the present case, however, the circumstances are different. It is not the appellant which has made the discrimination; in the present case so far as the appellant is concerned it was prepared to take back even those who supported Shri Bari and did actually take back a large number of such workmen. The genesis of the trouble in this case was a dispute within the union itself which led to the illegal strike, the history of which we have already given. The mutual agreement of September 2, 1954, shows that the union which represented the workmen was not agreeable that sixty one workmen should be taken back and these forty seven workmen are out of these sixty one. The appellant in this case was therefore placed in the position that it had to choose between the large majority of workmen and sixty one workmen whom the union did not want to be taken back. It was in these circumstances that the appellant did not take back those sixty one workmen out of whom are these forty seven. The charge of discrimination therefore cannot be properly laid at the door of the appellant in this case and if there is anybody to blame for it it is the union. In these circumstances when the managerial inquiry was held to be proper and the misconduct committed is such as to deserve dismissal under the Standing Orders, there was no reason for the tribunal to interfere with the order of dismissal passed by the appellant in the case of these forty seven workmen. It may be that participation in an illegal strike may not necessarily and in every case be punished with dismissal; but where an inquiry has been properly held and the employer has imposed the punishment of dismissal on the employee who has been guilty of the misconduct of joining the illegal strike, the tribunal should not interfere unless it finds unfair labour practice or victimisation against the employee. Then we come to the case of two workmen to whom no charge sheets were given at all. They are Jagdish Lal (respondent 31) and L. Choudhary (respondent 60). It is not in dispute that no charge sheets were issued to these workmen. The appellant 321 however contends that under the Standing Orders it was not necessary to issue any charge sheet to them. The Standing Orders provide that "any workman charged with an offence under these Orders, except in cases of lateness and absenteeism, shall receive a copy of such charge but in all cases will be given an opportunity of offering his explanation before any decision is arrived at. " It is said that the charge against these two workmen was only for absenting themselves; it was not therefore necessary to frame any charge sheet against them. This is not quite correct so far as Jagdish La]. in concerned as will appear from the letter of dismissal sent to him; but assuming it to be so, Standing Orders provide that though the charge sheet may not be given no action can be taken against a workman for any misconduct unless he is given an opportunity of offering his explanation before any decision is arrived at. There is no proof in this case that any opportunity was given to these two workmen of offering their explanation before the decision of dismissal was arrived at in their case. In these circumstances even though no charge sheet might have been necessary in the case of these two workmen their dismissal was against the provision of the Standing Orders, for no explanation was taken from them before arriving at the decision to dismiss them. The order of the tribunal with respect to these two workmen must be upheld. This brings us to the case of eleven workmen who are: Mohd. Mansoor (respondent 6), Ram Kuber Das (respondent 9), Ramasis (respondent 15), Mohd. Zafir (respondent 19), Mohd. Islam (respondent 20), Mohd. Zafir (respondent 22), Rajeshwar Prasad (respondent 26), Chirkut (respondent 27), Lal Das (respondent 43), Inderdip (respondent 47) and Mohd. Nazir (respondent 58). In their case the tribunal held that though charge sheets were issued to them, they could not be served and the inquiry took place without their knowing anything about the charges or the date of the inquiry. In those circumstances the tribunal held 41 322 that the inquiry was no inquiry and therefore ordered their reinstatement. It is contended on behalf of the appellant that the case of these eleven workmen is similar to the case of forty seven who refused to take the charge sheets sent to them by registered post. In any case it is urged that the charge sheets were notified on the notice board and notices were issued in the newspapers and that should be deemed sufficient service of the charge sheets on them. In this connection reliance was placed on Mckenzie & Co. Ltd. vs Its Workmen(1). In that case the Standing Orders provided that notice would be served on a workman by communicating the same orally to the workman concerned and/or by affixing the same on the company 's notice board and the company had acted in conformity with the Standing Orders by affixing the notices on its notice board. It was found in that case that the company first sent notices by registered post acknowledgement due to the workmen concerned. When some of the notices came back unserved the company wrote to the secretary of the union asking for the addresses of the workmen but the secretary gave no reply to the letter. It was then that the company affixed the notices on the notice board both inside and outside the mill gate. In those circumstances it was held that the company did all that it could under the Standing Orders to serve the workmen and the affixing of the notices on the notice board was sufficient service. The facts in the present case however are different. All that the Standing Orders provide is that the workmen charged with an offence shall receive a copy of such charge. It is also provided that a workman who refuses to accept the charge sheet shall be deemed to have admitted the charge made against him. There is no provision in the Standing Orders for affixing such charge sheets on the notice board of the company. The charge sheets in this case were sent to the eleven workmen by registered post and returned unserved, because they were not found in their villages. On the same day on which the charge sheets were sent by registered post it appears that notices were (1) [1959] SUPPl. 1 S.C.R. 222. 323 issued in certain newspapers to the effect that a group of workmen under a common understanding had engaged in an illegal strike from February 23, 1954, and that all such workmen were liable to strong disciplinary action and that in consequence they had been charged under the Standing Orders and Rules of the company and such charge sheets had been sent to them individually by registered post acknowledgement due and had also been displayed on the notice boards inside and outside the factory gate and they were required to submit the explanations by March 9, 1954. These notices did not contain the names of the work. men to whom charge sheets were sent and in whose case charge sheets were displayed on the notice boards. In the circumstances it can hardly be said that these eleven workmen would have notice that they were among those to whom charge sheets had been sent or about whom charge sheets had been displayed on the notice boards. The proper course in our view was when the registered notices came back unserved in the case of these eleven workmen to publish notices in their names in some newspaper in the regional language with a wide circulation in Bihar along with the charges framed against them. It would have been a different matter if the Standing Orders had provided for service of charge sheets through their display on the notice boards of the appellant. In the absence of such provision, the proper course to take was what we have mentioned above. If that course had been taken, the appellant would have been justified in saying that it did all that it could to serve the workmen; but as that was not done, we agree with the tribunal that these eleven workmen had no notice of the charges against them and the date by which they had to submit their explanations as well as the date of inquiry. In these circumstances the order of the tribunal with respect to these eleven workmen must also be upheld. We therefore allow the appeal so far as the first group of forty seven workmen are concerned and set aside the order of the tribunal reinstating them. We dismiss the appeals so far as the remaining thirteen 324 are concerned, namely, Jagdish Lal (respondent 31), L. Choudhary (respondent 60), Mohd. Mansoor (respondent 6), Ram Kuber Das (respondent 9), Ramasis (respondent 15), Mohd. Zafir (respondent 19), Mohd. Islam (respondent 20), Mohd. Zafir (respondent 22), Rajeshwar Prasad (respondent 26), Chirkut (respondent 27), Lal Das (respondent 43), Inderdip (respondent 47) and Mohd. Nazir (respondent 58) and confirm the order of the tribunal with respect to them. In the circumstances the parties will bear their own costs of this Court. Appeal partly allowed.

IN-Abs

During the course of conciliation proceedings in respect of a dispute between the appellant company and its workmen a settlement was arrived at between the parties on February 18, 1954. Despite the settlement some of the workmen went on strike on February 23, 1954, but eventually it was called off on March 19 and 20, 1954. On the ground that the strike was illegal because it took place during the currency of a settlement, the appellant took steps to serve charge sheets on the workmen who had joined the strike and, after a managerial inquiry, dismissed sixty of them. There were conciliation proceedings in respect of the dismissal of the workmen before the Labour Commissioner and an agreement was arrived at between the appellant and the union on September 2, 1954. The Labour Commissioner was apprised of this settlement, but since it was found that the union was opposing reinstatement of certain workmen, he proposed to hold further conciliation proceedings. The appellant was against holding further conciliation steps and, therefore, the Labour Commissioner reported the matter to the Government under section 12(4) of the . A reference was accordingly made and the Tribunal gave the award under which all the dismissed workmen were to be reinstated on the ground that they had not been shown to have taken part in violence and there were extenuating circumstances in their case inasmuch as they were misled to join the strike in order to oust the old office bearers of the union so that others might be elected in their place, and that though a much larger number of workmen had taken part in the illegal strike and the union took up the case, only these sixty were eventually dismissed while the rest were reinstated. The appellant objected to the award on the grounds (1) that as a settlement had been arrived at during the course of conciliation proceedings on September 2, 1954, which specifically dealt with the case of these sixty workmen, the reference was incompetent in view of section 18 of that Act, (2) the reference was also incompetent because what was referred was riot an industrial dispute but a dispute between the employer and its individual workmen, and (3) the Tribunal 's order of reinstatement was in any case unjustified. 309 Held:. .(1) under sections 12 and 18 of the , a settlement which is binding under section 18 on the ground that it was arrived at in the course of conciliation proceedings is a settlement arrived at with the assistance and concurrence of the conciliation officer, and that a settlement which is not binding under section 18 will not be a bar to a reference by the Government. In the present case the agreement of September 2, 1954, did not have the approval of the conciliation officer and, consequently, the reference based on 'the report of the conciliation officer under section 12 of the Act was competent. (2). that the reference was not bad on the ground that an individual dispute had been referred to the Tribunal for adjudication, because the dispute in the present case was originally sponsored by the union and related to the dismissal of a much larger number of workmen. (3). that where the finding of the Tribunal was that there was misconduct which merited dismissal under the Standing Orders and that the managerial inquiry was proper, the Tribunal was not justified in interfering with the action of the management unless it found unreasonable discrimination in the matter of taking back employees, or unfair labour practice or victimisation against the employees. Indian Iron and Steel Co. Ltd. and Another vs Their Workmen, ; , followed. I. G. N. and Railway Co. Ltd. vs Their Workmen, ; , distinguished.

Appeals Nos. 137 to 141 of 1958. Appeals by special leave from the judgment and order dated April 26, 1956 of the Patna High Court in Misc. Judicial Cases Nos. 362 to 366 of 1955. A. V. Viswanatha Sastri, section K. Majumdar and I. N. Shroff, for the appellants Nos. 2 to 4 (In all the appeals). Hardayal Hardy and D. Gupta, for the respondent (In all the appeals). December 15. The Judgment of the Court was delivered by KAPUR, J. The assessee who is the appellant has brought these five appeals against the judgment and order of the High Court of Patna by which it answered the two questions stated under section 66(2) of the Indian Income tax Act against the appellant and in favour of the Commissioner of Income tax. The appellant is the son of the late Maharajadhiraja of Darbhanga and the brother of the present Maharaja. The father died in 1929 and the appellant was given by way of maintenance the Estate of Rajnagar. He was also given a yearly allowance of Rs. 30,000 which was later raised to Rs. 48,000. From 1929, the appellant invested his cash surplus in shares and securities, the account of which was entered in what is called Account Book No. 1. From the year 1930 onwards up to the year 1941 42 the appellant purchased a large number of shares and securities which by the accounting year 1941 42 were of the value of Rs. 14.91 lacs. During this period the appellant sold shares and securities in the accounting years 1936 37 and 1939 40 of the value of 1.48 lacs and 1.69 lacs respectively. He made certain amount of profits on these sales but under orders of the Commissioner of Income tax in the former case and of the Income tax Tribunal in the latter case, these sums were not assessed to income tax. In the 290 accounting years 1942 43 to 1946 47 the appellant purchased and sold some shares and securities. The entries in Account No. 1 stood as follows: Total value of Total cost of Total cost of shares shares & securities shares and and securities sold cost at the securities pur during the year. beginning of the chased during the year. 1350 Fs. Rs. 14.66 lacs Nil Rs. 4.68 lacs 942 43 (13 items) 1351 Fs. Rs. 9.98 lacs Rs. 2.37 lacs. Rs. 416 lacs 1943 44 (4 items) (12 items) Rs. 3 05 lacs. Rs. 069 lacs 1352 FS. Rs. 8.20 lacs (2 items) and (3 items) 1944 45 other call money. 1353 Fs. Rs. 10.52 lacs Nil Rs. 1.03 lacs 1945 46 (3 items) 1354 Fs. Rs. 9.50 lacs Rs. 15 83 lacs. Rs. 3.39 lacs 1946 47 ( 9items) (2 items) and in all these years the appellant made profits which varied from Rs. 2,56,959 in the accounting year 194243 to Rs. 33,174 in the accounting year 1946 47. On July 16, 1940, the appellant arranged an overdraft with the Mercantile Bank of India and actually withdrew Rs. 10,000 for the purchase of shares. But his brother the Maharaja advanced to him without interest Rs. 10 lacs and thus the overdraft was paid off. A new Account was opened in the books of the appellant named No. 2 Investment Account which contained all entries in regard to shares purchased and sold from out of the money borrowed from the Maharajadhiraj. In this account entries of the different years were as follows: 292 was held not to. be taxable. Thus in the second period the assessee was held not to be carrying on any trade. In the third period, i.e., the assessment years 1944 45 to 1948 49 the profits made by the appellant from purchase and sale of shares were as follows: 1944 45. Rs.2,62,000 and odd 1945 46. Rs.3,95,000 and odd 1946 47. Rs.1,57,000 and odd 1947 48. Rs.1,33,000 and odd 1948 49. 76,000 and odd The Income Tax Officer held these to be liable to income tax as business profits. On appeal the Appellate Assistant Commissioner excluded the profits for the years 1944 45 and 1945 46 but for the years 1946 47 to 1948 49 the assessments were upheld. Both parties appealed to the Appellate Tribunal. It held on the evidence that the appellant was to be regarded as a dealer in shares and securities and therefore the profits were assessable to income tax. The appellant applied for a case to be stated under section 66(1) of the Income tax Act. This application was dismissed but the High Court made an order under section 66(2) of the Income tax Act to state a case on two questions of law. The questions were as follows: (1). Whether in the circumstances of the case, there is material to support the finding of the Appellate Tribunal that the assessee was a dealer in shares and securities with respect to each of the accounts and, therefore, liable to be taxed? (2). Whether, having regard to the findings of the Appellate Tribunal in respect of 1941/42 assessment, it was open to the Appellate Tribunal in the present case to hold that the profits and the transactions of sale and purchase of shares and securities amounted to profits of business and so liable to be taxed ? The High Court held that the facts and circumstances which the Tribunal took into consideration in arriving at the finding were the material before the Tribunal to support the finding and the first question 293 was answered in the affirmative and therefore against the appellant. In regard to the second question the answer was again in the affirmative and against ', the appellant who has come to this Court by special leave. It was argued on behalf of the appellant that he was not carrying on the business of buying and selling shares but his purchases and sales were in the nature of investments of his surplus monies and therefore the excess amounts received by sales were capital receipts being merely surplus and not profits. It was also submitted that the appellant being a zamindar the buying and selling of shares was not his normal activity; that he had a large income and it was his surplus income which he was investing in buying the shares and whenever he found it profitable he converted his holdings and securities and for a number of years from 1931 32 he had been buying shares but he did not sell them; that the very nature of investments was such that they had to be constantly changed so that the monies invested may be used to the best advantage of the investor; and that the sales were really for the purpose of reemploying the monies that he had invested to his best advantage. Counsel for the appellant relied upon certain cases in support of his submission that the first question raised was of a wider amplitude and that it had been erroneously restricted by the High Court and that its true import was the same as of the questions which were raised in the following cases decided by this Court. He relied on G. Venkataswami Naidu & Co. vs The Commissioner of Income tax (1), Oriental Investment Co., Ltd. vs The Commissioner of Income tax, Bombay (2). In the former case the assessee purchased four plots of land adjacent to the mills of which he was the Managing Agent. On various dates and about five years later sold them to the mills in which he realized about Rs. 43,000 in excess of his purchase price. This was treated by the Income tax authorities as purchase with a view to sell at a profit. The question referred was whether there was material for the (1) [1959] Supp. 1 S.C.R. 646. (2) ; 294 assessment of that amount as income arising from an adventure in the nature of trade. The High Court held that that was the nature of the transaction. On appeal this Court held that before the Tribunal could come to the conclusion that it was an adventure in the 'nature of trade, it had to take into consideration the legal requirements associated with the concept of the trade or business and that such a question was a mixed question of law and fact. It was also held that where a person invests money in land intending to hold it and then sells it at a profit it is a case of capital accretion and not profit derived from an adventure in the nature of trade but if a purchase is made solely and exclusively with the intention to resell it at profit and the purchaser never had any intention to hold the property for himself there would be a strong presumption that the transaction is in the nature of trade but that was also a rebuttable presumption. The purchase in the absence of any rebutting evidence was held to fall in the latter category, i.e., adventure in the nature of trade. In the Oriental Investment case(1) the assessee was an investment company. It had purchased certain shares and sold them and qua those shares it claimed to be treated as an investor and not a dealer on the ground that it did not carry on any business in the purchase and sale of shares. The assessee 's applications for reference to the High Court were rejected on the ground that no question of law arose out of the order of the Tribunal. It was held that the question whether the assessee 's business amounted to dealing in shares and in properties or was merely an investment was a mixed question of law and fact and the legal effect of the facts found was a question of law and this Court ordered the case to be stated on two questions that it framed. One of the questions was similar to the first question in the present case but the second question was a wider one, i.e., whether the profits and losses arising from the sale of shares etc. could be taxed as business profits. The question which the High Court had to answer (1) ; 295 in the present case was a narrow one and the answer to that on the material before the Court was rightly given in the affirmative. But even if the question is taken to be wider in amplitude, on the materials produced and on the facts proved the appellant must be held to have been rightly assessed. Counsel for the appellant argued that the amounts received by him in the accounting years were in the nature of capital accretions and therefore not, assessable. In support, Counsel for the appellant relied on the following cases: Raja Bahadur Kamakshya Narain Singh vs The Commissioner of Income Tax, Bihar & Orissa (1) where Lord Wright observed that profits realised by the sale of shares may be capital if the seller is an ordinary investor changing his securities but in some instances it may be income if the seller of the shares is an investment company or an insurance company. The other cases relied upon were Californian Copper Syndicate Limited vs Harris (2); Cooper vs Stubbs (3); Leeming vs Jones (4) and Edwards vs Bairstow & Harrison (5). It is not necessary to discuss these cases because. the principle applicable to such transactions is that. when an owner of an ordinary investment chooses to realise it and obtains a higher price for it than he originally acquired it at, the enhanced price is not a profit assessable to income tax but where as in the present case what is done is not merely a realisation or a change of investment but an act done in what is truly the carrying on of a business the amount recovered as appreciation will be assessable. In July 1948 the appellant had borrowed, though without interest, a large sum of money to the extent of about Rs. 10,00,000, no doubt from his brother. He started a new account calling it No. 2 Investment Account. For the assessment years under appeal shares purchased and sold were of a large magnitude ranging from Rs. 4.68 lacs to Rs. 69 thousands in what is called the first account and from Rs. 9,64,000 or even if Port Trust Debentures are excluded (1) [1943] L.R.70 I.A. 180,194. (2) (3) , 57. (4) (5). [1955] ; 296 Rs. 3,60,000 to Rs. 30,000. The magnitude and the frequency and the ratio of sales to purchases and total holdings was evidence from which the Income tax Appellate Tribunal could come to the conclusion as to the true nature of the activities of the appellant. The principle which is applicable to the present case is what we have said above and on the evidence which was before the Tribunal, i.e., the substantial nature of the transactions, the manner in which the books had been maintained, the magnitude of the shares purchased and sold and the ratio between the purchases and sales and the holdings, if on this material the Tribunal came to the conclusion that there was material to support the finding that the appellant was dealing in shares as a business, it could not be interfered with by the High Court and in our opinion it rightly answered the question against the appellant in the affirmative. The second question is wholly unsubstantial. There is no such thing as res judicata in income tax matters. The Appellate Tribunal has placed in a tabulated form the activities of the appellant showing the buying and selling and the magnitude of holdings and it cannot be said therefore that it was not open to the Appellate Tribunal to give the finding that it did. In our opinion the High Court rightly held against the appellant. The appeals are therefore dismissed with costs. One hearing fee in this Court. Appeals dismissed.

IN-Abs

The appellant used to invest his cash surplus in shares and securities and maintained an account book called Book No. 1 relating thereto. During the period from 1930 to 1941 42 he purchased a large number of shares and securities which by the accounting year 1941 42 were of a value Rs. 1491 lacs. He sold certain shares and securities of the value of several lacs and made certain amount of profit on those sales. In 1940 the appellant borrowed a large amount of money from his brother, the Maharaja of Darbhanga and opened a new account named account No. 2 which contained all entries regarding shares purchased and sold out of the money borrowed from the Maharaja. In the assessment year 1944 45 to 1948 49 the profits made by the (1) ; 288 appellant from purchase and sale of shares amounted to several lacs and the Income tax Officer held those to be liable to income tax as business profits. The Appellate Assistant Commissioner upheld the assessments but excluded the profits for the years 1944 45. On appeal by both the parties the Appellate Tribunal held on the evidence that the appellant was to be regarded as a dealer in shares and securities and therefore the profits were assessable to income tax. The High Court stated the following two questions under section 66(2) of the Income tax Act and answered them in the affirmative: "(1) Whether in the circumstances of the case, there is material to support the finding of the Appellate Tribunal that the assessee was a dealer in shares and securities with respect to each of the account and, therefore, liable to be taxed? (2)Whether having regard to the finding of the Appellate Tribunal in respect of 1941 42 assessment, it was open to the Appellate Tribunal in the present case to hold that the profits and transactions of sale and purchase of shares and securities amounted to profits of business and so liable to be taxed?" On appeal by special leave the appellant contended inter alia, that being a Zamindar the buying and selling of shares was not his normal activity and he did not carry on any such business but his purchases and sales were in the nature of investments of his surplus monies and therefore the excess amounts received by sales were capital receipts being merely surplus and not profits. Held, that on the materials produced and on the facts proved the appellant must be held to have been rightly assessed. The principle applicable to such transactions is that when an owner of an ordinary investment chooses to realise it and obtains a higher price for it than the original price paid by him, the enhanced price is not a profit assessable to income tax, but where as in the present case what is done is not merely a realisation or a change of investment but an act done in what is truly the carrying on of a business the amount recovered as appreciation will be assessable. G.Venkataswami Naidu & Co. vs The Commissioner of Income tax, [1959] Supp. 1 S.C.R. 464, Oriental Investment Company Ltd. vs The Commissioner of Income tax, ; , Raja Bahadur Kamakshya Narain Singh vs Commissioner of Income tax, Bihar and Orissa, (1943) L.R. 70 I.A. 180, discussed. The substantial nature of the transactions, the manner in which the books were maintained, the magnitude of the shares purchased and sold and the ratio between the purchases and sales and the holding justified tile Tribunal to come to the conclusion that the appellant was dealing in shares as business. The High Court could not interfere with those findings and it rightly answered the questions in the affirmative. There is no such thing as res judicata in income tax matters 289 and it was quite open to the Appellate Tribunal to give the finding that it did.

Appeals Nos. 290 to 292 of 1959. Appeals by special leave from the judgment and order dated December 6, 1957, of the Kerala High Court in Agricultural Income tax Referred Cases Nos. 15, 18 and 19 of 1955. C.K. Daphtary, Solicitor General of India, Thomas Vellapally and M. R. K. Pillai, for the appellants (in all the appeals) Sardar Bahadur, for the respondents. December 15. The Judgment of the Court was delivered by KAPUR, J. These three appeals are brought by special leave against the judgment and order of the High Court of Kerala and arise out of a common judgment of that court given in three Agricultural Income tax References Nos. 15, 18 and 19 of 1955. In the first reference the question raised was: "Whether under the Travancore Cochin Agricul tural Income Tax Act, 1950 in calculating the assessable agricultural income of a rubber estate already planted and containing both mature yielding rubber trees and also immature rubber plants which have not come into bearing, the annual expenses incurred for the upkeep and maintenance of such rubber plants, are not a permissible deduction, and if so, whether the sum of Rs. 42,660 4 1 expended by the assessee in the relevant accounting year 1952, under this head may be deducted." and in the other two the question referred was: 281 "Whether the expenses incurred for the mainte nance and upkeep of immature rubber trees constitute a permissible deduction within the meaning of section 5(j) of Act XXII of 1950?" In all the references the questions were answered in the negative and against the appellant. The appeals relate to three accounting years 1950, 1951 and 1952 (assessment years 1951 52, 1952 53 and 1953 54). The appellants have rubber plantations and in the accounting year 1950, corresponding to the assessment year 1951 52, the appellants had under cultivation 3558 84 acres out of which 334 64 acres had immature rubber trees growing and the rest i.e. 3224 20 acres mature rubber yielding trees under cultivation. In that year a sum of Rs. 19,056 0 9, which was expended for the upkeep and maintenance of immature portion of the rubber plantation, was allowed by the Agricultural Income tax Tribunal and at the instance of the respondent a reference was made to the High Court under section 60(1) of the Agricultural Income tax Act (Act XXII of 1950) hereinafter termed the 'Act ' and that was reference No. 18 of 1955. During the accounting year 1951 corresponding to the assessment year 1952 53 the appellant had under cultivation. a total area of 3426,55 acres of which 3091.91acres were mature rubber yielding trees and 334.64 acres had immature rubber trees. In that year a sum of Rs. 59,271.9 5 was the expenditure incurred for the upkeep and maintenance of immature portion of the rubber estate. That sum was allowed by the Agricultural Income tax Tribunal and at the instance of the respondent a reference was made under section 60(1) of the Act to the High Court and that was reference No. 19 of 1955. In Agricultural Income tax Reference No. 15 of 1955 which related to, accounting year 1952 and the assessment year 1953 54, the area under cultivation was 3453,65 out of which 2967,91 acres had mature rubber yielding trees and 485,74 acres had immature rubber growing trees. In that year the amount expended on the maintenance and tending of the imma ture rubber trees was Rs. 42,660,4 1. In that case, 36 282 however, the Agricultural Income tax Tribunal rejected the appellant 's claim and disallowed the expenditure. At the instance of the appellant a case was stated to the High Court under section 60(1) of the Act and was answered in the negative and against the appellant. In all the cases the assessee company is the appellant and the main question for decision is whether the amount expended for the upkeep and maintenance of the immature, rubber trees is a permissible deduction under section 5(j) of the Act. The charging section under the Act is section 3 and section 5 relates to computation of agricultural income. It provides: S.5 "The agricultural income of a person shall be computed after making the following deductions, namely: expenditure (not being in the nature of capital expenditure or personal expenses of the assessee) laid out or expended wholly and exclusively for the purpose of deriving the agricultural income;". In regard to this income the High Court held: "We find it impossible to say that the 'amounts spent on the upkeep and maintenance of the immature rubber plants were laid out or expended "for the purpose of deriving the agricultural income", much less that they were laid out or expended "wholly and exclusively for that purpose". "The agricultural income", in the context, can only mean the agricultural income obtained in the accounting year concerned and not the agricultural income of any other period." In our opinion the High Court has taken an erroneous view of the relevant provision. It is not denied that the expenditure claimed as a deduction was wholly and exclusively laid out for the purpose of deriving income but the use of the definite article "the" before agricultural income has given rise to the interpretation that the deduction is to be from the income of the year in which the trees on which the amount claimed 283 was expended bore any income. In a somewhat similar case Vallambrosa Rubber Co. Ltd. vs Farmer (1) the expenditure of the kind now claimed was allowed under the corresponding provision of the English Income tax Act. In that case a rubber company had an estate in which in the year of assessment only 1/7 produced rubber and the other 6/7 was in process of cultivation for the production of rubber. It may be added that rubber trees do not yield any rubber until they are about six years old. The expenditure for the superintendence, weeding etc. incurred by the company in respect of the whole estate including the nonbearing rubber estate was allowed on the ground that in arriving at the assessable profits the assessee was entitled to deduct the expenditure for superintendence, weeding etc. on the whole estate and not only on the 1/7 of such expenditure. Lord President said at page 534: "Well that is for the case quite correct, but it must be taken, as you must always take a Judge 's dicta, secundum materiam subjectum of the case that is decided. But to say that the expression of Lord Esher 's lays down that you must take each year absolutely by itself and allow no expense except the expense which can be put against the profit which is reaped for the year is in my judgment to press it much further than it will go." Counsel for the respondent relied upon a judgment of this Court in Assam Bengal Cement Co. Ltd. vs The Commissioner of Income tax, West Bengal (2) and particularly on a passage at page 983 where Bhagwati J. observed: "The distinction was thus made between the acquisition of an income earning asset and the process of the earning of the income. Expenditure in the acquisition of that asset was capital expenditure and expenditure in the process of the earning of the profits was revenue expenditure. " But that case has no relevancy to the facts of the present case nor has that passage any applicability to the facts of the present case. The question there was (1) (2) 284 whether certain payments made were by way of capital expenditure or revenue expenditure. The assessee acquired a lease from Government for twenty years and in addition to paying the rent and royalties for the lease the assessee had to pay two further sums as 'protection fees ' under the terms of the lease. Those sums were held to be capital expenditure inasmuch as they were incurred for the acquisition of an asset or an advantage of enduring nature and were no part of the working or operational expenses for carrying on the business of the assessee. In our opinion the amount expended on the superintendence, weeding etc. of the whole estate should have been allowed against the profits earned and it is no answer to the claim for a deduction that part of those expenses produced no return in that year because all the trees were not yielding rubber in that year. We therefore allow these appeals, set aside the judgments and orders of the High Court and answer the questions in favour of the appellant in all the three agricultural Income tax References. The appellant will have its costs in this Court and the High Court. One hearing fee in this Court. Appeals allowed.

IN-Abs

In computing the agricultural income of a person section 5(f) of the Travancore Cochin Agricultural Income tax Act, 1950, allowed deductions of any expenditure "laid out wholly and exclusively for purpose of deriving the agricultural income". The assessee who had rubber plantations claimed that the amount expended on the maintenance and tending of immature rubber trees should be deducted in computing its agricultural income but this was disallowed on the ground that the use of the article "the" before the words agricultural income implied deduction (1) ; 280 from the income of the year in which the trees on which the amount was expended bore income. Held, that the assessee was entitled to the deduction claim ed. It was no answer to the claim for the deduction that these expenses produced no return in the year in question as the trees were not yielding rubber in that year. Vallambrosa Rubber Co. Ltd. vs Farmer, , followed. Assam Bengal Cement Co. Ltd. vs The Commissioner of Income tax, West Bengal, , not applicable.

Appeal No. 352 of 1958. Appeal by special leave from the judgment and order dated July 27, 1956, of the Labour Appellate Tribunal of India, Bombay, in Appeal (Bom.) No. 72 of 1956. G. section Pathak, J. B. Dadachanji, section N. Andley and Rameshwar Nath, for the appellant. D. section Nargoulkar and K. R. Choudhuri, for the respondent No. 1. B. P. Maheshwari, for the Interveners. December 16. The Judgment of the Court was delivered by WANCHOO, J. This is an appeal by special leave in an industrial matter. The appellant owns two sugar mills. There was a dispute between the appellant and its workmen with respect to the employment of contract labour in the two mills. Consequently, a notice of change under section 42 (2) of the Bombay Industrial Relations Act, No. XI of 1947, (hereinafter called the Act) was given to the appellant by the union re. presenting the workmen. Thereafter the union, which is the respondent in the present appeal, made two references to the industrial court, one with respect to each mill, under section 73A of the Act, and the main demand in the references was that "the system of employing contractors ' labour should be abolished and the strength of the employees of the respective departments should be permanently increased sufficiently 344 and accordingly". The appellant raised two main contentions before the industrial court, namely, (i) that the industrial court had no jurisdiction to decide the dispute as the matter was covered by item (6) of Sch. III of the Act, which is within the exclusive jurisdiction of a labour court; and (ii) that any award directing abolition of contract labour would contravene the fundamental right of the appellant to carry on business under article 19(1)(g) of the Constitution. The industrial court decided both the points against the appellant; on the question of jurisdiction it held that the matter was covered by item (2) of Sch. 11 of the Act and therefore the industrial court would have jurisdiction, and on the second point it held that there was no contravention of the fundamental right conferred on the appellant under article 19(1)(g). It may be mentioned that the second point arose on the stand taken by the appellant that the workmen of the contractors were not the workmen of the appellant. The industrial court then dealt with the merits of the case and passed certain orders, with which we are however not concerned in the present appeal. It may be mentioned that there were cases relating to a number of other sugar mills raising the same points, which were decided at the same time by the industrial court. In consequence, there were a number of appeals to the Labour Appellate Tribunal by the mills and one by one of the unions (though not by the respondent union). All these appeals were heard together by the appellate tribunal, where also the same two points relating to jurisdiction and contra vention of the fundamental right guaranteed by article 19(1)(g) were raised. The Appellate Tribunal did not agree with the industrial court that the references were covered by item (2) of Sch. 11 to the Act. It, however, held that the word "employment" in item (6) of Sch. III to the Act had to be given a restricted meaning. It pointed out that the three Schedules did not exhaust the comprehensive provisions of section 42(2) and the subject matter of dispute, namely, the abolition of contract labour was a question of far reaching and important change which could not have 345 been intended to be dealt with in a summary way by a labour court, which is the lowest in the hierarchy of courts established under the Act. It therefore held that the industrial court had jurisdiction to decide the matter. On the question of contravention of the, fundamental right, the appellate tribunal took the view that the question whether the restriction imposed was reasonable depended upon the facts of each case and therefore was a matter outside its power as a court of appeal It then considered the merits of the matter and came to the conclusion that the approach of the industrial court to the questions raised before it was not correct and therefore it found it difficult to support the award. Eventually it set aside the award and remanded the matter for early hearing in the light of the observations made by it. Further, it decided that in the interest of justice the entire award should be set aside, even though there was no appeal before it by the unions in most of the cases. The appellant then came to this Court and was granted special leave; and that is how the matter has come up before us. Mr. Pathak on behalf of the appellant has raised the same two points before us. We shall first deal with the question of jurisdiction. Reliance in this connection is placed on item (6) of Sch. III of the Act, which is in these terms: "Employment including (i) reinstatement and recruitment; (ii) unemployment of persons previously employed in the industry concerned. " It is not in dispute that matters contained in Sch. III are within the jurisdiction of a labour court and an industrial court has no jurisdiction to decide any matter in a reference under section 73A of the Act which is within the jurisdiction of a labour court. Mr. Pathak contends that item (6) of Sch. III speaks of "employment" and includes in it two matters which might otherwise not have been thought to be included in it. Therefore, according to him, employment as used in item (6) is wider than the two matters included in it 44 346 and the question whether contract labour should be employed or not would be a matter of employment within the meaning of that word in item (6) of Sch. We do not think it necessary for purposes of this appeal to consider what would be the ambit of employment as used in item (6) of Sch. 111. The scheme of the Act shows that under sections 71 and 72 the jurisdiction of a labour court and an industrial court is concurrent with respect to any matters which the State Government may deem fit to refer to them; but under section 73A reference by a registered union which is a representative of employees and which is also an approved union, can only be made to an industrial court, subject to the proviso that no such dispute can be referred to an industrial court where under the provisions of the Act it is required to be referred to the labour court for its decision. 78 of the Act provides for jurisdiction of labour courts and matters specified in Sch. 11 are not within their ordinary jurisdiction. Therefore, when a registered union wishes to refer any matter which is contained in Sch. 11 of the Act such reference can be made by it only to the industrial court. It follows in consequence that whatever may be the ambit of the word "employment" used in item (6) of Sch. III, if any matter is covered by Sch. 11 it can only be referred to the industrial court under section 73A. Now the question whether contract labour should be abolished (on the assumption that contract labour is not in the employ of the mills) immediately raises questions relating to permanent increase in the number of persons employed, their wages including the period and mode of payment, hours of work and rest intervals, which are items (2), (9) and (10) of Sch. Therefore, a question relating to abolition of contract labour is so inextricably mixed up with the question of permanent increase in the number of persons employed, their wages, hours of work and rest intervals that any dispute relating to contract labour would inevitably raise questions covered by Sch. Therefore, a dispute relating to contract labour if it is to be referred under section 73A by a registered union can only be referred to an industrial court as it immediately 347 raises matters contained in items (2), (9) and (10) of Sch. Mr. Pathak urges however that matters relating to permanent increase in the number of persons employed due to the abolition of contract labour, their wages, hours of work and rest intervals were not really disputed at all by the appellant. It appears that in the written statements of the appellant, these points were not raised; but the decision of the appellate tribunal shows that one of the contentions raised before it by the sugar mills was that the workmen concerned were not employees of the sugar mills. Therefore, as soon as this contention is raised a dispute as to permanent increase in the number of persons employed, their wages, hours of work and rest intervals would immediately arise. It must therefore be held that a question relating to the abolition of contract labour inevitably raises a dispute with respect to these three items contained in Sch. In the circumstances we are of opinion that the industrial court had jurisdiction to deal with the matter. In particular, we may point out that in their petitions the unions had raised at least the question as to the permanent increase in the number of persons employed and that would immediately bring in item (2) of Sch. It is true that the question of permanent increase in the number of persons employed, their wages, hours of work and rest intervals would only arise if contract labour is to be abolished; but in our opinion these are matters so inextricably mixed up with the question relating to abolition of contract labour that they must be held to be in dispute as soon as the dis pute is raised about the abolition of contract labour, (assuming always that the employer does not accept contract labour as part of its labour force). The contention about jurisdiction must therefore be rejected. This brings us to the second contention raised by Mr. Pathak. He bases his argument in this behalf on section 3(18), which defines an " industrial matter " as meaning any matter relating to employment, work, wages, hours of work, privileges, rights or duties of employers or employees, or the mode, terms and 348 conditions of employment. Mr. Pathak urges that the definition of " industrial matter " contravenes the fundamental right guaranteed under article 19(1)(g), when it provides that the mode of employment is also included within it. Reference is also made to section 3(17) which defines an "industrial dispute" as any dispute or difference which is connected with any industrial matter. Mr. Pathak therefore urges that reading the two definitions together the industrial court is given the power to decide disputes as to the mode of employment and that contravenes the fundamental right guaranteed under article 19(1)(g), for it enables an industrial court to adjudicate on the mode of employment and thus interfere with the right of the employer to carry on his trade as he likes subject to reasonable restrictions. Now assuming that the mode of employment used in section 3(18) includes such questions as abolition of contract labour, the question would still be whether a provision which enables an industrial court to adjudicate on the question whether con tract labour should or should not be abolished is an unreasonable restriction on the employer 's right to carry on his trade. We cannot see how the fact that power is given to the industrial court, which is a quasi judicial tribunal to decide whether contract labour should be abolished or not would make the definition of "industrial matter" in so far as it refers to the mode of employment, an unreasonable restriction on the fundamental, right of the employer to carry on trade. The matter being entrusted to a quasi judicial tribunal would be decided after giving both parties full opportunity of presenting their case and after considering whether in the circumstances of a particular case the restriction on the mode of employment is a reasonable restriction or not. The tribunal would always go into the reasonableness of the matter and if it comes to the conclusion that the mode of employment desired by labour is not reasonable it will not allow it; it is only when it comes to the conclusion that the mode of employment desired by labour in a particular case is a reasonable restriction 349 that it will insist on that particular mode of employment being used. Take, for example, the case of contract labour itself. The tribunal will have to go into the facts of each case. If it comes to the conclusion that on the facts the employment of contract labour is reasonable and thus doing away with it would be an unreasonable restriction on the right of the employer to carry on trade, it will permit contract labour to be carried on. On the other hand if it comes to the conclusion that employment of contract labour is unreasonable in the circumstances of the case before it it will hold that it should be abolished, the reason being that its abolition would be a reasonable restriction in the circumstances. Therefore the decision whether the mode of employment in a particular case is a reasonable restriction or unreasonable one is in the hands of a quasi judicial tribunal. In the circumstances it cannot be said that by providing in section 3(18) that an "industrial matter" includes also the mode of employment, there is any contravention of the fundamental right of the employer to carry on trade. If the argument on behalf of the appellant were to be accepted it would mean that judicial and quasi judicial decisions could be unreasonable restrictions on fundamental rights and this the Constitution does not envisage at all. We are therefore of opinion that this contention also fails. Finally, Mr. Pathak draws our attention to sections 3(13) and 3(14) of the Act and submits that the appellant never said that contract labour employed in its mills was not in its employment. 3(13) defines the word "employee" and includes in it any person employed by a contractor to do any work for him in the execution of a contract with an employer within the meaning of sub cl. (e) of cl. 3(14) defines the word "employer" in an inclusive manner and in cludes "where the owner of any undertaking in the course of or for the purpose of conducting the undertaking contracts with any person for the execution by or under the contractor of the whole or any part of any work which is ordinarily part of the undertaking, the owner of the undertaking". It is urged that in view 350 of these definitions, the employees of the contractors are the employees of the mills and the mills are the employers of these employees of the contractors. Therefore, Mr. Pathak urges that there is no necessity of abolishing contract labour and that the industrial court may, if it so chooses, give the same wages and hours of work and rest intervals and other terms and conditions of employment to the employees of the contractors as are provided for comparable direct employees of the appellant and in such circumstances it would not be necessary to abolish the contract system so long as the employees of contractors are to be in the same position as the direct employees of the appellant as to their terms and conditions of service. This was not however the manner in which the case was contested before the industrial court or the appellate tribunal. All that we need therefore say is that when the matter goes back before the industrial court as directed by the appellate tribunal, the industrial court may take this submission of the appellant into account and may consider whether it is necessary to abolish the contract system, provided the appellant is able to assure the industrial court that employees of the contractors who are deemed to be its employees within the meaning of section 3(13) and section 3(14) would have the full benefit of the same terms and conditions of service as its comparable direct employees. The appeal fails and is hereby dismissed with costs. Appeal dismissed.

IN-Abs

A dispute having arisen between the appellant employer and its workmen regarding the employment of contract labour in the appellant 's mills, the union representing the workmen which is the respondent in the present case after serving notice on the appellant under section 42(2) of the Bombay Industrial Relations Act made reference to the Industrial Court under section 73A of the Act demanding the abolition of the system of employing contractors ' labour and the permanent increment of employees in the respective departments. The contention of the appellant, inter alia, was that the Industrial Court had no jurisdiction to decide the dispute which was within the exclusive jurisdiction of a Labour Court under item (6) of Sch. III of the Act, and that any award directing the abolition of contract labour would contravene the appellant 's fundamental right to carry on business under article 19(1)(g) of the Constitution. The Industrial Court decided that the Industrial Court would have jurisdiction as the matter was covered by item (2) of Sch. 11 of the Act and that there was no contravention of the fundamental rights of the appellants. On appeal the Labour Appellate Tribunal, held, that the Industrial Court had jurisdiction to decide the matter although it was not covered by item (2) of Sch. 11 of the Act. As regards the question of contravention of the fundamental right it held that the question whether the restriction imposed was reasonable depended upon the facts of each case and the matter was outside the powers of a court of appeal. Eventually it set aside the entire award on the merits. On appeal 'by the appellant by special leave, Held, that the Industrial Court had jurisdiction to deal with the matter. Whatever might be the ambit of the word "employment" used in item (6) of Sch. III, if a matter was covered by Sch. 11 it could only be referred to the Industrial Court under section 73A. A question relating to the abolition of contract labour inevitably raised a dispute relating to matters contained in items (2), (9) and (10) of Sch. 11, namely, permanent increase in the number of 343 persons employed, the employees ' wages, hours of work and rest intervals and could, therefore, be referred only to an Industrial Court. The power given to the Industrial Court which was a quasi judicial tribunal to decide whether contract labour should be abolished or not would not make the definition of "industrial " matter" in so far as it referred to the mode of employment an section unreasonable restriction on the fundamental right of the employer to carry on his trade and as such there was no contravention of his fundamental right by providing in section 3(18) that an "industrial matter" included also the mode of employment of the employees.