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Appeal No. 865 of 1964. 930 Appeal by special leave from the judgment and order dated February 14, 1964 of the Bombay City Civil Court at Bombay in Appeal No. 86 of 1963. M. C. Setalvad, J. B. Dadachanji, O. C. Mathur and Ravinder Narain, for the appellant. B. K. Bhattacharjee and section N. Mukherjee, for the respondent. The Judgment of the Court was delivered by Hidayatullah, J. In this appeal by special leave against the judgment and order of the Principal Judge, City Civil Court, Bombay dated February 14, 1964, the only question is whether the delegation by the Commissioner, Municipal Corporation of his functions under sections 105B to 105E to certain officers of the Corporation was valid and proper. This question arises in the following circumstances : One Govind Hari was a monthly tenant of room No. 23 of a chawl at Chandanwadi. After his death in 1961 the tenancy devolved on his widow Anusuyabai, who took in a boarder. The chawl belonged to the Municipal Corporation and proceedings were taken to eject Anusuyabai and the boarder under Chapter VI A of the Municipal Corporation Act. These proceedings were initiated by one of the officers to whom the powers of the Commissioner were delegated by him under section 68 of the Act. After due enquiry the officer passed an order evicting these persons. An appeal was filed under section 105F of the Act before the Bombay City Civil Court. In that appeal it was held that the delegation was not proper inas much as the judicial functions of the Commissioner under sections 105B to 105E had been delegated to be exercised under the Commissioner 's control and subject to his revision. The learned Judge pointed out that judicial or quasi judicial power could not ordinarily be delegated and, in any event, it could not be delegated so that the control over the decision was kept by the Commissioner. He, therefore, held that the officer who had passed the order was not properly invested with jurisdiction and the order was thus a nullity. The Bombay Municipal Corporation Act is an Act of 1888 and it has been amended frequently. Section 68 is one of the original sections and it provides as follows : "68. Municipal officers may be empowered to exercise certain of the powers, etc. of the Commissioner. 931 (1) Any of the powers, duties or functions conferred or imposed upon or vested in the Commissioner by any of the sections, sub sections or clauses mentioned in sub section (2) may be exercised, performed or discharged, under the Commissioner 's control and subject to his revision and to such conditions and limitations, if any, as he shall think fit to prescribe, by any municipal officer whom the Commissioner generally or specially either by name or by virtue of office, empowers in writing in this behalf; and in each of the said sections, sub sections and clauses the word "Commissioner" shall, to the extent to which any municipal officer is so empowered, be deemed to include such officer. (2) The sections, sub sections and clauses of this Act referred to in sub section (1) are the following namely Section 105B. " 105C. " 105D. " 105E. A reference to sections 105B, 105C, 105D and 105E was inserted by the Maharashtra Act XIV of 1961. These sections are in Chapter 6A which was also newly added by the same Act. It is not necessary to refer to these sections, except a portion from section 105B which brings into prominence the action taken by the Corporation against the respondents : "105B. Power to evict person from corporation premises. (1) Where the Commissioner is satisfied (a) that the person authorised to occupy any corporation premises has, whether before or after the commencement of the Bombay Municipal Corporation (Amendment) Act, 1960, (i) 932 (ii) sub let, contrary to the terms or condi tions of his occupation, the whole or any part of such premises; or the Commissioner may notwithstanding anything contained in any law for the time being in force, by notice order that person, as well as any other person who may be in occupation of the whole or any part of the premises, shall vacate them within one month of the date of the service of the notice. " It will be noticed that section 68 was originally intended to cover very different matters because Chapter 6A could not have been in contemplation. When Chapter 6A was added and a reference to sections 105B to 105E was included in section 68, the wording of that section became applicable to the powers exercisable under sections 105B to 105E, even though that wording, taken literally, is somewhat inapt to cover delegation of judicial power. No question has been raised that any of the amendments is ultra vires so the words of section 68 must be reasonably construed. It goes without saying that judicial power cannot ordinarily be delegated unless the law expressly or by clear implication permits it. In the present case the amendment of section 68 by inclusion of delegation of the functions of the Commissioner under sections 105B to 105E does indicate the intention that the judicial or quasi judicial powers contained in Chapter VIA were expressly intended to be delegated. To the delegation as such there can be no objection. What is objected to is the provision, both in the section as well as in the order of delegation, that the exercise of the function is to be under "the Commissioner 's control" and "subject to his revision". These words are really appropriate to a delegation of administrative functions where the control may be deeper than in judicial matters. In respect of judicial or quasi judicial functions these words cannot of course bear the meaning which they bear in the delegation of administrative functions. When the Commissioner stated that his functions were delegated subject to his control and revision it did not mean that he reserved to himself the right to intervene to impose his own decision upon his delegate. What those words meant was that the Commissioner could control the exercise administratively as to the kinds of cases in which the delegate 933 could take action or the period or time during which the power might be exercised and so on and so forth. In other words, the administrative side of the delegate 's duties were to be the subject of control and revision but not the essential power to decide whether to take action or not in a particular case. This is also the intention of section 68 as interpreted in the context of the several delegated powers. This is apparent from the fact that the order of the delegate amounts to an order by the Commissioner and is appealable as such. If it were not so the appeal to the Bombay City Civil Court would be incompetent and the order could not be assailed. The order of the delegate was the order of the Commissioner and the control envisaged both in section 68 and the order of delegation was not control over the decision as such but over the administrative aspects of cases and their disposal. No allegation has been made that the Commissioner intervened in the decision of the case or improperly influenced it. In these circumstances the order impugned in the appeal cannot be sustained. We allow the appeal and set aside the order of the Bombay City Civil Court and restore the order of the officer who exercised powers under section 105B of the Act, but make no order about costs. Appeal allowed.

IN-Abs

One C a tenant of a Chawl belonging to the Municipal Corporation of Bombay died, and his widow on whom the tenancy devolved, took in a boarder. Proceedings by the Corporation under Chapter VI A of the Municipal Corporation Act for their ejectment were initiated by an officer to whom the commissioner had delegated his powers under section 68 of the Act. After due enquiry the officer passed an order evicting C 's widow and her boarder. In an appeal filed under section 105F of the Act before the Bombay City Civil Court it was held that the delegation of the Commissioner 's power was not proper inasmuch as the judicial functions of the Com missioner under sections 105B to 105E had been delegated to be exercised under the Commissioner 's control and subject to his revision, and consequently the order of ejectment was without jurisdiction. The Corporation appealed, by special leave, to the Supreme Court. No question as to the validity of the law was raised. It was only contended that judicial power was delegated with administrative control over the delegates decision. HELD :(i) Section 68 was originally intended to cover very different matters because Chapter VI A could not then have been in contemplation. When Chapter VI A was added and a reference to sections 105B to 105E was included in section 68, the wording of that section became applicable to the powers exercisable under sections 105B to 105E, even though that wording, taken literally, is somewhat inapt to cover delegation of judicial power. [932 D] (ii) To the delegation of judicial power as such there can be no objection when the law either expressly or by necessary implication permits it. In the present case the amendment of section 68 by inclusion of the delegation of the function of the Commissioner under sections 105B to 105E does indicate the intention that the judicial and quasi judicial powers contained in Chapter VI A were expressly intended to be delegated. The words "the Commissioner 's control" and "subject to his revision" in section 68, as well as in order of delegation, are really appropriate to a delegation of administrative functions. They must be reasonably construed. In respect of judicial or quasi judicial functions these words cannot bear the meaning which they bear in the delegation of administrative functions. When the Commissioner stated that his functions were delegated subject to his control and revision it did not mean that he reserved to himself the right to intervene to impose his own decision upon his delegate. The control envisaged was not control over the decision as such but over the administrative aspects of cases and their disposal and the delegation was valid. [932 F 933 B] The order of the Bombay City Civil Court could not therefore be sustained.

No. 59 of1951. Appeal from the Judgment and Decree dated the 22nd August, 1944, of the High Court of Judicature at Allahabad (Verma and Hamilton JJ.) in First Appeal No. 345 of 1940 arising out of the Judgment and Decree dated the 24th August, 1940, of the Court of the Special Judge, 1st Grade of Shahjahanpur in Miscellaneous Case No. 52 of 1940 and Original Suit No. 2 of 1938. Chaudhry Niamutullah (Gopalji Mehrotra, with him) for the appellant. Onkar Nath Srivastava for respondent No. 5. 1953. October 8. 507 MAHAJAN J. This appeal is before us on a certificate granted by the High Court of Judicature at Allahabad under section 110 of the Code of Civil Procedure and the only point it raises is whether the appeal preferred by the appellant to the High Court was imperfectly constituted, inasmuch as all the creditors were not impleaded as parties to that appeal. The facts are that on the 28th October, 1936, Rama Krishna Narain and others submitted an application under section 4 of the U. P. Encumbered Estates Act, 1934, to the sub divisional officer, Tilhar, Shahjahanpur, praying that the provisions of the said Act be applied to them. This application was eventually transferred by the sub divisional officer to the court of the special judge, first grade, Shahjahanpur. The landlords on 26th August, 1938, submitted a written statement to the special judge under section 8 of the Act and therein stated inter alia that they had a pro prietary interest to the extent of ten annas share in 52 items of taluqdari villages which formed part of taluka Bharawan. A notice of this application was published as required by section 11(1) of the Act in the U.P. Gazette dated 13th May, 1939. On 30th November, 1939, Raja Dev Singh, who subsequently became a ward of the Court of Wards, filed a claim petition under section 11(2) of the Act and alleged therein that he was the proprietor of 6 1/2 pies share in 47 items of property mentioned in schedule (A) of the landlords ' written statement. This claim was. disallowed by the special judge by an order dated 24th August, 1940, and it was held that Raja Dev Singh was not the owner of the property claimed by him in his objection petition. The Deputy Commissioner of Hardoi who is the Court of Wards of Bharawan estate filed an appeal against this decision of the special judge to the High Court. All the applicant landlords were impleaded as respondents in the appeal along with the Unao Commercial Bank Ltd., one of the creditors who had taken part in the proceedings before the special judge at that stage. It does not appear from the record that the other creditors had either filed written statements 67 508 under section 10 or had made any allegation that the landlords had secreted any property. Their names were not mentioned in the memorandum of parties annexed to the memo of costs, and in these circumstances they were not impleaded as respondents in the appeal. Subsequently the appellant made an application for impleading them as respondents in the appeal and prayed that he be given the benefit of section 5 of the Indian Limitation Act. This application was rejected, and eventually the appeal was dismissed on the ground that it was. defective and could not be entertained in the absence of all the creditors as respondents in the appeal. The, cross objection filed by the Unao Commercial Bank with respect to costs was allowed. The appellant on 21st November, 1944, filed a petition for leave to appeal to His Majesty in Council. It was alleged in this application that the valuation of the subject matter of the appeal in the trial court in the High Court and before His Majesty in Council was over Rs. 10,000 and that though in the result the judgment and decree of the High Court affirmed the judgment and decree of the trial court , a substantial question of law affecting not only the parties but of general interest was involved. The High Court with out deciding whether the appeal raised a substantial question of law granted leave to the appellant under section 110 of the Code of Civil Procedure on the ground that the judgment of the High Court being one of variance, and the value of the subject. matter in dispute in the trial court as well as in the appeal to His Majesty in Council being over Rs. 10,000, the case fulfilled the requirements of that section. Mr. Srivastava who represented the debtors landlords before us raised a preliminary objection that the certificate under section 110 of the Civil Procedure Code was defective and the appeal was thus incompetent and could not be entertained by us. He contended that the only variation made by the High Court in the judgment of the trial judge was in respect of costs and such a variation in the matter of costs only did not invoice the decree a decree of variance, and that 509 being. so, the ground on which the High Court had granted the certificate was erroneous and the certificate being defective this appeal could not be heard. In our opinion, this contention is without force. It is no doubt true that costs are not taken into consideration and are treated as extraneous to the subjectmatter of a suit, and variation in the matter of costs does not make the decree of the appellate court a decree of variance; but as already stated, the appellant did not pray for the certificate on that ground. He had expressly alleged that the decree being one of affirmance he was entitled to a certificate, because the subject of the suit as well as of the appeal was a sum of orver Rs. 10,000 and the case involveda4 substantial question of law. It is obvious that the ground on which the appeal was dismissed by the High Court raises a question of law of importance to the parties and that being so, on that ground alone the appellant was entitled to a certificate under section I 10, Civil Procedure Code. The certificate therefore is good, though the around on which it was granted is erroneous. It is always open to an appellant to support the certificate on grounds other than those, on which it has been actually ordered to be given. The preliminary objection therefore fails. In order to determine whether the creditors are necessary parties in proceedings under chapters 3 and 4 of the U.P. Encumbered Estates Act, 1934, it is necessary to refer to the relevant provisions of the Act. The law was enacted for giving relief to encumbered estates in U. P. Section 4 provides that any landlord, who is subject to or whose immoveable property or any part thereof is encumbered with private debts, may make an application in writing to the Collector of the district, stating the amount of such private debts and also of his public debts both decreed and undecreed and requesting that the provisions of this Act be applied to him. The section gives an option to the landlord who is subject to private debts to make an application for obtaining relief under the provisions of the Act. The Collector then transmits the application to the special judge appointed under the Act. 510 The direct consequence of the acceptance of such an application by the collector is that the creditors are deprived of their rights of proceeding against such a landlord in civil or revenue courts in respect of their debts and all attachments made in execution of decrees become null and void and no process in execution can issue after that date. The provisions of the Act are clearly detrimental to the contractual rights of the creditors and to their remedies in civil law and such a statute can by no stretch of imagination be described to have been enacted for the benefit of creditors. Section 8 of the Act confers power on the special judge of calling upon the applicant to submit to him within a period to be fixed by him in this behalf, a written statement containing full particulars respecting the public and private debts to which he is subject or with which his immoveable property is encumbered; of the nature and extent of his proprietary rights in land; of the nature and extent of his property which is liable to attachment and sale; and lastly, of the names and addresses of the creditors, so far as can be ascertained by him. If the applicant fails to submit a written statement as called for or furnish the information referred to in the proviso to sub section (2), the special judge is empowered to dismiss the application. The landlord is not required to implead any creditors as party respondents in his written statement, but he has to furnish information, regarding the names and addresses of his creditors so far as they are known to or can be ascertained by him and his failure to give information may result in a dismissal of the application. Section 9 requires the special judge to publish in the official gazette a notice in English calling upon all persons having claims in respect of private debts both decreed and undecreed against the person or the property of the landlord to present to the special judge within three months from the date of the publication of the notice, a written statement of their claims. He is also required to cause copies of such notice to be published in such paper or papers as he may direct and to exhibit it at his own office, at the office of the collector and at some 511 conspicuous place where the landlord resides. He is further directed to send a copy of the notice and a copy of the written statement under sub section (1) of section 8 by registered post to each of the creditors whose names and addresses are mentioned in the statement under clause,(d) of sub section (1) of section 8. Section 10 provides that every claimant referred to in section 9 shall in the written statement of his claim give full particulars thereof and shall state so far as they are known to or can be ascertained by him, the nature and extent of the landlord 's proprietary rights in the land and the nature and extent of the landlord 's property other than proprietary rights in land. The provisions of this section not only require a creditor to give particulars of his own debt but also give him opportunity to contend that the landlord has secreted some property. Section 11 (1) of the AA directs the special judge to publish a notice specifying the property mentioned by the applicant under section 8 or by any claimant under section 10. The object of the provisions made in section 11 (1) is to find out the extent of the property that can be utilized to wards liquidation of the debts ascertained under the subsequent provisions of the Act. Section 11 (2) provides as follows: Any person having any claim to the property mentioned in such notice shall, within a period of three months, from the date of the publication of the notice in the official gazette make an application to the special judge stating his claim and the special judge shall determine whether the property specified in the claim, or any part thereof is liable to attachment sale or mortgage in satisfaction of the debts of the applicant. " Sub section (3) directs the special judge to determine such claims before he proceeds to determine the amount due to any creditor under section 14. He is further directed not to pass any decree under section 14 until the expiry of a period of one month from the last day on which he determines a claim under section 11. Sub section (4) off section 11 provides that any order passed by the special judge under this section shall be 512 deemed to be a decree of a civil court of competent jurisdiction. Section 13 enacts that every claim, decreed or undecreed against the landlord shall, unless made within the time prescribed be deemed for ;III purposes and on all occasions to have been duly discharged. Section 14 lays down the procedure for determination of the amount of debts. The judge is directed to give notice of the date of enquiring into the claims of the creditors to the different claimants and to the person who has made the application under ,section 4. He is directed to examine each claim after hearing all such parties as desire to be heard and after considering the evidence, if any, produced by them. The section lays down them mode of calculating interest on the amount of such claims and provides for the application of the provisions of the Usurious Loans Act to the proceedings under the Act. Sub section (7), provides as follows: "If the special judge finds that any amount is due to the claimant be shall pass a simple money decree for such amount together with any costs which he may allow in respect of proceedings in his court and of proceedings in any civil court stayed under the provisions of this Act, together with pendente lite and future interest at a rate not greater than the rate specified in section 27 and if he finds that no amount is due, he may pass a decree for costs in favour of the landlord. Such decree shall be deemed to be a decree of a ' civil court of competent jurisdiction but no decree against the landlord shall be executable within the United Provinces except under the provisions of this Act. " Section 18 provides that subject to the right of appeal or revision, the effect of a decree of the special judge under sub section (7) of section 14 shall be to extinguish the previously existing rights, if any, of the claimant, together with all rights, if any, of mortgage or lien by which the same are secured and, where any decree is given by the special judge to substitute for those rights a right to recover the amount of the decree in the manner and to the extent specified in the Act. Section 45 provides for appeals and revisions against orders and decrees of the special judge. 513 It is apparent from the provisions of the Act cited above that the U.P. Encumbered Estates Act is no more, nor less than, a code for the administration of the assets of the landlord debtor and for giving relief to him in a number of ways against the contractual rights of his creditors. It clearly deprives the creditors of any remedies that they would ordinarily have in ordinary civil courts and extinguishes the mortgages held by them. Sectional(2) deals with claims of third parties to the property alleged by the landlord as belonging to him and the judge is required to determine whether such property is liable to attachment or sale. It is noteworthy that under section 14(1) the special judge is directed to follow a certain procedure, but no such procedure is prescribed under section 1 1(2). In section 14 he is required to fix a date and to give notice of the date of inquiring into the claims of the creditors to all the claimants. There is no such parallel requirement in respect of claims of third parties under section 11(2), though as a matter of practice similar procedure is also followed in an enquiry under this section. The question that requires consideration in these circumstances is whether the rules of the first schedule to the Code of Civil Procedure should be rigorously applied to proceedings under the Encumbered Estates Act, and whether the creditors who are no doubt ' .persons interested in those proceedings and who would ultimately be entitled to recover their decretal debts from the property the extent of which falls for determination in an enquiry under section II, are necessary parties in the enquiry, or are merely proper parties thereto and as such entitled only to notice of the proceedings. Order 1, Rules I and 3 of the Code of Civil Procedure, provide in regard to the persons who are to be joined as plaintiffs or those who have to be joined as defendants in suits. Rule 1 is in these terms: "All persons may be joined in one suit as plaintiff, in whom any right to relief in respect of or arising of the same act or transaction or series of act transactions is alleged to exist, whether 514 severally or in the alternative, where, if such persons brought separate suits, any common question of law or fact would arise." Rule 3 provides: " All persons may be joined as defendants against whom any right to relief in respect of or arising out of the same act or transaction or series of acts or transactions is alleged to exist, whether jointly, severally or in the alternative, where, if separate suits were brought aaainst such persons any common question of law or fact would arise. " It is apparent that strictly speaking the provisions of these rules cannot be applied to the proceedings contemplated by the U. P. Encumbered Estates Act. These proceedings cannot be. described as suits. It was conceded at the Bar that an inquiry into third party claims under section 11(2) cannot be described as a suit. Neither section 8 nor section 1 1 provides that the creditors have to be impleaded as parties respondents in such an objection application. As already said, the section provides that the applicant has to give information about the names of the creditors and the amounts due to them. Till the time that a decree is passed under section 14 in favour of any of the creditors it cannot be, said that any one of them is entitled to share in the property of the debtor. It is only when a claim has been made under section 10 by a creditor and it has ripened into a decree that he is entitled to share in the assets of the landlord. But if he commits a default in submitting a written statement of the claim under section 10, the claim stands discharged under section 13. In this particular case it is not clear whether any of the creditors except the Unao Commercial Bank had made a claim under section 10. It is also not clear whether any decree under section 14 has been passed in favour of any of the creditors. An inquiry for the determination of the quantum of the debts of the landlord can only be made after third party claims have been settled under the provisions of section 11(2). In view of these provisions it seems difficult to hold that the technical and 515 strict rules as to impleading of parties can have appli cation to proceedings under section 11 of the U.P. Encumbered Estates Act. It is true that the creditors must be given notice and opportunity to say whether the landlord has secreted any property, but if they do not do so and are content with the disclosures made by the landlord they cannot be said to have any further interest in the quantum of the property which the landlord has mentioned under the provisions of section 8 in his written statement. In that situation, if a third party claims any item of property mentioned by the landlord in the written statement, the controversy at that stage lies only between the landlord and the claimant, though in the result the creditors may either be benefited or deprived of some of the 'assets which the landlord discloses in the application as liable to attachment and sale towards payment of decrees that may be passed in favour of the creditors. It can well be assumed that the fight at that stage being a bona fide fight between the objector and the landlord, the interests of the creditors will be fully represented by the landlord and any decision obtained in his favour or against him would be binding on all the creditors on the principles enacted in explanation 6 to section I 1, Civil Procedure Code. If, therefore, in such a contest the claimant loses and the landlord succeeds, then in an appeal against that decision he need only implead the landlord as a party respondent and it is not necessary to implead all the creditors as respondents merely on the ground that ultimately they would be affected by the result, either to their benefit or to their detriment. The court has power, if it considers that the presence of the creditors is necessary at the hearing, to give them notice of the appeal so that they may have the opportunity of placing their con tentions before it. The observance of such a procedure may well conduce to a fair hearing of the appeal, even if the creditors have raised no plea of any kind before the special judge. In a case, however, where the creditors raise a plea that the landlord has secreted certain property and it should be included in the schedule and such property is then claimed by a third 516 party, they may well be regarded as real parties to the controversy and failure to implead them may result in the appeal being imperfectly constituted. In the situation that arises in the present case the appeal should have been held to be properly constituted because all those who raised any controversy whatsoever as to the ownership of the property in dispute were impleaded. We are fully conscious of the fact that the view that we have expressed above is not in conformity with a number of decisions of the Oudh Chief Court and the Allahabad High Court. It is therefore necessary to examine those decisions in order to see whether the reasons given therein are sound or erroneous. In Rameshwar vs Ajodhia Prasad(1) a Bench of the Oudh Court held that all the creditors who were impleaded as parties to the application under the Act are necessary parties to an appeal by the objector against an adverse order passed against him under section 11. This judgment proceeds on the assumption that all the creditors having been impleaded as parties to the application and not having been made respondents in the appeal, the appeal became imperfectly constituted. In this case the question whether under the provisions of the Encumbered Estates Act an applicant is required to implead creditors as parties to the application was neither argued nor considered; on the other hand, it was assumed that all the creditors have to be impleaded as parties in the application made by the claimants under the Act. That assumption is, of course, erroneous. Under section 4 the applicant is entitled to request the collector, that the provisions of the Act be applied to him and relief given to him under its provisions. He is not required even to give information about the names and addresses of creditors and no question of impleading anyone as a respondent arises at that stage. When the collector has forwarded this application to the special judge, then the special judge is empowered to call upon the applicant to file a written statement and therein he is bound %to give information About the (1) A.I.R. 1941 Oudh 580, 517 names and addresses of his creditors so far as they are known to him or can be ascertained by him. In the written statement which he is called upon to file on a requisition by the special judge he is not called upon to implead any persons as parties, in the sense in which that term is used in the Code of Civil Procedure. This decision therefore is not of any help on the point that was argued before us. In Chaudhri Bishunath Prasad vs Sarju Saran Tewari(1), another Bench of the Oudh Court held that an enquiry into the indebtedness of the landlord is to be carried out by the special judge in the presence of all the creditors, that though it is true that each creditor is interested in establishing his own debt against the landlord, he is further interested that the landlord should not be allowed to withhold any property from the court, and that if 'a claimant under section I I sets up a title to the property shown by the landlord to belong to him, although the real contest may for the time being be between the claimant on the one hand and the landlord on the other hand, it is to the ultimate interest of the entire body of the creditors that the property should be held to belong to the landlord, and if the decision is in favour of the landlord, all the creditors will be entitled to have their debts satisfied out of such property; but if, however, the decision is against them, the property will go out of the reach of the creditors and will not be available to them for the satisfaction of their debts. It was further held that as all. the creditors had not been joined as parties to the appeal and as they were interested in the result of the appeal, it could not be held that they were wholly unconcerned in the result of the case and therefore the appeal was not maintainable. It seems to us that in making these observations the learned Judges did not clearly bear in mind the distinctions between the provisions of sections 11 and 14 of the Act. Section 14 lays down a definite procedure so far as the enquiry into the claims of creditors is concerned . Each creditor has to establish his claim against the landlord as he (1) A.I.R. 1942 Oudh 16. 518 would do if he had filed a suit against him. This enquiry is made after the quantum of the property of the debtor has been ascertained under section 11. As already pointed out, if any creditor raises any dispute as to the quantum of the property as he is entitled to raise such a dispute in his written statement filed under section 10, in that situation it may well be held that such a creditor is directly interested in the enquiry under section 11 ; but it is difficult to see that all other creditors who have accepted the list of property filed by the debtor as true are directly interested in the enquiry under that section and are as such necessary parties and that without impleading them the enquiry cannot proceed. Rules I and 3 of Schedule I Of the Code of Civil Procedure do not lay down that every person who is ultimately interested in the result of a suit should be impleaded as a defendant. All that these rules insist upon is that all persons should be joined as defendants against whom any right to relief is alleged to exist, provided that such right arises in respect of the same act or transaction or series of acts or transactions and the case is one where common question of law or fact would arise. It is not possible to hold that the objector can claim any right to relief against the creditors as such. The right to relief in the enquiry under section 11 is only against the landlord who alleges himself to be the owner of the property which the claimant says belongs to him, and creditors have no right of interest in the property claimed by the objector. The test of ultimate benefit therefore laid down by the Oudh Court for holding that all creditors are necessary parties in the enquiry under section 11 of the U.P. Encumbered Estates Act does not fulfil the conditions laid down in the Code for impleading parties as plaintiffs or as defendants. If they are not necessary parties in the true sense of the term in the enquiry under section 11, a fortiori failure to implead them as respondents in the appeal detective. In Lakshmi Narain vs Satgurnath(1) another Bench of the Oudh Court took the ' same view. In this case. (1) A.I.R. 1942 Oudh 339. 519 the earlier decisions of the Oudh Court were followed The view was reiterated that creditors are parties in the proceedings under the Encumbered Estates Act. In Benares Bank Ltd., Benares vs Bhagwandas (1), a Full Bench of the Allahabad High Court considered this question and expressed the same opinion as had been expressed in the Oudh decisions referred to above. Mr. Justice Braund, who was one of the Judges constituting the Full Bench, with great reluctance shared the opinion of the majority merely out of respect for the opinion of Pathak J. and it appears that, left to himself, he would have held otherwise. The majority judgment was delivered by Pathak J. He enunciated two tests for deciding whether a certain person was a necessary party in a proceeding: (1) that there must be a right to some relief against such party in respect of the matter involved in the proceedings in question, and (2) it should not be possible to pass an effective decree in the absence of such party, and proceeded to observe that the creditors of a landlord who have claimed relief under the Encumbered Estates Act are necessary parties to the proceedings under that Act and that the object of the Act is to compel the landlord to surrender his entire property for the benefit of his creditors and to liquidate the debts of all the creditors in accordance with and to the extent per mitted by the Act. There can be no question that these are the true tests for determining whether a person is a necessary party to certain proceedings but the question is whether judged on these tests the creditors of a landlord under the U. P. Encumbered Estates Act can be said to be necessary parties in an enquiry under section 11. It seems to us that in the first instance it is an incorrect assumption to make that the object of the Act is to grant relief to the creditors of a landlord; it is quite the converse. The object of the Act is to grant relief to the landlord whose estate is encumbered with debts, by scaling, down the debts and by depriving the creditors of their (1) A.I.R. 1947 All. 18. 520 civil remedies. The creditors are allowed to prove their debts and obtain decrees from the special judge according to the provisions of and to the extent allowed by the Act and they lose all their rights on securities held by them. Coming to the application of the tests laid down by the learned Judge, it is not possible to hold that any right of relief exists in an objector under section 11 as against the creditors. It is also difficult to see how an effective decree cannot be passed as regards title to the property in the absence of creditors. One test of the effectiveness of a decree is whether that decree can be executed without the presence of creditors as regards property decreed in favour of a claimant. It is obvious that in execution proceedings a warrant of attachment and for delivery of possession can only be issued against the owner, viz., the landlord, and not against the creditors. In these proceedings the special judge can give no relief to the objector against the creditors. So on the tests mentioned by the learned Judge it is clear that the creditors of a debtor are not necessary parties in these administrative proceedings under the Encumbered Estates Act, though they may be given notice of those proceedings and afforded opportunity to watch those proceedings in order to see that no property is secreted from them and it is preserved for satisfaction of decrees that may eventually be passed in their favour. In his judgment Pathak J. proceeded to observe that though the landlord is a, party to the dispute under section 11, it is obvious that the main party who is vitally interested in that dispute is the entire body of creditors, because the issue that arises out of such a claim is whether the property which is the subject matter of the claim is liable for the satisfaction of the debts due to the entire body of creditors. This statement also, in our opinion is not very precise. It is not correct to say that the result of a decision,in such a claim makes the property liable for satisfaction of debts due to the entire body of creditors who had made claims at that stage. The property is only 521 liable for satisfaction of decrees that may be passed subsequently under section 14. It may well be that of the persons who have been disclosed as creditor under section 8, a number of them may not at all be interested in the result of the decision of the claim under section II. It is an overstatement to make that the main party who is vitally interested in the dispute is the entire body of creditors '. The dispute relates to title to property and according to all principles of impleading of parties it is not the eventual benefit that a person may derive from a certain decision that is the crucial test in deciding whether a party is a necessary party or merely a proper party. Pathak J. proceeded to observe as follows : "Could it be suggested that in a suit under Order XXI, rule 63, Civil Procedure Code, the decree holders who desire to seize the property belonging to the judgment debtor are not necessary parties?" With great respect again, this analogy is not very happy or apposite. Under Order XXI, rule 63, it is only the attaching creditor who has the right to file a suit or of being impleaded as defendant in a suit by the judgment debtor. AR the creditors of the judgment debtor who have not attached the property are not necessary parties in a suit under Order XXI, rule 63, though after the decision in that suit they may be entitled to share in the rateable distribution of the property if they make an application for that purpose. In a way it is true to say that in all suits by a creditor against a debtor where the debtor owes to a number of creditors, every other creditor is interested in seeing that that creditor 's suit is dismissed or his debt is considerably cut down; but from that it does not follow that in a suit on a promissory note by a creditor against the debtor all the other creditors are necessary parties. The eventual interest of a party in the fruits of a litigation cannot be hold to be the true test of impleading parties under the Code of Civil Procedure and it is rather difficult to hold that where that is not the true test under the Code, that should be adopted as A test in proceedings of an administrative 522 character under the U. P. Encumbered Estates Act. it cannot be forgotten that under the provisions of section 11 no provision has been made for issuing notice to all the creditors. Reference may also be made to rule 6 framed under the Encumbered Estates Act. This rule provides that the proceedings under this Act shall be governed by the Code of Civil Procedure so far as they are applicable. As already pointed out, the provisions of Order 1, rules 1 and 3, cannot aptly be held applicable in such proceedings. We cannot uphold the view of Pathak J. that all creditors become parties to the proceedings under the Act in the technical sense of the term after a notice has been served upon them and in any event after they have filed the written statements, that they continue to remain ' as parties until the debts are liquidated or proceedings terminated in accordance with the provisions of the Act. This seems to be too wide a statement of the law on the point. Can it be said that after each individual creditor obtains a decree in respect of his claim under section 14, each one of these creditors has to be impleaded as a party in an appeal preferred by that creditor or by the debtor. It is not possible to give an answer in the affirmative to such proposition. no hesitation in saying that though he ultimately abondoned n thinking that in. We have therefore Mr. Justice Braund, his view, was right administrative proceedings technical rules of the First Schedule of the Code of Civil Procedure regarding impleading of parties should not be invoked and that the matter should be viewed in a more liberal way, regard always being had to the fact that there is no collusion between the debtor and the claimant and that there are persons who are bona fide litigating in respect of the title of the claimant under section 11, and if there has been such a bona fide fight which results in a decree in an appeal against that decree it is sufficient that those who took an active part in the proceedings under section II are impleaded. It is not necessary to implead each and every creditor who either did pot appear or put forward a written statement under 523 section 10 or took no active part in the proceedings under section 11(2). In the view that we have taken it is not necessary to decide the question whether the High Court was right in not exercising its powers under Order XLI, rule 20, in impleading the creditors as respondents to the appeal. For the reasons given above we allow this appeal, set aside the judgment of the High Court and remand the case to that court for hearing the appeal in accordance with law on its merits. If the High Court thinks fit that the presence of any creditors would help the court in arriving at a true decision of the matter it in its discretion may give notice to the creditors of the date of hearing, We leave the parties to bear their own costs of this appeal. Appeal allowed. Agent for respondent No. 5: section section Shukla.

IN-Abs

Creditors who did not take an active part in the proceedings are not necessary parties to an appeal from an order rejecting a claim made in a proceeding under section 11 (2) of the U. P. Encumbered Estates Act, 1934. The technical rules of the Civil Procedure Code regarding the impleading of parties should not be applied to such proceedings. The matter should be viewed in a more liberal way, regard being always had to the fact that there is no collusion between the debtor and the claimant. I Rameshwar vs Ajodhia Prasad (A.I.R. 1941 Oudh 580), Chaudhri Bishuanth Prasad vs Sarju Saran Tewar (A.I.R. 1942 Oudh 16), Lakshmi Narain vs Satgurnath (A.I.R. 1942 Oudh 339) and Benares Bank Ltd. vs Bhagwandas (A.I.R. 1947 All. 18) overruled.

ivil Appeal No. 630 of 1963. 48 Appeal from the judgment and order dated June 8, 1959 the Assam High Court in Civil Rule No. 42 of 1957. D.N. Mukherjee, for the appellant. Naunit Lal, for the respondent No. 3. The Judgment of the Court was delivered by Wanchoo, J. This appeal on a certificate granted by the Assam High Court raises the question of the constitutionality of an annual tax levied by local boards for the use of any land for the purpose of holding markets as provided by section 62 of the Assam Local Self Government Act, No. XXV of 1953, (hereinafter referred to as the Act). The appellant is a landholder in the district of i Kamrup. As such landholder, he holds a hat or market on his land since the year 1936 and this market is known as Kharma hat. In 1953 54, the local board of Barpeta, within whose jurisdiction the Kharma market is held, issued notice to the appellant to take out a licence and pay Rs. 600/ for the year 1953 54 as licence fee for holding the market. Later this sum was increased to Rs. 700/ for the year 1955 56. The appellant continued .protesting against this levy but no heed was paid to his protests and the amount was sought to be recovered by issue of distress warrants and attachment of his property. Consequently, the appellant filed a writ petition in the High Court challenging the constitutionality of the impost on a number of grounds. In the present appeal two main contentions have been urged in support of the appellant 's case that the impost is unconstitutional, namely, (i) that the Assam legislature had no legislative competence to tax markets, and (ii) that the tax actually imposed on the Kharma market infringes article 14 of the Constitution. We shall therefore consider these two contentions only. This attack on behalf of the appellant is met by the respondent by relying on item 49 of List 1I of the Seventh Schedule to the Constitution, and it is urged that the State legislature was competent to impose the tax under that entry, for this was a tax on land. As to article 14, the reply on behalf of the respondent is that under section 62 of the Act, a rule has been framed prescribing Rs. 1000/ as the maximum amount of tax which may be levied by any local board in Assam on markets licensed under that section. The rule also provides that any local board may with the previous approval of Government impose a tax within this maximum according to the size and importance of a market. So it is submitted that the tax has been imposed by Barpeta local board in accordance with this rule, and the appellant has failed to show that there has been any discrimination in the fixation of the amount of tax on the Kharma market. The High Court repelled the contentions raised on behalf of the appellant and dismissed the writ petition. As however, questions of constitutional importance were involved, the High Court 49 granted a certificate under article 132 of the Constitution; and that is how the matter has come up before us. The first question which falls for consideration therefore is whether the impost in the present case is a tax on land within the meaning of entry 49 of List II of the Seventh Schedule to the Constitution. It is well settled that the entries in the three legislative lists have to be interpreted in their widest amplitude and therefore if a tax can reasonably be held to be a tax on land it will come within entry 49. Further it is equally well settled that tax on land may be based on the annual value of the land and would still be a tax on land and would not be beyond the competence of the State legislature on the ground that it is a tax on income: (see Ralla Ram vs The Province of East Punjab(1). It follows therefore that the use to which the land is put can be taken into account in imposing a tax on it within the meaning of entry 49 of List II, for the annual value of land which can certainly be taken into account in imposing a tax for the purpose of this entry would necessarily depend upon the use to which the land is put. It is in the light of this settled proposition that we have to examine the scheme of section 62 of the Act, which imposes the tax under challenge. It is necessary therefore to analyse the scheme of section 62 which provides for this tax. Section 62(1) inter alia lays down that the local board may order that no land shall be used as a market otherwise than under a licence to be granted by the board. Sub section (2) of section 62 is the charging provision and may be quoted in full: "On the issue of an order as in sub section (1), the board at a meeting may grant within the local limits of its jurisdiction a licence for the use of any land as a market and impose an annual tax thereon and such conditions as prescribed by rules. " Sub section (3) provides that when it has been determined that a tax shall be imposed under the preceding sub section, the local board shall make an order that the owner of any land used as a market specified in the order shall take out a licence for the purpose. Such order shall specify the tax not exceeding such amount as may be prescribed by rule, which shall be charged for the financial year. It will be seen from the provisions of these three sub sections that power of the board to impose the tax arises on its passing a resolution that no land within its jurisdiction shall be used as a market. Such resolution clearly affects land within the jurisdiction of the board and on the passing of such a resolution the board gets the further power to issue licences for holding of markets on lands within its jurisdiction by a resolution and also the power to impose an annual tax thereon. Now it is urged on behalf of the appellant that when sub s (2) speaks of imposing of "an annual (1) 50 tax thereon" it means the imposition of an annual tax on the market, and that there is no provision in List II of the Seventh. Schedule for a tax on markets as such. "Markets and fairs" appear at item 28 of List H, and it is urged that under item 66 of the same List, fees with respect to markets and fairs can be imposed; but there is no provision for imposing a tax on markets in the entries from 45 to 63 which deal with taxes. It may be accepted that there is no entry in List II which provides for taxes as such on markets and fairs. It may also be accepted that entry 66 will only justify the imposition of fees on markets and fairs which would necessitate the providing of services by the board imposing the fees as a quid pro quo. That however, does not conclude the matter, for the contention on behalf of the State is that tax under section 62 is on land and not on the market and further the tax depends upon the use of the land as a market. It seems to us on a close reading of sub section (2) that when that sub section speaks of "annual tax thereon", the tax is on the land but the charge arises only when the land is used for a market. This will also be clear from the subsequent provisions of section 62 which show that the tax is on land though its imposition depends upon user of the land as a market. Sub section (3) shows that as soon as sub section (1) and (2) are complied with, the local board shall make an order that the owner of any land used as a market shall take out the licence. Thus the tax is on the land and it is the owner of the land who has to take out the licence for its use as a market. The form of the tax i.e. its being an annual tax as contrasted to a tax for each day on which the market is held also shows that in essence the tax is on land and not on the market held thereon. Further the tax is not imposed on any transactions in the market by persons who come there for business which again shows that it is an impost on land and not on the market i.e. on the business terein. Then sub s (5) provides that the tax shall be paid by the owner of any land used as a market which again shows that it is on the land that the tax is levied, though the charge arises when it is used as a market. Sub section (6) then lays down that on receiving the amount so fixed the board shall issue a licence to the person paying the same. Here again the license is for the rise of the land. Then comes sub section (8) which provides that wherever. being the wner or occupier of any land uses or permits the same to be used as a market without a licence shall be liable to fine. This provision clearly shows that the tax is on the land and it is the owner or occupier of the kind who is responsible and is liable to prosecution if he fails to take cut a licence. No liability of any kind is thrown on those who come to the market for the purpose of trade. Sub section (9) then lays down that where a conviction has been obtained under sub section (8), the District Magistrate or the Sub Divisional Officer, as the case may be, may stop the use of the land as a market. Sub section (10) then provides that every, 51 owner, occupier or farmer of a market shall cause such drain to be made therein and take all necessary steps to keep such market in a clean and wholesome state and shall cause supply of sufficient water for the purpose as well as for drinking purpose. Sub sections (ID and (12) give power to the board on the failure of any owner, occupier or farmer to comply with a notice under sub section (10), to take possession of the land and the market thereon and execute the works itself and receive all rents, tolls and other dues in respect of the market. This will again show that the tax provided by section 52(2) is a tax for the use of the land and it is not a tax on the market as such, for the income from the market in the shape of tools, rents and other dues is not liable to tax under section 52 and is different from tax. The scheme of section 62 therefore shows that whenever any land is used for the purpose of holding a market, the owner,occupier or farmer of that land has to pay a certain tax for its use as such. But there is no tax on any transaction that may take place within the market. Further the amount of tax depends upon the area of the land on which market is held and the importance of the market subject to a maximum fixed by the State Government. We have therefore no hesitation in coming to the conclusion on a consideration of the scheme of section 52 of the Act that the tax provided therein is a tax on land, though its incidence depends upon the use of the land as a market. Further as we have already indicated section 62(2) which uses the words "impose an annual tax thereon" clearly shows that the word "thereon" refers to any land for which a licence is issued for use as a market and not to the word "market". Thus the tax in the present case being on land would clearly be within the competence of the State legislature. The contention of the appellant that the State legislature was not competent to impose this tax because there is no provision in List II of the Seventh Schedule for imposing a tax on markets as such must therefore fail. Then we come to the contention under article 14 of the Constitution. As to that it is well settled that it is for the person who alleges that equality before law has been infringed to show that such really is the case. It was therefore for the appellant to produce facts and figures from which it can be inferred that the tax imposed in the present case is hit by article 14 of the Constitution. In that connection, all that the appellant has stated in his writ petition is that the board fixed a high rate arbitrarily and thus discriminated against the appellant 's market as against the other neighbouring markets where the tax had been fixed at a much lower rate, and that this was hit by article 14. There was certainly an allegation by the appellant that article 14 had been infringed; but that allegation is vague and gives no facts and figures for holding that the tax imposed on the Kharma market was discriminatory. It appears that the tax was imposed for the year 1953 54. which was continued Inter on, with some modifications. At that time there were five 52 markets on which the tax was imposed including the Kharma market. The lowest tax was at Rs. 400/ on two markets, then at Rs. 500/ on the third market and at Rs. 600/ on the Kharma market and finally at Rs. 1000/ on the fifth market. Rule 300(2), flamed in accordance with section 63(3) runs thus: "Rs. 1000/ (Rupees one thousand) only per annum has been fixed as the maximum amount of tax which may be levied by the local boards in Assam on markets licensed under section 62 of the Act. Any local board may with the previous approval of Government impose a tax within this maximum according to the size and importance of a market. " Now the rule provides that Rs. 1000/ is the maximum tax and within that maximum the board has to graduate the tax according to the size and importance of the market. The size of the market naturally takes into account the area of the land on which the market is held; the importance of the market depends upon the number of transactions that take place there, for the larger the number of transactions the greater is the importance of the market. If therefore the appellant is to succeed on his plea of article 14 on the ground that the tax fixed on his market was discriminatory he had to adduce facts and figures, firstly as to the size of the five markets on which the tax was levied in the relevant years and secondly as to the relative importance of these markets. But no such facts and figures have been adduced on behalf of the appellant. It is true that the respondent in reply to the charge of discrimination was equally vague and merely denied that there was any arbitrary discrimination. But it was for the appellant to show that in fixing the tax on the five markets as it did, the board acted arbitrarily and did not take into account the size and importance of the markets. As there is no material before us by which we can judge the relative size and importance of the five markets, it is not possible to hold that there was discrimination in taxing Kharma market at Rs. 600/ per year as compared to taxing the three other markets at less than Rs. 600/ . The attack therefore on the amount actually fixed on the ground of discrimination must fail. We therefore dismiss the appeal with costs. Appeal dismissed.

IN-Abs

The appellant as a land holder held a hat or market on his land. The respondent, the local board, within whose jurisdiction the market was held, issued notice to the appellant to take out a licence and pay a certain sum as licence fee for holding the market. Inspire of the continued protests of the appellant against the levy, the amount was sought to be recovered by the issue of distress warrants and attachment of his property. The appellant file.d a writ petition in the High Court challenging on a number of grounds, the constitutionality of the impost, which was dismissed. In appeal by certificate the appellant contended that (i)the Assam Legislature had no legislative competence to tax markets, and (ii) the tax actually imposed on this market infringed article 14 of the Constitution, because the board fixed a higher rate for the appellant 's market as compared with other neighbouring markets. HELD:(i) The tax in the present case being on land within the meaning of Entry 49 of List II of the Seventh Schedule of the Constitution, would clearly be within the competence of the State Legislature. [49 E C] The Scheme of section 62 of the Assam Local Self Government Act, 1953 shows that the tax provided therein is a tax on land, though its incidence depends upon the use of the land as a market and the owner, occupier or farmer of that land .has to pay a certain tax for its use as such. But there is no tax on the transaction that may take place within the market. Further the amount of tax depends upon the area of the land on which the market is held and the importance of the market subject to a maximum fixed by the State Government. Section 62(2) which used the words "impose an annual tax thereon" clearly shows that the word "thereon" refers to any land for which a licence is issued for use as a market and not to the word "market". The use to which the land is put can be taken into account in imposing a tax on it within the meaning of entry 49 of the List II. Ralla Ram vs The Province of East Punjab, , applied. [51 C F] (ii) It was for the appellant to show that in fixing the tax on the other markets as it did, the board acted arbitrarily and did not take into account the size and importance of the markets. As there was no material by which the relative size and importance of those markets, could be judged, it was not possible to hold that there was discrimination in taxing this market. [52 F G]

Appeal No. 892 of 1963. Appeal by special leave from the judgment and order dated December 22, 1958, of the Assam High Court in Misc. (First) No. 39 of 1955. D.N. Mukherjee, for the appellant. P.K. Chatterjee, for the respondent. 112 The Judgment of RAGHUBAR DAYAL, R.S. BACHAWAT and V. RAMASWAMI, JJ. was delivered by BACHAWAT, J. MUDHOLKAR, J. delivered a separate Opinion. Bachawat, J. The respondcnt is a banking company now in liquidation. The appellant had a combined overdraft and deposit account with the Shillong branch of the respondent. On December 9, 1946, the appellant gave the respondent for collection two cheques for Rs. 8,200 and Rs. 600 respectively drawn on the Bharati Central Bank, Shillong. On receipt of the cheques, the respondent credited the appellant with the sum of Rs. 8,800 in the accounts. The respondent then sent the cheques to the Bharati Central Bank, Shillong for collection. Instead of paying cash, the Bharati Central Bank sent to the respondent a cheque dated December 9, 1946 for Rs. 8,800 drawn by the Bharati Central Bank on the Nath Bank, Shillong in favour of the respondent. The respondent accepted this cheque on its own responsibility without consulting the appellant. On December 10, 1946, the respondent presented the cheque to the Nath Bank for payment. The Nath Bank returned the cheque with the remark "full cover not received". The respondent orally informed the appellant of the non payment of the cheque on the Nath Bank, and on December II, 1946 under oral instructions from the appellant, represented the cheque to Nath Bank for payment. The Nath Bank again returned the cheque with the remark "full cover not received", and the respondent thereupon debited the appellant with the sum of Rs. 8,800 in the accounts. On the same day, the respondent wrote to the Bharati Central Bank demanding cash payment of the two cheques drawn on them and dated December 9, 1946. The respondent also contacted the appellant. Under instructions from the appellant, the respondent accepted from the Bharati Central Bank a demand draft for Rs. 8,800 dated December 13, 1946 drawn by its Shillong Branch on its Calcutta Head Office towards payment of the two cheques. The respondent presented the draft to the Bharati Central Bank, Calcutta for payment, but instead of making payment, the Bharati Central Bank wrote on December 16, 1946 requesting the respondent to obtain payment from its Shillong Branch. The respondent orally communicated this advice to the appellant. On several dates thereafter, the respondent presented the draft to the Bharati Central Bank for payment, but the draft was not paid. On January 2, 1947, the Bharati Central Bank closed its business. On January 11, 1947, the respondent wrote to the appellant stating that it was holding the demand draft as also the cheque on the Nath Bank and would be glad to receive further instructions in the matter for necessary action. As the appeilant refused to give any instructions, the respondent continued to hold the securities on account of the appellant. In respect of the draft, the respondent duly preferred a claim in the liquidation of the Bharati Central Bank, and was admitted as a preferential creditor for the amount 113 of the draft. On January 28, 1947, the appellant wrote to the respondent alleging that the respondent had accepted the demand draft at its own risk and responsibility and was bound to give credit to the appellant for the sum of Rs. 8,800. The dealings between the appellant and the respondent continued, and the last entry in the combined overdraft and deposit account is dated December 29, 1950. On February 26, 1953, a petition was presented in the Assam High Court for the winding up of the respondent. By order dated May 24. 1953, the respondent was ordered to be wound up. On June 28. 1954 the liquidator of the respondent Bank presented an application to the Assam High Court under section 45(D) of the Banking Companies Act, 1949 for settlement of the list of debtors, claiming a decree for Rs. 5,965 8 9 and interest against the appellant. The appellant resisted the claim. The two issues, which are now material, are: (1) Is the suit barred by limitation, and (4) Whether the respondent is bound to give credit to the appellant for the sum of Rs. 8,800? A learned single Judge of the Assam High Court answered both the issues in the negative, and decreed the claim. An appeal preferred to a Division Bench of the High Court was dismissed. The appellant now appeals to this Court by special leave. The main contention of the appellant in the Courts below was that the respondent had accepted the demand draft on its own responsibility. The High Court held that the respondent accepted the draft with the consent and sanction of the appellant. This finding is no longer challenged. But the appellant before us contends that the respondent having credited the appellant 's account with the amount of the two cheques on the Bharati Central Bank and having accepted on its own responsibility from the Bharati Central Bank the cheque dated December 9, 1945 on the Nath Bank ought not to be allowed to say that it received the cheque on account of and as agent of the appellant, and that in any event the respondent acted negligently and in breach of its duty as the collecting agent of the appellant and is bound to give credit for the sum of Rs, 8,800. These contentions in the present form were not raised in the Courts below. Nevertheless, we allowed the appellant to raise these contentions, but we think that there is no substance in them. According to the uncontradicted testimony of the witness called on behalf of the respondent, the two cheques on the Bharan Central Bank were entrusted by the appellant to the respondent for collection. In paragraph 2 of its objections, the appellant admitted that the cheques were entrusted to the responsible for realisation. Beyond doubt, on December 9. 1946 the respondent received the two cheques for collection in the usual way as agent of 114 the appellant and not with the intention of acquiring title to them. On the same day, the respondent credited the appellant 's account with the amount of the cheques before the cheques were cleared. But on December 11, 1946, before the appellant drew upon this amount and as soon as the cheque on Nath Bank received in course of collection of the two cheques was dishonored, the respondent debited the appellant 's account with the like amount. It does not appear that the credit entry in the accounts was contemporaneously communicated to the appellant. Nor does the appellant prove any arrangement that the appellant was entitled to draw against the amount of the cheques before they were cleared. In the circumstances. the fact that the appellant 's account was credited with the amount of the two cheques does not show that the respondent ceased to be an agent for collection of the cheques. The respondent duly presented the cheques on the Bharati Central Bank for payment. Instead of paying the cheques in cash, the Bharati Central Bank sent its own cheque on the Nath Bank. According to the uncontradicted testimony of the witness called on behalf of the respondent, it was not the usual practice of the banks at Shilling to collect cash in all cases in respect of cheques entrusted for collection. When the respondent found that the drawer Bank instead of paying cash offered to pay by a cheque, the respondent acting in good faith in the interests of the appellant, accepted the cheque on its own responsibility. On being informed of the dishonour of the cheque on Nath Bank, the appellant adopted and ratified the respondent 's acceptance of the cheque. and on that footing, asked the respondent to represent the cheque. Subsequently, the appellant instructed the respondent to accept a demand draft drawn by the Bharati Central Bank on the head office in lieu of its cheque on the Nath Bank, and approved of all steps taken by the respondent in the matter of collection of the draft. Instead of disowning the acts of the respondent in respect of the collection of the cheques on the Bharati Central Bank, the appellant ratified them. In the circumstances, it is not open to the appellant now to say that the respondent accepted the cheque on the Nath Bank or the draft of the Bharati Central Bank on the respondent 's own account and not as agent of the appellant. A banker entrusted by its customer with the collection of a cheque is bound to act according to the directions given by the customer, and in the absence of such directions, according to the usages prevailing at the place where the banker conducts his business and applicable to the matter in hand. The banker is also bound to use reasonable skill and diligence in presenting and securing payment of the cheque and placing the proceeds to his customer 's accounts and in taking such other steps as may be proper, to secure the customer 's interests. In the instant case, it is not shown that the respondent acted negligently or in breach of its duties or contrary to any instructions given by the appellant or any lawful usages prevailing amongst bankers at Shillong. 115 There is no substance in the further contention of the appellant that by preferring a claim as creditor in respect of the draft in the liquidation of the Bharati Central Bank, the respondent accepted the draft in satisfaction of its dues from the appellant. The respondent owed a duty to the appellant to take steps in the liquidation proceedings for the realisation of the amount of the draft. By preferring the claim the respondent preserved all rights in respect of the draft and acted in the best interests of the appellant. In the circumstances, the Courts below rightly gave appropriate directions on the respondent for giving credit to the appellant for all sums which may be realised by the respondent from the Official Liquidator of the Bharati Central Bank. The Courts below rightly answered issue No. 4 in the negative. The next point in issue is whether the proceedings are governed by article 85 of the Indian Limitation Act, 1908, and if so, whether the suit is barred by limitation. The argument before us proceeded on the footing that an application under section 45(D) of the Banking Companies Act is governed by the Indian Limitation Act, and we must decide this case on that footing. But we express no opinion one way or the other on the question of the applicability of the Indian Limitation Act to an application under section 45(D). Now, article 85 of the Indian Limitation Act, 1908 provides that the period of limitation for the balance due on a mutual, open and current account, where there have been reciprocal demands between the parties is three years from the close of the year in which the last item admitted or proved is entered in the account; such year to be computed as in the account. It is not disputed that the account between the parties was at all times an open and current one. The dispute is whether it was mutual during the relevant period. Now in the leading case of Hirada Basappa vs Gadigi Muddappa(1). Holloway, Acting C. J. observed: "To be mutual there must be transactions on each side creating independent obligations on the other, and not merely transactions which create obligations on the one side, those on the other being merely complete or partial discharges of such obligations." These observations were followed and applied in Tea Financing Syndicate Ltd. vs Chandrakamal Bezbaruah(2) and Monotosh K. Chatterjee vs Central Calcutta Bank Ltd.(3), and the first mentioned Calcutta case was approved by this Court in Hindustan Forest Company vs Lal Chand(4). Holloway, Acting C. J. laid down the test of mutuality on a construction of section 8 of Act XIV of 1859, though that section did ' not contain the words "where there (1) [1871] Vl Madras High Court Reports. 142, 144. (2) [1931] L.L.R,. 55Cal. 642 (3) (4) 116 have been reciprocal demands, between the parties". The addition of those words in the corresponding article 87 of Act IX of 1871, article 85 of Act XV of 1877 and article 85 of the Act of 1908 adopts and emphasises the test of mutuality laid down in the Madras case. In the instant case, there were mutual dealings between the parties. The respondent Bank gave loans on overdrafts, and the appellant made deposits. The loans by the respondent created obligations on the appellant to repay them. The respondent was under independent obligations to repay the amount of the cash deposits and to account for the cheques, hundis and drafts deposited for collection. There were thus transactions on each side creating independent obligations on the other, and both sets of transactions were entered in the same account. The deposits made by the appellant were not merely complete or partial discharges of its obligations to the respondent. There were shifting balances; on many occasions the balance was in favour of the appellant and on many other occasions. the balance was in favour of the respondent. There were reciprocal demands between the parties, and the account was mutual. This mutual account was fairly active up to June 25, 1947. It is not shown that the account ceased to be mutual thereafter. The parties contemplated the possibility of mutual dealings in future. The mutual account continued until December 29, 1950 when the last entry in the account was made. It is conceded on behalf of the appellant that if the account was mutual and continued to be so until December 29, 1950, the suit is not barred by limitation, having regard to section 45 (O) of the Banking Companies Act. The Courts below, therefore, rightly answered issue No. 1 in the negative. The claim by the respondent on account of interest was contested in the Courts below, but that claim is no longer contested before us. The High Court discussed at length the legal characteristics of a demand draft as also questions relating to the interpretation of section 45(O) of the Banking Companies Act. In view of the contentions raised before us, those questions do not arise, and we do not propose to express any opinion thereon. In the result, the appeal is dismissed with costs. Mudholkar, J. I regret my inability to agree with the judgment of my learned brother Bachawat. This appeal arises out of a petition made under section 45 D of the Banking Companies Act, 1949 (10 of 1949) by the Liquidator of the respondent, the Shillong Banking Corporation for inclusion of the name of the appellant in the list of debtors of the Bank. The liquidator filed a list of 20 debtors of the Company with necessary particulars in Annexure A, to the application. One of the debtors mentioned therein is the appellant and the amount of debt due from him to the Bank is stated therein to be Rs. 5,965 5 9. Annexure A appears to have been prepared in accordance with the rules framed under the Banking Companies Act. The fourth item in the Annexure is "Description of 117 papers, writings and documents, if any, relating to each debt". In respect of this item the following particulars have been set out: "A cheque for Rs. 8,800 on Bharati Central Bank Ltd., Shillong was realised by the Bank 'on behalf of the party ' by a Demand Draft on Calcutta Branch of the Bharati Central Bank Limited, but the said Demand Draft could not be realised due to the suspension of business by Bharati Central Bank Ltd. The Bank 's claim to be treated as preferential Creditor has been admitted. " A notice of this claim having been served on the appellant he preferred an objection before the Court. There, the appellant had contended that the claim of the Bank is barred by time. Paras 2, 3, and 5 of the objection are material and it would be convenient to set them out in full. They run as follows: "2. That it is a fact that this opposite party did give a cheque for Rs. 8,800 to the Bank on the Bharati Central Bank Ltd., Shillong for realisation in 1947 and in normal course it realised the amount in cash but either for its own convenience or for remitting its own money to Calcutta it accepted a draft from the Bharati Central Bank Limited on its branch at Calcutta without any instruction or intimation to this opposite party and also this opposite party withdrew their amount by a cheque after this and if in the meantime the said bank stopped its business this opposite party cannot be held liable for the same. (3) That had the bank not received any cash payment in case of the opposite party 's cheque as it should have received it should have informed them in time. (5) That it is not a fact that the demand draft was accepted by the bank instead of cash payment with any knowledge of this opposite party and as such the claim of the Bank is false and frivolous." Deka J., who heard the application framed four issues one of which related to limitation and the fourth was as follows: "Issue No. 4, whether the plaintiff bank is bound to give credit to the defendant for a sum of Rs. 8,800 covered by a cheque or cheques on the Bharati Central Bank Limited, Shillong Branch?" The only oral evidence tendered was that of Narendra Nath Dutta, Assistant of the respondent Bank. Upon a consideration of the evidence of Dutta and the documents placed on ' record Deka J. found against the appellant on these issues and passed a decree in favour of the Bank for Rs. 5,965 5 9 in addition to Rs. 2,000 by way of interest. He further allowed Rs. 300 as costs and 6 per cent p.a. interest on the decretal amount till realisation. An appeal was preferred by the appellant under the Letters Patent 118 and that having been dismissed he has come up before this court by special leave. It is the case of the respondent Bank that the appellant had a mutual open and current account with the Bank. It is upon that basis that they have met the appellant 's contention that the suit was barred by time. On December 9, 1946 the respondent credited two cheques to the appellant 's account one for Rs. 8,200 and another for Rs. 600 and sent them for collection to the Bharati Central Bank Ltd., Shillong Branch upon which they were drawn. Instead of obtaining cash from the Bharati Central Bank the respondent obtained and accepted from that Bank a cheque on the Nath Bank Limited. This the respondent did, as admitted by Dutta, without consulting the appellant. Dutta has further admitted that the respondent Bank obtained the cheque on their own responsibility. They then presented the cheque to the Nath Bank on December 10, 1946. The Nath Bank returned the cheque with a note "full cover not received". According to the witness the Bank referred the matter to the appellant and with his specific instruction the cheque was presented the next day to the Nath Bank, when also it was returned. Thereafter, the witness proceeds, the respondent connected the appellant for instructions. On December 13, 1946 they accepted a demand draft from the Bharati Central Bank for an identical amount which they sent to their Calcutta Branch for collection. When the demand draft was presented to the Calcutta Branch of the Bharati Central Bank they requested by letter dated December 16, 1946 to present it to the Shillong Branch. Then, according to Dutta. on the advice of the appellant they presented the draft to the Shillong Branch of the Bharati Central Bank. In the meanwhile the Bharati Central Bank had applied for moratorium and this demand draft was not cashed. It would appear that in the proceedings for reconstructing the Bharati Central Bank the respondent asked to be treated as preferential creditors in respect of the amount for which the draft had been made out and have been so treated. It is contended on behalf of the appellant that the respondent having accepted the demand draft on their own responsibility and having sought to be treated as preferential creditors of the Bharat, Central Bank and having in fact been so treated cannot now turn round and say that the appellant 's cheques were not honoured and that, therefore, they are entitled to claim the sum of Rs.5,965 5 9 and interest from him. The question to which I would address myself is whether the respondent has to be regarded as the appellant 's agent only for the collection of these two cheques or whether they received these two cheques for being credited in the mutual and open current account between themselves and the appellant. It is no doubt that where a customer hands in a cheque to his banker for collection the banker accepting the performance of that duty becomes the agent of the customer for the purpose of collection. But if a banker credits a cheque in the customer 's account with the bank would the banker be necessarily deemed to be his agent when he takes the step of collecting the amount 119 payable under the cheque. If the customer makes an endorsement on the cheque to the effect that it is handed in for collection no difficulty would arise. But if there were no such endorsement what would be the position? The accepted position in banking law is that when a banker receives money from a customer he does not hold it in a fiduciary capacity. (see Practice and Law of Banking by H.P. Sheldon, 8th edn. p. 201). As the author points out : "To pay that money is 'deposited ' with a banker is likely to cause misapprehension. What really happens is that the money is not deposited with, but lent to the banker, and all that the banker engages to do is to discharge the debt by paying over an equal amount when called upon. " Sheldon has quoted the following observations of Lord Cottenham in Foley vs Hill (1948). "Money, when paid into a bank, ceases altogether to be the money of the principal; it is then the money of the banker, who, is bound to return an equivalent by paying a similar sum to that deposited with him when he is asked for it. The money paid into the banker 's is money known by the principal to be placed there for the purpose of being under the control of the banker; it is then the banker 's money; he is known to deal with it as his own; he makes what profit he can, which profit he retains to himself, by paving back only the principal, according to the custom of bankers in some places, or the principal and a small rate of interest, according to the custom of bankers in other places . . That being established to be the relative situations of banker and customer, the banker is not an agent or factor, but he is a debtor. " What would be the position if instead of paying in cash the customer hands in cheques or bills? With regard to this Sheldon has said as follows: "In Joachimson vs Swiss Bank Corporation, 1921 Lord Justice Atkin gave an admirable summary of the position. He stated that the banker undertakes to receive money and collect bills for his customer 's account, and that money so received is not held in trust for the customer but borrowed from him with a promise to repay it or any part of it . . against the customer 's written order addressed to the bank at such branch." (pp. 201 202). In the appeal before us the two cheques for Rs. 600 and Rs. 8,200 have not been placed on record and so we do not know in whose favour they were drawn and if they were drawn by the appellant in fayour of "self" what endorsement he had made on the back of the cheques. The cheques could have been drawn by the appellant either in his own favour or in favour of the bank. Whichever be the position the fact remains that these two cheques were credited by him in his account with the respondent. That is not all. Since the appellant had a mutual open and current account 120 with the respondent it may well be that money was owing by him to the respondent on that date and, therefore, he drew these two cheques on the Bharati Central Bank and credited them in his account with the respondent. Or it may be that the appellant merely credited ' the money in his own account even though nothing may have been owing from him to the respondent on that date. Whether it was one or the other the respondents would, with respect to the amounts for which the cheques were drawn, have become actual recipients of the money from the appellant, upon realisation of the cheques drawn by the appellant. Indeed. as the cheques were returned unpaid by the drawee bank the respondent have made a debit entry on December 11, 1960 of Rs. 8,800 against the appellant in his account with them. This would show that the respondent accepted the position that they were acting in this matter not as the appellant 's agents but as payee. This explains why, as admitted by Dutta. the respondent accepted from the Bharati Central Bank cheques on Nath Bank on their own responsibility instead of insisting upon cash. Indeed. as pointed out at p. 300 in Chalmers on Bills of Exchange (8th ed) "consequently an authority to an agent to receive a payment due to his principal is not in itself an authority to receive it by bill or cheque". Therefore, the respondents would not have acted in the way they did had they regarded themselves as merely agents of the appellant for collecting his cheques. Dutta has, in his evidence, stated that no formal note in writing was sent to the appellant by the respondents about the dishonouring of the cheque by the Nath Bank. Nor did they inform him of having debited his account with Rs. 8,800. No doubt, according to him. after a demand draft was issued to them by the Bharati Central Bank the respondents informed the appellant. But after that draft was dishonoured on presentation no information whatsoever was given to the appellant. This would further strengthen the conclusion that the respondents were acting for themselves at every stage after the cheques for Rs. 600 and Rs. 8.200 were credited in his account with them by the appellant. Therefore. though it is true that the sum of Rs. 8,800 was not received by the respondent in cash they must be deemed to have received the sum either by reason of the fact that they obtained from the Bharati Central Bank a cheque for Rs. 8,800 on the Nath Bank or by the acceptance by them of a demand draft drawn by the Bharati Central Bank, Shilling. on their Calcutta Branch. It is difficult to see how they can hold the appellant, whose account with the Bharati Central Bank has been debited by that Bank to the extent of Rs. 8,800, as being still liable upon those cheques. Whatever rights the respondents have. are against the Bharati Central Bank and not the appellant. Indeed, having claimed, as against the Bharati Central Bank to be treated as preferential creditors of that Bank to the rune of Rs. 8,800, particularly on their own showing what was owing to them from the appellant was something less than Rs. 6,000 they cannot now be heard to say that they merely acted as the appellant 's agents. 121 For these reasons, disagreeing with the High Court, I hold that the appellant 's name cannot be included in the list of the respondent 's debtors. I would, therefore, allow the appeal and dismiss the application of the Liquidator under section 45 D of the Banking Companies Act in so far as it relates to the appellant, with costs throughout and would direct further that the respondents pay the appellants costs both here and in the High Court. ORDER BY COURT In accordance with the opinion of the majority, this appeal is dismissed with costs.

IN-Abs

The appellant had a combined overdraft and deposit account, also described as a mutual open and current account, with the respondent bank. In December 1946, the respondent credited two cheques to the appellant 's account one for Rs. 8,200 and the other for Rs. 600 and sent them for collection to the Shillong branch of the Bharati Central Bank, on which they were drawn. Instead of obtaining cash from that Bank, the respondent accepted a cheque on the Nath Bank. This the respondent did without consulting the appellant and on its own responsibility. When the respondent presented the cheque to the Nath Bank, it was returned with a note "full cover not received". The respondent thereupon debited the appellant with the sum of Rs. 8,800 in the accounts without informing him. On the instructions of the appellant, who was informed about the dishonouring of the cheque, the respondent accepted a demand draft from the Bharati Central Bank drawn on its Calcutta branch for the amount. The Calcutta branch of the Bharati Central Bank however requested the respondent to present it to the Shillong branch. The respondent presented the draft to the Shillong branch of the Bharati Central Bank, but the Bank applied for moratorium and closed its business, in January 1947 and the draft was not cashed. In the proceedings for the reconstruction of the Bharati Central Bank, the respondent asked to be treated as a preferential creditor in respect of the amount of the draft, and was so treated. The dealings between the appellant and respondent continued till December 1950. In May 1953, the respondent Bank was ordered to be wound up and the liquidator presented an application to the High Court under section 45D of the Banking Companies Act, 1949, for settlement of the list of debtors, claiming a decree for about Rs. 6,000 and interest, against the appellant. The appellant resisted the claim but the High Court decreed it. In the appeal to the Supreme Court, it was contended that (i) the respondent acted negligently and in breach of its duty as collecting agent of the appellant and was bound to give credit for the sum of Rs. 8,800 and (ii) the claim was barred by limitation. HELD: (per Raghubar Dayal, Bachawat and Ramaswami. JJ.) (i) It was not shown that the respondent acted negligently or in breach of its duties or contrary to any instructions given by the appellant or any lawful usages prevailing amongst bankers and therefore was not bound to give credit to the appellant for the sum of Rs. 8,800. [114 H] A banker entrusted by its customer with the collection of a cheque is bound to act according to the directions given by a customer, and in the absence of such directions, according to the usages prevailing at the place where the banker conducts his business 111 and applicable to the matter in hand. The banker is also bound to use reasonable skill and diligence in presenting and securing payment of cheques and placing the proceeds to his customers ' accounts and in taking such other steps as may be proper to secure the customer 's interests. The respondent in the instant case received the two cheques for collection in the usual way as agent of the appellant and not with the intention of acquiring title to them. The appellant, instead of disowning the various acts of the respondent in respect of the collection of the cheques, had ratified them. By preferring a claim as creditor in respect of the draft, in the liquidation proceedings of the Bharati Central Bank, the respondent was not accepting the draft in satisfaction of its dues from the appellant. It was only preserving all the rights in respect of the draft and was acting in his best interests. [114 A, F H; 115 A B] (ii) The respondent gave loans on overdrafts and the appellant made deposits. The loans and deposits created mutual obligations. Since the account was mutual and continued to be so until December 1950, the claim against the appellant was not barred by limitation having regard to section 45 (0) of the Banking Companies Act. [116 B, E] Per Mudholkar, J. (Dissenting), the appellant 's name could not be included in the list of the respondent 's debtors. [121 A] Where a customer hands in a cheque to his banker for collection, the banker accepting the performance of that duty becomes the agent of the customer for the purpose of collection. But if a banker credits a cheque in the customer 's account with the bank, the banker would not necessarily be deemed to be the customer 's agent, when he takes steps for collecting the amount payable under the cheque. The facts, that the cheques when paid in, were credited in the appellant s account with the respondent and that when the cheques were returned unpaid, the respondent made a debit entry against the appellant 's account without informing the appellant show mat the respondent accepted the position that it was acting in the matter not as the appellant 's agent but as a payee. Since the appellant had a mutual open and current account with the respondent, the respondent would, with respect to the amounts for which the cheques were drawn, have become upon realisation of the cheques drawn by the appellant an actual recipient of the money from the appellant. Therefore, though it is true that the amount was not received by the respondent in cash it must be deemed to nave received the sum either by reason of the fact that it obtained from the Bharati Central Bank a cheque for the amount on the Nath Bank, or by the acceptance of the demand draft. Having claimed as against the Bharati Central Bank to be treated as a preferential creditor for the sum of Rs. 8,800 whatever rights the respondent would be against that Bank and not against the appellant. [118 H; 120 A, C, F H]

Appeal No. 638 of 1952. Appeal by special leave from the judgment and decree dated May 21, 1957 of the Assam High Court in First Appeal No. 7, of 1962. N.C. Chatterjee and D.N. Mukherjee, for the appellants. S.C. Nath, P.K. Chatterjee for R. Gopalakrishnan, for the respondent. The Judgment of RAGHUBAR DAYAL, BACHAWAT and RAMASWAMI JJ. was delivered by BACHWAT J. MUDHOLKAR J. delivered a separate Judgment. Bachawat .1. The appellants carrying on business at Raha in Nowgong District had dealings with the respondents, carrying on business at Gauhati. As a result of the said dealings, the appellants were indebted to the respondents in a sum of Rs. 9,447 4 9. In order to satisfy the dues of the respondents, the appellants sent to the respondents a cheque for Rs. 9,461 4 0 dated August 31, 1948. The cheque was drawn by a third party, Messrs. Nathuram Jaidayal of Sibsagar on the Tripura Modern Bank, Sibsagar Branch, in favour of the appellants, who endorsed it to the respondents. On September 4, 1948, the respondents sent the cheque to their bankers, the Calcutta Commercial Bank, Gauhati for collection. On the same day, the Calcutta Commercial Bank, Gauhati sent the cheque to the Tripura Modern Bank, Sibsagar for encashment. The Tripura Modern Bank, Sibsagar debited the accounts of their constituents. Messrs Nahuram Jaidayal with the sum of Rs. 9,461 4 0, and after deducting Rs. 6 4 0 on account of commission charges, sent to the Calcutta Commercial Bank, Gauhati a draft for Rs. 9,435/ dated September 14, 1948 towards payment of the cheque. The draft was drawn by the Tripura Modern Bank, Sibsagar on its Calcutta Head Office, and was marked current for three months from the date of the issue. On receipt of the draft, the Calcutta Commercial Bank, Gauhati sent it to their Head Office at Calcutta for collection. But the Calcutta Commercial Bank never presented the draft to the Tripura Modern Bank, and made no attempts to collect the amount of the draft. 105 In the meantime, the respondents wrote to the appellants informing them that cash payment for the cheque has not been received, and on September 18, 1948 the appellants replied asking the respondents to get back the cheque. But the cheque was never returned to the respondents. On September 17, 1948, the Calcutta Commercial Bank closed its business, and subsequently, it was ordered to be wound up. On October 16, 1948, the Tripura Modern Bank also closed its business. and in view of its inability to pay its dues, was compelled to enter into a scheme of arrangement with its creditors. On November 19, 1948, the respondents requested the Tripura Modern Bank to pay the amount of the draft to them and not 10 the Calcutta Commercial Bank. But no payment was made by the Tripura Modern Bank either to the respondents or to the Calcutta Commercial Bank. On March 8, 1949, the respondents instituted the suit, out of which the appeal arises, claiming payment of their dues from the appellants on the footing that the cheque dated August 31, 1948 was received by the respondents as a conditional payment, and as the cheque was not cashed, the respondents were entitled to enforce their original claim. The Subordinate Judge, Lower Assam District, dismissed the suit. On appeal, the High Court reversed the judgment appealed from, and decreed the suit. The appellants now appeal to this Court by special leave. The High Court rightly held that the respondents originally received the cheque dated August 31, 1948 as a conditional payment of their dues, and if nothing else happened, the original debt Would have revived on non payment of the cheque. But we think that having regard to the laches of the respondents in the collection of the draft and the consequential prejudice to the appellants, the respondents must be deemed to have retained the draft as absolute payment of the cheque, and on the payment of the cheque, the original debt stood discharged. In Chitty on Contracts, 22nd Edn., article 1079, the law is stated thus: "Where a negotiable instrument, upon which the debtor is not primarily liable, is accepted by the creditor as conditional payment, he is bound to do all that a holder of such an instrument may do in order to get payment; thus it is his duty to present a cheque within a reasonable time, and if he fails to do. so, and the debtor is thereby prejudiced, the creditor is guilty of laches and makes the cheque his own, so that it amounts to payment of the debt. " In Addison 's Treatise on the Law of Contracts, 11th Edn., p. 156, it is stated: "If the debtor makes an order upon his banker for payment of the amount of the debt, and the creditor accepts it, and keeps it in his hands an unreasonable time before 106 presenting it for payment, and the banker becomes insolvent, the debtor is discharged on account of the laches of the creditor." In Hobkins vs Ware(1), it was held that a creditor who takes from his debtor 's agent on account of the debt the cheque of the agent, is bound to present it for payment within a reasonable time; and if he fails to do so and by his delay alters for the worse the position of the debtor, the debtor is discharged, although he was not a party to the cheque. In the old case of Chamblerlyn vs Delarive(2) it was held that if a creditor accepting a note or draft of his debtor upon a third person holds it an unreasonable time before he demands the money, and the person upon whom it is drawn becomes insolvent, it is the creditor 's own loss, though the draft be not a bill of exchange or negotiable. Now, in the instant case, the respondents accepted from their debtors, the appellants, a cheque drawn by a third party on the Tripura Modern Bank and endorsed by the appellants. The respondents through their collecting agents, the Calcutta Commercial Bank, presented the cheque for collection to the Tripura Modern Bank, and instead of obtaining cash payment, received a draft drawn by the Sibsagar Branch of the Tripura Modern Bank on its Head Office. Having accepted this draft in course of collection of the cheque, the respondents vis a vis the appellants were in no better position than they would have been, if they had accepted the draft from the appellants directly as conditional payment of the cheque. In the circumstances, the respondents owed a duty to the appellants to present the draft for payment within a reasonable time. The draft could be presented for payment at any time during the period of three months from the date of its issue. Instead of presenting the draft for payment, the respondents collecting agents kept it in their hands, and made no attempts to cash it. P.W. 3, an employee of the Calcutta Commercial Bank, said that the draft, was sent by the Gauhati Office of the Bank to its head office by registered post, but the head office had closed its business and the draft came back to the Gauhati office undelivered. The closure of the business of the collecting agents was not a lawful excuse for not obtaining delivery of the draft and not presenting it for payment within a reasonable time. P.W. 3 admitted that had the draft been presented for payment to the Tripura Modern Bank before October 16, 1948, it would have been paid on presentation, and the money could not be realised only because the Calcutta Commercial Bank had closed in the meantime. The Tripura Modern Bank closed its ,business on October 16, 1948. Because of its inability to pay its debts, the Tripura Modern Bank is now working under a scheme of arrangement. The failure of the respondents and their agents to cash the draft within a reasonable time altered the position of the appellants for the worse, and caused prejudice to them. In the circumstances, the respondents must be regarded as having kept the (1)L.R. (2) ; ; 107 draft in absolute payment of the cheque. The cheque must be treated as duly paid and consequently, the original debt stood discharged. The High Court was on error in holding that the failure to obtain payment of the draft was not due to the laches of the respondents ' collecting agents. In one part of the judgment, the High Court wrongly assumed. contrary to fact, that the Tripura Modern Bank had stopped business on September 16, 1948 and therefore the draft could not be cashed on presentation, whereas, in fact, the Tripura Modern Bank had stopped business a month later on October 16, 1948. Moreover, the High Court wrongly assumed that the appellants did not suffer any loss on account of the delay in the presentation of the draft. There is clear evidence on the record that the draft would have been cashed, if it had been presented for payment before October 16, 1948. Mr. Chatterjee also contended that the respondents ' collecting agents must be deemed to have accepted the demand draft on September 14, 1948 as absolute payment of the cheque, and that the cheque was, in the eye of law, paid and discharged on that date. There is a lengthy discussion on this point in the judgment of the High Court, but we do not think it necessary to decide this, question. In the result. the appeal is allowed, the judgment and decree passed by the High Court are set aside, and those of the trial Court are restored. The respondents shall pay to the appellants the costs in this Court. The parties will pay and bear their own costs in the Courts below. Mudholkar, j. I agree with my brother Bachawat that this appeal should be allowed; but I would prefer to rest my decision upon a different ground. It is not necessary to repeat here the .facts which have been set out in my learned brother 's judgment. Mr. N.C. Chatterjee, appearing for the defendants appellants, urged two grounds, the first of which was that the plaintiffs respondents had accepted the draft for Rs. 9,455/ dated September 14, 1948 drawn by the Tristan Modern Bank, Sibsagar on its Head Office at Calcutta in payment of the cheque for Rs. 9,461 4 0 drawn on the Tripura Modern Bank, Sibsagar which the appellants had endorsed, in favour of the respondents in satisfaction of the amount due upon that cheque and that, therefore, the subsequent dishonor of the draft would not revive the appellants ' liability to pay Rs. 9,455/to the respondents. The other ground was that the appellants were discharged from liability because of the laches of the respondents in not presenting the draft for encashment within reasonable time of the drawing of that draft. My learned brother has rested his decision on the second ground. In my view, however, it is not necessary to express any opinion upon the second ground as the first ground urged by Mr. Chatterjee is a good answer to the respondent 's claim. 108 It is a well accepted rule of English law, which has been applied in this country also, that when a debt becomes due the debtor must tender to the creditor the exact amount of the debt in cash or other legal tender and that where a cheque is tendered by the debtor to the creditor the payment may be absolute or conditional, the strong presumption being in favour of conditional payment. (see Chalmers on Bills of Exchange, p. 301, 12th ed.). Therefore, when the respondents accepted the cheque drawn by Messrs Nathuram Jaidayal of Sibsagar in favour of the appellants and endorsed by the appellants in their favour and sent it to the Calcutta Commercial Bank Ltd., Gauhati Branch for collection they must have accepted it as conditional payment. The respondents ' bank, instead of collecting cash from the Tripura Modern Bank Ltd., Sibsagar, sought to collect the amount by draft. The reason for this given by Debendra Chandra Mazumdar, P.W. 3, who was Assistant Accountant at the Gauhati Branch of the Calcutta Commercial Bank Ltd. at the relevant time was that the Bank usually collected money from other banks by draft. There is nothing to indicate in his evidence that this was the prevailing practice in the Banks carrying on business in Assam. According to him, the respondents ' bank asked for a draft payable at Gauhati but the Tripura Modern Bank Ltd. sent one payable at Calcutta. The respondents ' bank, however, accepted the draft and sent it by registered post to Calcutta for collection. Some time thereafter the respondents ' bank closed business and the demand draft was returned undelivered. The respondents ' Bank made over the draft to the respondents. It may be mentioned that though the Tripura Modern Bank Ltd., had branch at Gauhati the respondents ' Bank did not object to a draft payable at Calcutta thinking that the money due thereunder could be collected earlier from the Calcutta branch of the Tripura Modern Bank. The matter, however, did not rest there. After the respondents ' Bank went into liquidation the respondents wrote a letter on November 19, 1948 to the Agent of the Tripura Modern Bank Ltd., Calcutta saying that the demand draft belonged to them and not to the Calcutta Commercial Bank Ltd., who were only acting as their agents for collection purposes and that the amount for which the draft was drawn should be paid to them and not to the Calcutta Commercial Bank or any one on its behalf. This letter clearly shows that the respondents accepted the draft in full payment of the amount due to them under the cheque which the appellants had endorsed in their favour. Thus, though the cheque endorsed by the appellants in favour of the respondents was only a conditional payment of the amount for which the cheque was drawn the respondents by accepting the demand draft drawn by the Tripura Modern Bank, Sibsagar on its Calcutta Branch must be deemed to have accepted that draft as a legal tender or as absolute payment of the amount payable order the cheque endorsed in their favour by the appellant. Thehrights thereafter would rest only upon the demand draft and not upon the original debt which the appellant owed to them. It may be mentioned that the 109 Tripura Modern Bank had not gone into liquidation till a month later and would, as stated by Debendra Chandra Mazumdar, P.W3, have been able to meet the draft had it been presented to its Calcutta Branch within reasonable time from the date on which it was drawn. It is because the respondents ' Bank went into liquidation just about the time the registered letter containing the draft was sent to Calcutta and no one took .delivery of it that the draft could not be presented to the Calcutta Branch of the Tripura Modern Bank. The remedy of the respondents, therefore, could be against their own bank, that is, the Calcutta Commercial Bank or against the Tripura Modern Bank but certainly not against the appellants. Reliance, however, was placed by Mr. S.C. Nath for the respondents upon the letter dated September 10, 1949 written by the appellant to the respondents in which the appellant wrote as follows. " . . and received your letter. You wrote that the payment of Rs. 9,461 4 0 had not been received. Please get the cheque back. We have written to the drawer, which please note. " According to learned counsel, therefore, the appellant must be deemed to have accepted its liability upon the cheque which it had endorsed in favour of the respondents. There is no reference in this letter to the demand draft and it is quite clear therefore what the appellant said was in ignorance of the fact that the respondents bank had accepted a demand draft in payment of the cheque. It may be mentioned that the Tripura Modern Bank, Sibsagar had actually debited the account of the drawer of the cheque with the amount for which the cheque had been drawn. The cheque had thus been honoured by them. But instead of paying cash they issued a demand draft at the instance of the respondents bank. This letter, therefore, does not improve matters for the respondents. For these reasons the appeal is allowed, the decree of the High Court is set aside and that of the trial court restored. The respondents will pay the appellants costs in this Court and in the Courts below and bear their own costs. Appeal allowed.

IN-Abs

In payment of an amount due from them to the respondents, the appellants sent to the respondents on August 31, 1948 a cheque which had been drawn on the Sibsagar branch of a Tripura Bank in favour of the appellants by a third party and thereafter endorsed by the appellants to the respondents. On September, 4, 1948, the respondents forwarded the cheque to their bankers, a Gauhati Bank who. in turn, sent the cheque to the Tripura Bank at Sibsagar for encashment. That bank debited the amount of the cheque to the account of the third party and sent to the respondent 's Gauhati Bank a draft which was payable at its own Head Office at Calcutta. Thereafter the respondents ' Gauhati Bank forwarded the. draft to their Head Office at Calcutta for collection but the latter never presented the draft and made no attempt to collect the amount of the draft. In the meantime, the respondents bank closed its business on September 17, 1948 and was ordered to be wound up. About a month later, the Tripura Bank also closed its business and was compelled to enter into a scheme of arrangement with its creditors. Upon the failure of their attempts to obtain payment of the draft amount from the Tripura Bank, the respondents instituted a suit against the appellants claiming payment of their dues on the ground that the cheque dated August 31, 1948 was received by the respondents as a conditional payment, and as the cheque had not been cashed, the respondents were entitled to enforce their original claim. The sub Judge dismissed the suit but the High Court in appeal reversed the decision and decree the suit. On appeal to the Supreme Court, HELD: (per Raghubar Dayal, Bachawat and Ramaswami, J J)Although the respondents originally received the cheque as a conditional payment of their dues, and if nothing else had happened, the original debt would have revived on non payment of the cheque, having regard to the laches of the respondents in the collection of the draft and the consequential prejudice to the appellants, the respondents must be deemed to have retained the draft as absolute payment of the cheque and on the payment of the cheque, the original debt stood discharged. [105 E F] Chetty on Contracts, 22nd Edn. article 1079; Addison 's Treating on the Law of Contracts, 11th Edn. p. 156; Hobkins vs Ware, ; Chamberlyn vs Delarive, ; , referred to. (per Mudholkar. J.): There was evidence to show that respondents ' bank, instead of collecting cash from the Tripura Bank at Sibsagar, sought, for reasons 0 their own, to collect the amount by draft. Furthermore, after the respondent bank went into liquidation, the respondents wrote to the Tripura Bank stating that the 104 amount of the demand draft belonged to them and not to their bankers who were only acting as their agents for collection purposes and that accordingly the draft amount should be paid to them. Thus, though the cheque endorsed by the appellants in favour of the respondents was only a conditional payment of the amount for which the cheque was drawn, the respondents, by accepting the demand draft drawn by the Tripura Bank must be deemed to have accepted the draft as a legal tender or as absolute payment of the amount payable under the cheque endorsed in their favour by the appellant. Their rights thereafter would rest only upon the demand draft and not upon the original debt which the appellant owed to them. The remedy of the respondents, therefore, could be against their own bank, or against the Tripura Bank, but not against the appellants. [108 E, 109 C]

Appeal No. 1017 of 1963. Appeal from the judgment and order dated March 30th and 31st, 1960 of the Bombay High Court in Income tax Reference No. 2 of 1949. N. A. Palkhivala and I. N. Shroff, for the appellant. C. K. Daphtary, Attorney General, R. Ganapathy Iyer, R. H. Dhebar and R. N. Sachthey, for the respondent. The Judgment of the Court was delivered by Gajendragadkar, C.J. When this appeal was argued before a Division Bench of this Court on October 23, 1964, it was urged on behalf of the appellant, the Keshav Mills Co. Ltd., that in view of the present decisions of this Court in The New Jehangir 910 Vakil Mills Ltd. vs The Commissioner of Income tax, Bombay North, Kutch and. Saurashtra(1), and The Petlad Turkey Red Dye Works Co. Ltd., Petlad vs The Commissioner of Income tax, Bombay, Ahmedabad (2), the appeal must be allowed and the case sent back to the Bombay High Court for disposal in accordance with the principles laid down in the latter decision. At that stage, the learned Attorney General for the respondent, the Commissioner of Income tax, Bombay North, Ahmedabad, urged that he wanted this Court to reconsider the said two decisions. He fairly conceded that if the said two decisions were to be followed, the appeal would have to be allowed and sent back as suggested by the appellant. The learned Judges constituting the Division Bench took the view that an opportunity should be given to the learned Attorney General to press his contention, and so, they directed that the appeal be placed before a Bench of five Judges. Thereafter, this appeal came on for hearing before the Constitution Bench on November 5, 1964. On this occasion again, the same contentions were raised on behalf of the appellant and the respondent respectively Mr. Palkhilvala for the appellant urged that it would be inappropriate to reconsider the recent decisions on which he relied, and he argued that on the merits, the view taken by this Court in the said two decisions was sound and correct. On the other hand, the learned Attorney General contended that he wanted this Court to reconsider the said two decisions, and he pointed out that the matter was of importance, and so, the appeal should be referred to a larger Bench in view of the fact that the decision in the case of the Petlad Co. (2) was a unanimous decision of a Bench consisting of five Judges of this Court. It was under these circumstances that the Court directed that the appeal should be placed before a Special Bench of seven Judges. 'Mat is how it has come on for a final decision before a Bench of seven Judges; and the only point which has been raised for the decision of the Special Bench is whether the two decisions in question should be reviewed and revised. Let us begin by stating the relevant facts leading up to the main point of controversy between the parties. The appellant is a company registered in the Baroda State as it then was. The assessment year with which the proceedings giving rise to this appeal are concerned is 1942 43 (the accounting year being calendar year 1941). During the said year, the appellant was a 'non resident '. It carried on business of manufacturing and (1) ; (2) [1963] Supp. 1 section C. R. 871. 911 selling textile goods in the Baroda State. The operations in relation to all sales of goods manufactured by the appellant 's Mills were completed at the appellant 's premises at Petlad on the footing of ex Mill delivery in every case. It appears that on March 22, 1947, the Income tax Officer, E.P.T. Circle, Ward B, Ahmedabad, passed an order under sec tions 23 (3) and 34 of the Indian Income tax Act, 1. 922 (No. 11 of 1922) (hereinafter called 'the Act) and held that sale proceeds in respect of the sales aggregating each of the following three items were received by the appellant in British India. These items were : (i) Sale proceeds actually received in the accounting Year through M/s Jagmohondas Ramanlal & Co. Rs. 12,68,460 (ii) Sale proceeds through British Indian Banks through Drafts: Rs, 4,40,878 (iii) Sale proceeds collected by collecting cheques on British Indian Banks and Hundis onBritish Indian Shorff and Merchants Rs. 6,71,735 It is with this last item that the present appeal is concerned. Aggrieved by the order thus passed by the Income tax Officer, the appellant preferred an appeal before the Appellate Assistant Commissioner of Income tax, Ahmedabad Range. The Appellate Authority held that the Income tax Officer was in error in not excluding items (i) and (iii) respectively from computation of the taxable profits of the appellant. Thus, the appellant succeeded before the appellate authority in respect of the item in dispute. This decision of the appellate authority led to two cross appeals, one by the Income tax Officer and the other by the appellant before the Income tax Appellate Tribunal hereafter called the Tribunal. The Tribunal dismissed the appellant 's appeal in respect of Rs. 4,40,878/ and allowed the Income tax Officer 's appeal in part and held that the item of Rs. 12,68,460/had been wrongly excluded by the Appellate Authority. In respect of item (iii) relating to Rs. 6,71,735/ , the Tribunal held that in the circumstances of the case the sale proceeds represented by the said item were not received in British India but in the State itself. This decision of the Tribunal led to two cross applications by the appellant and the Income tax Officer for raising the questions of law before it in relation to the items in respect of which 912 they had respectively failed. As a result of these proceedings, the Tribunal drew up the statement of the case on November 5, 1948, and raised ' the following question to the Bombay High Court : "Whether on the facts and in the circumstances of the case, the sums of Rs. 12,68,460/ , Rs. 4,40,878/and Rs. 6,71,735/ , or any of them, which represents receipts by the assessee company of its sale proceeds in British India, include any portion of its income in British India ?" In other words, all the three items in dispute between the appeal]ant and the Income tax Officer formed the subject matter of the question raised by the Tribunal before the Bombay High Court. This reference was registered as Income tax Reference No. 2 of 1949. By its judgment and order delivered on the 14th/15th Sep tember, 1949, in relation to items (i) and (ii) the High Court held that the two sums in question were not debts due from British Indian Merchants but sale proceeds of the goods sold by the appellant to merchants in British India and that such sale proceeds were received by the appellant in British India. In other words, the answers rendered by the High Court in respect of the said two items were against the appellant. The appellant came to this Court in appeal against the decision of the High Court, but its appeal failed and the view taken by the High Court was affirmed (vide Keshav Mills Ltd. vs Commissioner of Income tax, Bombay)(). In the result, the controversy between the appellant and the Income tax Officer in respect of the said items has been finally decided against the appellant. Reverting then to item (iii) with which the present appeal is concerned, the High Court took the view that before it could render an answer to the question in relation to the said item, it would like the Tribunal to furnish to the High Court further facts. Accordingly, the High Court directed that the Tribunal should submit a supplementary statement of case and state therein as to whether there was any arrangement or agreement between the Assessee and the merchants that the giving of cheques or hundis by the merchants to the Assessee would result in an unconditional discharge of the liability of the merchants. The High Court also issued some other directions asking the Tribunal to clarify (1) [19531 section C. R. 950. 913 some of its relevant findings which appeared to the High Court to be somewhat confused. As a result of this order, the case went back to the Tribunal which in turn remanded it to the Income tax Officer for getting the requisite information. On receiving the report of the Income tax Officer, the Tribunal submitted its Supplementary Statement of Case to the High Court on August 13, 1954. Whilst these proceedings were thus pending in the High Court, the decision of this Court in The Commissioner of Income tax, Bombay South, Bombay vs Messrs. Ogale Glass Works Ltd., Ogale Wadi(1) was pronounced. In that case, one of the points which arose for decision was whether the Post Office which takes the cheque from the sender to the addressee is the agent of the sender or the addressee; and on this point, the Court held that as between the sender and the addressee, it is the request of the addressee that makes the post office, the agent of the addressee and after such request, the addressee cannot be heard to say that the post office was not his agent. On the other hand, if there is no such request by the addressee, express or implied, then on delivery of the letter or the cheque to the post office by the sender, the post office acts as the agent of the sender. This decision had a significant impact on the further progress of the present dispute. After receiving the Supplementary Statement of Case from the Tribunal, the matter was argued before the High Court on the 15th February, 1955. On this occasion, the High Court referred the matter back again to the Tribunal with the direction : "that the Tribunal will determine on the evidence led by both parties whether the sum in question was paid by various merchants by sending drafts, hundis or cheques by post and that if the Tribunal found that in some cases the amount was not sent by post, then the Tribunal should determine what amount was sent otherwise than by post and the Tribunal should then submit a Supplementary Statement of the Case". It would be noticed that this direction was given by the High Court obviously because the High Court wanted to deal with the question referred to it in the light of the decision of this Court in the case of Ogale Glass Works Ltd." In fact, in giving this second direction, the High Court observed that when it had called for the first Supplementary Statement of the Case, it did not have the benefit of the decision of this Court in the case of Ogale Glass Works Ltd.,(1) and that after the said decision was pronounced, the position with regard ' (1) 914 to receipt of the cheque by the appellant had been considerably simplified. Pursuant to the second order of remand made by the High Court, the Tribunal submitted its second Supplementary Statement of the Case on the 26th October, 1959. After receipt of the second Supplementary Statement, the Reference again came up for hearing before the high Court. After hearing the parties, the High Court has rendered its answer against the appellant on the question in relation to the item in dispute. It is against this order passed by the High Court on the 30th and 31St March, 1960, that the appellant has come to this Court with a certificate granted by the High Court; and on its behalf, Mr. Palkhivala has urged that in view of the decisions of this Court in the New Jehangir Mills(1) case and Petlad Co.(2) case, the appeal must be allowed and the case remitted to the High Court to be dealt with in accordance with the principles laid down by this Court in the latter case. It is common ground that as a result of the two orders of remand passed by the High Court in the present Reference proceedings, some material evidence which was not on the record when the question was framed by the Tribunal and sent to the High Court under section 66(1) of the Act, has been collected and made a part of the Supplementary Statement of the Case; and basing himself on this fact, Mr. Palkhivala contends that the 'High Court had no jurisdiction to direct the Tribunal to collect additional material and form it a part of the Supplementary Statement under section 66(4) of the Act. It is in support of this contention that reliance is placed on the two decisions in question. Before addressing ourselves to the problem as to whether the view taken by this Court in the said two decisions needs to be reconsidered and revised, it is necessary that we should refer to the said two decisions as well as other decisions on which both the parties have relied before us in the course of the arguments. The first decision on which Mr. Palkhivala relies is the New Jehangir Mills(1) case. In that case, the question which was referred by the Tribunal to the High Court was whether the receipt of the cheques in Bhavnagar amounted to receipt of sale proceeds in Bhavnagar. Before rendering its answer to this question, the High Court had directed the Tribunal to furnish a Supplementary Statement of the Case on the following points "On the finding of the Tribunal that all the cheques were received in Bhavnagar, the Tribunal should find (1) ; (2) [1963] SUPP. section C. R. 871. 915 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". It would be noticed that as a result of this direction, the question which would really have to be considered by the High Court would be 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. It was urged by the appellant in that case that as a result of the direction issued by the High Court calling for a supplementary,.statement of the case, the nature of the question formulated by the Tribunal had been altered, and that was beyond the competence of the High Court under section 66(4). In substance, this plea was upheld by this Court and it was held that in calling for the supplementary statement of the case, the High Court had misconceived its powers. under section 66(4) of the Act. According to this decision, section 66(4) must be read with section 66(1) and section 66(2), and so read, it did not empower the High Court to raise a new question of law which did not arise out of the Tribunal 's order or direct the, Tribunal to investigate new and further facts necessary to determine the new question which had not been referred to it under section 66(1) or section 66(2) of the Act and direct the Tribunal to submit, supplementary statement of case. The additions and alterations in the statement of case which can be directed under section 66(4) could, in the opinion of this Court relate only to such facts as already formed part of the record but were not included by the. Tribunal in the statement of the case. Mr. Palkhivala contends that in the light of the decision, we ought to hold that in so far as the two orders of remand passed by the High Court in the present Reference proceedings have led to the collection of ' additional material and evidence and their inclusion in the supplementary statements of the case, the High Court has exceeded its jurisdiction under section 66(4). The other case on which Mr. Palkhivala strongly relies is the decision of this Court in the Petlad Co. Ltd (1). In that case, one of the points decided by this Court had reference to the extent of the powers and authority of the High Court under section 66(4). It was held that though the High Court had power to direct a supplemental statement to be made, it was beyond its competence to direct additional evidence to be taken. In other (1) [1963] Supp. 1 section C. R. 871. 916 words, this Court took the view that when the High Court makes an order of remand under section 66(4) and directs the Tribunal to furnish a supplemental statement of the case, it can require the Tribunal to include in such supplemental statement material and evidence which may. already be on the record, but which had not been included in the statement of the case initially made under Is. 66(1). The result of this decision is that section 66(4) does not confer on the High Court power to require the Tribunal to take additional evidence before it renders its answers on the questions formulated under section 66(1) or section 66(2). In accordance with the view thus taken by this Court, the direction issued by the High Court to submit a supplemental statement of the case after taking additional evidence was reversed, and following the precedent in the New Jehangir Mills(1) case, an order was passed that the appeals should be allowed and the matter remitted to the High Court to give its decision on the question of law referred to it as required under section 66(5) of the Act. Before the decision of this Court in the Petlad Co. Ltd. (2 was pronounced, a similar point had been raised in the case of M/s. Zoraster and Co. vs The Commissioner of Income tax, Delhi, Ajmer, Rajasthan and Madhya Bharat (now Madhya Pradesh(2). In this latter case, the question referred to the High Court for its decision was 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 ? While dealing with this question, the High Court thought it necessary to remand the case to the Tribunal for a supplemental statement of the 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 validity and correctness of this direction was challenged by the appellant before this Court in view of the decision of this Court in the care of New Jehangir Mills(3). While dealing with this objection raised by the appellant, this Court held that the question as it was framed, was wide enough to include an enquiry as to 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(4) case or in Shri Jagdish Mills Ltd. vs The Commissioner of Income tax, Bombay North, Kutch and Saurashtra, Ahmedabad(5) and since it did not appear (1) ; (2) [1963] Supp. 1 section C. R. 871. (3) ; (4) [1955] 1 section C. IL 185. (5) ; 917 from the order of remand passed by the High Court that the High Court intended that the Tribunal should admit fresh evidence before submitting its supplemental statement, the impugned direction could not be said to be invalid. This decision shows that when a question is framed for the decision of the High Court in wide terms, and the High Court finds that before rendering its answer on the said question some new aspects have to be considered and it feels that for dealing with the said new aspects of the matter, a supplemental statement of the case should be called for, the High Court is authorised to call such a supplemental statement, provided, of course, the High Court does not require the Tribunal to collect additional material or evidence before submitting its supplemental statement. The same view has been expressed by this Court in the case of Commissioner of Income tax, Madras vs M. Ganapathi Muda liar(1). According to this decision, a supplementary statement of case may contain such alterations or additions as the High Court may direct, but the statement must necessarily be based on facts which are already on the record. While exercising its jurisdiction under section 66(4), the High Court has no power to ask for a fresh statement of case with a direction that the Tribunal should go into the matter again and record further evidence. There is one more decision to which reference may inciden tally be made before we part with the series of decisions on which Mr. Palkhivala relies. In the Commissioner of Income tax, Bombay vs The Scindia Steam Navigation Co. Ltd., (2) this Court had occasion to consider the scope and denotation of the expression "any question of law arising out of such order ' occurring in section 66(1) of the Act. The majority decision has summed up the result of the discussion as to the scope and effect of the provisions of section 66 in these words : (1) When a question is raised before the Tribunal and is dealt with by it is clearly one arising out of its order. (2) When a question of law is raised before the Tribunal but the Tribunal fails to deal with it must be deemed to have been dealt with by it, and is, therefore, one arising out of its order. (3) When a question is not raised before the Tribunal but the Tribunal deals with it, that will also be a question arising out of its order. (4) When a question of law is neither raised before the Tribunal nor considered by it will not be a question arising (1) [1964] 53 (2) ; , 918 out of its order notwithstanding that it may arise on the findings given by it. In substance, these propositions mean that it is only a question that has been raised before or decided by the Tribunal that could be held to arise out of its order. Let us now refer to the decisions on which the learned Attorney General has relied in support of his contention that the High Court has power under section 66(4) to call for new additional evidence if it takes the view that such additional evidence is necessary to enable it to determine the question raised for its decision satisfactorily. The learned Attorney General has fairly conceded that he has not been able to find any decision where this question has been answered in favour of the view for which he contends after construing the relevant provisions of section 66(4) of the Act. He, however, urges that there is high authority in support of the practice for which he contends inasmuch as the Privy Council appears to have assumed that the High Court can, in exercise of its powers under section 66(4), call for additional evidence. The first decision of the Privy Council on which he relies is in the case of (Sir Sunder Singh Majithia vs The Commissioner of Income tax, C.P. & U.P.(1). In that case, two of the questions which arose were : whether the steps taken by the assessee to vest in his wife and sons an interest in the immovable assets of the business were not legally effective, e.g., for want of a registered instrument of transfer; and if the factory, land and buildings in question were joint family property, whether it was shown that a partition at the hands of the father of the said properties could not be effected without a written instrument ? The question of law formulated for the decision of the High Court was : "In all the circumstances of the case, having regard to the personal law governing the assessee and the requirements of the Transfer of Property Act (IV of 1882) and the Stamp Act (11 of 1899), has the deed of partnership dated February 12, 1933, brought into existence a genuine firm entitled to registration under the provisions of section 26 A of the Act?" While answering this question, one of the points which had to be decided was whether the immovable properties were the self acquisitions of the father or not. The Privy Council took the view that before a satisfactory answer could be rendered on the question framed, several facts had to be ascertained, and in its judgment the Privy Council has indicated the nature of these facts. "It is necessary to know", says the judgment, "as regards (a) the business, machinery, plant (1) 919 and other movables; (b) the factory buildings and land whether they were before 1931 the self acquired property of the father or his ancestral property or joint family property or whether they fall into some other and what category according to the customary law". The judgment also points out that the rights of the members of the family in respect of the said property would have to be ascertained and the conduct of the parties considered. Then, in regard to the agreement in question, the Privy Council pointed out that it would be necessary to enquire what agreement, if any, was made prior to February 12, 1933, and when as to a partnership being constituted to carry on the sugar factory and as to the assets which it was to have as a firm. "None of these essential facts", says the judgment, "have been found and stated by the Commissioner, with the result that the question referred cannot be answered until the High Court has exercised its powers under sub section (4) of section 66 of the Act". Having made these observations, the Privy Council left it to the discretion of the High Court to specify the particular additions and alterations which the Commissioner should be directed to make. In the result, the advice tendered by the Privy Council was "that the case be remanded to the High Court for disposal after taking such action under sub section (4) of section 66 of the Act as the High Court may think fit in the light of this judgment". The argument is that the facts which the Privy Council thought it necessary to ascertain before answering the question, indicate that they could not have been on the record at the time when the question was originally framed by the Commissioner, and so, the suggestion is that inasmuch as the Privy Council indicated that the High Court should call for a supplemental statement in regard to facts which were apparently not already on the record, this decision should be taken to support the contention that section 66(4) authorised the High Court to call for new additional material before it renders its answers to the questions formulated under section 66(1) or section 66(2). A similar argument is based on another decision of the Privy Council in Trustees of the Tribune Press, Lahore vs Commissioner of Income tax, Punjab, Lahore(1). In that case, the questions which were referred to the High Court were : "(1) whether the income of the Tribune Trust was liable to be assessed in the hands of the Trustees under the provisions of the Income tax Act ?; and (2) if it was, whether it was not exempt under section 4(3) (1) of the Act?" In the High Court, there was a sharp difference of opinion between the Judges who heard the reference; but ultimately the 4 Sup./65 13 920 answers went against the Tribune, and so, the dispute was taken to the Privy Council by the Trustees of the Tribune Trust. At the first hearing of the said appeal before the Privy Council, it was considered by the Board to be desirable that the powers conferred by sub section 4 of section 66 of the Act should be employed to obtain further information. Accordingly, by an Order in Council, dated July 29, 1937, it was directed in accordance with the advice tendered by the Board that the case ought to be remitted to the High Court of Judicature at Lahore with a direction that the said High Court shall refer the case back to the Commissioner under section 66(4), first for the addition of such facts during the life time of the testator Sardar Dayal Singh as may bear upon the proper interpretation of the expression 'keeping up the liberal policy of the said newspaper in clause XXI of the will of the said testator dated the 15th Day of June, 1895, and secondly, for the addition of such facts as to a compromise dated the 1st day of December, 1906, as may show whether the said compromise is binding on all parties interested in the estate of the said testator. Thereafter, a supplementary statement made by the Commissioner was filed and it appears that before he made the said statement, the Commissioner "carefully assembled considerable material explanatory of the direction given by the testator in the phrase 'keeping up the liberal policy of the said newspaper, and showing as their Lordships think, very fairly, the nature and purpose of the trust". After considering the said material, the Privy Council allowed the appeal preferred by the Trustees, because in its opinion the second question framed for the decision of the High Court had to be answered in favour of the assessee. It is urged that this decision also shows that the Privy Council called for additional material and evidence by requiring the High Court to exercise its powers in that behalf under section 66(4) of the Act. The learned Attorney General also stated that there were some other decisions of the High Courts in India where similar additional evidence had been called for by the High Courts under section 66(4), and by way of illustration, he cited before us the decision of the Bombay High Court in Messrs. Govindram Bros. Ltd. vs Commissioner of Income tax, Central, Bombay(1). It is, however, clear that in none of the decisions on which the learned Attorney General relies has the question about the construction of section 66(4) been argued, considered and decided. That, broadly stated, is the position disclosed by the judicial decisions bearing on the point with which we are concerned in the present appeal. (1) [1946]14 I.T.R. 764. 921 In dealing with the question as to whether the earlier decisions of this Court in the New Jehangir Mills(1) case, and the Petlad Co. Ltd.(1) case should be reconsidered and revised by us, we ought to be clear as to the approach which should be adopted in such cases. Mr. Palkhivala has not disputed the fact that in a proper case, this Court has inherent jurisdiction to reconsider and revise its earlier decisions, and so, the abstract question as to whether such a power vests in this Court or not need not detain us. In exercising this inherent power, however, this Court would naturally like to impose certain reasonable limitations and would be reluctant to entertain pleas for the reconsideration and revision of its earlier decisions, unless it is satisfied that there are compelling and substantial reasons to do so. It is general judicial experience that in matters of law involving questions of construing statutory or constitutional provisions, two views are often reasonably possible and when judicial approach has to make a choice between the two reasonably possible views, the process of decision making is often very difficult and delicate. When this Court hears appeals against decisions of the High Courts and is required to consider the propriety or correctness of the view taken by the High Courts on any point of law, it would be open to this Court to hold that though the view taken by the High Court is reasonably possible, the alternative view which is also reasonably possible is better and should be preferred. In such a case, the choice is between the view taken by the High Court whose judgment is under appeal, and the alternative view which appears to this Court to be more reasonable; and in accept ing its own view in preference to that of the High Court, this Court would be discharging its duty as a Court of Appeal. But different considerations must inevitably arise where a previous decision of this Court has taken a particular view as to the construction of a statutory provision as, for instance, section 66(4) of the Act. When it is urged that the view already taken by this Court should be reviewed and revised, it may not necessarily be an adequate reason for such review and revision to hold that though the earlier view is a reasonably possible view, the alternative view which is pressed on the subsequent occasion is more reasonable. In reviewing and revising its earlier decision, this Court should ask itself whether in the interests of the public good or for any other valid and compulsive reasons, it is necessary that the earlier decision should be revised. When this Court decides questions of law, its decisions are, under article 141, binding on all courts within the territory of India, and so, it must be the constant endeavour and concern of (1) ; (2) [1963] Supp. 1 S.C.R. 871. A Sup./65 14 922 this Court to introduce and maintain an element of certainty and continuity in the interpretation of law in the country. Frequent exercise by this Court of its power to review its earlier decisions on the ground that the view pressed before it later appears to the Court to be more reasonable, may incidentally tend to make law uncertain and introduce confusion which must be consistently avoided. That is not to say that if on a subsequent occasion, the Court is satisfied that its earlier decision was clearly erroneous, it should hesitate to correct the error; but before a previous decision is pronounced to be plainly erroneous, the Court must be satisfied with a fair amount of unanimity amongst its members that a revision of the said view is fully justified. It is not possible or desirable, and in any case it would be inexpedient to lay down any principles which should govern the approach of the Court in dealing with the question of reviewing and revising its earlier decisions. It would always depend upon several relevant considerations :What is the nature of the infirmity or error on which a plea for a review and revision of the earlier view is based ? On the earlier occasion, did some patent aspects of the question remain unnoticed, or was the attention of the Court not drawn to any relevant and material statutory provision, or was any previous decision of this Court bearing on the point not noticed ? Is the Court hearing such plea fairly unanimous that there is such an error in the earlier view ? What would be the impact of the error on the general administration of law or on public good ? Has the earlier decision been followed on subsequent occasions either by this Court or by the High Courts ? And, would the reversal of the earlier decision lead to public inconvenience, hardship or mischief ? These and other relevant considerations must be carefully borne in mind whenever this Court is called upon to exercise its jurisdiction to review and revise its earlier decisions. These considerations become still more significant when the earlier decision happens to be a unanimous decision of a Bench of five learned Judges of this Court. It is true that in the case of the Bengal Immunity Company Ltd. vs The State of Bihar & Ors. (1) this Court by a majority of 4 : 3 reversed its earlier majority decision (4 : 1) in the State of Bombay and Another vs The United Motors (India) Ltd. and Ors. (2); but that course was adopted by the majority of Judges in that case, because they were persuaded to take the view that there were several circumstances which made it necessary to adopt that course. (1) (2) ; 923 On the other hand, dealing with a similar problem in the case of Sajjan Singh etc. vs The State of Rajasthan etc.(1), this Court unanimously rejected the request made on behalf of the petitioners that its earlier decision in Sri Sankari Prasad Singh Deo vs The Union of India and State of Bihar (2) should be reviewed and revised. Hidayatullah and Mudholkar, JJ. who were somewhat impressed by some of the pleas made in support of the contention that the earlier decision should be revised, in substance agreed with the ultimate decision of the Court that no case had been made out for a review or revision of the said earlier decision. The principle of stare decision, no doubt, cannot be pressed into service in cases where the jurisdiction of this Court to reconsider and revise its earlier decisions is invoked; but nevertheless, the normal principle that judgments pronounced by this Court would be final, cannot be ignored, and unless considerations of a substantial and compelling character make it necessary to do so, this Court should and would be reluctant to review and revise its earlier decisions. That, broadly stated, is the approach which we propose to adopt in dealing with the point made by the learned Attorney General that the earlier decisions of this Court in the New Jehangir Mills(3) case, and the Petlad Co. Ltd. (4 ) case should be reconsidered and revised. Let us then consider the question of construing section 66(4) of the Act. Before we do so, it is necessary to read sub section (1), (2) and (4) of section 66. Section 66(1) reads thus : "Within sixty days of the date upon which he is served with notice of an order under sub section (4) of section 33, the assessee or the Commissioner may, by application in the prescribed form, accompanied where application is made by the assessee by a fee of one hundred rupees, require the appellate Tribunal to refer to the High Court any question of law arising out of such order, and the Appellate Tribunal shall within ninety days of the receipt of such application draw up a state ment of the case and refer it to the High Court". There is a proviso to this sub section which is not relevant for our purpose. Section 66(2) reads thus : "If on any application being made under sub section (1), the Appellate Tribunal refuses to state the (1) ; (2) ; (3) ; (4) [1963] Supp. 1 S.C.R. 871. 924 case on the ground that no question of law arises, the assessee or the Commissioner, as the case may be, may, within six months from the date on which he is served with notice of the refusal, apply to the High Court, and the High Court may, if it is not satisfied of the correctness of the decision of the Appellate Tribunal, require the Appellate Tribunal to state the case and to refer it, and on receipt of any such requisition the Appellate Tribunal shall state the case and refer it accordingly". That takes us to sub section (4) which reads thus "if the High Court is not satisfied that the statements in a case referred under this section are sufficient to enable it to determine the question raised thereby, the Court may refer the case back to the Appellate Tribunal to make such additions thereto or alterations therein as the Court may direct in that behalf". Section 66(5) provides that the High Court upon hearing of any such case shall decide the questions of law raised thereby and shall deliver its judgment thereon containing the grounds on which such decision is founded and shall send a copy of such judgment to the Appellate Tribunal which shall pass such orders as are necessary to dispose of the case conformably to such judgment. It is clear that when the Tribunal draws up a statement of the case and refers a question of law to the High Court under section 66(1), the said question must arise out of its order, and the statement of the case would necessarily be limited to the statement of facts already brought on the record either before the Income tax Officer or before the Appellate Assistant Commissioner, or before the Tribunal. There is no doubt and indeed no dispute before us that the question of law must arise from the Tribunal 's order and the statement of the case must be confined to the facts already brought on the record. The same would be the position where the High Court requires the Tribunal to state the case and refer to it under section 66(2). The position, therefore, is that when the High Court is exercising its advisory jurisdiction under section 66(4), it is dealing with a question of law arising from the order of the Tribunal and has to answer the said question in the light of the statement of the case submitted to it by the Tribunal. in normal course, the statement of the case would refer to facts selected by the Tribunal from out of the material already on the record and it is in the light of the said statement of the case that 925 the question has to be answered by the High Court. Thus far, there is no controversy or dispute. Section 66(4), however, authorises the High Court to refer the case back to the Tribunal to make such additions to the statement of the case or alterations therein as the Court may direct in that behalf. This power can be exercised by the High Court if it is satisfied that the statement of the case is not sufficient to enable it to determine the question raised by it. If the High Court feels that in order to answer satisfactorily the question referred to it is necessary to have additional material included in the statement of the case, the High Court can make an appropriate direction in that behalf. If the High Court is satisfied that some alterations should be made in the statement of the case to enable it to determine the question satisfactorily, it can make an appropriate direction in that behalf. The question is whether in issuing appropriate directions under $. 66(4), the High Court can ask the Tribu nal to travel outside the record and call for and collect material which is not already produced on the record. If section 66(4) is read along with section 66(1) and section 66(2), it may tend to show that the power of the High Court is limited to requiring the Tribunal to add to or alter the statement of the case in the light of the material and evidence already on the record. If the question that can be raised under section 66(1) and section 66(2) can arise only out of the order of the Tribunal and if the statement of the case required to be drawn up by the Tribunal under the said two provisions would inevitably be confined to the facts and material already on the record, it seems unlikely that section 66(4) would authorise the High Court to direct the Tribunal to collect additional material or evidence not on the record. The scheme of the Act appears to be that before the Income tax Officer all the relevant and material evidence is adduced. When the matter goes before the Appellate Assistant Commissioner, he is authorised under section 31(2) to make such further enquiry as he thinks fit, or cause further enquiry to be made by the Income tax Officer before he disposes of the appeal filed before him. Section 31 (2) means that at the appellate stage additional evidence may be taken and further enquiry may be made in the discretion of the Appellate Assistant Commissioner. When the matter goes before the Appellate Tribunal under section 33, the question about the admission of additional evidence is governed by Rule 29 of the Income (Appellate Tribunal) Rules, 1963. This Rule provides that the parties to the appeal shall not be entitled to produce additional evidence either oral or documentary before the Tribunal, but if 4 Sup./65 15 926 the Tribunal requires any documents to be produced or any witness to be examined or any affidavit to be filed to enable it to pass orders or for any other substantial cause, or if the Income tax Officer has decided the case without giving sufficient opportunity to the assessee to adduce evidence either on points specified by him or not specified by him, the Tribunal may allow such document to be produced or witness to be examined or affidavit to be filed or may allow such evidence to be adduced. After the Tribunal has passed orders on the appeal before it, the stage is reached to take the matter by way of reference proceedings before the High Court under section 66. This scheme indicates that evidence has to be led primarily before the Income tax Officer, though additional evidence may be led before the Appellate Assistant Commissioner or even before the Tribunal, subject to the provisions of section 31(2) of the Act and Rule 29 respectively, and that means that when the Tribunal has disposed of the matter and is preparing a statement of the case either under section 66(1) or under section 66(2), there is no scope for any further or additional evidence. When the matter goes to the High Court, it has to be dealt with on the evidence which has already been brought on the record. If the statement of the case does not refer to the relevant and material facts which are already on the record, the High Court may call for a supplementary statement under section 66(4), but the power of the High Court under section 66(4) can be exercised only in respect of material and evidence which has already been brought on the record. There is another consideration which is relevant in dealing with the question about the scope and effect of the provisions contained in section 66(4). Proceedings taken for the recovery of tax under the provisions of the Act are naturally intended to be over without unnecessary delay, and so, it is the duty of the parties, both the department and the assessee, to lead all their evidence at the stage when the matter is in charge of the Income tax Officer. Oppor tunity is, however, given for additional evidence by section 31(2) and Rule 29; but if further evidence is allowed to be taken under the directions of the High Court under section 66(4), it is likely that tax proceedings may be prolonged interminably, and that could not be the object of the Act as it is evidenced by the relevant provisions to which we have already referred. These mainly are the grounds on which the earlier decisions of this Court in the New 927 Jehangir Mills(1) case and the Petlad Co. Ltd. (2) case substantially rest. On the other hand, it must be conceded that the words used in section 66(4) are wide enough and they may, on a liberal construction, include the power to call for additional evidence by directing the Tribunal to file supplementary statement of the case. It is true that section 66(4) in terms does not confer such a power and it may be that having regard to the scheme of section 66(1) and (2), one would have expected specific and express terms conferring such power on the High Court in section 66(4) if the Legislature had intended that the High Court would be competent to call for additional evidence; but there are no terms of limitation in section 66(4), and it would be reasonably possible to construe section 66(4) as enabling the High Court to call for additional evidence if it is satisfied that the material in the statement of the case is not sufficient to answer satisfactorily the question raised by the statement of the case. When the High Court is dealing with the statement of the case under section 66(4), it is its duty to answer the question submitted to it. As has been held by this Court in Rajkumar Mills Ltd. vs Commissioner of Income tax, Bombay(1), where the question involved is one of law and the High Court finds it difficult to answer the question owing to the unsatisfactory nature of the statement of the case submitted by the Tribunal, the proper procedure is to call for a further statement of the case and then decide the question itself. The High Court would be adjuring its advisory function if it merely gives some directions and orders the Tribunal to dispose of the matter according to law and in the light of the directions given by it without referring the matter again to the High Court; and so, if the High Court finds that in order to deal with the question referred to it satisfactorily it is necessary to ascertain some relevant and material facts, it should be open to the High Court to direct the Tribunal to make a supplementary statement containing the said material and facts. There is no provision in section 66(4) which prevents the exercise of such a power. In some cases, the question of law referred to the High Court may have to be considered in several aspects some of which may not have been appreciated by the Tribunal. There is no doubt that if a question of law is framed in general terms and in dealing with it several aspects fall to be considered, they have to be considered by the High Court even though the Tribunal may not have considered them. In such a case, if in dealing with some aspects (1) ; (2) [1963] Supp. 1 S.C.R. 871. (3)(1955] 928 of the matter it becomes necessary to ascertain additional facts, it would be unsatisfactory to require the High Court to answer the question without such additional facts on the ground that they have not been introduced on the record already. Refusal to recognise the jurisdiction of the High Court to call for such additional evidence may lead to hardship in many cases, and since there are no words expressly limiting the powers of the High Court under section 68(4), there is no reason why the said powers should receive a narrow and limited construction. That is the view for which the learned Attorney General contends. It must be conceded that the view for which the learned Attorney General contends is a reasonably possible view, though we must hasten to add that the view which has been taken by this Court in its earlier decisions is also reasonably possible. The said earlier view has been followed by this Court on several occasions and has regulated the procedure in reference proceedings in the High Courts in this country ever since the decision of this Court in the New Jehangir Mills(1) was pronounced on May 12, 1959. Besides, it is somewhat remarkable that no reported decision has been cited before us where the question about the construction of section 66(4) was considered and decided in favour of the Attorney General 's contention. Having carefully weighed the pros and cons of the controversy which have been pressed, before us on the present occasion, we are not satisfied that a case has been made out to review and revise our decisions in the case of the New Jehangir Mills(2) and the case of the Petlad Co. Ltd. (2) . That is why we think that the contention raised by Mr. Palkhivala must be upheld. In the result, the order passed by the High Court is set aside and the matter is sent back to the High Court with a direction that the High Court should deal with it in the light of the two relevant decisions in the New Jehangir Mills(1) and the Petlad Co. Ltd. (2 ). Before we part with this appeal, however, we would like to add that in the course of the debate in the present appeal, Rule 39 of the Income tax (Appellate Tribunal) Rules was incidentally referred to, though neither party based any argument on it. That being so, the question as to the true scope and effect of the provisions contained in the said Rule does not fall to be considered in the present proceedings and we express no opinion on it. There would be no order as to costs throughout. Appeal allowed and remanded.

IN-Abs

The appellant was a company registered in the erstwhile Baroda State. In connection with the assessment year 1942 43 the Income tax Officer Ahemdabad held that certain sale proceeds were received by the appellant in British India and the profit thereon was taxable under the Indian income tax Act, 1922. One of the items in dispute related to the sale proceeds collected by collecting cheques on British India Shroffs and Merchants. In respect of the said item the Appellate Assistant Commissioner as well as the Appellate Tribunal decided against the appellant, and thereafter, reference was made to the High Court. The High Court felt that it required further facts to decide the reference and twice remanded the case to the Tribunal for investigation of those facts. The Tribunal after taking evidence submitted a supplementary Statement of Case on each occasion. Finally the High Court decided the question against the appellant, but granted it a certificate of fitness to appeal to the Supreme Court. It was contended on behalf of the appellant that the High Court had no jurisdiction to direct the Tribunal to collect additional material and make it a part of the supplementary Statement of Case under section 66(4) as had been decided by this Court in the cases of the Petlad Co. and the New Jahangir Mills. On behalf of the Revenue it was contended that these two cases required reconsideration. The Court therefore had to consider whether it should review and revise its earlier view taken in the said two cases. HELD : (i) The view contended for on behalf of the Revenue namely, that the High Court had power to ask the Tribunal to investigate further facts and submit a supplementary Statement of Case was a reasonably possible view. But on the other hand the opposite view taken by this Court in the Petlad Co. case and the New jahangir Mills case was also reasonably possible. The latter view had been followed by this Court on several occasions and it had regulated the procedure in reference proceedings in the High Courts ever since the decision in the New Jahangir Mills case was pronounced. Besides, no reported decision had been cited at the bar where the question about the constitution of section 66(4) was considered and decided in favour of the view con tended for by the Revenue. No case therefore was made out for a revision or review of the Court 's decisions in the Petlad Co. and New Jahangir Mills cases. [928 C F] Case law discussed. The New jahangir Vakil Mills Ltd. vs Commissioner of Income tax, Bombay North; , and ' The Petlad Turkey Red Dye 909 Works Co. Ltd. Petland vs Commissioner of Income tax, Bombay, Ahemdabad, [1963] Supp. 1 S.C.R. 871, affirmed. (ii) The principle of stare decisis cannot be pressed into service in cases where the power of this Court to reconsider and revise its earlier decisions is invoked, because that power is inherent in this Court; but nevertheless the normal principle that judgments pronounced by this Court would be final cannot be ignored. Unless considerations of a subs tantial and compelling character make it necessary to do so this Court should and would be reluctant to review and revise its earlier decisions. [923 B D] Bengal Immunity Company Ltd. vs State of Bihar , distinguished. (iii) If the Court is satisfied that its earlier decision was clearly erroneous, it should not hesitate to correct the error; but before a previous decision is pronounced to be plainly erroneous, the Court must be satis fied with a fair amount of unanimity amongst its members that a revision of the said view is fully justified. It is not possible or desirable, and in any case it would be inexpedient to lay down any principles which should govern the approach of the Court in dealing with the question of reviewing and revising its earlier decisions. It would always depend upon several relevant considerations What is the nature of the infirmity or error on which a plea for a review and revision of the earlier view is based ? On the earlier occasion, did some patent aspects of question remain unnoticed, or was the attention of the Court not drawn to any relevant and material statutory provision, or was any previous decision of this Court bearing on the point not noticed ? Is the Court hearing such plea fairly unanimous that there is such an error in the earlier view? What would be the impact of the error on the general administration of law or on public good ? Has the earlier decision been followed on subquent occasions either by this Court or by the High Courts ? And, would the reversal of the earlier decision lead to public inconvenience, hardship or mischief ? These considerations become still more significant when the earlier decision happens to be a unanimous decision of a Bench of five learned Judges of this Court [922 B F]

minal Appeal No. 248 of 1964. 87 Appeal from the judgment and order dated September 16, 1964 of the Allahabad High Court in Criminal Appeal No. 348 of 1964 and capital sentence No. 26 of 1964. P.C. Khanna, for the appellant. O.P. Rana, for the respondent. The Judgment of the Court was delivered by Subba Rao, J. Sahoo, the appellant, is a resident of Pachperwa in the District of Gonda. He has two sons, Badri and Kirpa Shanker. He lost his wife years ago. His eldest son, Badri, married one Sunderpatti. Badri was employed in Lucknow, and his wife was residing with his father. It is said that Sunderpatti developed illicit intimacy with Sahoo; but there were incessant quarrels between them. On August 12, 1963, during one of those quarrels,Sunderpatti ran away to the house of one Mohammed Abdullah ,a neighbour of theirs. The appellant brought her buck, and after some wordy altercation between them they slept in the only room of their house. The only other inmate of the house was the appellant 's second son, Kirpa Shanker, a lad of about 8 years. On the morning of August 13, 1963, Sunderpatti was found with serious injuries in the room of the house where she was sleeping and the appellant was not in the house. Sunderpatti was admitted in the Sadar Hospital Gonda, at 5.25 p.m. on that day and she died on August 26, 1963 at 3 p.m. Sahoo was sent up for trial before the Court of Sessions, Gonda, on a charge under section 302 of the Indian Penal Code. The learned Sessions Judge, on a consideration of the entire evidence came to the conclusion that Sahoo killed Sunderpatti. On that finding, he convicted the accused under section 302 of the Indian Penal Code and sentenced him to death. On appeal, a Division Bench of the High Court at Allahabad confirmed both the conviction and the sentence. Hence the appeal. Except for an extra judicial confession, the entire evidence in the case is circumstantial. Before we advert to the arguments advanced in the appeal it will be convenient to narrate the circumstances found by the High Court, which are as follows: (1) The accused had illicit connections with the deceased; (2) the deceased and the accused had some quarrel on the Janmashtami day in the evening and the deceased had to be persuaded through the influence of their neighbors, Mohammed Abdullah and his womenfolk, to go back to the house of the accused; (3) the deceased was seen in the company of the accused for the fast time when she was alive; (4) during the fateful night 3 persons, namely. the accused. the deceased and the accused 's second son, Kirpa Shanker (P.W. 17), slept in the room inside the house; (5) on the early morning of next day, P.W. 17 was asked by his father to go out to attend to calls of nature, and when he came back to the verandah of the house he heard some gurgling sound and he saw his father going out of the house murmuring something; and (6) P. Ws. 9, 11, 13 88 and 15 saw the accused going out of the house at about 6 a.m. on that day soliloquying that he had finished Sunderpatti and thereby finished the daily quarrels. This Court in a series of decisions has reaffirmed the following well settled rule of "circumstantial evidence". The circumstances from which the conclusion of guilt is to be drawn should be in the first instance fully established. "All the facts so established should be consistent only with the hypothesis of the guilt of the accused and the circumstances should be of a conclusive nature and tendency that they should be such as to exclude other hypotheses but the one proposed to be proved. " Before we consider whether the circumstances narrated above would stand the said rigorous test, we will at the outset deal with the contention that the soliloquy of the accused admitting his guilt was not an extra judicial confession as the Courts below held it to be. If it was an extra judicial confession, it would really partake the character of direct evidence rather than that of circumstantial evidence. It is argued that it is implicit in the concept of confession, whether it is extra judicial or judicial, that it shall be communicated to another. It is said that one cannot confess to himself: he can only confess to another. This raises an interesting point, which fails to be decided on a consideration of the relevant provisions of the Evidence Act. Sections 24 to 30 of the Evidence Act deal with the admissibility of confessions by accused persons in criminal cases. But the expression "confession" is not defined. The Judicial Committee in Pakala Narayana vs R.(1) has defined the said expression thus: "A confession is a statement made by an accused ' which must either admit in terms the offence. or at any rate substantially all the facts which constitute the offence. " A scrutiny of the provisions of sections 17 to 30 of the Evidence Act discloses, as one learned author puts it, that statement is a genus. admission is the species and confession is the sub species. Shortly stated, a confession is a statement made by an accused admitting his guilt. What does the expression "statement" mean? The dictionary meaning of the word "statement" is "the act of stating, reciting or presenting verbally or on paper." The term "statement" therefore, includes both oral and written statements. Is it also a necessary ingredient of the term that it shall be communicated to another? The dictionary meaning of the term does not warrant any such extension; nor the reason of the rule underlying the doctrine of admission or confession demands it. Admissions and confessions are exceptions to the hearsay rule. The Evidence Act places them in the category of relevant evidence, presumably on the ground that, as they are declarations against the interest of the person making them, they are probably true. The probative value of 89 an admission or a confession does not depend upon its communication to another, though, just like any other piece of evidence, it can be admitted in evidence only on proof. This proof in the case of oral admission or confession can be offered only by witnesses who heard the admission or confession, as the case may be. The following illustration pertaining to a written confession brings out the said idea: A kills B; enters in his diary that he had killed him, puts it in his drawer and absconds. When he places his act on record, he does not communicate to another; indeed, he does not have any intention of communicating it to a third party. Even so, at the trial the said statement of the accused can certainly be proved as a confession made by him. If that be so in the case of a statement in writing, there cannot be any difference in principle in the case of an oral statement. Both must stand on the same footing. This aspect of the doctrine of confession received some treatment from wellknown authors on evidence, like Taylor, Best and Phipson. In "A Treatise on the Law of Evidence" by Taylor, 11th Edn., Vol. I, the following statement appears at p. 596: "What the accused has been overheard muttering to himself, or saying to his wife or to any other person in confidence, will be receivable in evidence. " In "The Principles of the Law of Evidence" by W.M. Best, 12th Edn., at p. 454, it is stated much to the same effect thus: "Words addressed to others, and writing, are no doubt the most usual forms; but words uttered in soliloquy seem equally receivable. " We also find the following passage in "Phipson on Evidence", 7th Edn., at p. 262: "A statement which the prisoner had been overheard muttering to himself,f, if otherwise than in his sleep, is admissible against him, if independently proved." These passages establish that communication to another is not a necessary ingredient of the concept of "confession". In this context a decision of this Court in Bhogilal Chunilal Pandya v The State of Bombay(1) may usefully be referred to. There the question was whether a former statement made by a witness within the meaning of $. 157 of the Evidence Act should have been communicated to another before it could be used to corroborate the testimony of another witness. This Court, after considering the relevant provisions of the Evidence Act and the case law on the subject came to the conclusion that the word "statement" used in section 157 meant only "something that is stated" and the element of communication was not necessary before "something that is stated" became a statement under that section. If, as we have said, statement is the genus and confession is only a sub species of that genus, we do not see any reason why the statement implied in the confession should be given (1) [1959] Supp. 1 S.C.R. 310. 90 a different meaning. We, therefore, hold that a statement, whether communicated or not, admitting guilt is a confession of guilt. But, there is a clear distinction between the admissibility of an evidence and the weight to be attached to it. A confessional soliloquy is a direct piece of evidence. It may be an expression of conflict of emotion; a conscious effort to stifle the pricked conscience; an argument to find excuse or justification for his act; or a penitent or remorseful act of exaggeration of his part in the crime. The tone may be soft and low; the words may be confused; they may be capable of conflicting interpretations depending on witnesses, whether they are biased or honest, intelligent or ignorant, imaginative or prosaic, as the case may be. Generally they are mutterings of a confused mind. Before such evidence can be accepted, it must be established by cogent evidence what were the exact words used by the accused. Even if so much was established, prudence and justice demand that such evidence cannot be made the sole ground of conviction. It may be used only as a corroborative piece of evidence. The circumstances found by the High Court, which we have stated earlier, lead to the only conclusion that the accused must have committed the murder. No other reasonable hypothesis was or could be suggested. Further, in this case, as we have noticed earlier, P.W.s 11, 13 and 15 deposed that they clearly heard the accused say when he opened the door of the house and came out at 60 'clock in the morning of the fateful day that he had "finished Sunderpatti, his daughter in law, and thereby finished the daily quarrels". We hold that this extra judicial confession is relevant evidence: it certainly corroborates the circumstantial evidence adduced in the .case. In the result, we agree with the conclusion arrived at by the High Court both in regard to the conviction and the sentence. The appeal fails and is dismissed. Appeal dismissed.

IN-Abs

The Sessions Judge in convicting the appellant of murder took into account an extra judicial confession alleged to have been made by him when shortly after the murder he was muttering to himself that he had finished the deceased. The High Court confirmed the conviction. In appeal before this Court it was contended that the muttering of the accused did not amount to a confession as it was implicit in the concept of confession whether judicial or extra judicial that it should be communicated to another. A man can. not confess to himself; he can only confess to another. HELD: (i) Sections 24 to 30 of the Evidence Act deal with the admissibility of confessions, but the expression 'confession ' is not defined. Shortly stated a confession is a statement made by an accused admitting his guilt. [88 E] Pakala Narayana vs R.L.R. 66 I.A. 66, referred to. (ii) It is not a necessary ingredient of the term confession that it shall be communicated to another. The dictionary meaning of the term does not warrant any such extension, nor the reason of the rule underlying the doctrine of admission or confession demands it. The probative nature of an admission or confession does not depend on its communication to another though just like any other piece of evidence can be admitted in evidence only on proof. The following illustration pertaining to a written confession brings out the idea: A kills B; enters in his diary that he had killed him, puts it in his drawer and absconds. When he places his act on record he does not communicate to another; indeed he does not have any intention of communicating it to a third party. Even so at the trial the said state agent of the accused can certainly be proved as a confession made by him. If that be so in the case of a statement in writing, there cannot be any difference in principle in the case of an oral statement, [88 H 89 C] Bhogilal Chunilal Pandya vs State of Bombay, [1959] Supp. 1 S.C.R.310,reliedon. (iii) But there is a clear distinction between the admissibility of an item. of evidence and the weight to be attached to it. A confessional soliloquy is a direct piece of evidence. Generally such soliloquies are mutterings of a confused mind. Before such evidence can be accepted it must be established by cogent evidence what were the exact words used by the accused. Even if so much was established prudence and justice demand that such evidence cannot be made the sole ground of conviction. It may be used only as a corroborative piece of evidence. [90 B, D] In the present case the confession along with the other evidence of circumstances was sufficient to prove the guilt of the appellant.

Appeal No. 434 of 1963. Appeal from the judgment and decree dated July 22, 1960, of the Andhra Pradesh High Court in Appeal Suit No. 709 of 1954. A. Ranganadham Chetty, A. Vedavalli and A.V. Rangam, for the appellants. M.S.K. Sastri and M.S. Narasimhan, for the respondents. The Judgment of the Court was delivered by Bachawat, J. The first respondent, Seetharamamma, is a Brahmin woman. She was married to one Ramakrishnayya. During the life time of her husband she became the concubine of one Lingayya, a Sudra by caste. From 1938 until the death of Lingayya in February, 1948, she was the permanently kept concubine of Lingayya, and lived with him. During this period and thereafter, she preserved sexual fidelity to Lingayya. The second, third and fourth respondents are the sons of the first respondent by Lingayya. The husband of the first respondent is still alive. The appellants are the brothers and brothers ' sons of Lingayya. Lingayya was separate in estate from his brothers and brothers ' sons. The parties are residents of Choragudi, Bapatla, now in Andhra Pradesh and governed by the Mitakshara school of Hindu law. In the plaint, as originally filed, the respondents claimed that they were exclusively entitled to the estate left by Lingayya. The Subordinate Judge and the High Court found that as the first respondent was and continued to be a married woman while she lived with Lingayya and bore him children, she was not the lawfully wedded wife of Lingayya and the children born of the union were not his legitimate sons, nor were they Dasiputras and as such entitled to his properties. The suit was originally dismissed by the Subordinate Judge, but on appeal, the High Court gave the respondents leave to amend the plaint by making suitable averments for the award of maintenance, and remanded the suit for trial on the question of maintenance. At the subsequent trial on the amended plaint, the Subordinate Judge decreed the respondents ' claim for maintenance and consequential 124 reliefs and awarded to them maintenance during their lifetime out of the estate of Lingayya. The Subordinate Judge passed his decree on September 20, 1954. During the pendency of the appeal preferred by the appellants before the High Court, the Hindu Adoptions and Maintenance Act of 1956 (hereinafter referred to as the Act) came into force. The main controversies in the appeal before the High Court were (1) whether the provisions of the Act are retrospective; and (2) whether a married woman who left her husband and lived with another as his permanently kept mistress could be regarded as an A varuddha Stree. In view of the importance of these questions, the appeal was referred to a Full Bench of the High Court. On the first question the High Court held that the relevant provisions of the Act applied only to the estates of Hindus dying after the commencement of the Act, and that the right of the respondents to maintenance during their lifetime under the Hindu law in force at the time of the death of Lingayya was not affected by the Act. On the second question, the High Court held that the first respondent was an Avaruddha Stree of Lingayya, and was entitled to maintenance from his estate, though her husband was alive and the connection with Lingayya was adulterous. The High Court agreed with the Subordinate Judge with regard to the quantum of maintenance. On behalf of the appellants, it is contended that the respondents are not entitled to claim any maintenance from the estate of Lingayya under the Hindu law as it stood prior to the commencement of the Act, because (a) the first respondent is not a Dasi and the second, third and fourth respondents are not Dasiputras of Lingayya, and this point is concluded by the previous judgment of the High Court, which has now become final between the parties; (b) the husband of the first husband still alive, and the connection of the first respondent with Lingayya. was adulterous during the period of her intimacy with Lingayya and while she bore him children; (c) the first respondent being a Brahmin adulteress and Lingayya being a Sudra, the connection was Pratiloma and illegal. Now, under the Hindu law as it stood before the commencement of the Act, the claim of a Dasiputra or the son of a Dasi, that is, a Hindu concubine in the continuous and exclusive keeping of the father rested on the express texts of the Mitakshara, Ch. I, s.12 V. 1, 2 and 3. In the case of Sudras, the Dasiputra was entitled to a share of the inheritance, and this share was given to him not merely in lieu of maintenance but in recognition of his status as a son, see Gur Narain Das and another vs Gur Tahal Das and others(1). But the illegitimate son of a Sudra by his concubine was not entitled to a share of the inheritance if he were the offspring of an incestuous connection, see Datti Parisi Nayudu vs Datti Bangaru Nayudu(2), or if at the time of his conception, the connection was (1)[1952] S.C.R. 869, 875. (2) [1869] 4 Madras High Court Reports. 204, 125 adulterous, see Rahi and others vs Govind Valad Teja(1), Narayan Bharthi vs Laving Bharthi and others(2), Tukaram vs Dinnkar(3). Such an illegimate son could not claim the status of a member of his father 's family and could not get a share of the inheritance as a Dasiputra under the express text of the Mitakshara. For the reason, the previous judgment of the High Court rightly held that the second, third and fourth respondents were not Dasiputras of Lingayya, and could not claim the inheritance. But the point whether they are entitled to maintenance out of the estate of Lingayya is not concluded by the previous judgment. It is well recognised that independently of the express texts of the Mitakshara, Ch. I section 12, V. 3, the illegitimate son of a Sudra was entitled to maintenance out of his father 's estate, though his mother was not a Dasi in the strict sense and though he was the result of a casual or adulterous intercourse. It was not essential to his title to maintenance that he should have been born in the house of his father or of a concubine possessing the peculiar status therein. See: Muttusawmy Jagavera Yettappa Naicker vs Vencataswara Yettayya(4). The illegitimate son of a Sudra was entitled to maintenance out of his father 's estate, though at the time of his conception his mother was a married woman, her husband was alive and her connection with the putative father was adulterous, see Rahi vs Govind(2), Viraramuthi Udayan vs Singaravelu(5), Subramania Mudaly vs Valu(6). According to the Mitakshara school of law, the illegitimate son a Sudra was entitled to maintenance from his father 's estate during his lifetime. Under the Hindu law, as it stood prior to the commencement of the Act, the first, second and third respondents were, therefore, entitled to maintenance during their lifetime, out of the estate of Lingayya. The claim of an Avaruddha Stree or woman kept in concubinage for maintenance for her lifetime against the estate of her paramour rested on the express text of Bai Nagubai vs Bai Monghibai(1), where the man and the woman were Hindus and the paramour was governed by the law of the Mayuka, Lord Darling said: "providing the concubinage be permanent, until the death of the paramour, and sexual fidelity to him be preserved, the right to maintenance is established; although the concubine be not kept in the family house of the deceased. " The law of the Mitakshara is in agreement with the law of the Mayuka on this point. In the instant case, the first respondent (1)[1875] I.L.R.1 Bom.97 (2)[1878] I.L.R.2Bom.140. (3)[1931] 33 B.L.R. 280. (4)[1868] ,220. (5)[1877] I.L.R. 1 Mad.306 (6)[1911] I.L.R. 34 Mad.68. (7)[1926] I.L.R. 50 Bom.604,614,(P.C.). 126 being continuously and exclusively in the keeping of Lingayya until his death for about 10 years, the concubinage has been found to be permanent. She observed sexual fidelity to Lingayya during his lifetime, and after his death has continued to preserve her qualified chastity. In Akku Pralhad vs Ganesh Pralhad(1), a Full Bench of the Bombay High Court held that a married woman who left her husband and lived with her paramour as his permanently kept mistress could claim the status of an Avaruddha Stree by remaining faithful to her paramour, though the connection was adulterous, and was entitled to maintenance from the estate of the paramour so long as she preserved her sexual fidelity to him. This Full Bench decision overruled the decision in Anandilal Bhagchand vs Chandrabai(2)and followed the earlier decisions in Khemkore vs Umiashankar(3), and Bingareddi vs Lakshmawa(1). The decision in Akku Pralhad vs Ganesh Pralhad(1) has been the subject of strong criticism in Mayne 's Hindu law and Usage, 11th Edn., article 683, p. 816 edited by Sri N. Chandrasekhara Aiyar and in a learned article in (1946) 1 M.L.J., Notes of Indian cases, p. 1, but the Full Bench of the Andhra Pradesh High Court in the instant case found themselves in complete agreement with the Bombay decision. We are of the opinion that the Bombay decision lays down the correct law. Avaruddha Stree, as understood by Vijnaneswara, includes a Swairini or adulteress kept in concubinage. While dealing with the assets of a deceased Hindu not liable to partition, Mitakshara, Ch. I, section 4, V. 22, he says, "Swairini and others who are Avaruddha by the father, though even in number, should not be divided among the sons". Colebrooke 's translation of the passage is as follows: "But women (adulteresses and others) kept in concubinage by the father must not be shared by the sons, though equal in number". In his commentary on Yajnavalkya 's Verse 290 in Vyavahara Adhyaya, Ch. 24 on Stree Sangrahana, Vijnaneswara, citing Manu, explains Swairini as a woman who abandons her own husband and goes to another man of her own Varna out of love for him. Thus, a Swairini and other adulteress kept in concubinage could claim the status of an Avaruddha Stree. The connection was no doubt immoral, but concubinage itself is immoral; yet it was recognised by law for the purpose of rounding a claim for maintenance by her and her illegitimate sons. The paramour may be punishable for the offence of adultery, but the concubine is not punishable as abettor of the offence. A concubine was not disqualified from claiming maintenance by reason of the fact that she was a Brahmin. The claim of a concubine who was a respectable woman of the Brahmin caste and (1) I.L.R. (2)I.L.R (3) [1873] 10 Biombay High Court Reports. (4)[1901] I.L. R. 127 her illegitimate sons for maintenance was allowed in Hargovind Kuari vs Dharam Singh(1). No doubt, a Pratiloma connection is denounced by the Smriti writers and the Commentators, and before the Hindu Marriages Validity Act, 1949 (Act XXI of 1949) Pratiloma marriages between a Sudra male and a Brahmin female were declared invalid in Bai Kashi vs Jamnadas(2) and in Ramchandra Doddappa vs Hanamnaik Dodnaik(3), but even those cases recognise that a Brahmin concubine in the exclusive and continuous keeping of a Sudra until his death was entitled to claim maintenance. We express no opinion on the question whether a Pratiloma marriage was valid under the old Hindu law, but we are satisfied that the claim of the respondents for maintenance cannot be defeated on the ground that the first respondent was a Brahmin and her paramour was a Sudra. We are satisfied that the respondents were entitled to maintenance during their lives out of the estate of Lingayya under the Hindu law as it stored in 1948, when Lingayya died, in December 1949, when the suit was instituted and also in 1954, when the suit was decreed by the Subordinate Judge. The question is whether this right is taken away by the Hindu Adoptions and Maintenance Act, 19 5 6, which came into force during the pendency of the appeal to the High Court. The Act is intended to amend and codify the law relating to adoptions and maintenance among Hindus. Section 4 of the Act is as follows: "4. Save as otherwise expressly provided in this Act, (a) any text, rule or interpretation of Hindu law or any custom or usage as part of that law in force immediately before the commencement of this Act shall cease to have effect with respect to any matter for which provision is made in this Act; (b) any other law in force immediately before the commencement of this Act shall cease to apply to Hindus in so far as it is inconsistent with any of the provisions contained in this Act. " Section 21 defines "dependants" as meaning certain relatives of the deceased, and under sub cl (viii), includes "his or her minor illegitimate son, so long as he remains a minor". A concubine is not one of the persons within the definition of "dependants" given in section 21, and an illegitimate son is not a dependant when he ceases to be a minor. Section 22 reads thus: "22. (1) Subject to the provisions of sub section (2), the heirs of a deceased Hindu are bound to maintain the dependants of the deceased out of the estate inherited by them from the deceased. 128 (2) Where a dependant has not obtained, by testamentary or intestate succession, any share in the estate of a Hindu dying after the commencement of this Act, the dependant shall be entitled, subject to the provision of this Act, to maintenance from those who take the estate. (3) The liability of each of the persons who takes the estate shall be in proportion to the value of the share or part of the estate taken by him or her. (4) Notwithstanding anything contained in sub section (2) or sub section (3), no person who is himself or herself a dependant shall be liable to contribute to the mainten(2) or sub section (3), no person who is himself or herself the value of which is, or would, if the liability to contribute were enforced, become less than what would be awarded to him or her by way of maintenance under this Act. " Sub section (1) of section 22 imposes upon the heirs of a deceased Hindu the liability to maintain the dependants of the deceased defined in section 21 out of the estate inherited by them from the deceased. but this liability is subject to the provisions of sub section (2), under which only a dependant who has not obtained by testamentary or intestate succession, any share in the estate of a Hindu dying after the commencement of the Act is entitled, subject to the provisions of the Act, to maintenance. Specific provision is thus made in section 22 with regard to maintenance of the dependants defined in section 21 out of the estate of the deceased Hindu, and in view of section 4, the Hindu law in force immediately before the commencement of the Act ceases to have effect after the commencement of the Act with respect to matters for which provision is so made. In terms, sections 21 and 22 are prospective. Where the Act is intended to be retrospective, it expressly says so. Thus, section 18 provides for maintenance of a Hindu wife, whether married before or after the commencement of the Act, by her husband, section 19 provides for the maintenance of a Hindu wife, whether married before or after the commencement of the Act, by her father in law, after the death of her husband, and section 25 provides for alteration of the amount of maintenance whether fixed by a decree of Court or by agreement either before or after the commencement of the Act. Now, before the Act came into force, rights of maintenance out of the estate of a Hindu dying before the commencement of the Act were acquired, and the corresponding liability to pay the maintenance was incurred under the Hindu law in force at the time of his death. It is a well recognised rule that a statute should be interpreted, if possible, so as to respect vested rights. See Craies on Statute Law, 6th Edn. (1963), p. 397. We think that sections 21 and 22 read with section 4 do not destroy or affect any right of maintenance out of the estate 129 of a deceased Hindu vested on his death before the commencement of the Act under the Hindu law in force at the time of his death. On the death of Lingayya, the first respondent as his concubine and the second, third and fourth respondents as her illegitimate sons had a vested right of maintenance during their lives out of the estate of Lingayya. This right and the corresponding liability of the appellants to pay maintenance are not affected by sections 21 and 22 of the Act. The continuing claim of the respondents during their lifetime springs (out of the original right vested in them on the death of Lingayya and is not rounded on any right arising after the commencement of the Act. In section Kameswarammna vs SubramanYam(1), the plaintiff 's husband had died in the year 1916, and the plaintiff had entered into a compromise in 1924 fixing her maintenance at Rs. 240 per year and providing that the rate of maintenance shall not be increased or reduced. The question arose whether, in spite of this agreement, the plaintiff could claim increased maintenance in view of section 25 of the . It was held that, in spite of the aforesaid term of the compromise, she was entitled to claim increased maintenance under section 25. This conclusion follows from the plain words of section 25, under which the amount of maintenance, whether fixed by decree or agreement either before or after the commencement of the Act, may be altered subsequently. The decision was therefore, plainly right. No doubt, there are broad observations in that case to the effect that the right to maintenance is a recurring right and the liability to maintenance after the Act came into force is imposed by section 22, and there is no reason to exclude widows of persons who died before the Act from the operation of section 22. Those observations were not necessary for the purpose of that case, because the widow in that case was clearly entitled to. maintenance from the estate of her deceased husband dying in 1916 under the Hindu law, as it stood then,independently of sections 21 and 22 of the Act, and in spite of the compromise timing the maintenance before the commencement of the Act, the widow could in view of section 25 claim alteration of the amount of the maintenance. The decision cannot be regarded as an authority for the proposition that sections 21 and 22 of the Act affect rights already vested before the commencement of the Act. We therefore, hold that the claim of the respondents to main tenance for their lives is not affected by the Act. We see no reason to interfere with the concurrent finding of Courts below with regard to the quantum of maintenance. In the result, the appeal is dismissed with costs. Appeal dismissed.

IN-Abs

The first respondent S, a Brahmin woman married to R, during the lifetime of her husband became the permanently kept concubine of L, a sudra by caste. The other three respondents were the sons of S & L. After L 's death, in a suit filed by the respondent against L 's brother and their sons (the appellants here), the sub judge, by a decree dated September 20, 1954, awarded maintenance to the respondents during their life time out of the estate of L and this award was upheld on appeal by the High Court. During the pendency of the appeal before the High Court, the Hindu Adoptions and Maintenance Act of 1956 came into force and upon a contention being raised before it, the High Court held that the relevant provisions of the new Act did not have retrospective effect so as to adversely affect the rights of maintenance available to the respondents under the Hindu Law before the Act came into force. In appeal before the Supreme Court, it was contended on behalf the appellants (1), that the respondents were not entitled to claim any maintenance from the estate of L under the Hindu Law in force before the 1956 Act because (a) the first respondent was not a Dasi and the other three respondents were not Dasiputras of L; (b) the husband of the first respondent having been alive, her connection with L was adulterous and she could not therefore be entitled to maintenance as an Avaruddha Stree and (c) the first responden being a Brahmin adulteress and L being a Sudra. the connection was Pratiloma and illegal. (2) That in any event, by virtue of section 4 of the 1956 Act, the Hindu Law prior to that Act ceased. to have effect with respect to matters for which provision was made in the Act and that provision for maintenance, etc. had in fact been made in sections 21 and 22 of the Act. HELD ': (1) The respondents were entitled to maintenance during their lives out of the estate of L under the Hindu Law as it stood before the 1956 Act came into force. [127 D] (a) It was well recognised that independently of the express texts of the Mitakshara, whereby, in the case of Sudras the Dasiputra was entitled to a share of the inheritance, the illegitimate son of a Sudra was entitled to maintenance out of his father 's estate though his mother was not a Dasi in the strict sense and though he was the result of a casual or adulterous relationship. [125 C] Mitakshara Ch. I, section 12 V. 1, 2 and 3 referred to; Case law reviewed. (b) Under Mitakshara law. a married woman who left her husband and lived with her paramour as his permanently kept mistress could claim the status of an Avaruddha Stree by remaining faithful 123 to her paramour, even though the connection was adulterous, and she was entitled to maintenance from the estate of the paramour so long as she preserved sexual fidelity to him. [125 H, 126 B] Akku Prahlad vs Ganesh Prahlad I.L.R. affirmed Case law reviewed. (c) A Brahmin concubine in the exclusive and continuous keeping of a Sudra until his death was entitled to claim maintenance.[127 B] Case law referred to. Sections 21 and 22 are in terms prospective and these sections read with section 4 did not destroy or affect the right of maintenance of the respondents which vested in them on the death of L and before the commencement of the 1956 Act. A] section Kameshwaramma vs Subramanyam A.I.R. 1959 Andhra Pradesh 269; distinguished.

ivil Appeal No. 424 of 1963. Appeal by special leave from the judgment and order dated April 8, 1960 of the Allahabad High Court in Civil Misc. Writ No. 2650 of 1956. C.B. Agarwala and O.P. Rana, for the appellant. Yogeshwar Prasad, Harder Singh and M.V. Goswami, for the respondents. The Judgment of the Court was delivered by Raghubar Dayal, J. This appeal, by special leave, raises the question whether Zamindari Abolition Compensation Bonds (shortly termed Bonds) issued by the U.P. Government to intermediaries in payment of compensation payable on the basis of their rights under the Uttar Pradesh Zamindari Abolition and Land Reforms Act, 1950 (U.P. Act I of 1951), hereinafter referred to as the Act, have to be accepted by the appropriate authorities in payment of the agricultural income tax due from them. 131 The facts leading to the appeal, in brief, are that the respondent, an ex Zamindar, was assessed to agricultural income tax in the assessment year 1360 F corresponding to 1952 53, on the basis of the agricultural income accruing in the previous year 1359 F corresponding to 1951 52. He did not pay the assessed tax and was further assessed to a penalty. In the result, Rs. 868/ were to be paid by him for tax plus penalty. The respondent 's writ petition contending that he was not liable to pay tax was dismissed by the High Court. Thereafter, the agricultural income tax authorities took out proceedings for the realisation of the amount due from him. On July 24, 1956, the respondent presented an application to the Agricultural Income tax Assessing Officer, Allahabad, stating that he had no ready cash to pay the dues and that he was therefore depositing Bonds of the value of Rs. 850/ and Rs. 18/ in cash and praying that the Bonds be accepted in payment of tax dues. This application was rejected by an order stating that there was no rule for the acceptance of those bonds and that they be returned to the applicant. On August 1, 1956, the respondent made a similar application to the Collector complaining that the Assessing Officer had no valid reason to refuse to take the Bonds when the Bonds were negotiable instruments. This application was also rejected on a report of the Assessing Officer that the Bonds were not accepted in the settlement of agricultural income tax dues, that they were not negotiable and that there was no provision in the Act for their acceptance. Thereafter, the respondent presented a writ petition to the High Court of Allahabad praying for the issue of a writ of certiorari quashing the orders of the Assessing Officer and the Collector, Allahabad, for the issue of a writ of mandamus directing them to accept the Bonds in lieu of the tax dues and, in any case, to deduct the amount from the rehabilitation grant due to the petitioner and for the issue of a writ of prohibition directing the opposite parties from adopting coercive measures for the realisation of the tax due from the petitioner. The grounds mentioned in support of the prayers were that the Bonds were negotiable instruments and therefore refusal to accept them in payment of agricultural income tax was illegal, that they, having been issued by Government, could not be subsequently refused they being perfectly valid legal tender and that in view or r. 8A of the Rules made under the Act the amount due for tax should have been deducted from the interim compensation. The counter affidavit filed by the Naib Tehsildar Agriculture Income tax Officer, Allahabad, on behalf of the State, stated that the respondent was assessed to agricultural income tax in the assessment year commencing from July 1, 1952 on the income derived in the previous year commencing from July 1, 1951, that the tax 132 had to be paid in four instalments and in default of payment a penality of Rs. 43/ was imposed for each default in payment of the four instalments and that the Bonds could not be accepted towards the tax due under section 6(d) of the Act read with r. 48 of the Rules as the tax had fallen due in 1360 F, corresponding to July 1, 1952 to June 30, 1953. The High Court held that the orders of the Agricultural Income tax Assessing Officer and the Collector were wrong as the ground for refusing to accept the Bonds in payment of the tax on the ground that there was no rule or statutory provision for their acceptance was incorrect and appeared to have been given in complete ignorance of the provision of law. Reference was made to the provisions of section 6(d) of the Act and r. 8A. The High Court was of the opinion that these have been completely ignored by the two officers. It, therefore thought that the orders were liable to be quashed and that adequate relief would be available to the respondent if a direction was given to the Collector to decide his application dated August I, 1956, in accordance with law. The High Court therefore quashed the order of the Collector dated August 24, 1956 and directed him to decide the respondent 's application afresh in accordance with law as indicated above. The appellant thereafter obtained special leave from this Court and appealed against the order of the High Court dated April 8, 1960. The main contention for the appellant before us is that neither section 6(d) of the Act nor r. 8A provides that Bonds can be accepted in payment of agricultural income:tax and that therefore the order of the Collector dated August 24, 1956 was correct. For the respondent it is urged that r. 8A makes it mandatory for the Agricultural Income tax Officer to realise the agricultural income tax due from the compensation payable and that compensation continues to be payable till the Bonds are actually encashed, Section 6(d) of the Act, as originally enacted, did not provide, among the consequences of the vesting of the estate in the State, that arrears on account of agricultural income tax might be realised by deducting the amount from the compensation money payable to the intermediary under Chapter III. An amendment was made in this clause (d) by section 3 of U.P. Act XVI of 1953, with retrospective effect from July 1, 1952. and the relevant portion of the provision after amendment reads thus: "All arrears of revenue, . or an arrear on account of tax on agricultural income assessed under the U.P. Agricultural Income tax, Act, 1948 for any period prior to the date of vesting shall continue to be recoverable from such intermediary and may, without prejudice to any other mode of recovery be realised by deducting the amount from the compensation money payable to such intermediary under Chapter III;" 133 Rule 8A was added to the rules by Notification No. 3266/I A 1056 1954 dated August 17, 1954 and its relevant portions read: "8 A. Without prejudice to the right of the State Government to recover the dues mentioned below by such other means, as may be open to it under law: (1) all arrears of land revenue in respect of the estates which have vested in the State Government as a result of the notification under Section 4 of the Uttar Pradesh Zamindari Abolition and Land Reforms Act, 1950 (Act 1 of 1951), and of tax on agricultural income assessed under the U.P. Agricultural Income tax Act, 1948 (U.P. Act III of 1949) due from an intermediary for any period prior to the date of vesting shall be realised: (a) in the case of an intermediary who was assessed to land revenue of Rs. 10,000 or more from the amount of interim compensation due to him, and (b) in the case of an intermediary who was assessed to a land revenue of less than Rs. 10,000 per annum by deduction from the amount of compensation payable to It is clear from the above provisions that neither section 6(d) nor r. 8A provide that Bonds must or can be accepted in payment of tax on agricultural income. It has been held by this Court in Collector of Sultanpur v Raja Jagdish Prasad Sahi(1) that the provisions of section 6(d) of the Act would apply to arrears on account of agricultural income tax assessed in 1360F on the basis of agricultural income during the year 1359F and that the provisions of r. 8A are mandatory. It is not urged for the appellant that r. 8A is inconsistent with the provisions of section 6(d) which provides that arrears of tax may be realised from the compensation payable and therefore appears to give a discretion to. the authorities to realise the arrears of tax from the compensation payable. We do not agree with the contention for the respondent that the compensation payable to the intermediary continues to remain payable even after the compensation Bond 's had been delivered to him. Section 68 of the Act provides that the compensation under the Act shall be payable in cash or in bonds or partly in cash and partly in bonds as may be prescribed. It is clear therefore that the delivery of Bonds to the intermediary is in payment of the compensation. The claim for compensation is thus satisfied when the compensation has been paid in accordance with the provisions of section 68. This is also clear from the relevant rules for the payment of compensation. (1) 134 Rule 62 as it stood prior to November 29, 1956, provided that the compensation would be paid in negotiable bonds which would be described as Zamindari Abolition Compensation Bonds. Rule 63 as it then stood provided that the Bonds would be issued in specified denominations and would bear interest at the specified rate on the principal that had become payable calculated from the date of vesting. Rule 64 provided that interest together with the principal of a Bond would be paid in equated annual installments except for the last, as described in Appendix IV during the period of 40 years beginning from the date of vesting, provided that any Bond might be redeemed at an earlier date at the option of the Government. Rule 65 provided that the instalments due on a Bond from the date of its effacement would be payable on presentation from and after July 1st next after the delivery of the Bond to the intermediary. These rules show that the compensation does not remain payable alter the delivery of the Bonds and that the Bonds could not be cashed before the due date for their encashment. The fact that the Bonds are negotiable does not make them legal tender and does not make it obligatory on anyone, including Government, to accept them in payment of any dues. The only result of their being treated as negotiable instruments is that the owner of the Bends can transfer them to any person who is agreeable to purchase them. When the compensation payable to an intermediary has been paid in the form of cash or Bonds, that compensation ceases to be payable. Section 6(d) of the Act and r. 8A of the rules do not. as already stated, provide for the receipt of agricultural income tax in the form of Bonds. We are therefore of opinion that the Collector cannot be said be in error in not accepting the Bonds which had been delivered and which were not even cashable at the time, in payment of the arrears of agricultural income tax payable under the Agricultural Income tax Act. We accordingly allow the appeal, set aside the order of the High Court and restore that of the Collector dated August 24, 1956 The respondent will pay the costs of the appeal to the appellants Appeal allowed.

IN-Abs

The respondent who was assessed to agricultural income tax made an application to the Assessing Officer depositing compensation Bonds and prayed that the Bonds be accepted in payment of tax dues. This was rejected stating that there was no rule for acceptance of these bonds. Another attempt by the respondent was also turned down by the Collector. Thereafter the respondent presented a writ petition in the High Court for directing them to accept the Bonds in lieu off the tax dues. The High Court was of the opinion that the two officers completely ignored the provisions of section 6(d) of the Act and r. 8A, and directed the Collector to decide the respondent 's application in accordance with law. In appeal by special leave: HELD: (i) Neither section 6(d) nor r. 8A provide that the Bonds must or can be accepted in payment of tax on agriculture income. [133 E] Collector of Sultanpur vs Raja Jagdish Prasad Sahi. , referred to. (ii) When the compensation payable to an intermediary has been paid in the form of cash or Bonds. that compensation ceased to be payable. The fact that the Bonds are negotiable does not make them legal tender and does not make it obligatory on anyone including Government to accept them in payment of any dues. The only result of their being treated as negotiable instruments is that the owner of the Bonds can transfer them to any person who is agreeable to purchase them. [134 D F]

vil Appeal No. 281 of 1962. Appeal by special leave from the judgment and order dated January 14, 1959 of the Bombay High Court in Special Civil Application No. 2145 of 1958. S.G. Patwardhan and R.H. Dhebar, for the appellants. S.T. Desai, J.B. Dadachanji, O.C. Mathur and Ravinder Narain, for respondents No. 1, 2, 4, 6, 10 and 12. The Judgment of the Court was delivered by Ramaswami, J. Respondents nos. 1 to I 1 were the Jagirdars of Waghach State in former Sankeda Mewar in Reva Kantha Agency which now forms part of the State of Gujarat. They claimed that they were the full owners of all the land including forest areas in the said State and exercised full revenue power during their regime. There were 39 villages in Waghach State in all of which there were forests. Except for the lands which were cultivated, all the lands in the said villages were forest lands. Respondents nos. 1 to l1 further claimed that they had full proprietary rights over the forest lands and enjoyed the produce as full owners thereof. By the agreement of merger dated June 1, 1948 the State of Waghach was merged with the State of Bombay with effect from June 10, 1948. On August 19, 1953, respondents 1 to 11 entered into an agreement with respondent No. 12 whereby respondent No. 12 became entitled to cut and remove all species of trees from the forest lands in the 39 villages for a period of ten years. On August 1, 1954, the Bombay Merged Territories and Areas (Jagirs Abolition) Act, 1953 (Act XXXIX of 1954) came into force. This Act was passed with the object of abolishing jagirs in the merged territories and merged areas in the State of Bombay and providing for matters consequential and incidental thereto. The jagirs were classified, under the Act, into two categories, namely, (1) Proprietary jagirs and (2) Non proprietary jagirs. It is the undisputed position in the present case that the jagirs fell in the category of proprietary jagirs. Under section 5 of the Jagirs Abolition Act the Jagirdars became occupants in the lands including forest areas which were in their possession before coming into force of the Act. On July 6, 1956 the State Government issued a notification under section 34(A) of the Indian Forest Act. declaring all uncultivated lands in the said 39 villages to be forests for 179 the purposes of Ch. 5 of the Act. On March 19, 1953 the Divisional Forest Officer wrote a letter to the respondents wherein he stated that all the rights of the jagirdars had been abolished by the Jagirs Abolition Act and that the reserved species of trees standing on the lands belonged to the State Government. He, therefore, asked the respondents to refrain from cutting teak and Pancharao trees standing in the forest lands. On July 11, 1958. the Divisional Forest Officer wrote another letter to the respondents in which he stated that the reserved species of trees teak, blackwood and sandalwood vested in the State Government and, therefore, prohibited the respondents from cutting and removing the material from those trees. He also warned the respondents that if they cut and removed the material of such trees they will be liable to prosecution. On the same date he wrote another letter to the respondents and informed them that the material obtained by cutting teak and blackwood trees which was tying in the forest lands, had been advertised for sale. The respondents thereafter filed a Special Civil Application No. 2146 of 1958 in the High Court of Judicature at Bombay against the applicants for the grant of a writ in the nature of mandamus under article 226 of the Constitution directing them to cancel the orders contained in the fetters of the Divisional Forest Officer dated March 19, 1958 and July 11, 1958 and to restrain the appellants from enforcing the said orders. The High Court, by its judgment dated January 14, 1959, allowed the application of the respondents holding that after coming into force of the Jagirs Abolition Act the rights of the jagirdars in the forest lands and the trees were extinguished but at the same time jagirdars became occupants of the forest lands under section 5(1)(b) of the said Act and they accordingly became entitled to the trees standing on the forest lands. The High Court held that all the trees standing on the forest lands belonged to the respondents 1 to 11 and the same did not belong to the State Government and consequently the State Government was not entitled to sell the material obtained by cutting the trees. Accordingly the High Court issued an injunction restraining the appellants from preventing the respondents from cutting any species of trees standing in the forest lands in the villages in question and from removing and disposing of the produce thereof. The High Court further held that this order would be without prejudice to the right of the State Government, if they had any, to reserve any class of trees under section 40 of the Land Revenue Code or under any other law for the time being in force, or to impose such restrictions as it may be lawful for them to do, under the provisions of the Indian Forest Act and the Rules made thereunder. The present appeal is brought by special leave on behalf of the State of Gujarat and the other appellants against the order of the High Court of Judicature at Bombay in the Special Civil Application No. 2146 of 1958. 180 The question presented for determination in this case is whether the trees standing in the forest lands of the 39 villages in question belong to the jagirdars respondents 1 to 11 or to the State Government and whether the respondents have a right to cut and remove the trees including the reserved species of trees from the forest lands of these villages. Section 3 of the Bombay Merged Territories and Areas (Jagirs Abolition) Act, 1953 (hereinafter to be called the Jagirs Abolition Act) states: "3. Notwithstanding anything contained in any usage, grant, sand, order, agreement or any law for the time being in force, on and from the appointed date, all jagirs shall be deemed to have been abolished; (ii) save as expressly provided by or under the provisions of this Act, the right of a jagirdar to recover rent or assessment of land or to levy or recover any kind of tax, cess, fee, charge or any has, and the right of reversion lapse, if any, vested in a jagirdar, and all other rights of a jagirdar or of any person legally subsisting on the said date, in respect of a village as incidents of jagir shall be deemed to have been extinguished. " Under section 4 all jagir villages are made liable to the payment of land revenue in accordance with the provisions of the Code and the rules made thereunder, and the provisions of the Code and the rules relating to unalienated lands are made applicable to such villages. Section 5 (1) (b) provides as follows: "5. (i) In a proprietary jagir village, (b) in the case of land other than Gharkhed land. which is in the actual possession of the jagirdar or in the possession of person other than a permanent holder holding through or from the jagir dar, such jagirdar. shall be primarily liable to the State Government for the payment of land revenue due in respect of such land and shall be entitled to all the rights and shall be liable to all the obligations in respect of such land as an occupant under the Code or any other law for the time being in force: 181 Section 8 of the Jagirs Abolition Act states: "8. All public roads. lanes and paths. the bridges. ditches. dikes and fences. on or beside the same. the bed of the sea and of harbouts. creeks below high water mark. and of rivers. streams, nalas. lakes. wells and tanks and all canals and water courses. and all standing and flowing water. all unbuilt village site lands. all waste lands and all uncultivated lands (excluding lands used for building or other non agricultural purposes) which are situate within the limits of any jagir village, shall. except in so far as any rights of any person other than the jagirdar may be established in or over the same and except as may otherwise be provided by any law for the time being in force. vest in and shall be deemed to be. with all rights in or over the same or appertaining thereto. the property of the State Government and all rights held by a jagirdar in such property shall be deemed to have been extinguished and it shall be lawful for the Collector. subject to the general or special orders of the State Government. to dispose them of as he deems lit. subject always to the rights of way and other rights of the public or of individuals legaliy subsisting. Section 9 reads: "9. The rights to trees specially reserved under the . or any other law for the time being in force. except those the ownership of which has been transferred by the State Government under any contract. grant or law for the time being in force. shall vest in the State Government and nothing in this Act shall in any way affect the right of the State Government to apply the provisions of the . as in force in the pre Reorganisation State of Bombay. excluding the transferred territories to forests in a Jagir Village. " Section 10 provides as follows: "10. Nothing in this Act or any other law for the time being in force. shall be deemed to affect the rights of any jagirdar subsisting on the appointed date to mines or mineral products in a jagir village granted or recognised under any contract. grant or law for the time being in force or by custom or usage. " Section 11 provides for compensation to Jagirdars in the manner provided therein. Section 2(2) of the Jagirs Abolition Act states that any word or expression which is defined in the Code and not defined in the Act shall be deemed to have the meaning given to it in the Code. 182 Section 2(1)(ii) of the Jagirs Abolition Act defines the 'Code ' to mean 'the Bombay Land Revenue Code, 1879 '. Section 3(16) of the Bombay Land Revenue Code defines "Occupant" as a holder in actual possession of unalienated land, other than a tenant: provided that where the holder in actual possession is a tenant, the landlord or superior landlord, as the case may be, shall be deemed to be occupant. Section 3(17) defines "Occupancy" to mean a portion of land held by an occupant. Under section 3(19) of the Code "Occupation" means possession. Section 40 of the Bombay Land Revenue Code provides as follows: "40. In villages, or portions of villages, of which the original survey settlement has been completed before the passing of this Act, the right of the Government to all trees in unalienated land, except trees reserved by the Government or by any survey officer, whether by express order made at, or about the time of such settlement, or under any rule, or general order in force at the time of such settlement, or by notification made and published at, or at any time after, such settlement, shall be deemed to have been conceded to the occupant. But in the case of settlement completed before the passing of Bombay Act 1 of 1865 this provision shall not apply to teak, black wood or sandal wood trees. The right of the Government to such trees shall not be deemed to have been conceded, except by clear and express words to that effect. "In the ease of villages or portions of villages of which the original survey settlement shall be completed after the passing of this Act, the right of the Government to all trees in unalienated land shall be deemed to be conceded to the occupant of such land except in so far as any such rights may be reserved by the Government, or by any survey officer on behalf of the Government, either expressly at or about the time of such settlement, or generally by notification made and published at any time previous to the completion of the survey settlement of the district in which such village or portion of a village is situate. "When permission to occupy land has been, or shall hereafter be granted after the completion of the survey settlement of the village or portion of a village in which such land is situate, the said permission shall be deemed to include the concession of the right of the Government to all trees growing on that land which may not have been, or which shall not hereafter be, expressly reserved at the time of granting such permission, or which may not have been reserved, under any of the foregoing provisions of this section, at or about the time of the original survey settlement of the said village or portion of a village. "Explanation. In the second paragraph of this section, the expression "In the case of villages or portions of villages of which 183 the original survey settlement shall be completed after the passing of this Act" shall include cases where the work of the original survey settlement referred to therein was undertaken before the passing of this Act as well as cases where the work of an original survey settlement may be undertaken at any time after the passing of this Act. " Section 41 states: "41. The right to all trees specially reserved under the provision of the last preceding section, and to all trees. brushwood, jungle, or other natural product growing on land set apart for forest reserves under section 32 of Bombay Act I of 1865 or section 38 of this Act. and to all trees, brushwood, jungle or other natural product, wherever growing, except in so far as the same may be the property of individuals or of aggregates of individuals capable of holding property, vests in the State Government and such trees, brushwood, jungle or other natural product shall be preserved or disposed of in such manner as the State Government may from time to time direct. " Section 65 states: "65. An occupant of land assessed or held for the purpose of agriculture is entitled by himself, his servants, tenant, agents, or other legal representatives, to erect farm buildings, construct wells of tanks, or make any other improvements thereon for the better cultivation of the land, or its more convenient use for the purpose aforesaid. But, if any occupant wishes to use his holding or any part thereof for any other purpose the Collector 's permission shall in the first place be applied for by the occupant. The Collector, on receipt of such application, (a) shall send to the applicant a written acknowledgment of its receipt, and (b) may, after due inquiry, either grant or refuse permission applied for; When any such land is thus permitted to be used for purpose unconnected with agriculture it shall be lawful for Collector, subject to the general order of the State Government to require the payment of a fine in addition to any new assessment which may be leviable under the provisions of section 48. " 184 Section 68 states that the occupant 's rights are conditional, and is to the following effect: "68. An occupant is entitled to the use and occupation of his land for the period, if any, to which his tenure is limited, or if the period is unlimited, or a survey settlement has been extended to the land, in perpetuity conditionally on the payment of the amounts due on account of the land revenue for the same, according to the provisions of this Act, or of any rules made under this Act, or of any other law, for the time being in force, and on the fulfilment of any other terms or conditions lawfully annexed to his tenure; The High Court expressed the view that under section 3 of the Jagirs Abolition Act the rights of the jagirdars in the forest lands and the trees which grew upon them were extinguished. The High Court further held that with the coming into force of the Jagirs Abolition Act jagirdars became the occupants in the forest lands under section 5(1)(b) of that Act and the respondents 1 to 11 become. therefore, entitled to the trees standing on the forest lands. In our opinion, the view expressed by the High Court is erroneous and must be reversed. It is manifest that under section 3 of the Jagirs Abolition Act all jagirs were abolished and all the rights of the jagirdars were extinguished, save those rights which are expressly provided by other provisions of the Act itself. It is also manifest that under section 5(1)(b) of the Act the only rights conferred on the jagirdars are the rights of occupancy of the forest lands. In our opinion, the rights of the occupants under the Bombay Land Revenue Code do not include the right to cut and remove the trees from the forest lands. The reason is that the 36 villages in dispute have not been surveyed or settled and until there is completion of the survey and settlement there is no question of concession on the part of the State Government of the right to the trees in favour of the occupants. Section 40 of the Bombay Land Revenue Code provides that in the case of villages of which the original survey settlement has been completed before the passing of the Act, the right of the Government to all trees in unalienated land. except trees reserved by the Government or by any survey officer, whether by express order made at, or about the time of such settlement, or under any rule, or general order in force at the time of such settlement, or by notification made and published at, or at any time after, such settlement, shall be deemed to have been conceded to the occupant. The second para of section 40 deals with concession of Government rights to trees in case of settlements completed after the passing of the Act. The second para states that in the case of villages or portions of villages of which the original survey settlement shall be completed after the passing of the Act, the right of the Government to all trees in unalienated land shall 185 be deemed to be conceded to the occupant of such land except in so far as any such rights may be reserved by the Government, or by any survey officer on behalf of the Government, either expressly at or about the time of such settlement, or generally by notification made and published at any time previous to the completion of the survey settlement. The third paragraph of section 40 relates to the concession of Government rights to trees in case of land taken up after completion of settlement. The section states that when permission to occupy land has been granted after the completion of the survey settlement of the village, the said permission shall be deemed to include the concession of the right of the Government to all trees growing 'on that land which may not have been, or which shall not hereafter be, expressly reserved at the time of granting such permission. In 'the present case, the 36 villages in question have admittedly not been surveyed and settled and the necessary conclusion to be drawn is that the rights of the State Government to trees cannot be deemed to be conceded to the occupants of the land. The assumption is implicit in section 40 of the Bombay Land Revenue Code that all the trees standing and growing on the lands with the occupants belong to the State Government and not to the occupants and until there is a survey and settlement of the village the question of concession on the part of the State Government of rights to the trees does not arise. In other words, until there is survey and settlement of the land there is no implication in favour of respondents 1 to 11 that they had concession of the rights of the Government to the trees standing on the forest lands. On behalf of the respondents Mr. S.T. Desai referred to section 9 of the Jagirs Abolition Act and stressed the argument that the right of trees mentioned in that section alone vested in the State Government and there was no other reservation in the Act or any other law, in favour of the State Government. It was contended that by implication it must be held that the jagirdars had rights to the trees in the forest areas apart from those mentioned in section 9 of the Act. We do not accept this argument as correct. Section 3 of the Act provides for abolition of jagirs and under that section all jagirs shall be deemed to have been abolished on and from the appointed date i.e., August 1, 1954 and all rights of a Jagirdar, in respect of a jagir village as incidents of jagir, shall be deemed to have been extinguished by virtue of the section unless there is express provision in the Act saving such right. In our opinion, section 9 of the jagirs Abolition Act is not an express provision saving the right of the jagirdars with regard to the trees and the argument of Mr. Desai must be rejected on this point. Our view is supported by the language of section 10 of the Jagirs Abolition Act which expressly saves the right of the jagirdar to mines or mineral products in a jagir village subsisting on the appointed day. There is no provision in the Jagirs Abolition Act corresponding to section 10 with regard to the saving of the right to the trees in favour of the jagirdars. We are accordingly of the opinion that after coming into 186 force of the Jagirs Abolition Act respondents 1 to 11 became occupants in respect of the forest lands in the 36 villages and the only rights which they have are those of occupants under the provisions of the Bombay Land Revenue Code and such rights do not include the right to cut and remove the trees from the forest lands of the villages in question. In our opinion, the High Court was in error in holding that the respondents were entitled to cut and remove all species of trees standing in the forest lands of the 36 villages in question. We accordingly allow this appeal, set aside the order of the High Court dated January 14, 1959 in Special Civil Application No. 2146 of 1958 and order that the Special Civil Application should be dismissed. The appellants are entitled to costs both in this Court and in the High Court. Appeal allowed.

IN-Abs

The first eleven respondents were Jagirdars in a former state which was merged with the State of Bombay in June 1948. In August 1953, these respondents entered into an agreement with respondent No. 12, whereby, the latter could cut and remove all species of trees from forest lands in 39 villages over which the first eleven respondents claimed full proprietary rights. On August, 1, 1954, the Bombay Merged Territories and Areas (Jagirs Abolition) Act, 1953 came into force whereby all Jagirs in the merged territories in Bombay State were abolished. Under section 5 of the Act, the Jagirdars became 'occupants ' in the lands including forest areas which were then in their possession. On July 6, 1956 the State Government issued a notification under section 34(A) of the Indian Forest Act, declaring all uncultivated lands in the 39 villages to be forests for the purposes of Ch. 5 of the Act. Thereafter, in March and July 1958, the Divisional Forest Officer wrote to the respondents stating, inter alia, that all the rights of the Jagirdars having been abolished, the reserved species of trees on the lands belonged to the State Government and prohibiting them from cutting and removing the trees. The respondents thereupon filed a writ petition, seeking a direction to the appellants to cancel, and to restrain from enforcing the orders contained in the letters of the Divisional Forest Officer. The High Court allowed the petition, mainly on the ground that as the Jagirdars became occupants within the meaning of the Bombay Land Revenue Code of the forest lands under section 5(1)(b) of the Abolition Act, they, and not the State Government, were entitled to the trees standing on them. In the appeal to the Supreme Court it was further contended on behalf of the respondents that as section 9 of the Act vested some of the rights to trees in forest areas in the State Government, by implication, all the remaining rights belonged to the Jagirdars. HELD: Under section 5(1)(b) of the Abolition Act, the only rights conferred on the Jagirdars were the occupancy rights of the Forest lands; under section 40 of the Bombay Revenue Code the rights of occupants did not include the right to cut and remove trees from the forest lands except in the case of villages as which the original survey and settlement has been completed, whereupon the Government 's rights to the trees, unless expressly or otherwise reserved, are deemed to have been conceded to the occupant. In the present case the villages in question had admittedly not been surveyed and 178 settled and therefore the rights of the State Government to the trees could not be deemed to have. been conceded to the respondents as occupants. [184 E 185 E] By section 3 of the Abolition Act all Jagirs and all the rights of a Jagirdar were extinguished unless there was any express provision in the Act saving any right. It could not be said that because section 9 of the Act reserved certain rights to trees of the State Government and by implication the Jagirdars had all the other rights, there was an express provision saving the rights of the Jagirdars within the meaning of section 3. [185 F H]

Appeal No. 216 of 1952. Appeal from the judgment and decree dated September 15, 1959 of the Bombay High Court in First Appeal No. 600 of 1955 from Original Decree. A.V. Viswanatha Sastri, Rameshwar Nath, S.N. Andley and P.k. Vohra, for the appellant. S.N. Pershad, M.H. Chhatrapati, 1. B. Dadachanji, O.C. Mathur and Ravinder Narain, for respondents Nos. 1 and 2. K.L. Hathi and R.H. Dhebar, for respondent No. 3. The Judgment of the Court was delivered by Raghubar Dayal, J. There is a temple known as Shri Chandraprabhu Khandelwal Jain Temple at Dhulia. Gulabchand Hiralal, father of appellant Hukumchand Gulabchand Jain, a leading member of the Khandelwal Jain Community at Dhulia, looked after the temple for over 40 years till his death sometime in 1950.The appellant looked after it after his father 's death. Two members of the community interested in the temple, held to be a public temple, instituted the suit against the appellant and the Charity Commissioner, Bombay, praying for the removal of the appellant from possession of the trust properties, for the rendering of true and faithful accounts of all the assets and income of the trust property and for the framing of the scheme for the administration of the trust. It was alleged in the plaint that the appellant 's father was maintaining all accounts of income and expenditure concerning the temple and that the funds of the temple were many times advanced at interest and that the temple had come to hold large properties, movable and immovable. It was further alleged that the temple had a large income from offerings, house rent etc., but the appellant and his deceased father had not been maintaining the accounts properly and that the. funds of the temple were being advanced at interest, though no such income was shown as received recently by the appellant. The appellant, in his written statement, denied that the amount was so advanced at interest as alleged by the plaintiffs and stated that his father had been keeping a ledger in the name of the temple in the accounts in which its income and expenditure had been duly entered since over 40 years and that the appellant himself had kept separate account books for the temple since October 30, 1951. He denied that any income recently received had not been shown in the accounts. The trial Court held that the appellant had committed minor irregularities in the maintenance of the accounts, that he was liable to render accounts and that the Commissioner was to ascertain the 93 amount due from the appellant on taking the accounts. It definitely held it not established that income, if any, derived by way of interest on loans advanced out of the funds of the temple had not been credited to the account of the temple and that no instance of fraudulent or dishonest misappropriation of temple funds on the part of defendant No. 1 or his father had been established. It found that the meeting of the community had passed a resolution on August 22, 1958, by an overwhelming majority, sanctioning the accounts submitted by the appellant and that only two persons who opposed against the resolution were the two plaintiffs of the suit. The Commissioner found that on the date of the institution of the suit, i.e. on February 17, 1954, Rs. 10.088 10 3 were due for principal and Rs. 16,853 6 0 were due for interest, from the appellant. The plaintiffs admitted the report to be correct but the appellant contended that under the rule of damdupat interest exceeding the amount of principal could not be allowed. The appellants contention was accepted and the trial Court passed a decree on April 23, 1955, for Rs. 20,177 4 6 against the appellant, with future interest at 6 per cent per annum. We are not now concerned with the other items of the decree and therefore we make no reference to them. The appellant deposited the amount due under the decree on July 18, 1955. The plaintiffs appealed and claimed a larger amount on various grounds, including the one that the principle of damdupat should not have been applied and that interest on the balance of the trust fund should have been calculated and compound interest allowed in place of simple interest on the amount of the trust fund in the hands of the defendant or his father. The appellant filed a cross objection against the allowing of interest on the balance of the trust funds with his father and himself. The High Court agreed with the plaintiffs that the principle of damdupat could not be applied in the circumstances of the case and that compound interest should have been charged against the appellant. It therefore set aside the decree passed by the trial Court in so far as it determined the amount due to the temple and referred the case back to the trial Court for reassessment of the amount due to the temple having due regard to the observations made in its judgment. On an application by the appellant, certificate under article 133(1) of the Constitution was granted. The appellant has then filed this appeal and questioned the correctness of the order of the High Court holding him liable to pay compound interest and holding that the principle of damdupat was not applicable in this case. The High Court said in its judgment that it was the contention of the plaintiffs that the appellant 's father and the appellant 3(D)2SCI 8 94 used the funds of the temple in their business and that they were therefore liable to account on that footing. There was no such allegation in the plaint or in the memorandum of appeal to the High Court. The High Court referred to the khulasa submitted to the Commissioner by the plaintiffs and stated that it was specifically alleged therein that the amount was being used by the defendant and his father in business. Support for such an allegation was found in the statement Exhibit 24 of the appellant 's father in 1931. Reference was also made to the fact that the appellant had nowhere denied the fact of the moneys of the temple being used for the purpose of the business and to the non production of certain books of account by the appellant. His statement that they were not available was not accepted. The High Court recorded the finding in this form (at p. 43 of the appeal record): "Under these circumstances it would not be an unreasonable inference to draw that the amounts belonging to the temple were being utilised by Defendant No. 1 (the appellant) and before him by his father in their business." Having come to this conclusion and to the view that the position of the appellant 's father and the appellant vis a vis the temple funds was that of a trustee, the High Court considered whether the plaintiffs could claim interest on equitable grounds and held that they could claim compound interest with yearly rests, as the money had been used in the business or had been so mixed up with their own funds that it was impossible to say that they had not so used it. The High Court did not apply the rule of damdupat as the liability of the appellant was not rounded on loans or on any contract. It is contended for the appellant that there was neither an allegation nor evidence to the effect that the trust funds had been used in his business by the appellant 's father or the appellant and that therefore the appellant was not liable to pay compound interest on the trust funds in his hands or in the hands of his father. It was further urged that if interest was payable by the appellant 's father or the appellant on the balance of trust funds, it should be simple interest and the amount of interest could not be more than the amount of principal due on the date of the institution of the suit on the principle of damdupat. It has not been established in this case that the trust funds with the appellant or his father were used in their trade or business. We have already referred to the finding Of the High Court in this respect. It is a very halting finding. The High Court has not definitely held it proved that the funds were used in the business. We say so, as the High Court has said (at p. 46 of the appeal record): "Since we are of the view that the defendant No. 1 and his father have used the monies of the temple in their business or have so mixed it up with their own funds that it is impossible to say that they have not so used it . " 95 This is not a clear cut definite finding that the funds had been used in business or trade. The earlier finding noted at p. 43 of the appeal record and quoted by us earlier, loses its force in view of what has been said later. There is no evidence about such use of the money. There was no such allegation in the plaint. It was said in the khulasa dated December 22, 4954 and included in the Additional Report of the Commissioner of even date: "Because the amount that was received by the defendant in respect of the temple could be utilised by the defendant in his business he used to pay interest thereon at the rate of annas 8. " This too, is not, as stated by the High Court, a specific allegation that the amount was being used in business. The plaint did not even say that the amount had been always advanced on loan. What it said in para l is that the funds of the temple were many times advanced at interest and that no income from interest recently received had been shown in the accounts. No evidence has been led about the regular advance of the trust funds as loans. On the other hand, the accounts show only a few entries about the receipt of interest on the trust funds. The statement, Exhibit 24, made by the appellant 's father on October 26, 1931, in Regular Suit No. 377 of 1931, was in a suit instituted by the appellant 's father for the recovery of money advanced on a mortgage at compound rate of interest. Gulabchand, father of the appellant, stated in examination in chief, that the funds lent were of the temple, the transactions of the temple were in his name and that interest at compound rate had been agreed upon. In cross examination he stated that he had with him funds of the temple and that he paid for them compound interest at 8 annas. This statement does not necessarily mean that the appellant 's father had been crediting the temple accounts with compound interest, at the rate of 8 annas, on the temple funds in his hands. Gulabchand made another statement on January 12, 1950. It is exhibit 23. This statement was made in proceedings on Miscellaneous Application No. 110 of 1949. He stated: "Suit No. 377 of 1931 had been filed. In the same my deposition has been recorded. I have made a statement that the amount was of the temple. But I gave a statement to that effect as that amount has been set apart for the temple. I have given a statement that after the mortgage deed was executed and before the suit was filed, I set apart this amount for the temple and that the transaction of the temple was in my name. That statement is correct, 96 If it is the amount of the Mandir, I credit it to the Khata of the Mandir. I do not pay interest for the amount of the Mandir. As there was interest in the mortgage deed, I have taken interest at eight annas from Mangilal. I have made a statement that I have with me the amount of the temple and that I pay interest for it at eight annas. " These statements, taken together, lead to the inference that Gulabchand was not crediting interest on the temple funds in the accounts except when he received interest on the amounts lent and that this statement made in 1931 was in connection with the amount lent on a mortgage deed. He charged compound interest from the mortgagor and therefore credited that interest in the accounts. It is significant to note that the four entries about interest were for the years 1927 to 1931 when Suit No. 377 of 1931 was filed. The fact that no interest appears to have been credited after 1931 bears out the inference we derive from the statements of Gulabchand. There is another matter which throws light on this question and tends to support our conclusion. The report submitted ' by the Commissioner on November 29, 1954 shows that the balance at the beginning of samvat year 1996, corresponding to 1939 40, was Rs. 7,649 14 3. The amount credited during the year was Rs. 573 12 0 and the amount debited was Rs. 769 3 6. If the opening balance be ignored, there would be a deficit of Rs. 195 7 0 and the accounts for the samvat year 1997 opened with a debit balance of Rs. 195 7 0. This shows that the opening balance of samvat year 1996, i.e. Rs. 7,649 14 3, had been taken out of the accounts. It appears that this amount was taken over to some Bhandara account and was credited again in the temple accounts for samvat year 2009, i.e., 1952 53, after being brought out from Bhandara account. Such dealing with this amount does not appear to be consistent with its being used in business. In view of the shaky finding of the High Court about the funds being used in business by the appellant 's father or the appellant and in view of what we have said above, we hold that it has not been proved that these funds had been used in business and that therefore the appellant is not liable to pay compound interest on the balance of the trust funds with his father or himself. We may now consider whether the appellant is liable to pay simple interest on the balance of trust money with his father or himself. Two questions arise for consideration and they are whether the trustee is liable to pay simple interest on the trust capital in his hands and if he is so liable what rate of interest be charged from him in the present case. Interest can be allowed on equitable grounds only as no statutes in force during the period in suit and dealing with public charitable trusts made the trustee liable to pay 97 interest. The Indian Trusts Act does not apply to public or private religious or charitable endowments and therefore the provisions of section 23 thereof cannot be used for charging interest from the appellant trustee. The Charitable and Religious Trusts Act has no provision which provides for charging the trustee with interest. Reference may therefore be made in this connection to what is stated in para 1691 of Halsbury 's Laws of England, III Edition. 38: "Subject to this, or unless a trustee is expressly otherwise authorised or required under the terms of his trust. he must duly and promptly invest all capital trust money coming to his hands, and all income which cannot be immediately applied for the purposes of the trust; and he is liable for any loss which may result from its being improperly invested or being left uninvested for an unreasonable length of time, and for interest during the period of its being so left. " This is so because the trustee has to conduct the affairs of the trust in the same manner as an ordinary prudent man of business would conduct his own affairs. In para 1812 are set out the circumstances in which a trustee, besides being required to account for the principal trust money, can also be charged with interest on it and one of the circumstances is when the Court considers that the trustee ought to have received interest. Such could be the case when the trustee, in breach of his duty, retains the trust money in his own hands uninvested or mixes it with his own money or property. It appears from the Commissioner 's report that the trustee in this case had over Rs. 10,000 in his hands from samvat year 1988 commencing from November 10, 1931, upto February 17, 1954, when this suit was instituted. The trustee kept such a large sum uninvested for a long time extending over 22 years. The accounts show that reasonably he could not have expected to require this amount for any current purpose of the trust during these years. He should have invested the amount. His failure to do so makes him liable to pay interest. It appears from what is said in para 1814 of Halsbury 's Volume 38 that where a trustee simply fails to invest trust money which he ought to have invested or there are no other special circumstances in the case, he is in general charged simple interest at the rate of 4 per cent per annum. We consider it reasonable to charge interest at 4 per cent per annum in this case. We have now therefore to decide what had been the amount of trust funds in the hands of the appellant 's father at different times and what would be the amount due from the appellant on the date of the institution of the suit, both for principal amount of trust money and for accumulated interest with him. We do not 98 consider it desirable that the case be sent back to the trial Court for these calculations, in the light of our finding, as this litigation has been pending for over 10 years and as the accounting is to be done for a period commencing from November 10, 1931, from which date the accounts are available to the Court. The Additional Report of the Commissioner, dated December 22, 1954, shows that the amount of principal on February 17, 1954, the date on which the suit was filed, was Rs. 10,088 10 3 and that the accumulated amount of interest due on that date was Rs. 16,853 6 0 at the rate of 6 per cent per annum. The plaintiffs respondents admitted this report to be correct. The defendant also admitted the correctness of the principal amount found due by the Commissioner. He, in fact, did not even dispute that the amount of interest at 6 per cent per annum would be what has been found by the Commissioner. What he contended was that he was not liable to pay interest in excess of the amount of principal found due, in view of the rule of damdupat. In these circumstances, these figures can be accepted as correct. When the Commissioner had submitted his first report on November 29, 1954. both the parties objected to the accounts prepared by him. The defendant had objected to the Commissioner 's including a sum of Rs. 7,648 14 3 twice over in his accounts. This sum represents the balance at the close of samvat year 1995 corresponding to 1938 39. It was not taken over in the accounts for the samvat year 1996. The Commissioner, in preparing the account, took this amount into consideration without making up the accounts for the samvat year 1996. He found and noted in his accounts that the amount credited to the temple during the samvat year 2009 corresponding to 1952 53 was Rs. 9,978 5 3 and that this amount included a sum of Rs. 7,648 14 3 which had been brought from the Bhandara account. He however did not consider this sum to be the sum which had been not included in the accounts of the temple from the samvat year 1996. The learned District Judge agreed with the objection of the defendant and held that this amount had been included twice in the Commissioner 's accounts. The respondents did not dispute the correctness of this finding in the High Court and therefore we do not consider it a sound contention that this sum of Rs. 7,648 14 3 be further added to the balance found due by the Commissioner. The appellant stated that the statement of the balance in hand submitted by him to the meeting on August 22, 1953 was arrived at by adding an amount of Rs. 7,000 to the balance shown in the accounts as he had found a sum of Rs. 7,000 in a bag marked 'Dharmadya ' inside a safe. The High Court has not considered the statement of the defendant about so finding a sum of Rs. 7,000 reliable. It was not urged before the High Court, as has been urged 99 before us, that this sum of Rs. 7,000 be included in the amount of trust money in the hands of the appellant on the date of the institution of the suit. The High Court merely dealt with the complaint for the respondents that the Commissioner had not taken this sum into account for the purpose of computation of interest on funds in possession of the defendant. The High Court considered this complaint to be justified. We therefore do not accept the respondent 's contention that Rs. 7,000 be added to the balance found due by the Commissioner and hold that the High Court was in error in ordering interest to be calculated on this amount as well. According to the report of the Commissioner, the amount of interest on the principal amount of trust money in the hands of the trustee worked out to Rs. 16,853 6 0 up to February 17, 1954 at 6 per cent annum. We have held that the interest be calculated at 4 per cent per annum. If follows that at this rate the amount of interest found due by the Commissioner would be reduced to Rs. 1 I,235 9 4. The principal due on that date was Rs. 10,088 10 3. The question now arises whether the amount of interest be limited 10 the amount of principal, on the basis of the principle of Damdupat, or not. The High Court has held that the principle of Damdupat will not apply in this case. We agree with that opinion. The rule of Damdupat applies to cases where a loan is advanced. This is clear from Colebrooke 's Digest on Hindu Law. Part I, Vol. I, of the Digest deals with Contracts. Book I of this Part deals with Loans and Payment. Section I of Chapter I of Book I deals with Loans in General and describes what may or may not be loaned by whom, to whom and in what form, with the rules for delivery and receipt. These matters are comprised under the title 'loans delivered (rinadana) ', which means the complete delivery of a loan or debt by whom, where and to whom made. Chapter II deals with Interest and states at the commencement of Section I: "Such interest, as may be taken without a breach of duty on the part of the creditor, is a rule (dherma) for delivery by the creditor. Or . for it is the nature of a loan, that it should produce to the lender the principal sum advanced, and interest in addition thereto. " The various Articles in this Section use the expressions 'creditor '. 'render '. 'Joan ', 'principal ', 'lent ', 'borrowers ' and thus make it amply clear that it deals with interest on the amounts advanced by a creditor to a debtor. Section I deals with the rates of interest to be charged. Section 1I deals with Special Forms of Interest. Paragraph 53 thereof states: "Interest on money, received at once, not year by year, month by month, or day by day, as it ought, must never be more than enough to double the debt, that is, more than the amount of the principal paid at the same time. " 100 This is what is known by the rule of Damdupat and has been rightly construed, as long ago as 1863, by the Bombay High Court in Dhondu Jagannath vs Narayan Ramchandra(1). Section III deals with Interest Specially Authorized and Specially Prohibited. Article II of this Section deals with Limits of Interest. Paragraph 59 thereof states: "The principal can only be doubled by length of time, after which interest ceases. " The limit of interest is different under other paragraphs for loans advanced in different circumstances. Paragraph 61 repeats what has been stated in paragraph 53 of Section II and adds a special rule to the effect: "On grain, on fruit, on wool or hair, on beasts of burden, lent to be paid in the same kind of equal value, it must not be more than enough to make the debt quintuple. " It is therefore clear, as stated earlier, that the rule of Damdupat applies in respect of interest due on amounts lent by a creditor to the borrower, the debtor. The question then is whether the funds in the hands of a trustee can be said to be such loans nationally advanced by the trustee to himself as an individual. If their character can be deemed to be such, there may be a case for applying the rule of Damdupat to the interest on such funds and that if it is not so, this rule of Damdupat will not apply to the interest ordered to be paid on such funds. It has been urged for the appellant that the trustee is a debtor with respect to the trust money in his hands. Reference has been made to Halsbury 's Laws of England, III Edition, Vol. 38, 1044 where it is stated at para 1801: "A breach of trust is, in equity, regarded as giving rise to a simple contract debt. " In the foot note is stated: "Strictly speaking, the relation of debtor and creditor does not subsist between a trustee and his cestui que trust (per Lindley, L.J. in Lewin on 'Trusts ', 15th Edition, states at p. 745: "The debt constituted by a breach of trust is, even after it has been established by a decree, an equitable debt only, and until the Bankruptcy Act, 1869, would not have supported a petition in bankruptcy. " It was said by the Earl of Halsbury, L.C., in Sharp vs Jackson(2): "It has been suggested that there was a proposition which could be maintained, as to which I confess I entertain grave doubts whether any decision goes to that extent, namely, that the relation between a cestui que trust 101 and a trustee who has misappropriated the trust fund is not that of debtor and creditor. That it may be something more than that is true, but that it is that of debtor and creditor. 1 can entertain no doubt. As that question has been mooted and brought before your Lordships ' House as one question for decision here, I certainly have no hesitation in saying that in my opinion no such proposition can properly be maintained, and that although there are other and peculiar elements in the relation between a cestui que trust and a trustee, undoubtedly the relation of debtor and creditor can and does exist." No other Lord expressed an opinion on this point. The correctness of this expression of the Earl of Halsbury has been doubted in Lake, in re. Dyer, Ex Parte( ') by Rigby L.J., who remarked at the hearing: "How is a trustee a debtor '? Can he be sued at common law '? I do not see how he can be a 'debtor ', for the money he is fraudulently dealing with is, at law, his own money. No doubt he can be called upon to replace the money, but that must be by a suit in equity, not at law. Notwithstanding the high authority of the statement that has been referred to, I confess I do not understand it. " We are of opinion that though a trustee., who has custody of trust funds, has a pecuniary liability to make good those funds if he has used them and may, on the basis of such a liability, be said to be a debtor of the trust, yet he, as an individual, is not a borrower of the funds from the trust and cannot be said to have taken a loan from himself as a trustee in charge of the trust funds. His liability to pay interest, when ordered by the Court on equitable grounds, does not come within the provisions dealing with interest in Hindu Law, as mentioned in Colebrooke 's Digest. There is no fixed rate of interest which a trustee be liable to pay as there is no contract between him as a trustee and as an individual to pay interest. He simply uses the money in his custody. It is only when the Court determines his liability to pay interest that interest is to be calculated on the principal amount due from him. It is not the case of a creditor letting interest accumulate and thus make the debtor pay interest much more than what he had borrowed as principal. The principle of Damdupat was evolved both as an inducement to the debtor to pay the entire principal and interest thereon at one and the same time in order to save interest in excess of the principal and as a warning to the creditor to take effective steps for realising the debt from the borrower within reasonable time so that there be not such accumulation of interest as would be in excess of the principal amount due, as in that case he would have to forego the excess amount. There may be justification for the (1) ,715. 102 principle of Damdupat applying in the case of an ordinary creditor and a debtor, but there seems no justification for extending that principle to the case of a trustee who has to pay interest on the funds in his hand with respect to which on certain grounds he is held liable to pay interest. We therefore hold that the rule of Damdupat will not apply with respect to the interest adjudged payable by a trustee on his committing breach of trust with respect to the trust funds in his hands . The result then is that the appellant is liable to pay Rs. 10,088 10 3 for principal and Rs. 11,235 9 4 as interest, upto the date of the institution of the suit, i.e. upto February 17, 1954. We therefore allow the appeal, set aside the decree of the High Court and modify the decree of the trial Court accordingly. The result will be that the suit temple will be entitled to get from defendant No. 1 a sum of Rs. 21,324 3 7 upto the date of the suit, together with future interest at 4 per cent per annum on Rs. 10,088 10 3 from the date of the suit till the date of payment. The appellant will bear his costs throughout. The costs of the respondents will come out of the estate. Appeal allowed.

IN-Abs

The respondents who were interested in a public temple filed a suit against the appellant who was looking after the affairs of the temple. They prayed for his removal from possession of the trust properties, for the rendering by him of true and faithful accounts and for the framing of a scheme. The trial court held that the appellant was liable to render accounts. Having ascertained the amount of principal, it determined the interest payable at an amount equal to that of the principal on the basis of the rule of damdupat. The respondents appealed to the High Court and urged that the rule of damdupat should not have been applied and that compound interest should have been charged against the appellant. The High Court held that the appellant had used the trust moneys in his business and therefore agreed with the contention of the respondents and remanded the case to the trial court for ascertaining the amount due to the temple. In the appeal to the Supreme Court, it was contended that, (i) there were no grounds for making the appellant liable to pay compound interest, and (ii) even if there was liability to pay any interest, it was only for paying simple interest and that the rule of damdupat should be applied. HELD: (i) It had not been proved that the trust funds had been used in the appellant 's business and therefore the appellant was not liable to pay compound interest on the balance of the trust funds with him. [96 G] (ii) In the absence of statutes during the period of suit dealing with public charitable trusts making a trustee liable to pay interest, interest could be charged only on equitable grounds. One such circumstance is, when the Court considers that the trustee ought to have received interest, as when he retains trust money in his hands uninvested. Since the accounts, in the instant case, show that the appellant had retained the principal amount uninvested for over twenty years he would be liable to pay simple interest at the rate of 4 per cent per annum. Even though the interest calculated at that rate exceeded the principal, that entire interest would have to be paid, because, the rule of damdupat would not apply. The principle of damdupat was evolved both as an inducement to the debtors to pay the entire principal and interest at one and the same time in order to save interest in excess of the principal, and as a warning to the creditor to take effective steps for realising the debt from the borrower within a reasonable time, so that, there may not be accumulation of interest in excess of the principal amount. But that rule applies only to cases where a loan is advanced. Though a trustee who had custody of trust funds, has a pecuniary liability to make good those funds if he has used them and may, on the basis of such a liability, be said to be a debtor of the trust, yet he, as an individual, is not a borrower of the funds from the trust and cannot be said to have taken a loan from himself as a trustee in charge of the trust funds. [96 H; 97 E H; 99 D; E; 101 E F, H] 92 Sharp vs Jackson, (1899) A.C.419 and Lake, in re Dyer Ex Parte, (1901)1 K.B. 710, referred to.

Appeal No. 1040/63. C.K. Daphtary, Attorney General, M.S.K. Sastri and R.H. Dhebar, for the appellant. C.B. Agarwala and A.G. Ratnaparkhi, for the respondent. The Judgment of the Court was delivered by Gajendragadkar, C.J. The short question of law which arises in this appeal is whether the appellant, the State of Bombay (now Maharashtra), shows that its predecessor State of Madhya Pradesh (hereinafter called the Government) had given a reasonable opportunity to. the respondent, Narul Latif Khan, to defend himself before it passed the final order on June 6, 1952 compulsorily retiring him under Article 353 of the Civil Service Regulations. By this order, the respondent was compulsorily retired and in relaxation of article 353, the Government was pleased to allow the respondent to draw a compassionate allowance equal to the pension which would have been admissible to him had he been invalidated. This order was challenged by the respondent by filing a suit in the Court of the first Additional District Judge at Nagpur. In his plaint, the respondent alleged that the impugned order whereby he was compulsorily retired, was invalid and he claimed a declaration that it was ultra vires and inoperative. He also asked for a declaration that he was entitled to be restored to the post which he held on July 6, 1950, and that he should be given all pay, allowances. increments and promotions to which he would have been entitled if he had been permitted to continue in service. In the result, the respondent asked for a decree for Rs. 62,237 with interest at 6 per cent per annum from the date of the suit till realisation. This claim was resisted by the appellant on several grounds. The principal ground on which the appellant challenged the respondent 's claim, however, was that he had been given a reasonable opportunity to defend himself, and so, the impugned order was perfectly valid, and legal. Several other pleas were also raised by the appellant. On these pleas, the learned trial Judge framed appropriate issues. The issue with which we are concerned in the present appeal, however, centered round the question as to whether the Constitutional provision prescribed by article 311 affording protection to the respondent had been contravened. The trial Judge made a finding against the respondent on this issue. He also recorded his findings on the other issues with which we are not directly concerned in the present appeal. In regard to the money claim made by the respondent, the learned trial Judge made a finding that in case he was held entitled to such relief, a decree for Rs. 37,237 may have to be passed in his favour. In view of his conclusion that the impugned order was valid, no question arose 137 for making such a decree in favour of the respondent. The respondent 's suit, therefore, failed and was dismissed. The respondent then took the matter in appeal before the High Court of Judicature at Bombay, Nagpur Bench. The High Court has, in substance, held that the constitutional provisions prescribed by article 311 have not been complied with by the appellant before it passed the impugned order against the respondent. It has found that the departmental enquiry which was held suffered from the serious infirmity that the enquiry officer did not hold an oral enquiry and did not allow an opportunity to the respondent to lead his oral evidence. It has also held that the second notice served by the appellant on the respondent calling upon him to show cause why the report made by the enquiry officer should not be accepted and appropriate punishment should not be inflicted on him, was defective, and that also made the impugned order invalid. The High Court appears to have taken the view that the impugned order does not show that the appellant had taken into account the explanation offered by the respondent in response to the second notice issued by the appellant. As a result of these findings, the High Court has reversed the conclusion of the trial Court on the main question and has found that the impugned order is invalid and inoperative. On that view, the High Court considered the money claim made by the respondent, and it confirmed the finding of the trial Court that the respondent would be entitled to a decree for Rs. 37,237. In fact, the alternative finding recorded by the trial Court in respect of the amount to which the respondent would be entitled in case he succeeded in challenging the validity of the impugned order, was not questioned before the High Court. In the result, the High Court allowed the appeal and passed a money decree for Rs. 37,237 in favour of the respondent in terms of prayer (A) of paragraph 31 of the plaint. The appellant then applied for and obtained a certificate from the High Court and it is with the said certificate that it has brought the present appeal before this Court. That is how the main question which falls for our decision is whether the constitutional provision prescribed by article 311 has been complied with by the appellant before it passed the impugned order. At this stage, it may be relevant to refer to some material facts. The respondent was appointed as Extra Assistant Commissioner in 1926 and since then he had been holding various offices in the State service of the then Madhya Pradesh Government. In 1950, he was holding the post of a Treasury Officer at Nagpur. It appears that privilege leave for over a year was due to him and he had applied for four months ' privilege leave. On June 12, 1950, Government informed him that his request for leave was rejected and he was told that no further application for leave would be entertained in future. On July 7, 1950, the respondent proceeded 138 on casual leave for two days, and on July 8, 1950 he renewed his application for four months ' leave on medical grounds. This application was accompanied by a certificate given by Dr. Dange. Government, therefore, decided to constitute a Medical Board for examining the respondent in order to .decide whether leave on medical grounds should be granted to him. Accordingly, the respondent appeared before a Special Medical Board on July 22, 1950. The Medical Board, however, could not come to a decision as to whether the respondent should be granted leave on medical grounds for four months. It recommended that the respondent should get himself admitted in the Mayo Hospital, Nagpur. for observation and investigation. In accordance with this report, Government asked the respondent to get himself admitted in the Mayo Hospital in time, so that the Board could examine him on August 8, 1950. The respondent refused to, go to the Mayo Hospital and pressed that he should be allowed to go to Calcutta to receive medical treatment from experts. It appears that on July 26, 1950, the respondent received a telegram from Raipur stating that his daughter was dangerously ill there. He, therefore, made another application on the same day requesting for ten days ' leave to enable him to go to Raipur and see his ailing daughter. On July 31, 1950, Government granted the respondent 's request. Accordingly, the respondent went to Raipur. From Raipur he renewed his application for four months ' leave on Medical grounds and produced certificates from Dr. Bhalerao and Dr. Kashyap. That led to a lengthy correspondence between the respondent and the Government which shows that Government insisted on his appearing before the Medical Board and the respondent was not prepared to go to. Nagpur because he alleged that he was seriously ill and could not undertake a journey to Nagpur. Ultimately, on September 9, 1950, Government called upon the respondent to resume his duties within three days from the receipt of the said letter failing which he was told that he would be suspended and a departmental enquiry would be started against him. On October 4, 1950, the respondent wrote a lengthily reply setting forth his contentions in detail. Since he did not resume his duties, Government decided to suspend him and start a departmental enquiry against him. Mr. S.N. Mehta, I.C.S., was accordingly appointed to hold the. enquiry. On November 29, 1950, Mr. Mehta wrote to the respondent that Government had directed him to conduct the departmental enquiry, and called upon the respondent to attend his office on December 7, 1950, at 11.00 a.m. The respondent, however. did not appear before him and wrote to Mr. Mehta that owing to his illness, he was unable to appear before him. He again pleaded that he was seriously ill. On January 15, 1951, Mr. Mehta served the respondent with a charge sheet. Three charges were framed against him. The first charge was that he had deliberately disobeyed the orders of Government when he was asked to get himself admitted in the Mayo 139 Hospital for observation and investigation. The second charge was that he had failed to report for duty even though no leave was sanctioned to him by Government and he was specifically ordered by Government to report for duty. The third charge was that he had persistently disobeyed the orders of Government and he had thereby shown himself unfit to continue as a member of the State Civil Service. Material allegations on which reliance was placed against the respondent in support of these charges were also specified under the respective charges. The respondent was, however, not prepared to appear before Mr. Mehta and he raised several technical contentions. Ultimately, he sent his written statement and denied all the charges. His case appears to have been that he had not deliberately disobeyed any of the orders issued by Government. In regard to his getting admitted in the Mayo Hospital, he seems to have taken the plea that when he was allowed to go on casual leave to see his ailing daughter at Raipur, it was clear that he could not have got himself admitted in the Mayo Hospital so as to enable the Medical Board to examine him on August 8, 1950. In respect of the charge that he had persistently refused to obey the orders of Government, his case was that he was dangerously ill and that he genuinely apprehended that if he undertook a journey to resume his duty, he might even collapse. He requested the enquiry officer to allow him to appear by a lawyer whom he would instruct to cross examine the witnesses whom the Government would examine against him. He also stated that he wanted to give evidence of his own doctors who would depose to his ailing condition at the relevant time. It appears that Mr. Mehta wanted to accommodate the respondent as much as he could and when he found that the respondent was not appearing in person before him, he in fact fixed a date for hearing at Raipur on September 21, 1951 where he happened to be camping. On that date, the respondent appeared before Mr. Mehta and Mr. Mehta made a note as to what transpired on that date. The note shows that "the whole case was discussed with the respondent. His plea was that he should be allowed to appear through a counsel, but it was explained to him in detail that as far as the case can be seen from Government side at present, it does not involve the taking up oral evidence. He agreed that he would not press for this facility. He would, however, like to give a detailed answer to the charge sheet. He also undertook to appear in person regularly in future". Thereafter, Mr. Mehta required the respondent to file his detailed written statement. and in fact, the respondent did file his detailed written statement containing the pleas to which we have already referred. On November 8. 1951, Mr. Mehta wrote to the respondent that he would be glad to hear him in person in case he wished to make an oral statement on November 20, 1951, and when the respondent did not 140 appear on the said date, Mr. Mehta proceeded to examine the documentary evidence showing the failure of the respondent to comply with the orders issued by Government and made his report on November 24, 1951. He found that the three charges framed against the respondent were proved. In his report, Mr. Mehta observed that "the conduct of the respondent and the language used by him from time to time in his communications .discloses an attitude of disobedience and insubordination which no Government can tolerate from its subordinate officers". We may incidentally observe that the comment thus made by Mr. Mehta in regard to the communications addressed by the respondent to him appears to us to be fully justified but, in our opinion, this aspect of the matter cannot have any material bearing on the question with which we are concerned. The validity of the impugned order must be judged objectively without considering the impropriety of the language used by the respondent or the reluctance shown by him to appear before Mr. Mehta. In his report, Mr. Mehta has also observed that when the respondent met him, he explained to him that the case did not involve recording of any oral evidence as it was based on documents only. Mr. Mehta adds that according to the impression he got at that time, the respondent was satisfied that in the circumstances, the assistance of a counsel was unnecessary. It is, however, plain from the several letters written by the respondent to Mr. Mehta that he was insisting upon an oral enquiry and that he wanted to examine his doctors to show that he was so iII at the relevant time that he could not have resumed his duties. On March 2, 1951, the respondent wrote to Mr. Mehta stating, inter alia, that he wished to put in the witness box a few high ranking Government officers and the doctors whom he had consulted about his illness. Earlier on January 20, 1951, he had written to Mr. Mehta requesting him to conduct an oral enquiry as laid down in paragraph 8(iv) G.B. Circular 13. Similarly, on April 23, 1951, he again informed Mr. Mehta that in his opinion the institution of the departmental enquiry after suspending him was illegal and had caused him grave injury, and he added that oral and documentary evidence will be produced in defence. It does appear that Mr. Mehta explained to the respondent that so far as Government was concerned, it rested its case merely on documents and did not think it necessary to examine any witnesses, and thereupon the respondent agreed that he need not have the facility of the assistance of a lawyer. But it is clear from the remarks made by Mr. Mehta in the order sheet on September 21, 1951, and the observations made by him in his report that the only point on which the respondent agreed with Mr. Mehta was that he need not be allowed the assistance of the lawyer in the departmental enquiry. We have carefully examined the record in 141 this case and we see no justification for assuming that the respondent at any time gave up his demand for an oral enquiry in the sense that he should be given permission to cite his doctors in support of his pica that his failure to resume his duties was due to his ill health. The charge against him was that he had deliberately disobeyed the Government orders, and it is conceivable that this charge could have been met by the respondent by showing that though he disobeyed the orders, the disobedience was in no sense deliberate because his doctors had advised him to lie in bed; and thus considered, his desire to lead medical evidence cannot be treated as a mere subterfuge to prolong the enquiry. It is true that the respondent did not give a list of his witnesses; but he had named his doctors in his communications to Mr. Mehta, and in fact Mr. Mehta never fixed any date for taking the evidence of the witnesses whom the respondent wanted to examine. If Mr. Mehta had told the respondent that he would take the evidence of has witnesses on a specified date and the respondent had failed to appear on the said date with his witnesses, it would have been an entirely different matter. Therefore, the position is that Mr. Mehta did net hold an oral enquiry and did not give an opportunity to the respondent to examine his witnesses and so, the question which arises for our decision is: does the failure of Mr. Mehta to hold an oral enquiry amount to a failure to give a reasonable opportunity to the respondent within the meaning of article 311 ? The requirements of article 311(2) have been considered by this Court on several occasions. At the relevant time, article 311(2) provided that no person to whom article 311 applies shall be dismissed or 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 t9 him. It is common ground that the impugned order of compulsory retirement attracts the provisions of article 311 (2). If it appears that the relevant statutory rule regulating the departmental enquiry which was held against the respondent made it obligatory on the enquiry officer to hold an oral enquiry if the respondent so demanded. then there would be no doubt that the failure of the enquiry officer to hold such an oral enquiry would introduce a serious infirmity in the enquiry and would plainly amount to the failure of the appellant to give a reasonable opportunity to the respondent. This position is not disputed by the learned Attorney General and is indeed well settled. So, the narrow question to which we must address ourselves is whether it was obligatory on Mr. Mehta to hold, an oral enquiry and give d reasonable opportunity to the respondent to lead oral evidence and examine his doctors. We will assume for the purpose of this appeal that in a given case, Government would be justified in placing its case against the charge sheeted officer only on documents and may be under no obligation to examine any witnesses, 142 though we may incidentally Observe that even in such cases, if the officer desires that the persons whose reports or orders are being relied upon against him should be offered for cross examination, it may have to be considered whether such an opportunity ought not to be given to the officer; but that aspect of the matter we will not consider in the present appeal. Therefore, even if it is assumed that Government could dispense with the examination of witnesses in support of the charges framed against the respondent, does the relevant rule make it obligatory on the Enquiry Officer to hold an oral enquiry and give the respondent a chance to examine his witnesses or not? This question falls to be considered on the construction of rule 55 of the Civil Services (Classification, Control and Appeal) Rules. This rule reads thus: "Without prejudice to the provisions of the Public Servants Inquiries Act, 1850, no order of dismissal, removal or reduction shall be passed on a member of a service (other than an order based on facts which have led to the conviction in a Criminal Court or by a Court, Martial) unless he has been informed in writing of the grounds on which it is proposed to take action, and. has been afforded an adequate opportunity of defending himself. The grounds on which it is proposed to take action shall be reduced to the form of a definite charge or charges, which shall be communicated to the person charged together with a statement of the allegations on which each. charge is based and of any other circumstances which it is proposed to take into consideration in passing orders on the case. He shall be required within a reasonable time, to put in a written statement of his defence and to state whether he desires to be heard in person. If he so desires or if the authority concerned so direct, an oral enquiry shall be held. At that enquiry oral evidence shall be heard as to such of the allegations as are not admitted, and the person charged shall be entitled to cross examine the witnesses, to give evidence in person and to have such witnesses called. as he may wish, provided that the officer conducting the enquiry may, for special and sufficient reason to be recorded in writing. refuse to call a witness. The proceedings shall contain a sufficient record of the evidence and a statement of the findings and the grounds thereof. " It appears that the Government of Madhya Pradesh had issued a Circular explaining this Rule. The Circular contained Rule 8 which is relevant. It provides that "particular attention is invited to the provisions regarding oral enquiry. In case the person charged desires that an oral enquiry should be held, the authority holding the departmental enquiry has no option to refuse it". The High 143 Court seems to have based its conclusion substantially, if not entirely, on this rule. We do not propose to adopt that course. The rule may be no more than a circular issued by Government and we do not propose to examine the question as to whether it has the force of a statutory rule. Our decision would, therefore, be based on the construction of Rule 55 of the Civil Services Rules which admittedly applied and which admittedly is a statutory rule. The relevant clause in this Rule provides that the officer charge sheeted shall be required within a reasonable time to put in a written statement of his defence and to state whether he desires to be heard in person. This clause has been complied with m the present proceedings. Mr. Mehta gave notice to the respondent to appear before him in person on the 20th November, 1951 and the respondent did net appear on that date. It is the next clause on which the decision of the present appeal depends. This clause lays down that if he, that is to say the charge sheeted officer, so desires or if the authority concerned so directs, an oral enquiry shall be held. In our opinion, it is plain that the. requirement that an oral enquiry shall be held if the authority concerned so directs. or if the charge sheeted officer so desires is mandatory. Indeed. this requirement is plainly based upon considerations of natural justice and fairplay. If the charge sheeted officer wants to lead his own evidence in support of his plea, it is obviously essential that he should be given an opportunity to lead such evidence. Therefore. we feel no hesitation in holding .that once the respondent expressed his desire to Mr. Mehta that he wanted to lead evidence in support of his plea that his alleged disobedience of the Government orders was not deliberate, it was obligatory on Mr. Mehta to have fixed a date for recording such oral evidence and give due intimation to the respondent in that behalf. It is true that the oral enquiry which the enquiry officer is bound to hold can well be regulated by him in his discretion. If the charge sheeted officer starts cross examining the departmental witnesses in an irrelevant manner, such cross examination can be checked and controlled. If the officer desires to examine witnesses whose evidence may appear to the enquiry officer to be thoroughly irrelevant, the enquiry officer may refuse to examine such witnesses; but in doing so, he will have to record his special and sufficient reasons. In other words, the right given to the charges heated officer to cross examine the departmental witnesses or examine his own witnesses can be legitimately examined and controlled by the enquiry officer; he would be justified in conducting the enquiry in such a way that its proceedings are not allowed to be unduly or deliberately prolonged. But, in our opinion it would be impossible to accept the argument that if the charge sheeted officer wants to lead oral evidence, the enquiry officer can say that having regard to the charges framed against the officer. he would not hold any oral enquiry. In the present case, the witnesse. 144 whom the respondent wanted to examine; would undoubtedly have given relevant evidence. If the doctors who treated the respondent had come and told the enquiry officer that the condition of the respondent was so bad that he could not resume work, that undoubtedly would have been a relevant and material fact to consider in deciding whether the charges framed against the respondent were proved. Even if we disapprove of the attitude adopted by the respondent in the course of this enquiry and condemn him for using extravagant words and making unreasonable contentions in his communications to the enquiry officer, the fact still remains that he wanted to examine his doctors, and though he intimated to Mr. Mehta that he desired to examine his doctors, Mr. Mehta failed to give him an opportunity to do so. That, in our opinion, introduces a fatal infirmity in the whole enquiry which means that the respondent has not been given a reasonable opportunity to defend himself within the meaning of article 311(2). On that view of the matter, it is unnecessary to consider whether the High Court was right in its other conclusions that the second notice served by the appellant on the respondent was defective and that the final order was also defective inasmuch as it did not appear that the appellant had taken into account the representation made by respondent. It is not disputed by the learned Attorney General that if we hold that the enquiry conducted by Mr. Mehta contravened the mandatory provision of r. 55, the decision of the High Court could be sustained on that ground alone. In the result. the appeal fails and is dismissed with cost. Appeal dismissed.

IN-Abs

The appellant who was in the service of a State Government asked for long leave which was refused. Subsequently he asked for ten days ' leave which was granted. On the expiry of the leave period he did not join duty on the ground that he was seriously ill. The Government refused to accept the plea and instituted a departmental inquiry against him. The respondent wanted to produce oral evidence in support of his plea including the evidence of doctors who treated him, but the enquiry officer refused to record oral evidence on the ground that the case against the appellant rested on documents alone and therefore no oral evidence was necessary. On the report of the enquiry ' officer the State Government ordered the compulsory retirement of the respondent. The latter filed a suit in which he claimed inter alia that the constitutional provision in article 311 had been contravened. The trial judge held against him but the High Court decided in his favour. The State Government appealed to the Supreme Court with certificate. The narrow question to which the COurt had to address itself was whether it was obligatory on the enquiry officer to give a reasonable opportunity to the respondent to lead oral evidence and examine his doctors. HELD: (i) The Civil Services (ClassifiCation, Control and Appeal) Rules provide in r. 55 that if the charge sheeted Officer so desires or if the authority concerned so directs an oral enquiry shall be held. This provision is mandatory and is based on considerations of natural justice and fair play. Therefore when the respondent expressed his desire to the enquiry officer that he wanted to lead evidence in support of his plea, it was obligatory on the enquiry officer to have fixed a date for recording such oral evidence and give due intimation to the respondent in that behalf. [143 D F] (ii) Though an enquiry officer would be justified in conducting the enquiry in such a way that its proceedings are not allowed to be unduly or deliberately prolonged, it would be impossible to accept the argument that if the charge sheeted officer wants to lead oral evidence the enquiry officer can say that having regard to the charges against the officer he would not hold any oral enquiry [143 H] (iii) In the present case the witnesses whom the respondent wanted to examine would undoubtedly have given relevant evidence. He wanted to examine his doctors but the enquiry officer failed to give him an opportunity to do so. That introduced a fatal infirmity in the whole enquiry as the respondent had not been given a reasonable opportunity to de.fend himself within the meeting of article 311 (2). The appeal of the State Government had therefore to be dismissed. [144 A, C] 136

Appeal No. 80 of 1952. Appeal from the Judgment and Decree dated the 6th September, 1950, of the High Court of Judicature at Calcutta (Das Gupta and Lahiri JJ.) in Appellate Decree No. 318 of 1949 from the Judgment and Decree dated the 25th February, 1949. of the Court of the District Judge of Zillah 24 Parganas in Title Appeal No. 8 of 1948 arising out of the Judgment and Decree dated the 10th October, 1947, of the Court of the Additional Subordinate Judge, 7th Court, Alipore. M.C. Setalvad, Attorney General for India (Aurobindo Guha and Gobinda Mohan Roy, with him) for the appellant. Atul Chandra Gupta (Bijan Behari Das Gupta, with him) for respondent No. 1 1953. November 16. The Judgment of the Court was delivered by MUKHERJEA J. The facts giving rise to this appeal are, for the most part, uncontroverted and the dispute between the parties centres round the short point as to whether a contract for sale of land to which this litigation relates, was discharged and came to an end by reason of certain supervening circumstances which affected the performance of a material part of it. To appreciate the merits of controversy, it will be necessary to give a brief narrative of the material facts. The defendant company, which is the main respondent in this appeal, is the owner of a large tract of land situated, in the vicinity of the Dhakuria Lakes within Greater Calcutta. The 313 company started a scheme for development of this land for residential purposes which was described as Lake Colony Scheme No. I and in furtherance of the scheme the entire area was divided into a large number of plots for the sale of which offers were invited from intending purchasers. The company 's plan of work seemed to be, to enter into agree ments with different purchasers for sale of these plots of land and accept from them only a small portion of the con sideration money by way of earnest at the time of the agree ment. The company undertook to construct the roads and, drains necessary for making the lands suitable for building and residential purposes and as soon as they were completed. the purchaser would be called upon to complete the con veyance by payment of the balance of the consideration money. Bejoy Krishna Roy, who was defendant No. 2 in the suit and figures as a pro forma respondent in this appeal, was one of such purchasers who entered into a contract with the company for purchase of a plot of land covered by the scheme. His contract is dated the 5th of August, 1940, and he paid Rs. 101 as earnest money. In the receipt granted by the vendor for this earnest money, the terms of the agree ment are thus set out: "Received with thanks from Babu Bejoy Krishna Roy of 28 Tollygunge Circular Road, Tollygunge, the sum of Rs. 101 (Rupees one hundred and one only) as earnest money having agreed to sell to him or his nominee 5 K. more or less in plot No. 76 on 20 and 30 ft. Road in Premises No. Lake Colony Scheme No. 1, Southern Block at the average rate of Rs. 1,000 (Rupees one thousand only) per Cotta. The conveyance must be completed within one month from the date of completion of roads on payment of the balance of the consideration money, time being deemed as the Essence of the Contract. In case of default this agreement will be considered as cancelled with forfeiture of earnest money. Mokarari Mourashi 314 Terms of payment:One third to be paid at the time of registration and the balance within six years bearing Rs. 6 per cent. interest per annum". On 30th November, 1941, the plaintiff appellant was made a nominee by the purchaser for purposes of the contract and although he brought the present suit in the character of a nominee, it has been held by the trial judge as well as by the lower appellate court, that he was really an assignee of Bejoy Krishna Roy in respect to the latter 's rights under the contract. Some time before this date, there was an order passed by the Collector, 24 Parganas, on 12th of November, 1941 under section 79 of the Defence of India Rules, on the strength of which a portion of the land covered by the scheme was requisitioned for military purposes. Another part of the land was requisitioned by the Government on 20th of December, 1941. while a third order of requisition, which related to the balance of the land comprised in the scheme, was passed sometime later. In November, 1943, the company addressed a letter to Bejoy Krishna Roy informing him of the requisitioning of the lands by the Government and stating inter alia that a considerable portion of the land appertaining to the scheme was taken possession of by the Government and there was no knowing how long the Government would retain possession of the same. The constructs of the proposed roads and drains, therefore, could not be taken up during the continuance of the war and possibly for many years after its termination. In these circumstances,, the company decided to treat the agreement for sale with the addressee as cancelled and give him the option of taking back the earnest money within one month from the receipt of the letter. There was offer made in the alternative that in case the purchaser refused to treat the contract as cancelled, he could, if he liked, complete the conveyance within one month from the receipt of the letter by paying the balance of the consideration money and take the land in the condition in which it existed at that time, the company undertaking to construct the roads and the drains, as circumstances might permit, after the termination of the war. 315 The letter ended by saying that in the event of the addressee not accepting either of the two alternatives, the agreement would be deemed to be cancelled and the earnest money would stand forfeited. This letter was handed over by Bejoy Krishna to his nominee, the plaintiff, and there was some correspondence after that, between the plaintiff on the one hand and the company on the other through their respective lawyers into the details of which it is not necessary to enter. It is enough to state that the plaintiff refused to accept either of the two alternatives offered by the company and stated categorically that the latter was bound by the terms of the agreement from which it could not, in law, resile. On 18th of January, 1946, the suit, out of which this appeal arises, was commenced by the plaintiff against the defendant company, to which Bejoy Krishna Roy was made a party defendant and the prayers in the plaint were for a two fold declaration, namely, (1) that the contract dated the 5th of August, 1940, between the first and the second defendant, or rather his nominee, the plaintiff, was still subsisting; and (2) that the plaintiff was entitled to get a conveyance executed and registered by the defendant on payment of the consideration money mentioned in the agreement and in the manner and under the conditions specified therein. The suit was resisted by the defendant company who raised a large number of defences in answer to the plaintiff 's claim, most of which are not relevant for our present purpose. The principal contentions raised on behalf of the defendant were that a suit of this description was not maintainable under section 42 of the Specific Relief Act and that the plaintiff had no locus standi to institute the suit. The most material plea was that the contract of sale stood discharged by frustration as it became impossible by reason of the supervening events to perform a material part of it. Bejoy Krishna Roy did not file any written statement and he was examined by the plaintiff as a witness on his behalf. 316 The trial judge by his judgment dated 10th October, 1.947, overruled all the pleas taken by the defendant and decreed the plaintiff 's suit. An appeal taken by the defendant to the Court of the District Judge of 24 Parganas was dismissed on the 25th February, 1949, and the judgment of the trial court was affirmed. The defendant company thereupon preferred a second appeal to the High Court which was heard by a Division Bench consisting 'of Das Gupta and Lahiri JJ. The only question canvassed before the High Court was, whether the contract of sale was frustrated by reason of the requisition orders issued by the Government? The learned Judges answered this question in the affirmative in favour of the defendant and on that ground alone dismissed the plaintiff 's suit. The plaintiff has now come before us on the strength of a certificate granted by the High Court under article 133(I)(c) of the Constitution of India. The learned Attorney General, who appeared in support of the appeal, has put forward a three fold contention on behalf of his client. He has contended in the first place that the doctrine of English law relating to frustration of contract, upon which the learned Judges of the High Court based their Decision has no application to India in view of the statutory provision contained in section 56 of the Indian Contract Act. it is argued in the second place, that even if the English law Applies, it can have no application to contracts for sale of land and that is in fact the opinion expressed by the English ,judges themselves. His third and the last argument is that on the admitted faacts and circumstances of this case there was no frustrating event which could be said to have taken away the basis of the contract or tendered its performance impossible in any sense of the word. The first argument advanced by the learned AttorneyGeneral raises a somewhat debatable point regarding the true scope and effect of section 56 of the Indian Contract Act and to what extent, if any, it incorporates the English rule of frustration of contracts. 317 Section 56 occurs in Chapter IV of the Indian Contract Act which relates to performance of contracts and it purports to deal with one circumstances under which performance of a, contract is excused or dispensed with on the ground of the contract being void. The section stands as follows: "An agreement to do an act impossible in itself is void. A contract to do an act which after the contract is made, becomes impossible, or, by reason of some event which the promiser could not prevent, unlawful, becomes void when the act becomes impossible or unlawful. Where one person has promised to do something which he knew, or, with reasonable diligence, might have known, and which the promisee did not know to be impossible or unlawful, such promisor must make compensation to such promisee for any loss which such promise sustains through the non performance of the promise". The first_paragraph of the section lays down the law in the same way as in England. It speaks of something which is impossible inherently or by its very nature, and no one can obviously be directed to an act. The second paragraph enunciates the law relating to discharge of contract by reason of supervening impossibility or illegality of the act agreed to be done. The wording of this paragraph is quite general, and though the illustrations attached to it are not at all happy, they cannotderogate from the general words used in the enactment. This much is clear that the word "impossible" has not been used here in the sense of physical or literal impossibility. The performance of an act may not be literally impossible but it may be impracticbale and useless from the point of view of the object and purpose which the parties had in view and if an untoward event or change of circumstances totally upset the very foundation upon which the parties rested their bargain, it can very well be said that the promisor L/B(D)2SCI 6(a) 318 found it impossible to do the act which he promised to do. Although various theories have been propounded by the Judges and jurists in England regarding the juridical basis of the doctrine of frustration, yet the essential idea upon which the doctrine is based is that of impossibility of performance of the contract: in fact impossibility and frustration are often used as interchangeable expressions. The changed circumstances, it is said, make the performance of the contract impossible and the parties are absolved from the further performance of it as they did not promise to perform an impossibility The parties shall be excused, as Lord Loreburn says(1), "if substantially the whole contract becomes impossible of performance or in other words impracticable by some cause for which neither was responsible,. " In Joseph Constantine Steamship Line Limited vs Imperial Smelting Corporation Ltd.(2), Viscount Maugham obseryed that the "doctrine of frustration is only a special case of the discharge of contract by an impossibility of performance arising after the contract was made." Lord Porter agreed with this view and rested the doctrine on the same basis. The question was considered and discussed by a Division Bench of the Nagpur High Court in Kesari Chand vs Governor General in Council(3) and it was held that the doctrine of frustration comes into play when a contract becomes impossi ble of performance, after it is made, on account of circum stances beyond the control of the parties. The doctrine is a special case of impossibility and as such comes under section 56 of the Indian Contract Act. We are in entire agreement with this view which is fortified by a recent pronouncement of this court in Ganga Saran vs Ram Charan(4), where Fazl (1) See Tamplin Steamship Co. Ltd. vs Anglo Mexican Petroleum Products Co. Ltd.[1916] 2 A.C. 397, 403. (2) at 168. (3) I.L.R. (4) ; at 52. 319 Ali J., in speaking about frustration, observed in his judgment as follows: "It seems necessary for us to emphasise that so far as the courts in this country are concerned, they must loot primarily to the law as embodied in sections 32 and 56 of the . " We hold, therefore, that the doctrine of frustration is really an aspect or part of the law of discharge of contract by reason of supervening impossibility or illegality of the act agreed to be done and hence comes within the purview of section 56 of the . It would be incorrect to say that section 56 of the Contract Act applies only to cases of physical impossibility and that where this section is not applicable, recourse can be had to the principles of English law on the subject of frustration. It must be held also that to the extent that the deals with a particular subject, it is exhaustive upon the same and it is not permissible to import the principles of English law dehors these statutory provisions. The decisions of the English courts possess only a persuasive value and may be helpful in showing how the courts in England have decided cases under circumstances similar to those which have come before our courts. It seems necessary however to clear up some misconception which is likely to arise because of the complexities of the English law on the subject. The law of frustration in England developed, as is well known, under the guise of reading implied terms into contracts. The court implies a term or exception and treats that as part of the contract. In the case of Taylor vs Caldwell(1), Blackburn J. first formulated the doctrine in its modern form. The court there was dealing with a case where a music hall in which one of the contracting parties had agreed to give concerts on certain specified days was accidentally burnt by fire. It was held that such a contract must be regarded "as subject to an implied condition that the parties shall be excused, in case, before breach, performance becomes impossible from perishing of the thing without (1) ; 320 default of. the contractor. " Again in Robinson vs Davison(1) there was a contract between the plaintiff and the defendant 's wife (as the agent of her husband) that she should play the piano at a concert to be given by the plaintifl on a specified day. On the day in question she was unable to perform through illness. The contract did not contain any term as to what was to be done in case of her being too ill to perform. In an action against the defendant for breach of contract, it was held that the wife 's illness and the consequent incapacity excused her and that the contract was in its nature not absolute but conditional upon her being well enough to perform. Bramwell B. pointed out in course of his judgment that in holding that the illness of the defendant incapaciated her from performing the agreement the court was not really engrafting a new term upon an express contract. It was not that the obligation was absolute in the original agreement and a new condition was subsequently added to it; the whole question was whether the original contract was absolute or conditional and having regard to the terms of the bargain, it must be held to be conditional. The English law passed through various stages of development since then and the principles enunciated in the various decided authorities cannot be said to be in any way uniform. In many of the pronouncements of the highest courts in England the doctrine of frustration was held "to be a device by which the rules as to absolute contracts are reconciled with a special exception which justice demands"(2). The court, it is said, cannot claim to exercise a dispensing power or to modify or alter contracts. But when an unexpected event or change of circumstance occurs, the possibility of which the parties did not circumstance occurs, the possibility contract is taken to be not what the parties actual intended, but what they as fair and reasonable men would presumably have intended and agreed upon, if having such possibility in view they had made express provsion as to their rights and liabilities in the event of such occurrence(1). As Loard Wright (1) ; (2) Vide Hirji Mulji vs Cheong Yue Steamship Co. Ltd. at 510. (3) Vide Dahl vs Nelson, Donkinand Co. (1881) 6 App. 38 at 59. 321 observed in Joseph Constantine Steamship Co. vs Imperial Smelting Corporation Ltd.(1). "In ascertaining the meaning of the contract and its application to the actual occurrences, the court has to decide, not what the parties actually intended but what as reasonable men they should have intended. The court personifies for this purpose the reasonable man. " Lord Wright clarified the position still further in the later case of Denny, Mott and Dickson Ltd. vs James B. Fraser & Co. Ltd.(1), where he made the following observations: "Though it has been constantly said by high authority, including Lord Sumner, that the explanation of the rule is to be found in the theory that it depends on an implied con dition of the contract, that is really no explanation. It only pushes back the problem a single stage. It leaves the question what is the reason for implying a term. Nor can I reconcile that theory with the view that the result does not depend on what the parties might, or would, as hard bargainers, have agreed. The doctrine is invented by the court in order to supplement the defects of the actual contract. To my mind the theory of the implied condition is not really consistent with the true theory of frustration. It has never been acted on by the court as a ground of decision, but is merely stated as a theoretical explanation. " In the recent case of British Movietonews Ltd. vs London and District Cinemas Ltd.(1), Denning L. J. in the Court of Appeal took the view expressed by Lord Wright as stated above as meaning that "the court really exercises a qualifying power a power to qualify the absolute., literal or wide terms of the contract in order to do what is just and reasonable in the new situation". "The day is gone," (1) at 185. (2) ; at 275. (3) L/ B(D) 2SCI 7 322 the learned Judge went on to say, "when we can excuse an unforeseen injustice by saying to the sufferer 'it is your own folly, you ought not to have passed that form of words. You ought to have put in a clause to protect yourself '. We no longer credit a party with the foresight of a Prophet or his lawyer with the draftsmanship of a Chalmers. We realise that they have their limitations and make allowances accor dingly. It is better thus. The old maxim reminds us that he who clings to the letter clings to the dry and barren shell and misses the truth and substance of the matter. We have of late paid heed to this warning, and we must pay like heed now. " This decision of the Court of Appeal was reversed by the House of Lords and Viscount Simon in course of his judgment expressed disapproval of the way in which the law was stated by Denning L.J. It was held that there was no change in the law as a result of which the courts could exercise a wider power in this regard than they used to do previously. "The principle remains the same", thus observed his Lordship. "Particular applications of it may greatly vary and theoretical lawyers may debate whether the rule should be regarded as arising from implied term or because the basis of the contract no longer exists. In any view, it is a question of construction as Lord Wright pointed out in Constantine 's case and as has been repeatedly asserted by other masters of law. "(1) These differences in the way of formulating legal theories really do not concern us so long as we have a statutory provision in the . In deciding cases in India the only doctrine that we have to go by is that of supervening impossibility or illegality as laid down in section 56 of the Contract Act taking the word "Impossible" in its practical and not literal sense. It must be borne in mind, however, that section 56 lays down a rule of positive law and does not leave the matter to be determined according to the intention of the parties. (1) at 184. 323 In the latest decision of the House of Lords referred to above, the Lord Chancellor puts the whole doctrine upon the principle of construction. But the question of construction may manifest itself in two totally different ways. In one class of cases the question may simply be, as to what the parties themselves had actually intended and whether or not there as a condition in the contract itself, express or implied, which operated, according to the agreement of the Parties themselves to release them from their obligations; this would be a question of construction pure and simple and the ordinary rules of construction would have to be applied to find out what the real intention of the parties was. According to the , a promise may be express or implied(1). In cases, therefore, where the court gathers as a matter of construction that the contract itself contained impliedly or expressly a term, according to which it would stand discharged on the happening of certain circumstances the dissolution on of the contract would take place under the terms of the contract itself and such cases would be outside the purview of section 56 altogether. Although in English law these cases are treated as cases of frustration, in India they would be dealt with under section 32 of the which deals with contingent contracts or similar other provisions contained in the Act. In the large majority of cases however the doctrine of frustration is applied not on the ground that the parties themselves agreed to an implied term which operated to release them from the performance of the contract. The relief is given by the court on the ground of subsequent impossibility when it finds that the whole purpose or basis of a contract was frustrated by the intrusion or occurrence of an unexpected event or change of circumstances which was beyond what was contemplated by the parties at the time when they entered into the agreement. Here there is no question of finding out an implied term agreed to by the parties em bodying a provision for discharge, because the parties did not think about the matter at all nor could possibly have any intention regarding it. When such an event or change of (1) Vide section 9. L/B(D)2SCI 7(a) 324 circumstance occurs which is so fundamental as to be re garded by law as striking at the root of the contract as a whole, it is the court which can pronounce the contract to be frustrated and at an end. The court undoubtedly has to examine the contract and the circumstances under which it was made. The belief, knowledge and intention of the parties are evidence, but evidence only on which the court has to form its own conclusion whether the changed cir cumstances destroyed altogether the basis of the adventure and its underlying object(1). This may be called a rule of construction by English Judges but it is certainly not a, principle of giving effect to the intention of the parties which underlies all rules of construction. This is really a rule of positive law and as such comes within the purview of section 56 of the . It must be pointed out here that if the parties do con template the possibility of an intervening circumstance which might affect the performance of the contract, but expressly stipulate that the contract would stand despite such circumstances, there can be no case of frustration because the basis of the contract being to demand performance despite the happening of a particular event, it cannot disappear when that event happens. As Lord Atkinson said in Matthey vs Curling(1), "a person who expressly contracts absolutely to do a thing not naturally impossible is not excused for nonperformance because of being prevented by the act of God or the King 's enemies. . or vis major". This being the legal position, a contention in the extreme form that the doctrine of frustration as recognised in English law does no come at all within the purview of section 56 of the cannot be accepted. The second contention raised by the Attorney General can be disposed of in few words. It is true that in England the judicial opinion generally expressed is, that the doctrine of frustration does not operate in the case of contracts for (1) Vide Morgan vs Manser (1947] 2 AU E.R. 666. (2) at 234. 325 sale of land(1). But the reason underlying this view is that under the English law as soon as there is a concluded contract by A to sell land to B at certain price, B becomes in equity, the owner of the land, subject to his obligation to pay the purchase money '. On the other hand, A in spite of his having the legal estate holds the same in trust for the purchaser and whatever rights he still retains in the land are referable to his right to recover and receive the purchase money. The rule of frustration can only put an end to purely contractual obligations, but it cannot destroy an estate in land which has already accrued in favour of a contracting party. According to the Indian law, which is embodied in section 54 of the Transfer of Property Act, a contract for sale of land does not of itself create any interest in the property which is the subject matter of the contract. The obligations of the parties to a contract for sale of land are, therefore, the same as in other ordinary contracts and consequendy there is no conceivable reason why the doctrine of frustration should not be applicable to contracts for sale of land in India. This contention of the Attorney General must, therefore, fail. We now come to the last and most important point in this case which raises the question as to whether, as a result of the requisition orders, under which the lands comprised in the development scheme of the defendant company were requisitioned by Government, the contract of sale between the defendant company and the plaintiff 's predecessor stood dissolved by frustration or in other words became impossible of performance. It is well settled and not disputed before us that if and when there is frustration the dissolution of the contract occurs automatically. It does not depend, as does rescission of a contract on the ground of repudiation or breach, or on the choice or election of either party. It depends on the effect (1) Vida Billington Estates Co. vs Stonfield Estate Ltd. [1952] 1 All E.R.853. 326 of what has actually happened on the possibility of performing the contrat (1). What happens generally in such cases and has happened here is that one party claims that the contract has been frustrated while the other party denies it. The issue has got to be decided by the court "ex post facto, on the actual circumstances of the case"(2). We will now proceed to examine the nature and terms of the contract before us and the circumstances under which it was entered into to determine whether or not the disturbing element,which is allowed to have happened here, has substantially prevented the performance of the contract as a whole. It may be stated at the outset that the. contract before us cannot be looked upon as an ordinary contract for sale and purchase of a piece of land; it is an integral part of a development scheme started by the defendant company and is one of the many contracts that have been entered into by a large number of persons with the company. The object of the company was undoubtedly to develop a fairly extensive area which was still undeveloped and make it usable for residential purposes by making roads and constructing drains through it. The purchaser. on the other hand, wanted the land in regard to which he entered into the contract to be developed and make ready for building purposes before he could be called upon to complete the purchase. The most material thing which deserves notice is, that there is abso lutely no time limit within which. the roads and drains are to be made. The learned District Judge of Alipore, who heard the appeal, from the trial court 's judgment found it as a fact, on the evidence in the record, that there was not an understanding between the parties on this point. As a matter of fact, the first requisition order was passed nearly 15 months after the contract was made and apparently no work was done by the defendant company in the meantime. Another important thing that requires notice in this con (1) Per Lord Wright in Denny, Mott and Dicksom Ltd. vs Jameso B. Fraser and Co., Ltd. ; , 274, (2) Ibid. 327 nection is that the war was already on, when the parties entered into the contract. Requisition orders for taking temporary possession of lands for war purposes were normal events during this period. Apart from requisition orders there were other difficulties in doing construction work at that time because of the scarcity of materials and the various restrictions which the Government had imposed in respect of them. That there were certain risks and difficulties involved in carrying on operations like these, could not but be in the contemplation of the parties at the time when they entered into the contract, and that is probably the reason why no definite time limit was mentioned in the contract within which the roads and drains are to be completed. This was left entirely to the convenience of the company and as at matter of fact the purchaser did not feel concerned about it. It is against this background that we are to consider to what extent the passing of the requisition orders affected the performance of the contract in the present case. The company, it must be admitted, bad not commenced the development work when the requisition order was passed in November, 1941. There was no question, therefore, of any work or service being interrupted for an indefinite period of time. Undoubtedly the commencement of the work was delayed but was the delay going to be so great and of such a character that it would totally upset the basis of the bargain and comercial object which the parties had in view? The requisition orders, it must be remembered, were ' by their very nature, of a temporary character and the requisitioning authorities could, in law, occupy the position of a licensee in regard to the requisitioned property. The order might continue during the whole period of the war and even for some time after that or it could have been withdrawn before the war terminated. If there was a definite time limit agreed to by the parties within which the construction work was to be finished, it could be said with perfect propriety that delay for an indefinite period would 328 make the performance of the contract impossible within the specified time and this would seriously affect the object and purpose of the venture. But when there is no time limit whatsoever in the contract, nor even an understanding bet ween the parties on that point and when during the war the parties could naturally anticipate restrictions of various kinds which would make the carrying on of these operations more tardy and difficult than in times of peace, we do not think that the order of requisition affected the fundamental basis upon which the agreement rested or struck at the roots of the adventure. The learned Judges of the High Court in deciding the case against the plaintiff relied entirely on the time factor. It is true that the parties could not contemplate an absolutely unlimited period of time to fulfil their contract. They might certainly have in mind a period of time which was reasonable having regard to the nature and magnitude of the work to be done as well as the conditions of war prevailing at that time. Das Gupta, J., who delivered the judgment of the High Court, says first of all that the company had in contemplation a period of time not much exceeding 2 or 3 years as the time for performance of the contract; the purchaser also had the same period of time in contemplation. The learned Judge records his finding on the point in the following words: "My conclusion on a consideration of the surrounding circumstances of the contract is that the parties contemplated that the roads and drains would be constructed and the conveyance would be completed in the not distant future. " This finding is inconclusive and goes contrary to what has been held by the District Judge who was undoubtedly the last court of facts. In our opinion, having regard to the nature and terms of the contract, the actual existence of war conditions at the time when it was entered into, the extent of the work involved in the development scheme and last though not the least the total absence of any definite period of time agreed to by the parties within which the work was 329 to be completed, it cannot be said that the requisition order vitally affected the contract or made its performance impossible. Mr. Gupta, who appeared for the respondent company. put forward an alternative argument that even if the performance of the contract was not made impossible. it certainly became illegal as a result of the requisition order and con sequently the contract became void under section 56 of the as soon as the requisition order was made. In support of his contention the learned counsel placed reliance upon certain provisions of the Defence of India Rules and also upon illustration (d) to section 56 of the Contract Act. All that the Defence Regulations show is that the violation of a requisition order could be punished as a criminal offence. But no matter in whichever way the requisition order could be enforced, in substance it did nothing else but impose a prohibition on the use of the land during the period that it remained in force. The effect of such prohibition on the performance of the contract, we have discussed above, and we do not think that the mere fact that the requisition order was capable of being enforced by a criminal sanction made any difference in this respect. In any view this question was not raised in any of the courts below and has not been indicated even in the respondent 's statement of the case. We do not think that it would be proper to allow this question to be raised for the first time before us, as it requires consideration of the different provisions of the Defence of India Act and also of the implication of illustration (d) appended to section 56 of the Contract Act. In our opinion, the events which have happened here cannot be said to have made the performance of the contract impossible and the contract has not been frustrated at all. The result is that the appeal is allowed, the judgment and decree of the High Court of Calcutta are set aside and those of the courts below restored. The plaintiff will have his costs in all the courts. Appeal allowed. Agent for the respondent No. I : R. R. Biswas.

IN-Abs

The doctrine of frustration is really an aspect or part of the law of discharge of contract by reason of supervening impossibility or illegality of the act agreed to be done and hence comes within the purview of section 56 of the Indian Contract Act. The view that section 56 applies only to cases of physical impossibility and that where this section is not applicable recourse can be had to the principles of English law on the subject of frustration is not correct. English cases can have only a persuasive value, and are only helpful in showing how English courts decided cases under similar circumstances. Section 56 of the Indian Contract Act lays down a rule of positive law and does not leave the matter to be determined according to the intention of the parties. According to the Indian Contract Act. a promise may be express or implied. In cases, therefore, where the court gathers as a matter of construction that the contract itself contained impliedly or expressly a term, according to which it would stand discharged on the happening of certain circumstances, the dissolution of the contract would take place under the terms of the contract itself and such cases would be outside the purview of section 56 altogether. Although in English law these cases are treated as cases of frustration, in India they would be dealt with under section 32 of the Indian Contract Act which deals with contingent contracts or similar other provisions contained in the Act. In the large majority of cases however the doctrine of frustration. is applied not on the ground that the parties themselves agreed to an implied term which operated to release 311 them from the performance of the contract. The relief is given by the court on the ground of subsequent impossibility when it finds that the whole purpose or basis of a contract was frustrated by the intrusion or occurrence of an unexpected event or change of circumstances which was beyond what was contemplated by the parties at the time when they entered into the agreement. Here there is no question of finding out an implied term agreed to by the parties embodying a provision for discharge, because the parties did not think about the matter at all nor could possibly have any intention regarding it. When ' such an event or change of circumstance occurs which is so, fundamental as to be regarded by law as striking at the root of the contract as a whole, it is the court which can pronounce the contract to be frustrated and at an end. The court undoubtedly has to examine the contract and the circumstances under which it was made. The belief, knowledge and intention of the parties are evidence, but evidence only on which the court has to form its own conclusion whether the changed circum stances destroyed altogether the basis of the adventure and its underlying object. This may be called a rule of construction by English Judges but it is certainly not a principle of giving effect to the intention of the parties which underlies all rules of construction. This is really a rule of positive law and as such comes within the purview of section 56 of the Indian Contract Act. The reason underlying the rule of English law that the doctrine of frustration does not apply to contracts for the sale of land. is that under the English law, ,is soon as the agreement to sell is complete the buyer becomes the owner of the land in equity. As a mere agreement to sell does not confer any rights of ownership on the buyer under the Indian law, the doctrine of frustration is as applicable in India to agreements for sale of land as in the case of other agreements. In 1940 as an integral part of a development scheme of an extensive area of land started by the defendant company, it entered into a contract with the plaintiff 's predecessor for the sale of a Plot of land to the latter accepting a small sum of money as earnest. It undertook to construct roads and drains and the conveyance was to be completed soon after the completion of tile roads on payment of the balance of the Price. As a considerable portion of the area comporised in the scheme was requisitioned by the Government for military Purposes in 1941, the company wrote to the defendant that the road construction could not be taken up for an indefinite period and required him to treat the agreement as cancelled and receive back his earnest: Held. that having regard to the nature and terms of the contracts the actual existence of war condition at the time when it was entered into the extent of the work involved in the scheme fixing no time limit in the agreement for the cons truction of the roads etc., and the fact that the order of requisition was in its very nature of a temporary character, the requisition did not affect the fundamental basis of the contract; nor 312 did the performance of the contract become illegal by reason of the requisition, and the contract had not therefore become impossible within the meaning of section 56 of the Indian Contract Act. Joseph Constantine Steamship Co. vs Imperial Smelting Cor poration Ltd. ([1942] A.C. 154), Tamplin Steamship Co. Ltd. vs Anglo American Products Co. Ltd. ([1916] A.C. 397), Kesari Chand vs Governor General in Council (I.L.R. , Ganga Saran vs Ram Charan ([1952] S.C.R. 36), Taylor vs Caldwell (3 B. and section 826), Robinson vs Davison ; Denny Mott and Dickson Ltd. vs James B. Frazer & Co. Ltd. ; referred to.

Appeal No. 844 of 1963. 169 Appeal by special leave from the judgment and decree date November 1, 1960 of the Madras High Court in Appeal No. 199 of 1957. A. Ranganadham Chetty and A.V. Rangam, for the appellant. A.V. Vishwanatha Sastri and R. Thiagarajan, for respondent Nos. 1 and 2. The Judgment of the Court was delivered by Shah, J. Venkatarama lyengar, Kasthuri Iyengar and Ranga lyengar, residents of the village Kariamanikam in Tiruchirappalli District, with the aid of contributions, subscriptions and donations set up a Samaradhanai Fund for feeding Brahmin pilgrims attending Sri Venkatachalapathiswami shrine at village Gunaseelam on the occasion of Rathotsavam festival. Between the years 1936 and 1940 seven acres of land were purchased for Rs. 10,500 to provide a permanent income for the Fund. It was found that the expenses incurred for the Rathotsavam festival did not exhaust the entire income and the balance was utilised for Vanabhojanam in Kariamanikam village in the month of Kartigai and on the Dwadesi following Vaikunta Egadesi day. The President, Hindu Religious and Charitable Endowments Board, sought to levy for the years 135 1 to 1354 Fasli contributions under section 69 of Madras Act 2 of 1927 in respect of the Fund. But in Suit No. 297 of 1947 of the file of the District Court at Tiruchirappalli that claim was disallowed. The District Court held that the charity was not a "specific endowment" within the meaning of Act 2 of 1927. After the Madras Hindu Religious and Charitable Endowments Act 19 of 1951 was enacted, the Deputy Commissioner of Hindu Religious and Charitable Endowments initiated a fresh proceeding under section 57(d) of that Act and held that the Samardhanai Fund was a "religious charity" within the meaning of section 6(13) of the Act. Against that order an appeal was carried by the trustees of the Fund to the Commissioner of Hindu Religious and Chartiable Endowments. The Commissioner held that feeding Brahmins in connection with the religious festival of Hindus was a public charity and also a religious charity within the meaning of section 6(13) of Madras Act 19 of 1951. The trustees of the Fund then instituted Suit No. 181 of 1954 in the Court of the Subordinate Judge. Tiruchirappalli to set aside the order of the Commissioner on the plea that the Samardhanai Fund was a private charity not associated with any Hindu festival or service in a temple and was not religious charity or a specific endowment or a public charity, and that it could in no manner become subject to control of the Commissioner, Madras Hindu Religious and Charity Endowments. The suit was resisted by the Commissioner contending that the Fund was held and administered for a religious charity viz. feeding Brahmin pilgrims on the occasion of a Hindu festival. The Subordinate Judge held 170 that the Fund was a public charity and that it was also "a religious charity" within the meaning of section 6(13) of the Act,. the charity being associated with the Hindu festival of Rathotsavam at the Gunaseelam temple. In appeal against the order of the Subordinate Judge dismissing the suit filed by the trustee_, the High Court of Madras held that the Samardhanai Fund was a public charity within the meaning of section 6(13) of the Act, but not being associated with any Hindu festival or observance of a religious character it was not a "religious charity" and the Commissioner had no jurisdiction to bring it under his control. The High Court accordingly allowed the appeal and decreed the suit filed by the trustees. With special leave, the Commissioner has appealed to this Court. The only question which falls to be determined in this appeal is whether on the facts found by the Court of First Instance and confirmed by the High Court, the Samardhanai Fund is a "religious charity" within the meaning of section 6(13) of Madras Act 19 of 1951. Clause (13) of section 6 defines "religious charity" as meaning "a public charity associated with a Hindu festival or observance of a religious character, whether it be connected with a math or temple or not". The definition prescribes two conditions which go to constitute a religious charity: there must be a public charity and that charity must be associated with a Hindu festival or observance, co of a religious character. If these be fulfilled, a public charity will be a religious charity, even if it is not connected with a math or temple. The Subordinate Judge held on the evidence that the "charity in question is a feeding charity conducted during the ten days of the Rathotsavam in the Prasanna Venkatachallapathiswami temple in Gunaseelam in the month of Purattasi. Only Brahmins are fed and not other community people. There are similar feeding charities for the different communities conducted by the respective community people. The charity in question has no connection with the Gunaseelam temple in the sense that the food "prepared is not offered to the deity, and feeding is done not in the temple premises but at a separate place originally in a specially erected pandal and now in Seshagiri Iyer 's choultry (Dharamshalla). The other communities are not fed at this charity. The temple authorities have no voice in the conduct of the feeding", and the High Court agreed with that view. The Subordinate Judge held on those findings that the Samardhanai Fund was a public charity within the meaning of section 6(13) and with that view also the High Court agreed. The Subordinate Judge also held that the charity was associated with the Hindu festival of Rathotsavam in Sri Prasanna Venkatachallapathiswami temple in Gunaseelam Rathotsavam being an observance of a religious character when the deity is taken out in procession in a chariot and therefore the charity in question was clearly one associated with a Hindu festival and also with the observance of a religious character. In disagreeing with that view, the High Court observed that the expression "associated with a Hindu festival or observance of a religious character" imported some unity of purpose or 171 common object or common endeavour between the festival and the charity and in the absence of such unity, common object or common endeavour, the charity could not be regarded as a religious charity within the meaning of section 6(13)of the Act. In the view of the High Court that feeding Brahmin pilgrims during the Rathotsavam festival of Sri Venkatachallapathiswami shrine at Gunaseelam did not constitute an association between the Fund and the Rathotsavam festival itself, for the trustees of the shrine conducting the festival "had no manner of check, control or supervision over the feeding charity or Samardhanai Fund", they could not insist upon the feeding being done during the festival, and "cessation or discontinuance of the feeding by the trustees of the feeding charity may constitute a breach of trust on their part but cannot in the least affect the due performance of the Rathotsavam festival itself". They further observed that belief of the founders of the charity that feeding Brahmins on the occasion of an important festival was meritorious. will not establish "any link or connection" between the festival and the charity. We are unable to agree with the view so expressed by the High Court. The expression "associated" in section 6(13) of Act 19 of 1951 is used having regard to the history of the legislation, the scheme and objects of the Act, and the context in which the expression occurs, as meaning "being connected with" or "in relation to". The expression does not import any control by the authorities who manage or administer the festival. A Hindu religious festival or observance may have a local significance, in that it is celebrated or observed in a particular locality in connection with a shrine, temple or math, or it may be a festival or observance celebrated generally without any connection with any temple or math. In the case of such general festivals or observances there is no one who can be so said to control the celebrations, and the definition of "religious charity" includes such general festivals and observances. It cannot be assumed that there must always be a set of persons who control the celebration of a festival or an observance. The test suggested by the High Court that in order that there should be, between the charity and the festival or observance such a relation that the administration of the charity must be controlled by those who celebrate the festival or observance in a temple or math, besides being inapt in the case of general festivals and observances can only be evolved if words which are not found in the definition of "religious charity" are added thereto. Mr. Vishwanatha Sastri appearing on behalf of the respondenttrutees contended that the expression "associated with a Hindu festival or observance of a religious character" in the definition of "religious charity" implies that the public charity must be an integral part of the Hindu religious festival or observance. But there is nothing in the Act which indicates any such intention on the part of the Legislature. Mr. Sastri sought to give diverse illustrations in support. of his contention that mere feeding of Brahmins on the occasion of a Hindu festival or observance will 172 not amount to association within the meaning of section 6(13). It is unnecessary to deal with these illustrations, for the definition contemplates a public charity which alone can be a religious charity if the other conditions are fulfilled. A voluntary celebration of an event of religious significance by feeding Brahmins does not make it a public charity. There must be an institution which may in law be regarded as a public charity, before it may by its association with a religious festival or observance be regarded as a religious charity. The association undoubtedly must be real and not imaginary, but to constitute association it is not predicated that the administration of public charity must be controlled by the persons responsible for celebrating the religious festival in a temple or math or be an integral part of the festival or observance. On the facts found, it is clear that on the occasion of the Rathotsavam festival of Sri Prasanna Venkatachalapathiswami shrine, pilgrims from many places attend the festival and the object of the charity is to feed Brahmins attending the shrine on the occasion of this festival. It is not disputed that setting up a Fund for feeding Brahmins is a public charity. The primary purpose of the charity is to feed Brahmin pilgrims attending the Rathotsavam. This public charity has therefore a real connection with the Rathotsavam which is a Hindu festival of a religious character, and therefore it is a religious charity within the meaning of section 6(13) of Madras Act 19 of 1951. Surplus income of the Fund is used in Vanabhojanam in the month of Kartigai, and on the day following the Vaikunta Ekadeshi. it is not suggested that on that account the Fund is not a "religious charity". We therefore set aside the order passed by the High Court and restore the order passed by the Trial Court. There will be no order as to costs throughout. Appeal allowed.

IN-Abs

A Samaradhanai Fund was started for the purpose of feeding Brahmin pilgrims attending Sri Venkatachalapathiswami shrine at village Gunaseelam (in Madras State) on the occasion of Rathotsavam festival. On the enactment of the Madras Hindu Religious and Charitable Endowments Act 19 of 1951 the Deputy Commissioner of Hindu Religious and Charitable Endowments initiated proceedings under section 57(d) of the Act and held that the aforesaid fund was a religious charity ' within the meaning of section 6(13) of the Act. His order was upheld by the Commissioner. The Trustees of the Fund then filed a suit to set aside the order of the Commissioner contending that the Samaradhanai Fund was neither a public charity nor a religious charity '. In section 6(13), 'religious charity ' is defined as a "public charity associated with a Hindu festival or observance a religious character, whether it be connected with a math or temple or not". The trial court decided against the trustees but the High Court held in their favour. According to the High Court feeding the Brahmins was a public charity but it was not a 'religious charity in as much as those who conducted the celebration of the Rathotsavam at the shrine had no control over the feeding of Brahmins out of the Samaradhanai Fund. On appeal to the Supreme Court by the Commissioner, with special leave. HELD: Feeding of Brahmins out of the Samaradhanai fund was associated with the celebration of the Rathotsavam at the Venkatachalapathiswami shrine. The expression "associated" in section 13 of Act 19 of 1951 is used having regard to the history of the legislation the scheme and objects of the Act and the context in which it occurs, as meaning "being connected with" or "in relation to". The expression does not import any control by the authorities who manage or administer the festival. There are many Hindu festivals which are celebrated by the public generally without any connection with any temple or math. The definition of "religious charities" includes such general festivals and observances. It cannot be said that there must always be a set of persons who control the celebration of a festival or an observance. F171 D G] Nor can it be contended that the expression "associated with a Hindu festival or observance of a religious character" in the definition of "religious charity" implies that the public charity must be an integral part of the Hindu religious festival or observance. There is nothing in the Act which indicates any such intention on the part of the legislature. [171 H]

Appeal No. 583 of 1961. Appeal by special leave from the Judgment and decree dated August 12, 1959, of the Rajasthan High Court in Civil Misc. First Appeal No. 50 of 1956. Gopal Singh, for the appellant. B. P. Maheshwari, for the respondent. April 22, 1964. The Judgment of the Court was delivered by AYYANGAR, J. The facts giving rise to this appeal, by special leave, are briefly as folows: The respondent Bhooralal brought a suit Civil Suit 20 1954 in the Court of the Subordinate Judge, First Class, Kekri against the appellant claiming possession of certain property which was described in the plaint and for mesne profits. The allegation in the plaint was that the plaintiff was the absolute owner of the said property of which the defendant was in wrongful possession and that in spite of demands he had failed to vacate the same and was therefore liable to pay the mesne profits claimed. In the plaint he made reference to a previous suit that had been filed by him and his mother (C.S. 28 of 1950) wherein a claim had been made against the defendant for the recovery of the mesne profits in regard to the same property for the period ending with February 10, 1950. It was also stated that mesne profits had been decreed in the said suit. In the Written Statement that was filed by the present appellant, besides disputing the claim of the plaintiff to the reliefs prayed for on the merits, a technical plea to the maintainability of the suit was also raised in these terms: "That 0. r. 2, Civil Procedure Code is a bar to the suit. When the suit referred to in paragraph 2 of the plaint was filed the plaintiff had a cause of action for the reliefs also. He having omitted to sue for possession in that suit, is now barred from claiming relief of possession. No second suit for recovery of mesne profits is maintainable in law. 833 Since the plaintiff had lost his remedy for the relief of possession he cannot seek recovery of mesne profits also. " On these pleadings the learned Subordinate Judge framed 5 issues and of these the 4th issue ran: "Whether 0. r. 2, Civil Procedure Code is a bar?". Before evidence was led by the parties issue No. 4 was argued before the learned trial Judge as a preliminary issue and the Court recorded a finding that the suit was barred by the provision named and directed the dismissal of the suit. The plaintiff preferred an appeal from this decree to the additional District Judge and the appellate Court considered this plea as regards the bar under 0. r. 2, Civil Procedure Code on two alternative bases. In the first place, the learned District Judge pointed out that the pleadings in the earlier suit C.S. 28 of 1950 had not been field in the case and made part of the record, so that it was not known what the precise allegations of the plaintiff in his previous suit were. For this reason the learned District Judge held that the plea of a bar under 0. r. 2, Civil Procedure Code should not have been entertained at all. He also considered the question as to whether, if the plea was available, it could have succeeded. On this he referred to the conflict of Judicial opinion on this point and held that if the point did arise for decision he would have decided in favour of the plaintiff and treated the cause of action for a suit for mesne profits as different from the cause of action for the relief of possession of property from a trespasser. In view, however, of his finding on the first point as to there being no material on the record to justify the plea of a bar under 0. 2. r. 2, Civil Procedure Code the learned District Judge did not rest his decision on his view of the law as regards the construction of 0. 2. r. 2(3). In the circumstances he set aside the dismissal of the suit and remanded it to the trial Court for being decided on the merits in accordance with the law. The defendant the appellant before us preferred a second appeal to the High Court of Rajasthan and the learned Single Judge dismissed this appeal. It is from this judgment that the appellants have preferred this appeal after obtaining special leave. As already indicated, there is a conflict of judicial opinion on the question whether a suit for possession of immoveable property and a suit for the recovery of mesne profits from the same property are both based on the same cause of action, for it is only if these two reliefs are based on "the same cause of action" that the plea of 0. , Civil Procedure Code 1, P(D)ISCI 27 834 that was raised by the appellant could succeed. Clause (3)of O. 2. r. 2, Civil Procedure Code that is relevant in this context reads: (3) A person entitled to more than one relief in respect of the same cause of action may sue for all or any of such reliefs, but if he omits, except with the leave of the Court, to sue for all such reliefs, he shall not afterwards sue for any reliefs so omitted. " Some of the High Courts, notably Madras, have in this con nection, referred to the terms of 0. 2. r. 4 which runs: "R. 4. No cause of action shall, unless with the leave of the Court, be joined with a suit for the recovery of immoveable property, except (a) claims for mesne profits or arrears of rent in respect of the property claimed or any part thereof; (b) claims for damages for breach of any contract under which the property or any part thereof is held; and (c) claims in which the relief sought is based on the same cause of action: Provided that nothing in this rule shall be deemed to prevent any party in a suit for foreclosure or redemption from asking to be put into possession of the mortgaged property". as an aid to the construction of the term 'cause of action ' and the expression 'relief based on the same cause of action ' in 0. 2. r. 2(3). Reading these two provisions together it has been held that the cause of action for suits for possession of immoveable property and the cause of action for a suit in respect of mesne profits from the same property are distinct and different. On the other hand, it has been held, particularly by the High Court of Allahabad that the basis of a claim for mesne profits is wrongful possession of property and so is a claim for possession and thus the cause of action for claiming either relief is the same viz., wrongful possession of property to which the plaintiff is entitled. On this reasoning it has been held that a plaintiff who brings in the first instance a suit for possession alone or for mesne profits alone is afterwards debarred from suing for the other relief under 0. 2. r. 2(3). The learned trial Judge had, after referring to the ,conflict of authority, expressed his preference for the Allahabad view and had, therefore, upheld the defence. At the stage of the appeal the learned District Judge had, as already pointed out, expressed his preference for the other view. The 835 learned Single Judge expressed his concurrence with the learned District Judge in preferring the Madras view as against the decisions of the Allahabad High Court. Learned counsel for the appellant sought to argue that the Allahabad view was more in accordance with principle and with the proper construction of 0. 2. r. 2(3), Civil Proce dure Code. We do not consider it necessary to examine this conflict of judicial opinion in this case as, in our opinion, the learned District Judge was right in holding that the appellant had not placed before the Court material for the purpose of founding a plea of 0. r. 2, Civil Procedure Code. In order that a plea of a bar under 0. 2. r. 2(3), Civil Procedure Code should succeed the defendant who raises the plea must make out (1) that the second suit was in respect of the same cause of action as that on which the previous suit was based, (2) that in respect of that cause of action the plaintiff was entitled to more than one relief, (3) that being thus entitled to more than one relief the plaintiff, without leave obtained from the Court, omitted to sue for the relief for which the second suit had been filed. From this analysis it would be seen that the defendant would have to establish primarily and to start with, the precise cause of action upon which the previous suit was filed, for unless there is identity between the cause of action on which the earlier suit was filed and that on which the claim in the later suit is based there would be no scope for the application of the bar. No doubt, a relief which is sought in a plaint could ordinarly be traceable to a particular cause of action but this might, by no means, be the universal rule. As the plea is a technical bar it has to be established satisfactorily and cannot be presumed merely on basis of inferential reasoning. It is for this reason that we consider that a plea of a bar under 0. 2. r. 2, Civil Procedure Code can be established only if the defendant files in evidence the pleadings in the previous suit and thereby proves to the Court the identity of the cause of action in the two suits. It is common ground that the pleadings in C.S. 28 of 1950 were not filed by the appellant in the present suit as evidence in support of his plea under 0. r. 2, Civil Procedure Code. The learned trial Judge, however, without these pleadings being on the record inferred what the cause of action should have been from the reference to the previous suit contained in the plaint as a matter of deduction. At the stage of the appeal the learned District Judge noticed this lacuna in the appelllant 's case and pointed out, in our opinion rightly, that without the plaint in the previous suit being on the record, a plea of a bar under 0. r. 2, Civil Procedure Code was not main tainable. Learned counsel for the appellant, however, drew our attention to a passage in the judgment of the learned Judge in the High Court which read: LP(D)ISCl 27(a) 836 "The plaint, written statement or the judgment of the earlier court has not been filed by any of the parties to the suit. The only document filed was the judgment in appeal in the earlier suit. The two courts have, however, freely cited from the record of the earlier suit. The counsel for the parties have likewise done so. That file is also before this Court. " It was his submission that from this passage we should infer that the parties had, by agreement, consented to make the pleadings in the earlier suit part of the record in the present suit. We are unable to agree with this interpretation of these ,observations. The statement of the learned Judge "the two courts have, however, freely cited from the record of the ,earlier suit" is obviously inaccurate as the learned District Judge specifically pointed out that the pleadings in the earlier suit were not part of the record and on that very ground had rejected the plea of the bar under 0. 2. r. 2, Civil Procedure Code. Nor can we find any basis for the suggestion that the learned Judge had admitted these documents at the second appeal stage under 0. r. 27, Civil Procedure Code by consent of parties. There is nothing on the record to suggest such an agreement or such an order, assuming that additional evidence could legitimately be admitted in a second appeal under 0. r. 27, Civil Procedure Code. We can therefore proceed only on the basis that the pleadings in the earlier suit were not part of the record in the present suit. Learned counsel for the appellant, however, urged that in his plaint in the present suit the respondent had specifically referred to the previous suit having been for mesne profits and that as mesne profits could not be claimed except from a trespasser there should also have been an allegation in the previous suit that the defendant was a trespasser in wrongful possession of the property and that alone could have been the basis for claiming mesne profits. We are unable to accept this argument. In the first place, it is admitted that the plaint in the present suit was in Hindi and that the word `mesne profits ' is an English translation of some expression used in the original. The original of the plaint is not before us and so it is not possible to verify whether the expression `mesne profits ' is an accurate translation of the expression in the original plaint. This apart, we consider that learned counsel 's argument must be rejected for a more basic reason. Just as in the case of a plea of res judicata which cannot be established in the absence on the record of the judgment and decree which is pleaded as estoppel, we consider that a plea under 0. r. 2, Civil Procedure Code cannot be made out except on proof of the plaint in the previous suit the filing of which is said to create the bar. As the plea is basically founded 837 on the identity of the cause of action in the two suits the ,defence which raises the bar has necessarily to establish the ,cause of action in the previous suit. The cause of action would be the facts which the plaintiff had then alleged to support the right to the relief that he claimed. Without placing before the Court the plaint in which those facts were alleged, the defendant cannot invite the Court to speculate or infer by a process of deduction what those facts might be with reference to the reliefs which were then claimed. It is not impossible that reliefs were claimed without the necessary averments to justify their grant. From the mere use of the words `mesne profits ' therefore one need not necessarily infer that the possession of the defendant was alleged to be wrongful. It is also possible that the expression 'mesne profits ' has been used in the present plaint without a proper appreciation of its significance in law. What matters is not the characterisation of the particular sum demanded but what in substance is the ,allegation on which the claim to the sum was based and as regards the legal relationship on the basis of which that relief was sought. If is because of these reasons that we consider that a plea based on the existence of a former pleading cannot be entertained when the pleading on which it rests has not been produced. We therefore consider that the order of remand passed by the learned Additional District Judge which was confirmed by the learned Judge in the High Court was right. The merits of the suit have yet to be tried and this has been directed by the order of remand which we are affirming. The appeal fails and is dismissed. In the circumstances of the case there will be no order as to costs. Appeal dismissed.

IN-Abs

The plaintiff respondent brought a suit against the appel lant for recovery of possession of certain property and for mesne profits. The plaintiff claimed recovery of possession and mesne profits on the ground that he was the absolute owner of the property described in the plaint and the defendant was in, wrongful possession of the same. In the plaint the plaintiff made reference to a previous suit that had been filed by him and his mother (C.S. 28 of 1950) wherein a claim had been made against the defendant for the recovery of the mesne profits in regard to the same property for the period ending February 1.0, 1950. In the previous suit the mense profits had been decreed. In his written statement in the present suit the defendant appellant raised a technical plea under Order 2 rule 2 of the Civil Procedure Code to the maintainability of the suit. Before evidence was led by the parties the trial court de cided this preliminary issue raised by the defendant. The trial court held that the suit was barred under 0. 2 r. 2 of the Code. On appeal, the Appellate Court held that the plea of a bar under Order 2 rule 2, Civil Procedum Code should not have teen entertained at all because the pleadings in the earlier suit C.S. 28 of 1950 had not been filed in the present case. Therefore, the Appellate Court set aside the order of the trial Court. Against this order the defendant preferred an appeal which was dismissed by the High Court. The appellant obtained special leave against the judgment of the High Court. Hence the appeal Held:(i) A plea under Order 2 rule 2 of the Code based on the existence of a former pleading cannot be entertained when the pleading on which it rests has not been produced. It is for this reason that a plea of a bar under 0. 2 r. 2 of the Code can be established only if the defendant files in evidence the pleadings in the previous suit and thereby proves to the court the identity of the cause of action in the two suits. In other words a plea under 0. 2 r. 2 of the Code cannot be made out except on proof of the plaint in the previous suit the filing of which is said to create the bar. Without placing before the court the plaint in which those facts were alleged, the defendant cannot invite the court to speculate or infer by a process of deduction what those facts might be with reference to the reliefs which were then claimed. On the facts of this case it has to be held that the plea of a bar under 0, 2 r. 2 of the Code should not have been entertained at all by 832 the trial Court because the pleadings in civil suit No. 28 of 1950 were not filed by the appellant in support of this plea. (ii)in order that a plea of a bar under 0. 2 r. 2 (3) of the Code should succeed the defendant who raises the plea must make out (i) that the second suit was in respect of the same cause of action as that on which the previous suit was based; (ii) that in respect of that cause of action the plaintiff was entitled to more that one relief (iii) that being thus entitled to more than one relief plaintiff, without leave obtained from the Court omitted to sue for the relief for which the second suit had been filed.

Appeal No. 791 of 1962. Appeal by special leave from the judgment and order dated March 22, 1960, of the Bombay High Court in Award No. 18 of 1959. section T. Desai and I. N. Shroff, for the appellant. B. C. Misra, for the respondent. April 29, 1964. The Judgment of the Court was delivered by HIDAYATULLAH J. This appeal by special leave is directed against an order of the High Court of Bombay dated March 22, 1960 in its ordinary original civil jurisdiction. The facts are simple. By a letter dated July 30, 1955, Messrs. Kajaria rraders (India) Ltd., who is the respondent here and Messrs. Foreign Import and Export Association (sole proprietory firm owned by the appellant Jagdish C. Gupta) entered into a partnership to export between January and June 1956, 10,000 tons of manganese ore to Phillips Brothers (India) Ltd., New York. Each partner was to supply a certain quantity of manganese ore. We are not concerned with the terms of the agreement but with one of its clauses which provided: "That in case of dispute the matter will be referred for arbitration in accordance with the Indian . " The company alleged that Jagdish Chander Gupta failed to carry out his part of the partnership agreement. After some correspondence, the company wrote to Jagdish Chander Gupta on February 28, 1959 that they had appointed Mr. R. J. Kolah (Advocate O.S.) as their arbitrator and asked Jagdish Chander Gupta either to agree to Mr. Kolah 's appointment as sole arbitrator or to appoint his own arbitrator. Jagdish Chander Gupta put off consideration and on March 17, 1959 the company informed Jagdish Chander Gupta that as he had failed to appoint an arbitrator within 15 clear days they were appointing Mr. Kolah as sole arbitrator. Jagdish Chander Gupta disputed this and the corn 53 pany filed on March 28, 1959 an application under section 8 (2) of the Indian for the appointment of Mr. Kolah or any other person as arbitrator. Jagdish Chander Gupta appeared and objected inter alia to the institution of the petition. Two grounds were urged (i) that section 8(2) of the Indian was not appli cable as it was not expressly provided in the arbitration clause quoted above that the arbitrators were to be by consent of the parties and (ii) that section 69(3) of the afforded a bar to the petition because the partnership was not registered. The petition was refer red by the Chief Justice to a Divisional Bench consisting of Mr. Justice Mudholkar (as he then was) and Mr. Justice Naik. The two learned Judges agreed that in the circumstances of the case an application under section 8 of the Indian was competent and that the court had power to appoint an arbitrator. They disagreed on the second point: Mr. Justice Mudholkar was of the opinion that section 69(3) of the barred the application while Mr. Justice Naik held otherwise, The case was then referred to Mr. Justice K. T. Desai (as he then was) and he agreed with Mr. Justice Naik with the result that the application was held to be competent. In this appeal it was not contended that the conclusions of the learned Judges in regard to section 8(2) were erroneous. The decision was challenged only on the ground that section 69(3) was wrongly interpreted and the bar afforded by it was wrongly disallowed. Section 69 of the may be reproduced here : "69.(1) No suit to enforce a right arising from a contract or conferred by this Act shall be instituted in any Court by or on behalf of any person suing as a partner in a firm against the firm or any person alleged to be or to have been a partner in the firm unless the firm is registered and the person suing is or has been shown in the Register of Firms as a partner in the firm. 54 (2) No suit to enforce a right arising from a contract shall be instituted in any Court by or on behalf of a firm against any third party unless the firm is registered and the persons suing are or have been shown in the Register of Firms as partners in the (3) The provisions of sub sections(1) and (2) shall apply also to a claim ofset off or other proceeding to enforce a rightarising from a contract, but shall not affect (a) the enforcement of any right to sue for the dissolution of a firm or for accounts of a dissolved firm, or any right or power to realise the property of a dissolved firm, or (b) the powers of an official assignee, receiver or Court under the , or the , to realise the property of an insolvent partner. (4) This section shall not apply (a) to firms or to partners in firms which have no place of business in the territories to which this Act extends, or whose places of business in the said territories are situated in areas to which, by notification under section 56, this Chapter does not apply, or (b) to any suit or claim of set off not exceeding one hundred rupees in value which, in the Presidency towns, is not of a kind specified in section 19 of the , or outside the Presidency towns, is not of a kind specified in the Second Schedule to the Provincial Small Cause Courts Act, 1887, or to any proceeding in execution or other proceeding incidental to or arising from any such suit or claim 'Me section, speaking generally, bars certain suits and pro ceedings as a consequence of non registration of firms. Sub 55 section (1) prohibits the institution of a suit between partners inter se or between partners and the firm for the purpose of .enforcing a right arising from a contract or conferred by the Partnership Act unless the firm is registered and the person suing is or has been shown in the Register of Firms as a partner in the firm. Sub section (2) similarly prohibits a suit by or on behalf of the firm against a third party for the purpose of enforcing rights arising from a contract unless the firm is registered and the person suing is or has been shown in the Register of Firms as a partner in the firm. In the third sub section a claim of set off which is in the nature of a counter claim is also similarly barred. Then that subsection bars "other proceedings". The only doubt that has arisen in this case is regarding the meaning to be given to the expression "other proceeding". One way to look at the matter is to give these words their full and natural meaning and the other way is to cut down that meaning in the light of the words that precede them. The next question is whether the application under section 8 (2) of the can be regarded as a proceeding "to enforce a right arising from a contract", and therefore, within the bar of section 69 of the . Mr. Justice Mudholkar in reaching his conclusion did not interpret the expression "other proceeding" ejusdem generis with the words "a claim of set off". He held further that the application was to enforce a right arising from the contract of the parties. Mr. Justice Naik pointed out that the words used were not "any proceeding" nor "any other proceedings" but "other proceeding" and that as these words were juxtaposed with 'a claim of set off ' they indicated a, proceeding of the nature of a claim in defence. On the second point Mr. Justice Naik held that this was not a proceeding to enforce a right arising from a contract but was a claim for damages and such a claim, could be enter tained because it was based on something which was inde pendent of the contract to supply ore. He held that the, right which was being enforced was a right arising from the and not from the contract of the parties. Mr. Justice K. T. Desai agreed with most of these conclu sions and suggeted that the words preceding "other proceed 56 ing", namely, "a claim of set off" had 'demonstrative and limiting effect '. He seems to have ascertained the meaning of the expression "other proceeding" by reference to the meaning of the words "a claim of set off", which he considered were associated with it. Ile first question to decide is whether the present pro ceeding is one to enforce a right arising from the contract of the parties. The proceeding under the eighth section of the has its genesis in the arbitration clause, because without an agreement to refer the matter to arbitration that section cannot possibly be invoked. Since the arbitration clause is a part of the agreement constituting the partnership it is obvious that the proceeding which is before the court is to enforce a right which arises from a contract. Whether we view the contract between the parties as ;a whole or view only the clause about arbitration, it is impossible to think that the right to proceed to arbitration is not one of the rights which are founded on the . agreement of the parties. The words of section 69(3) "a right arising from a contract" are in either sense sufficient to cover the present matter. It remains, however, to consider whether by reason of the fact that the words "other proceeding" stand opposed to the words "a claim of set off" any limitation in their eaning was contemplated. It is on this aspect of the case that the learned Judges have seriously differed. When in a statute particular classes are mentioned by name and then are followed by general words, the general words are sometimes construed ejusdem generis, i.e. limited to the same category or genus comprehended by the particular wordsbut it is not necessary that this rule must alwavs apply. The nature of the special words and the general words must e considered before the rule is applied. In Allen vs Emerson (1), Asquith J. gave interesting examples of particular words followed by general words where the Principle of ejusdem generis might or might not apply. We ink that the following illustration will clear any difflculty. In the expression "books, pamphlets, newspapers and other (1) [i944] 1 K.B. 362. 57 documents" private letters may not be held included it 'other documents ' be intepreted ejusdem generis with what goes before. But in a provision which reads "newspapers or other document likely to convey secrets to the enemy", the, words 'other document ' would include document of any kind and would not take their colour from 'newspapers '. It follows, therefore, that interpretation ejusdem generis or noscitur a sociis need not always be made when words showiig particular classes are followed by general words. Before the general words can be so interpreted there must be a genus constituted or a category disclosed with reference to which the general words can and are intended to be restricted. Here the expression "claim of set off" does not disclose a category or a genus. Set offs are of two kinds legal and equitable and both are already comprehended and it is difficult to think of any right "arising from a contract" which is of the same nature as a claim of set off and can be raised by a defendant in a suit. Mr. B. C. Misra, whom we invited to give us examples, admitted frankly that it was impossible for him to think of any proceeding of the nature of a claim of set off other than a claim of set off which could be raised in a suit such as is described in the second sub section. In respect of the first sub secton he could give only two examples. They are (i) a claim by a pledger of goods with an unregistered firm whose goods are attached and who has to make an objection under 0. 21 r. 58 of the Code of Civil Procedure and (ii) proving a debt before a liquidator. The latter is not raised as a defence and cannot belong to the same genus as a "claim of set off". The former can be made to fit but by a stretch of some considerable imagination. It is difficult for Lis to accept that the Legislature was thinking of such far fetched things when it spoke of "other proceeding" ejusdem generis with a claim of set off. Mr. Justice Naik asked the question that if all proceedings were to be excluded why was it not considered suffi cient to speak of proceedings along with suits in sub sections (1) and (2) instead of framing a separate subsection about proceedings and coupling 'other proceeding, ' with 'a 58 the search for the answer in the ' scheme of the section itself gives the clue. The section thinks in terms of (a) suits and (b) claims of set off which are in a sense of the nature of suits and (c) of other proceedings. The section first provides for exclusion of suits in sub sections (1) and (2). Then it says that the same ban applies to a claim of set off and other proceeding to enforce a right arising from a contract. Next it excludes the ban in respect of the right to sue (a) for the dissolution of a firm, (b) for accounts of. a dissolved firm and (c) for the realisation of the property of a dissolved firm. The emphasis in each case is on dissolution of the firm. Then follows a general exclusion of the section. The fourth sub section says that the section as a whole, is not to apply to firms or to partners and firms which have no place of business in the territories of India or whose places of business are situated in the territories of India but in areas to which Chapter VII is not to apply and to suits or claims of set off not exceeding Rs. 100 in value. Here there is no insistence on the dissolution of the firm. It is significant that in the latter part of clause (b) of that section the words are "or to any proceeding in execution or other proceeding incidental to or arising from any such suit or claim" and this clearly shows that the word "proceeding" is not limited to a proceeding in the nature of a suit or a claim of set off. Subsection (4) combines suits and a claim of set off and then speaks of "any proceeding in execution" and "other proceeding incidental to or arising from any such suit or clainm" as being outside the ban of the main section. It would hardly have been necessary to be so explicit if the words other proceeding in the main section had a meaning as restricted as is suggested by the respondent. It is possible that the draftsman wishing to make exceptions of different kinds in respect of suits, claims of set off and other proceedings grouped suits in sub sections (1) and (2), set off and other proceedings in sub section (3) made some special exceptions in respect of them in sub section (3) in respect of dissolved firms and then viewed them all together in sub section (4) providing for a complete exclusion ' of the section in respect of suits of particular classes. For convenience of drafting this 59 scheme was probably followed and nothing can be spelled out from the manner in which the section is sub divided. Some cases noticed by the High Court were cited to us but none of them appears to be really in point. In Hafiz Qamar Din vs Nur Din( ') and Babutal Dhandhania vs Messrs. Gauttam and Co.( ') proceedings were started on an award, in one to make it a rule of the Court and in the other to get it set aside. These cases are distinguishable because they deal with awards and it is not necessary to decide whether after an award the proceeding is one to enforce a right arising from a contract. We do not refer to them. In Kottamasu Sreemannarayanamuthy and another vs Chakka Arjanadu() a petition for adjudication of a partner as insolvent was held to be a right arising not from, a contract but from statute. Here the right that is being enforced through the medium of the arises from the contract between the parties and is a part of it. In Jamal vs Firm Umar Haji Karim (4 ) the bar of section 69(3) was claimed during the execution of a consent decree and was disallowed. Grille C. J. observed that the expression 'other proceeding ' indicated something which was 'sui generis of a claim of set off '. If the partners of an unregistered firm. go to court without either asking for a dissolution of the firm or dissolving it themselves and enter into an agreement and compose their differences it is possible to say that the enforcement of the consent decree is no more than the enforcement of a right arising from a contract and is within the ban. It is, however, not necessary to decide this point here. in Ram Lal Harnam Das vs Pal Krishan and others() it was expressly pointed out that the expression 'other proceeding ' in the third sub section applied to proceedings of the nature of a claim of set off and nothing else. This case cannot be said to interpret the sub section correctly. Similarly, Mahendra vs Gurdeyal( '), which lays down that section 69 does not bar a partner of an unregistered partnership firm from applying to the court under section 8 of the for referring the dispute (1) A.T.R (3) A.I.R. 1939 Mad. (5) A.I.R. 1917 Punjab 159. (2) A.r. R. (4) I.L.R. (6) I.L.R. 30 Pat. 109. 60 between partners to arbitrator as provided in the condition of their agreement, cannot be accepted as sound. The ,reason given by the Divisional Bench that as section 69 allows dissolution and accounts of unregistered partnership it cannot bar such an application appears to us to be not quite in Point. In our judgment, the words 'other proceeding ' in sub section (3) must receive their full meaning untramelled by the words 'a claim of set off '. The latter words neither intend nor can be construed to cut down the generality of the words 'other proceeding '. The sub section provides for the application of the provisions of sub sections (1) and (2) to claims of set off and also to other proceedings of any Kind which can properly be said to be for enforcement of any right arising from contract except those expressly mentioned as exceptions in sub section (3) and sub section The appeal is, therefore, allowed. The decision of the High Court will be set aside and the application under section 8(2) of the shall stand dismissed with costs throughout on the applicant in the High Court.

IN-Abs

The respondent entered into a partnership agreement with the appellant. But this was not registered. There was an arbitration clause sti 51 pulating that in case of dispute the matter will be referred for arbitration in accordance with . Dispute having arisen between the respondent and the appellant the former wrote to the latter stating that the dispute be referred for arbitration and that the respondent has appointed one K as the sole arbitrator. On the failure of the appellant to agree to this the respondent filed an application under section 8(2) of the Indian for the appointment of arbitrator. The application was heard by a Division Bench of the High Court before which the appellant contended that section 69(3) of the afforded a bar to the petition because the partnership was not registered. One of the Judges upheld the contention while the other rejected it and the matter was referred to another Judge who held that the application was competent. The present appeal was filed by special leave granted by this Court. HELD: (i) Thai since the arbitration clause formed a part of the agreement constituting the partnership it is obvious that the proceeding which is before the Court is to enforce a right which arises from a contract. Whether one views the contract between the parties as a whole or one views only the arbitration clause it is impossible to think that the right to proceed to arbitration is not one of the rights which are founded on the agreement of the parties. The words of section 69(3) "a right arising from a contract" are in either sense sufficient to cover the present matters. (ii) Interpretation ejusdem genuris or noscitur a sociis need not always be made when showing particular classes are followed try general words. Before the general words can be so interpreted there must be a genus constituted or a category disclosed with reference to which the general words can and are intended to be restricted. The expression "claim of set off" does not disclose a category or a genus. Set offs are of two kinds legal and equitable and both are already comprehended and it is difficult to think of any right "arising from a contract ' which is of the same nature as a claim of set off and can be raised by a dependent in suit. Allen vs Emerson, , referred to. Hafiz Qamar Din vs Nur Din, A.I.R. 1936 Lah. 136, Babulal Dhan Dhania vs M/s. Gautam & Co. A.I.R. 1950 Cal. 341, Kottamasu sreemannarayanmurthy vs Chokka Arjanadtu, A.I.R. , Jamal vs Firm Umar Haji Karim, I.L.R. , and Ram Lal Harnam Das Y. Bal Kishan, A.I.R. 1957 Punj. 159, distinguished. (iii) The words "other proceeding" in sub section (3) must receive their full meaning untramelled by the words "a claim of set off. The latter words neither intend nor can be construed to cut down the generality of the words "other proceeding". The sub section provides for the application of the provisions of sub sections (1) and (2) to claims of set off and also to other proceedings of any kind which can properly be said to be for enforcement of any right arising from contract except those expressly mentioned as exceptions in subsections (3) and (4).

l Appeal No. 897 of 1963. Appeal from the judgment and order dated October 4, 1962 of the Kerala High Court, Ernakulam, in Writ Appeal No. 17 of 1962. 188 A.V. Viswanatha Sastri, Arun B. Saharaya and Sardar Bahadur, for the appellant. V.P. Gopalan Nambiar, Advocate General for the State Kerala and V.A. Seyid Muhammad, for the respondent. The Judgment of the Court was delivered by Bachswat, J. The short question in this appeal is whether the proposed acquisition of the electrical supply undertaking of the appellant by the State of Kerala in pursuance of the notice exhibit G, dated November 20, 1959 is authorised by section 6 of the . The appellant is the holder of a license for the supply of electrical energy in Ernakulam and other places in Cochin. The license was originally granted to the managing agents of the appellant under the Cochin Electricity Regulation III of 1902 then in force in Cochin and subsequently assigned to the appellant with the permission of the Cochin Government. On the merger of Travancore Cochin with the Union of India, the was made applicable by the Part B States Laws Act, 1951 (Act III of 1951) to the Travancore Cochin area, and the Cochin Electricity Regulation stood repealed. The (Act 54 of 1948) was also made applicable to the Travancore Cochin area by the Part B States Laws Act, 1951. On March 31, 1957 the Kerala Electricity Board was constituted, and by s.71 of Act 54 of 1948, any right and option to purchase the undertaking of the licensee under the was transferred to and vested in the Board. Now, the right or option to purchase the undertaking of a licensee under s.7(1) of the then in force was exercisable "on the expiration of such period, not exceeding fifty years, and of every such subsequent period, not exceeding twenty years as shall be specified in this behalf in the license. " Sub section (4) of s.7 provided: "Not less than two years ' notice in writing of any election to purchase under this section shall be served upon the licensee by the local authority or the State Government, as the case may be." Clause 15(a) of the license held by the appellant provides: "The option of purchase given by Section 7, sub section (i) of the Regulation shall first be exercisable on the expiration of 25 years from the commencement of this license and on the expiration of every subsequent period of ten years during the continuance of this license." Section 7(1) of the corresponds to section 7(i) of the Regulation, that is to say, of the Cochin Electricity. Regulation. The date of the commencement of the license is December 3, 1935. The period of 25 years mentioned in el. 15(a) of the license expired on December 2, 1930. The last date for giving the two years notice of the election to purchase on, the try of ' December 2, 1960 required under section 7(4) of the Indian e electricity Act, 1910 expired on December 2. 1958. On February 11, 1959, the State Electricity Board served on the appellant a notice, exhibit B, of its election to purchase the undertaking of, the appellant on the expiry of December 2, 1960, but this notice was not being in accordance with section 7,(4) was of no legal effect. By the Indian Electricity (Amendment) Act, 1959 (Act 32 1959), s.6 now in force was substituted for the old s.7 of the , with effect from September 5, 1959. Section 6 of the now in force reads: "6. (1) Where a license has been granted to any person not being a local authority, the State Electricity Board shall, (a) in 'the case of a license granted ' before the commencement of the Indian Electricity (Amendment) Act, 1959, on the expiration of each such period as is specified in the license; and (b) in the case of a. license granted on or after the commencement of the said Act, on the expiration of such period not exceeding twenty years and of every such subsequent period, not exceeding ten years, as shall be specified in this behalf in the license; have the option of purchasing the undertaking and such opt:on shall be exercised by the State Electricity Board serving upon the license a notice in writing of not less than one year requiring the licensee to sell the undertaking to it at the expiry of the relevant period referred to in this sub section. (2) Where a State Electricity Board has not been constituted, or if constituted, does not elect to purchase the undertaking, the State Government shall have the like option to be exercised in the like manner of purchasing the undertaking. (3)Where neither the State Electricity Board nor the Government elects to purchase the undertaking, any authority constituted for an area within which the area of supply is included shall have the like option to be exercised in the like manner of purchasing the undertaking. (4) If the State Electricity Board intends to exercise the option of purchasing the undertaking under this it shall send an intimation in writing of such intention to the State Government at least eighteen months before the expiry of the relevant period referred to in subsection (1) and if no such intimation as aforesaid is receiv 190 ed by the State Government the State Electricity Board shall be deemed to have. elected not to purchase the undertaking. (5) If the State GoVernment intends to exercise the option of purchasing the undertaking under this section. shall send an intimation in writing of such intention to the local authority, if any, referred to in sub section (3) at least fifteen months before the expiry of the relevant period referred to in sub section (1) and if no such intimation as aforesaid is received by the local authority. the State Government shall be deemed to have elected not to purchase the undertaking. (6) Where a notice exercising the option of purchasing the undertaking has been served upon the licensee under this sect:on, the licensee shall deliver the undertaking to the State Electricity Board, the State Government or the local authority, as the case may be, on the expiration of the relevant period referred to in sub section (1) pending the determination and payment of the purchase price. (7) Where an undertaking is purchased under this section, the purchaser shall pay to the licensee the purchase price determined in accordance with the provisions of sub section (4) of section 7A." On October 24, 1959, the State Electricity Board served upon the appellant a notice exhibit D, of its election to purchase the undertaking on the expiry of December 2, 1960. On October 29, 1959, the State Electricity Board served upon the appellant another notice, exhibit E, of its election. On November 20, 1959, the State Government served upon the appellant a notice, exhibit G, of its election to purchase the undertaking on the expiry of December 2. 1960. On November 14, 1960, the appellant filed a writ petition in the High Court of Kerala impleading the State of Kerala and the Kerala State Electricity Board and asking for the issue of appropriate writs and orders restraining them from taking any action pursuant to the notices. B,D,E and G. On December 20. 1961, a learned single Judge of the High Court passed the following order : "In view of the representation made before me by both the learned Advocate General appearing for the State, the I st respondent, and Mr. Krishnaswami lIyengar, learned counsel appearing for the Kerala State Electricity Board. the second respondent. that for the purpose of this writ petition. the notices issued by the Kerala State Electricity Board, Exs. B. D and E can be ignored, it follows that neither the 1st respondent nor the 2nd respondent has any jurisdiction or power to take any action on the basis Exs. B. D or E. In view of the fact that I am uphold 191 ing the action of the State Government, who had issued the notice exhibit G, it follows that the 1st respondent alone is entitled to take further action under the Act. in pursuance of the notice, exhibit G, issued and sent along with the covering letter, exhibit F on 20 1 1 1959. It follows, subject to what is stated about Exs. B, D and E, that the writ petition has to be dismissed. There will be no order as to costs. " The effect of this order was that the State Electricity Board waived and abandoned all its rights of purchase of the undertaking under the notices, Exs. B, D and E, and neither the Kerala State Electricity Board nor the State of Kerala had any jurisdiction or power to take any action on the basis of those notices, and save as aforesaid, the writ petition was dismissed, and it was held that State Government was entitled to take further action under its notice, exhibit G. Aggrieved by this order, the appellant filed an peal in the Kerala High Court impleading the State Government only as the party respondent. The State Electricity Board did not file any appeal from the order of the learned single Judge. By its judgment dated October 4, 1962, a Division Bench of the High Court dismissed the appeal. In paragraph 15 of its judgment, Bench observed: "In its petition the appellant asked for reliefs both against the State Government and the State Electricity Board. However, in the course of the hearing of the petition, the Board gave up its claims under Exts. B. D and E, and only the claim of the State Government under Ext. G was canvassed. The petition was, in effect, allowed: against the Board. The Baord has not appealed and is not a party to the present appeal; and its notices may therefore be ignored except to the extent that they may affect the rights of the State Government. " The appellant now appeals to this Court under a certificate granted by the High Court under articles 133(1)(a) and 133(1)(c) of the Constitution. On half of the appellant, Mr. Vishwanath Sastry contended that (1) as the two years ' notice in writing of. the election to purchase the undertaking on the expiry of December, 2, 1960 was not served on the appellant as required by the old section 7(4) of the . 1910. the appellant acquired a vested right to hold the license until the expiry of a further period of ten years.that is to say, until December, 2, 1970. and this vested right was not taken away either expressly or by necessary implication by the new s.6 of the introduced by the amending Act 32 of 1958; (2) the expression "on the expiration of each such period as is specified in the license" in the new s.6(1)(a) means a period which has not expired and on the expiry of which the option may be legally exercised. and since in the absence of the two years ' notice required under the old s.7(4), the option of purchase on the expiry of December 2, 1960 could not be legally 192 exercised, the new s.6(1) did not confer any option of purchase on the expiry of December 2, 1960 and the first option exercisable under the new s.6(1) would be on the expiry of December 2, 1970; (3) sub sections (4) and (5) of the new s.6 show that the period on the expiry of which the option under sub s(1)of s.6 is exercisable, is a period which would expire at least 18 months after the coming into force of the new s.6, that is to say, after September 5, 1959, and since the period expiring on December 2, 1960 is not such a period, the new s.6(1) did not confer any option of purchase on the expiry of December 2, 1960; and (4) in any event, the State Electricity Board having duly elected to purchase the undertaking on the expiry of December 2, 1960, the State Government acquired no option of purchase under sub s(2) of s.7 of the . On behalf of the respondent. Mr. V.P. Gopalan Nambiar, the Advocate General of Kerala, contended (1) that the absence of two years ' notice under the old s.7(4) of the did not confer upon the appellant a vested right to hold the license until the expiry of December 2, 1970, and the immunity from compulsory purchase under the old s.7 arising from the non service of the requisite two years ' notice could be, and, in fact, was taken away by the new s.6, which required only one year 's notice of intention to purchase the undertaking; (2) assuming that the appellant acquired under the old s.7 a vested right to hold .the license until December 2, 1970, such vested right was taken away by the new s.6, which expressly applies to licenses granted before its commencement, and the period of 25 years is a period specified in as the license on the expiry of which the option of purchase was legally exercisable; (3) sub sections (4) and (5) of the new s.6 did not cut down the plain meaning of sub s(1) of the section and the option on the expiry of the period of 25 years was vested 'under sub s(1) of s.6, though this period did not expire 18 months after September 5. 1959; and (4) as the State Electricity Board did not send to the State Government any intimation in 'writing 'of ' its intention to exercise the option on the expiry of December 2, 1960 as required by sub s(4) of s.6, the Board must be deemed to have elected not to exercise this option, and consequently by sub S(2) of s.6. the State Government is vested with the option We think that the fourth contention of Mr. Viswanatha Sastry is sound, and should be accepted. Assuming, without deciding, that the option of purchasing the undertaking on the expiry of the period of 25 years specified in the license was available under sub s(1) of s.6, such option vested in the State Electricity Board, and as the Board duly elected to purchase the undertaking, the State Government acquired no right or option of purchasing the undertaking under s.6. On this ground alone, the appeal should be allowed, and in this view of the matter, we do not think it necessary to express any opinion on the other contentions urged 193 before us. As far as the State Electricity Board is concerned,. it has abandoned and waived its option of purchase on the expiry of 25 years. Sub section (1) of s.6 expressly vests in the State Electricity Board the option of purchase on the expiry of the relevant period specified in the license. But the State Government claims that under sub s(2) of s.6 it is now vested with the option. Now, under sub s(2) of s.6, the State Government would be vested with the option only "where a State Electricity Board has not been constituted, or if constituted, does not elect to purchase the undertaking. " It is common case that the State Electricity Board was duly constituted. But the State Government claims that the State Electricity Board did not elect to purchase the undertaking. For this purpose, the State Government relies upon the deeming provisions of sub s(4) of s.6, and contends that as the Board did not send to the State Government any intimation in writing of its intention to exercise the option as required by the sub section, the Board must be deemed to have elected not to purchase the undertaking. Now, the effect of sub s(4) read with sub s(2) of s.6 is that on failure of the Board to give the notice prescribed by sub s(4), the option vested in the Board under sub s(1) of s.6 was liable to be divested. Sub section (4) of s.6 imposed upon the Board the duty of giving after the coming into force of s.6 a notice in writing of its intention to exercise the option at least 18 months before the expiry of the relevant period. Section 6 came into force on September 5, 1959, and the relevant period expired on December 3. 1960. In the circumstances, the giving of the requisite notice of 18 months in respect of the option of purchase on the expiry of December 2, 1960, was impossible from the very commencement of s.6. The performance of this impossible duty must be excused in accordance with the maxim, lex non cogitate ad impossible (the law does not compel the doing of impossibilities), and sub s(4) of s.6 must be construed as not being applicable to a case where compliance with it is impossible. We must therefore, hold that the State Electricity Board was not required to give the notice under sub s(4) of s.6 in respect of its option of purchase on the expiry of 25 years. It must follow that the Board cannot be deemed to have elected not to purchase the undertaking under sub s(4) of s.6. By the notice served upon the appellant, the Board duly elected to purchase the undertaking on the expiry of 25 years. Consequently, the State Government never became vested with the option of purchasing the undertaking under sub s(2) of s.6. The State Government must, therefore, be restrained from taking further action under its notice, exhibit G, dated November 20, 1959. In the result, the appeal is allowed, and the respondent State of Kerala is restrained from taking any action under the notice, exhibit G, dated November 20, 1959. The respondent shall pay to the appellant the costs in this Court. We direct the parties to pay and bear their own costs in the Courts below. Appeal allowed.

IN-Abs

The appellant held a licence for the supply of electrical energy in Kerala which was granted for a period of 25 years, and was subject to continuation for ten year terms in the absence of a notice by the local authority or State Government of an election to purchase the undertaking. The first 25 year term of the licence expired on December 2, 1960, and prior to that, on October 24 and again on October 29, 1959, the State Electricity Board gave notice to the appellant under s.6(1) of the , to purchase the under taking on the expiry of the licence. On November 20, 1959,the State Government also served notice on the appellant of its election to purchase the undertaking on December 2, 1960. In November 1960, the appellant filed a writ petition in the High Court seeking orders restraining the State Electricity Board and the respondent State Government from taking any action pursuant to the notices given by them. In the course of the hearing the petition the State Electricity Board waived and abandoned all its rights of purchase of the Undertaking. The writ petition thereafter dismissed and it was held that the State Government was entitled to take further steps under its notice dated November 20, 1959. An appeal against this decision to a Division Bench of the High Court was dismissed. In the appeal to the Supreme Court, the appellant contended,inter alia, that the State Electricity Board having duly elected under 6(1) to purchase the undertaking on the expiry. of the licence, the State Government acquired no option of purchase under section 6(2) the 1910 Act. HELD: Any option of purchasing the undertaking on the expiry of the period of 25 years specified in the licence under section 6(1) vested in the State Electricity Board, and as the Board duly elected to purchase the undertaking by the notice served on the appellants, the State Government acquired no right or option of purchasing the undertaking under section 6. [193 G H] As section 6 came into force less than eighteen months before December 2, 1960, it was impossible for the Board to have given notice to the State Government as required by section 6(4) of its intention to exercise the option. On the principle of lex non cogit ad impossibil must therefore ' be construed as not being applicable in the that the Board could not be deemed circumstances of the case, so elected not to purchase the undertaking under section 6(4).[193 E F]

vil Appeals Nos. 568 and 757 of 1953. Appeals from the judgment and order dated October 10, 1960. of the Madhya Pradesh High Court, Indore Bench, Indore, in Civil Miscellaneous Appeals Nos. 33 of 1958 and 81 and 82 of 1957. G.S. Pathak, B. Dutta, 1. B. Dadachanji, O.C. Mathur and Ravinder Narain, for the appellant. B.R.L. lyengar, S.K. Mehta and K.L. Mehta, for the respondent. The Judgment of the Court was delivered by Bachawat, J. The appellant is the Ruler of the former Indian State of Jaora. He had money dealings with the respondent. By an agreement dated February 23, 1957. the appellant and the respondent agreed to refer their disputes regarding those dealings to the arbitration of Lala Durgashankar. On the same date, the arbitrator made an award. By this award, the arbitrator found that a sum of Rs. 1,60,000 was due to the respondent from the appellant, and .directed that this sum would be payable in eight quarterly installments, the first four installments to be of Rs. 21,000 each and the next four instalments to be of Rs. 19,000 each, the amount of interest would be payable in another quarterly instalment, the respondent would have a first charge on the sums receivable by the appellant from the Government of India as privy purse, and would be entitled to realise those sums under a letter of authority issued by the appellant, and if the Government would raise any objection to the payment, the respondent would have the right to realise the dues from the personal property of the appellant. Some the items of the loans in respect of which the award was made were secured on lands and ornaments. The award therefore provided: "The documents relating to debts obtained on lands and ornaments shall remain as before till the payment of the debts and they shall also remain as securities till then, and the Nawab Sahab shall have no right to transfer the land. " The award was signed by the arbitrator and also by the appellant and the respondent. 203 On the same day, the arbitrator filed the award in the Court of the District Judge, Ratlam. Notice of filing of the award under section 14 of the Indian was duly served on the parties. On March 9, 1957, an agent of the appellant filed a written submission accepting the award and requesting the Court to pass a decree in terms of the award. But on the same day, an application was made by another agent of the appellant intimating that steps would be taken for setting aside the award. The Court fixed March 23, 1957 for firing the objection. The time was subsequently extended up to April 2, 1957. On that day, an application was filed on behalf of the appellant praying for setting aside the award. But on April 5, 1957, an application was filed on behalf of the appellant withdrawing the objections and asking the Court to pass a decree in terms of the award, subject to the modification that the amount of the award would be payable in quarterly instalments of Rs. 13,000 each. This application was signed by the respondent in token of his consent to the modification of the amount of the instalments. On April 30, 1957. the arbitrator filed the relevant papers. On the same day, an agent of the appellant filed an application praying for setting aside the compromise and the award. The case was fixed for hearing on June 19. 1957. On that date. the Court received by registered post an application from the appellant withdrawing the objections and praying for an order in accordance with the compromise application filed on April 5. 1957. In the circumstances, on June 19. 1957, the Court recorded the compromise and passed a decree in terms of the award as modified by the compromise. The appellant filed in the Madhya Pradesh High Court Appeal No. 81 of 1957 under section 39 of the Indian against the order dated June 19. 1957 treating it as an order refusing to set aside the award. The appellant also filed Appeal No. 82 of 1957 under 0.43(1)(m) of the Code of Civil Procedure against the order dated June 19, 1957 recording the compromise. In the meantime. the respondent started Execution Case No. 5 of 1957. and on September 9. 1957 obtained an ex parte order for transfer of the decree to the Court of the District Judge. Delhi. On November 1.1957. the Central Government gave a certificate under s 86(3) read with section 8713 of the Code of Civil Procedure. 1908 cpnsenting to the execution of the decree against the properties of the appellant. On November 8, 1957. the District Judge. Delhi passed a prohibitory order under O. 21. r. 46 of the Code of Civil Procedure in respect of sums payable to the appellant on account of the privy purse. By letter dated December 26. 1957, the Central Government informed the appellant of the prohibitory order. On January 8, 1958, the appellant applied to the Court of the District Judge. Ratlam praying for vacating the order of transfer of the decree and for cancellation of the certificate issued under O. 21. r. 6(b) of the Code of Civil Procedure. By order dated March 15, 1958. the Court recalled the decree and cancelled the certificate as prayed for. on the ground that the amount receivable by the appel 204 lant on account of his privy purse was not attachable. The respondent preferred Appeal No. 33 of 1958 before the High Court against order. By another order dated January 7, 1959, the District Judge, Ratlam dismissed certain objections of the appellant filed in Execution Case No. 2 of 1958. We are informed that the appellant flied before the High Court Appeal No. 13 of 1959 from this order. Appeals Nos. 81 and 82 of 1957, 33 of 1958 and 13 of 1959 were heard and disposed of by the High Court by a common judgment on October 10, 1960. The High Court dismissed Appeals Nos. 81 and 82 of 1957 and 13 of 1959 preferred by the appellant and allowed Appeal No. 33 of 1958 preferred by the respondent. The appellant has referred to this Court Civil Appeal No. 568 of 1963 against the order of the High Court passed in Appeal No. 33 of 1958. He has also preferred Civil Appeal No. 767 of 1963 from the order of the High Court passed in Appeals Nos. 81 and 82 of 1957. Civil Appeals Nos. 568 and 767 of 1963 were heard together, and are being disposed of by this common judgment. On behalf of the appellant, Mr. Pathak raised three contentions only. He argued that: (1) the award affected immovable property of the value of more than Rs. 100, and as it was not registered, no decree could be passed in terms of the award; (2)the proceedings under section 14 of the Indian were incompetent in the absence of the consent of the Central Government under section 86(1) read with section 87B, Code of Civil Procedure, and the decree passed in those proceedings is without jurisdiction and null and void; and (3) the amount receivable by the appellant from the Central Government as his privy purse is a political pension within the meaning of section 60(1)(g), Code of Civil Procedure, and is not liable to attachment or sale in execution of the .decree. These contentions are disputed by Mr. Iyengar on behalf of the respondent. The first two contentions of Mr. Pathak arise in Civil Appeal No. 767 of 1963 and the third contention arises in Civil Appeal No. 568 of 1963. The first contention raised by Mr. Pathak must be rejected. The award stated that the existing documents relating to. debts obtained on lands would remain as before, and they would remain as securities till payment of the debts and the appellant would have no right to transfer the land. This portion of the award stated an existing fact. It did not create, or of its own force declare any interest in any immovable property. Consequently, the document did not come within the purview of section 17 of the Indian , and was not required to be registered. The second contention of Mr. Pathak raises questions of construction of sections 86 and 87B of the Code of Civil Procedure. By reason of section 86(1) read with section 87B, no Ruler of any former Indian State "may be sued in any Court otherwise competent to try the suit except with the consent of the Central Government. " Section 205 86(2) provides that the requisite consent may be given with respect to a specified suit or with respect to several specified suits or with respect to all suits of any specified class or classes, Section 86 plainly deals with a special class of suits, and this conclusion is reinforced by the heading of Part IV, "Suit in Particular Cases", in which sections 86 and 87B appear. Order 4, rule 1, Code of Civil Procedure provides that every suit shall be instituted by presenting a plaint to the Court or such other officer as it appoints in this behalf. In the context of section 176 of the Government of India Act, 1935, Mahajan and Mukherjea, observed that the expression "sue" means the "enforcement of a claim or civil right by means of legal proceedings", see Province Bombay v .K.S. Advani and others(1). But in the context of the Indian Limitation Act, 1908, Lord Russell of Killowen observed in Hansraj Gupta vs Official Liquidator, Dehra Dun Mussorrie Electric Tramway Co.(2): "The word 'suit ' ordinarily means, and apart from some context must be taken to mean, a civil proceeding instituted by the presentation of a plaint." And construing section 86 of the Code of Civil Procedure, Shah, J. speaking on behalf of this Court observed in Bhagwat Singh vs State Rajasthan(3): "The appellant is recognised under article 366(22) of the Constitution as a Ruler of an Indian State, but section 86 in terms protects a Ruler from being 'sued ' and not against the institution of any other proceeding which is not in the nature of a suit. A proceeding which does not commence with a plaint or petition in the nature of plaint, or where the claim is not in respect of dispute ordinarily triable in a Civil Court, would prima facie not be regarded as falling within section 86, Code of Civil Procedure. " Now, a proceeding under section 14 read with section 17 of the Indian for the passing of a judgment and decree on an award does not commence with a plaint or a petition in the nature of a plaint, and cannot be regarded as a suit and the parties to whom the notice of the filing of the award is given under section 14(2) cannot be regarded as "sued in any Court otherwise competent to try the suit", within the meaning of section 86(1) read with section 87B, Code of Civil Procedure. Accordingly, the institution of this proceeding against the Ruler of a former Indian State is not barred by section 86(1) read with section 87B. Section 141, Code of Civil Procedure does not attract the provisions of section 86(1) read with section 87B to the proceedings under section 14 of the Indian . Section 86(1) read with section 87B confers upon the Rulers of former Indian States substantive rights of im (1)[1950] S.C.R. 621, at pp. 661, (2)[1932] L.R. I.A.13,19. (3) ; at pp. 445, 446. 206 munity from suits. Section 141 makes applicable to other proceedings only those provisions of the Code which deal with procedure and not those which deal with substantive rights. Nor does section 41(a) of the Indian carry the matter any further. By that section, the provisions of the Code of Civil Procedure, 1908 are made applicable to all proceedings before the Court under the Act. Now, by its own language section 86(1) applies to suits only, and section 141, Code of Civil Procedure does not attract the provisions of section 86(1) to proceedings other than suits. Accordingly, by the conjoint application of section 41(a)of the Indian and sections 86(1) and 141 of the Code of Civil Procedure, the provisions of section 86(1) are not attracted to a proceeding under section 14 of the Indian . It follows that the Court was competent to entertain the proceedings under section 14 of the Indian and to pass a decree against the appellant in those proceedings, though no consent to the institution of those proceedings had been given by the Central Government. A sovereign foreign State and a Ruler of such State may enjoy a wider immunity from legal proceedings other than suits under the rules of International Law recognised by our Courts, but the appellant is not now a Ruler of a sovereign State, and cannot claim immunity from proceedings other than suits. The second contention of Mr. Pathak must, therefore, be rejected. The third contention of Mr. Pathak raises the question whether an amount payable to a Ruler of a former Indian State as privy purse is a political pension within the meaning of section 60(1)(g), Code of Civil Procedure. The word "pension" in section 60(1)(g), Code of Civil Procedure implies periodical payments of money by the Government to the pensioner. See Nawab Bahadur of Murshidabad vs Karnani ,Industrial Bank Ltd.(1) And in Bishambhar Nath vs Nawab Imdad Ali Khan(2), Lord Watson observed: "A pension which the Government of India has given a guarantee that it will pay, by a treaty obligation contracted with another sovereign power, appears to their Lordships to be, in the strictest sense, a political pension. The obligation to pay, as well as the actual payment of the pension, must, in such circumstances, be ascribed to reasons of State policy. " Now, the history of the integration and the ultimate absorption of the Indian States and of the guarantee for payment of periodical sums as privy purse to the Rulers of the former Indian States are well known. Formerly Indian States were semi sovereign vassal States under the suzerainty of the British Crown. With the declaration of Independence, the paramountly of the British Crown lapsed as from August 15, 1947, and the Rulers of Indian States 207 became politically independent sovereigns. The Indian States parted with their sovereignty in successive stages, firstly on accession to the, Dominion of India, secondly on integration of the States into sizable administrative units and on closer accession to the Dominion of India, and finally on adoption of the Constitution of India and extinction of the separate existence of the States and Unions of States. During the second phase of this political absorption of the States, the Rulers of the Madhya Bharat States including the Ruler of Jaora State entered into a Covenant on April 22, 1948 for the formation of the United State of Gwalior, Indore and Malwa (Madhya Bharat). By article II of the Covenant, the Covenanting States agreed to unite and integrate their territories into one State. Article VI provided that the Ruler of each Covenanting State shall not later than July 1, 1948 make over the administration of the State to the Rajpramukh and thereupon all rights, authority and jurisdiction belonging to the Ruler and appertaining or incidental to the Government of the State would vest in the United . State of Madhya Bharat. Article XI(1) provided that "the Ruler of each Covenanting State shall be entitled to receive annually from the revenues of the United State for his privy purse the amount specified against that Covenanting State in Schedule I." In Sch. I, a sum of Rs. 1,75,000 was specified against the State of Jaora. Article XI(2) provided that the amount of the privy purse was intended to cover all the expenses of the Ruler and his family including expenses of the residence, marriage and other ceremonies and neither be increased nor reduced for any reason whatsoever. Article XI(3) provided that the Rajpramukh would cause the amount to be paid to the Ruler in four equal instalments at the beginning of each quarter in advance. Article XI(4) provided that the amount would be free of alI taxes whether imposed by the Government of the United State or by the Government of India. Article XIII of the Covenant secured to the Ruler of each Covenanting State all personal privileges, dignities and titles then enjoyed by them. Article XIV guaranteed the succession, according to law and custom, to the gadding of each Covenanting State and to the personal rights, privileges, dignities and titles of the Ruler. The Covenant was signed by all the Rulers of the Covenanting States. At the foot of the Covenant, it was stated that "The Government of India hereby concur in the above Covenant and guarantee all its provisions." In confirmation of this consent and guarantee, the Covenant was signed by a Secretary to the Government of India. On the coming into force of the Constitution of India, the territories of Madhya Bharat became an integral part of India. Article 291 of the Constitution provided: "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 208 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." In view of the guarantee by the Government of the Dominion of India to the Ruler of Jaora State in the Covenant for the formation of the United State of Madhya Bharat, the payment of the sums specified in the covenant as privy purse to the Ruler became charged on the Consolidated Fund of India, and became payable to him free from all taxes on income. Article 362 provides that in the exercise of the legislative and executive powers, due regard shall be had to the guarantee given in any such covenant as is referred to in article 291 with respect to the personal rights, privileges and dignities of the Ruler of an Indian State. Article 363(1) provides, that notwithstanding anything contained in the Constitution, the Courts would have no jurisdiction in any dispute arising, out of any provision in any covenant entered into by any Ruler of an Indian State to which the Government of the 'Dominion of India was a party, or in any dispute in respect of any right accruing under or any liability or obligation arising out of any of the provisions of the Constitution relating to any such covenant. Article 366(22) provides that the expression "Ruler" in relation to an Indian State means a person by whom the covenant referred to in article 299(1) 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. Now, the Covenant entered into by the Rulers of Madhya Bharat States was a treaty entered into by the Rulers of independent States by which they gave up their sovereignty over their respective territories and vested it in the new United State of Madhya Bharat. The Covenant was an act of State, and any violation of its terms cannot form the subject of any action in any municipal courts. The guarantee given by the Government of India was in the nature of a treaty obligation contracted with the sovereign Rulers of Indian States and cannot be enforced by action in municipal courts. Its sanction is political and not legal. On the coming into force of the Constitution of India, the guarantee for the payment of periodical sums as privy purse is continued by article 291 of the Constitution, but its essential political character is preserved by article 363 of the Constitution, and the obligation under this guarantee cannot be enforced in any municipal court. Moreover, if the President refuses to recognise the person by whom the covenant was entered into as the Ruler of the State, he would not be entitled to the amount payable as privy purse under article 291. 209 Now, the periodical payment of money by the Government to a Ruler of a former Indian State as privy purse on political considerations and under political sanctions and not under a right legally enforceable in any municipal court is strictly a political pension within the meaning of section 60(1)(g) of the Code of Civil Procedure. The use of the expression "privy purse" instead of the expression "pension" is due to historical reasons. The privy purse satisfies all the essential characteristics of a political pension, and as such, is protected from execution under section 60(1)(g), Code of Civil Procedure. Moreover, an amount of the privy purse receivable from the Government cannot be said to be a debt or other property over which or the proceeds of which he has disposing power within the main part of section 60(1),Code of Civil Procedure. It follows that the third contention of Mr. Pathak must be accepted, and it must be held that the amounts of the privy purse are not liable to attachment or sale in execution of the respondent 's decree. The third contention is raised in Civil Appeal No. 568 of 1963 arising out of Appeal No. 33 of 1958. It follows that Civil Appeal No. 568 of 1963 must be allowed. All the contentions raised in Civil Appeal No. 767 of 1963 arising from Appeals Nos. 81 and 82 of 1957 fail, and accordingly this appeal must be dismissed. In the result, Civil Appeal No. 568 of 1963 is allowed, the order of the High Court in Appeal No. 33 of 1958 is set aside and the order of the District Judge dated March 15, 1958 is restored with costs in this Court only. Civil Appeal No. 767 of 1963 is dismissed with costs. Appeal 568 of 1963 allowed. Appeal 767 of 1963 dismissed.

IN-Abs

The appellant, who was a Ruler of a former Indian State, had money dealings with the respondent. They referred their disputes to an arbitrator who made his award directing the appellant to pay. a certain sum of money, in installments. The award also stated that the existing documents relating to debts on lands would remain as before and would remain as securities till the payment of debts The arbitrator filed the award into court and the court, after notice to the parties passed a decree in terms of a compromise modifying the award. The respondent started execution proceedings and the court passed a prohibitory order under O.XXI, r. 46 of the Civil Procedure Code, 1908, in respect of the sums payable to the appellant by the Central Government on account of the privy purse; but on the application of the appellant, that order was vacated. The appellant and respondent filed appeals in the High COurt, against the various orders, and the High Court decided all the appeals against the appellant. In the appeal to the Supreme Court, it was contended that, (i) as the award affected immovable property of the value of more than Rs. 100, and was not registered, a decree could not be passed in terms the award, (ii) the proceedings under the Indian , were incompetent in the absence of the consent of the Central Government under sections 86(1) and 87B of the Code, and therefore the decree passed in those proceedings was without jurisdiction and void and (iii) the amount receivable by the appellant as his privy purse was a political pension within the meaning of section 60(1)(g) of the Code, and not liable to attachment or sale in execution of a decree. HELD: (i)The award did not create or of its own force declare any interest in any immovable property and since it did not come within the purview of section 17 of the , was not required to be registered. [(204 H] (ii) A proceeding under section 14 read with section 17 of the , for the passing of a judgment and decree on an award, does not commence with a plaint or a petition in the nature of a plaint, and cannot be regarded as a suit and the parties to whom the notice of the filing of the award is given under section 14(2) cannot be regarded as "sued in any Court otherwise competent to try the suit" within the meaning of section 86.(1) read with section 87B of the Code. Neither are those provisions of the Code attracted by reason of section 41(a) of the or section 141 of the Code. It follows that the COurt was competent to entertain the proceedings under section 14 of the and pass a decree in those proceedings though no consent to the institution of the proceedings had been given by the Central Government. [205 G H; 206 B D] 202 (iii) The amounts of the privy purse of the appellant were not liable to attachment or sale in execution of the respondent 's decree. [209 C D] The periodical payment of money by the Government to a Ruler of a former Indian State as privy purse on political considerations and under political sanctions and not under a right legally enforceable in any municipal court is strictly a political pension within the meaning of section 60(1)(g) of the Code. The privy purse satisfies all the essential characteristics of a political pension, and as such is protected from execution under section 60(1) (g). [209 A C]

Appeal No. 79 of 1965. Appeal from the judgment and order dated August 5, 1964. of the Rajasthan High Court, Jodhpur, in D.B. Civil Writ Petition No. 536 of 1964. L,/B(D)SCI 13 174 Sarjoo Prasad, J.B. Dadachanji, O.C. Mathur and Ravinder Narain, for the appellant. M.M. Tewari, K.K. Jain and R.N. Sachthey, for respondent No. 1. B.B. Tawakley and K.P. Gupta, for respondent No. 2. The Judgment of the Court was delivered by Raghubar Dayal, J. This appeal, on certificate granted by the Rajasthan High Court, is against the dismissal of the appellant 's writ petition under article 226 of the Constitution praying for the issue of a writ of certiorari to the State of Rajasthan, respondent No. 1. for the canceling and setting aside of its order dated April 1, 1964 granting the contract for collecting royalty on building stones excavated from certain area to respondent No. 2, Dharti Dan Shramik Theka Sahkari Samiti Ltd., a cooperative society. The appeal arises in these circumstances. The appellant offered the highest bid at the auction for the grant of royalty collection contract on January 21, 1964. Respondent No. 2 was also one of the bidders, but stopped after offering a bid of Rs. 33,000. The final bid of the appellant was for Rs. 42,200. The State Government made the order in favour of respondent No. 2 on an application made by it on March 5. stating therein that the appellant had not deposited 25 per cent of the bid amount as security immediately after the completion of the auction in accordance with r. 36(7) of the Rajasthan Minor Mineral Concession Rules, 1959, hereinafter called the rules, and as per the terms and conditions of the Auction Notification and that it was prepared to take the royalty collection contract on the highest bid of Rs. 42,200. It was further stated in the application that respondent No. 2 was a cooperative society of the laborers who themselves worked on the mines of the area and therefore in view of Government 's policy it should receive preference to an individual bidder. It was further stated that the benefit accruing out of the contract of royalty collection would be shared by the labourers and workers themselves which would go a long way to improve their socioeconomic conditions and thus ultimately would ameliorate the conditions of the workers who were working hard in quarries since long. The contention for the appellant is that the Government had merely to confirm the highest bid at the auction by way of formality and was not competent to sanction the contract in favour of someone who had not offered the highest bid at the auction. Rule 34 of the rules provides that royalty collection contracts may be granted by the Government by auction or tender for a maximum period of two years after which no extension was to be granted. The procedure for auction is provided by r. 36. Sub rule 175 (5) thereof provides that no bids shall be regarded as accepted unless confirmed by Government or the competent authority and sub rule (7) provides that on completion of the auction the result will be announced and the provisionally selected bidder shall immediately deposit 25 per cent of the amount of bid for one year and another 25 per cent as security for due observance of the terms and conditions of the lease or contract. It is admitted for the appellant that on completion of the auction he did not deposit 25 per cent of the bid as security in compliance with the provisions of sub r. He therefore lost whatever claim he could have had for the final acceptance of his bid by Government and therefore cannot question the grant of the contract to any other person by the Government. The appellant urges that he held such royalty collection contract for the year 1963 64 and had deposited Rs. 9,250 as security for the due performance of that contract. On February 12, 1964, over three weeks after the auction, he submitted an application to the Mining Engineer, Jaipur, stating that he had been continuously taking contract for the last three years and that he was depositing Rs. 1,300 and that the balance of the security amount required, i.e. Rs. 9,250 be adjusted against Rs. 9,250 with the Government in connection with the earlier contract. This letter was not replied to. The request made in this letter could not possibly be accepted. The earlier contract was to continue up to March 31, and the security money had to remain with the Government upto that date. It is only after March 31, that anything could be said with some definiteness as to how much of the security money in deposit would be available to the contractor. Paragraph 2 of the Form of Agreement of Collection of Royalty on Minor Minerals, prescribed under the rules, and set out in the Schedule to the rules, states that the agreement shall remain in force for a period commencing from first April of a year and ending on March 31 of the next year on which the period of the contract would expire and that the security would be refunded on the termination of the contract. Para 6 of the Form provides that for the due fulfillment of the terms and conditions of the contract the Contractor shall deposit 25 per cent of the contract money in advance as security which will be refunded on the termination of the contract. The appellant alleged that there was a practice of adjusting previous security amounts towards the security for the next contract. The practice is denied on behalf of respondent No. 1 and the practice against the provisions of the rules cannot be recognized as of any binding effect. It may be mentioned here that the representation which the appellant made to the State Government on April 6, 1964, made no reference to his depositing the security by depositing Rs. 1,300 and by making a request for the adjustment of the balance from the security amount already in deposit and indicates that he too did not consider the request for adjustment of the amount acceptable. 176 There is nothing in r. 36 of the rules which may lead to the conclusion that the Government has to accept the highest bid by formally confirming it or that it cannot grant the contract to any person other than one who had bid the highest. A bid is not regarded as accepted unless it is confirmed by Government. The Government has therefore discretion to confirm the bid or not to confirm it. Further, r. 59 provides for the relaxation of any provision of the rules in the interest of mineral development or better working of mines. There is the letter dated February 14, 1962 from the Director of Mines and Geology, to All Mining Engineers on the subject of encouragement of cooperative mines and states that cooperative societies ought to be encouraged for mining work also as per directive of the Government of India. Respondent No. 2 addressed a letter to the Director of Mines and Geology and referred to Government policy for the encouragement of cooperative societies in connection with royalty collection contracts. The order of Government dated April 1, 1964, after referring to the appellant 's offering the highest bid, stated that the Government was satisfied that the Society, respondent No. 2, was a suitable party for the grant of the said contract. The view taken by the Government in preferring respondent No. 2 to the appellant for the grant of the contract cannot be said to be arbitrary or without any justification. The cooperative society is of the labourers who work in the mines and it is obvious that any benefit arising out of the contract would go to the labourers and thus improve their economic position. In view of the spirit underlying r. 59, Government could therefore relax any such rule which could in any way come in the way of its granting the contract to respondent No. 2. We therefore hold that the Government was competent to give the contract to respondent No. 2 it being not bound to accept the highest bid at the auction, though usually it accepts such bids. Another consideration which is decisively against the appellant is that the contract for the collection of royalty for the year 1964 65 is shortly to come to an end and it would not be desirable, even if the appellant 's contentions were acceptable, to interfere with that contract. Reference, in this connection. may be made to the decision of this Court in K.N. Guruswamy vs State of Mysore(1) where the appellant was refused a writ solely on the ground that it would have been ineffective, the period of the impugned contract coming to an end after about a fortnight of the order of this Court. That was a case where on merits the Court was of opinion that the writ should have been issued. We therefore dismiss the appeal and order the parties to bear their own costs. Appeal dismissed.

IN-Abs

The appellant offered the highest bid at the auction for the grant of royalty collection contract on January 21, 1964. Respondent No.2 a cooperative society of workers was also one of the bidders. Resportdent No. 2 made an application on March 5, 1964 to the Government stating therein that the appellant had not deposited 25 Dee cent of the bid amount as security within the time prescribed by Rule 36(7) of the Rajasthan Minor Mineral Concession Rules, 1959, and that it was prepared to take the royalty collection contract on the highest bid as made by appellant. On the above application the State Government made an order in favour of Respondent No. 2. The appellant thereupon filed a writ petition in the High Court which was dismissed. He was however granted a certificate of fitness. In appeal it was contended that the Government had merely to confirm the highest bid at the auction by way of formality and was not competent to sanction the contract in favour of someone who had not offered the highest bid at the auction. HELD: (i) The appellant had admittedly failed to deposit 25 per cent of the bid as security in compliance with the provisions of Rule 36(7). The rules did not contemplate adjustment of security deposited for an earlier period as the appellant claimed. He therefore lost whatever claim he could have had for the final acceptance of his bid by Government and therefore could not question the grant of the contract to any other person by the. Government. [175 B C] (ii) Nothing in Rule 36 requires the Government to accept the highest bid by formally confirming it. The Government has discretion to confirm the bid or not to confirm it. Further Rule 59 provides for the relaxation of any provision of the rules in the interest of mineral development or better working of the mines. [176 A B] (iii) The view taken by the Government in preferring Respondent No. 2 to the appellant cannot be said to be arbitrary or without any justification. The cooperative society is of the laborers who work in the mines and the benefit of the contract would go to the labourers. In view of the spirit underlying Rule 59, Government could therefore relax any such rule which could in any way come in the way of" its granting the contract to Respondent No. 2. [176 D F] (iv) The time for which the contract was granted was shortly to come to an end, and it would not be desirable even if the appellant was right to interfere with the contract. [176 G] K.N. Guruswamy vs State of Mysore, ; , relied on.

ivil Appeal No. 764 of 1954. Appeal by special leave from the judgment and decree dated May 9, 1963, of the Allahabad High Court in Second Appeal No. 2272 of 1959. A.V. Viswanatha Sastri, B.R.L. lyengar, S.K. Mehta, and K.L. Mehta, for the appellants. C.B. Agarwala, S.S. Khanuja and Ganpat Rai, for the respondents. The Judgment of the Court was delivered by Gajendragadkar, C.J. The short question of law which arises in this appeal by special leave is whether the revisional order passed by the State Government of Uttar Pradesh under section 7 F of the Uttar Pradesh (Temporary) Control of Rent and Eviction Act, 1947 (hereinafter called the Act), is rendered invalid by reason of the fact that before passing the said order, the State Government did not hear the two respondents, Ram Chand and Kailash Chand, who were affected by it. This question arises in this way. The respondents are the present tenants of the premises bearing municipal No. 863, situated at Jumna Kinara Road, Agra, commonly known as Putaria Mahal. Their predecessors were let into possession as tenants by the appellants, Lala Shri Bhagwan and Shrimati Gopal Devi, on an agreement that they would pay a monthly rent of ' Rs. 58 4 0 and that the tenancy would commence from the Sudi 1 of each Hindi month and end on Badi 15 of the next month. The two appellants applied to the Rent Controller and Eviction Officer (hereafter called the Officer), under section 3 of the Act for permission to file a suit in ejectment against the predecessors in interest of the respondents. The Officer granted permission by his order passed on September 1, 1951. The respondents then moved ' the Additional District Magistrate, who had been authorised by the District Magistrate to hear appeals against the decision of the Officer. The appellate authority declined to confirm the permis 220 sion granted to the appellants and remanded the case to the Officer for a fresh hearing. On re hearing the matter, the Officer changed his view and rejected the appellants ' application for permission on August 9, 1952. The appellants then moved the appellate authority again and prayed that the original order granting permission to them to sue the respondents should be restored. On December 9, 1952, the appellate authority ordered that permission should be granted to the appellants for suing the respondents in ejectment. The respondents then moved the Commissioner of Agra in revision. On February 4, 1953, the revisional authority allowed the revisional application and set aside the appellate order granting permission to the appellants. That took the appellants to the State Government under section 7 F of the Act. On May, 7, 1953, the State Government directed the Commissioner to revise his order on the ground that it thought that the need of the appellants was genuine. Acting in pursuance of this direction, the Commissioner passed an order on July 28, 1953, by which he cancelled his previous order and confirmed the order passed by the appellate authority, granting permission to the appellants to sue the respondents in ejectment. This order was clearly the result of the direction issued by the State Government under s.7 F of the Act. After this order was passed, the appellants sued the respondents in ejectment in the court of the Civil Judge, Agra. The claim made by the appellants for ejectment of the respondents was resisted by them on several grounds, and on the contentions raised by the respondents, the trial court framed six issues. One of the issues was whether the permission granted to the appellants to sue the respondents was valid. It is with this issue that we are concerned in the present appeal. The trial Judge found in favour of the appellants on this issue and recorded his conclusion in their favour even on the other issues which had been framed by him. In the result, the trial court passed a decree in favour of the appellants on August 31, 1957. The respondents challenged this decree by preferring an appeal in the court of the First Additional Civil Judge, Agra. In their appeal, they disputed the correctness of the findings recorded by the trial court on all the issues, including the issue about the validity of the sanction obtained by the appellants before filing the present suit. The appeal court confirmed all the findings recorded by the. trial Judge, with the result that the respondents ' appeal was dismissed, on the 30th May, 1959. The respondents then went to the Allahabad High Court by way of second appeal. The learned single Judge of the said High Court, who heard the said appeal, was called upon to consider the question as to whether the permission granted to the appellants was valid. That, in fact, was the only issue which was raised before him. The other issues which had been found in favour of the appellants were not raised before the learned Judge. On the issue as to the validity of the sanction obtained by the appellants, the learned 221 Judge came to the conclusion that the said sanction was invalid inasmuch as the State Government in exercising its authority under s.7 F of the Act, had not given an opportunity to the respondents to be heard. He took the view that in exercising its authority under section 7 F, the State Government was required to decide the matter in revision in a quasi judicial manner and it was absolutely essential that the principles of natural justice should have been followed by the State Government before reaching its decision and an opportunity should have been given by it to the respondent to place their case before it. It appears that this question had been considered by Division Benches of the Allahabad High Court in the past and the consensus of judicial opinion appears to have been in favour of the, view that the revisional order which the State Government is authorised to pass under section 7 F, is not a quasi judicial order but is a purely administrative order, and so, it is not necessary that the State Government should hear the parties before exercising its jurisdiction under the said section. The learned single Judge was persuaded by the respondents to consider whether the said decisions were right and he came to the conclusion that the view taken in the said decisions was not right. The judgment delivered by the learned single Judge shows that he had reached this conclusion on re examining the question in the light of some decisions of this Court to which his attention was invited. After he had reached this conclusion and had dictated a substantial part of his judgment, his attention was drawn to a decision of this Court in Laxman Purshottam Pimputkar vs State of Bombay and others(1), which was then not reported. The learned Judge considered the blue print of the judgment to which his attention was invited and thought that the said judgment confirmed the view he had already taken about the nature of the proceedings and the character the jurisdiction contemplated by section 7 F. Having held that the State Government was bound to give an opportunity to the respondents to place their version before it, before it exercised its authority under section 7 F, the learned Judge naturally came to the conclusion that the impugned order passed by the State Government under section 7 F was invalid, and that inevitably meant that under section 3 of the Act, the suit was incompetent. In the result, the second appeal preferred by the respondents was allowed and the appellants ' suit ordered to be dismissed. In the circumstances of the case, the learned Judge directed that the parties should bear their own costs throughout. It is against this decision that the appellants have come to this Court by special leave; and so, the only point which falls for our decision is whether the revisional order passed by the State Government under section 7 F, without giving an opportunity to the respondents to place their case before it, is rendered invalid. When a legislative enactment confers jurisdiction and power on any authority or body to deal with the rights of citizens, it (1) [1964] I.S.C.R. 200. 222 often becomes necessary to enquire whether the said authority or body is required to act judicially or quasi judicially in deciding questions entrusted to it by the statute. It sometimes also becomes necessary to consider whether such an authority or body is a tribunal or not. It is well known that even administrative bodies or authorities which are authorised to deal with matters within their jurisdiction in an administrative manner, are required to reach their decisions fairly and objectively; but in reaching their decisions, they would be justified taking into account considerations cf policy. Even so, administrative bodies may, in acting fairly and objectively, follow the principles of natural justice; but that does not make the administrative bodies tribunals and does not impose on them an obligation to follow the principles of natural justice. On the other hand, authorities or bodies which are given jurisdiction by statutory provisions to deal with the rights of citizens, may be required by the relevant statute to act judicially in dealing with matters entrusted to them. An obligation to act judicially may, in some cases, be inferred from the scheme of the relevant statute and its material provisions. In such a case, it is easy to hold that the authority or body must act in accordance with the principles of natural justice before exercising its jurisdiction and its powers; but it is not necessary that the obligation to follow the principles of natural justice must be expressly imposed on such an authority or body. If it appears that the authority or body has been given power to determine questions affecting the rights of citizens, the very nature of the power would inevitably impose the limitation that the power should be exercised in conformity with the principles of natural justice. Whether or not such an authority or body is a tribunal, would depend upon the nature of the power conferred on the authority or body, the nature of the rights of citizens, the decision of which fails within the jurisdiction of the said authority or body, and other relevant circumstances. This question has been considered by this Court on several occasions. In the Associated Cement Companies Ltd., Bhupendra Cement Works, Surajpur vs P.N. Sharma and another(1), both aspects of this matter have been elaborately examined, and it has been held, adopting the view expressed by the House of Lords in Ridge vs Baldwin and others(1) that the extent of the area where the principles of natural justice have to be followed and judicial approach has to be adopted, must depend primarily on the nature of the jurisdiction and the power conferred on any authority or body by statutory provisions to deal with the questions affecting the rights of citizens. In other words, in that decision this Court has held that the test prescribed by Lord Reid in his judgment in the case of Ridge(2) affords valuable assistance in dealing with the vexed question with which we are concerned in the present appeal. Let us, therefore, examine. the scheme of the Act and the (1) ; (2) ; 223 nature of the power and jurisdiction conferred on the State Government by section 7 F. The Act was passed in 1947 and its main object obviously was, in the words of the preamble, to continue during a limited period powers to control the letting and the rent of residential and non residential accommodation and to prevent the eviction of tenants therefrom. The preamble further provides that whereas due to shortage of accommodation in Uttar Pradesh it is expedient to provide for the continuance during a limited period of powers to control the letting and the rent of such accommodation and to prevent the eviction of tenants therefrom, the Act was enacted. Indeed, it is a matter of common knowledge that similar Acts have been passed in all the States in India. Section 3 of the Act provides that "subject to any order passed under sub section (3), no suit shall, without the permission of the District Magistrate, be filed in any civil court against a tenant for his eviction from any accommodation, except on one or more of the following grounds". Then follow seven clauses (a) to (g) which set out the grounds on which a landlord can seek to evict his tenant even without the permission of the District Magistrate The scheme of section 3, therefore, is that in ,order to protect the tenants from eviction, the legislature has provided that the landlords could evict their tenants only if there was proof of the existence of one or the other of the seven grounds specified by clauses (a)to (g)in section 3(1). Having made this general provision, section 3(1) makes an exception and enables the landlord to seek to evict his tenant even though his case may not fall under any of the seven clauses of section 3(1), provided he has obtained the permission of the District Magistrate, In other words, if the District Magistrate grants permission to the landlord, he can sue to evict the tenant under the general provisions of the Transfer of Property Act, as for instance, section 106. This clearly means that the District Magistrate is empowered to grant exception to the landlord from complying with the requirements of clauses (a) to (g) of section 3(1) and take the ease of the tenancy in question outside the provisions of the said clauses. That is the nature and effect of the power conferred on the District Magistrate to grant permission to the landlord to sue his tenant in eviction. Section 3, as it was originally enacted, provided that no suit shall, without the permission of the District Magistrate, be filed in any civil court against a tenant for his eviction from any accommodation except on one or more of the grounds specified by clauses (a) to (f). Clause (g) has been subsequently added. In 1952, clauses (2), (3) and (4) were added to section 3 by the Amending Act 24 of 1952. It is as a result of these amendments that section 3(1) now provides that subject to any order passed under sub section (3), the permission granted by the District Magistrate would enable the landlord to sue his tenant in ejectment. It is now necessary to read. sub sections (2), (3) and (4), which are as follows: "(2) Where any application has been made to the District 224 Magistrate for permission to sue a tenant for eviction from any accommodation and the District Magistrate grants or refuses to grant the permission, the party aggrieved by his order may, within 20 days from the date on which the order is communicated to him, apply to the Commissioner to revise the order." "(3) The Commissioner shall hear the application made under sub section (2), as far as may be, within six weeks from the date of making it, and he may, if he is not satisfied as to the correctness, legality or propriety of the order passed by the District Magistrate or as to the regularity of proceedings held before him, alter or reverse his order, or make such other order as may be just and proper." "(4) The order of the Commissioner under sub section (3) shall, subject to any order passed by the State Government under section 7 F, be final. " The scheme of these three sub sections is that the District Magistrate should first consider whether the landlord should be allowed to sue without complying with clauses (a) to (g) of section 3(1). When he decides the question one way or the other. the party aggrieved by the decision has been given a right to apply to the Commissioner to revise the said order within the limitation prescribed by sub section That takes the proceedings before the Commissioner, and he exercises his revisional jurisdiction and reaches his own decision in the matter. Sub section (4) provides that the revisional order passed by the Commissioner shall, subject to the order passed by the State Government under section 7 F, be final. That takes us to section 7 F. Section 7 F reads thus: "The State Government may call for the record of any case granting or refusing to grant permission for the filing of a suit for eviction referred to in section 3 or requiring any accommodation to be let or not to be let to any person under section 7 or directing a person to vacate any accommodation under section 7 A and may make such order as appears to it necessary for the ends of justice. " As we have already indicated, the question we have to decide in the present appeal is: what is the nature of the proceedings taken before the State Government under section 7 F and what is the character of the jurisdiction and power conferred on the State Government by it; are the proceedings purely administrative, and can the State Government decide the question and exercise its jurisdiction without complying with the principles of natural justice? In dealing with this question, we have first to examine the nature of the power conferred on the District Magistrate himself. There is no doubt that what the District Magistrate is authorised to do is to permit the landlord to claim eviction of his tenant, though 225 he may not comply with section 3(1), clauses (a) to (g) and that clearly means that the order which the District Magistrate may pass while. granting sanction to the landlord has the effect of taking away from the tenants the statutory protection given to them by the scheme of section 3(1). A landlord can normally evict his tenant by complying with the relevant provisions of the Transfer of Property Act. Section 3(1) imposes a statutory limitation on the said power by requiring the proof of one or the other of the seven grounds stated in clauses (a) to (g) of section 3(1), before he can seek to evict his tenant. That limitation is removed by the sanction which District Magistrate may grant; and so, it is plain that the order which the District Magistrate passes under section 3(2) affects the statutory rights of the tenants. That is one aspect of the matter which cannot be ignored. The second aspect of the matter is that the party who may feet aggrieved by ' the order passed by the District Magistrate, is given the right to move the Commissioner in revision within the prescribed period of limitation, and this provision necessarily implies that the District Magistrate should indicate his reasons why he makes a particular .order under section 3(2). Unless the District Magistrate indicates, though briefly, the reasons in support of his final order, the Commissioner would not be able to exercise his jurisdiction under section 3(3). How could the Commissioner consider the question as to whether the order passed by the District Magistrate is correct or is legal or is proper. unless he knows the are,q. sons on which the said order is based? Thus, the provision for a revisional application to the Commissioner also indicates that the District Magistrate has to weigh the pros and cons of the matter and come to a certain conclusion before he makes the order. The rule naturally imports the requirement that the parties should be allowed to put their versions before him. The District Magistrate cannot reasonably weigh the pros and cons unless both the landlord and the tenant are given an opportunity to place their versions before him, Therefore, we are satisfied that the jurisdiction conferred on the District Magistrate to deal with the rights of the parties is of such a character that principles of natural justice cannot be excluded from the proceedings before him. This conclusion is very much strengthened when we consider the provisions of section 3(3). This clause specifically requires the Commissioner to hear the application made under sub section (2) within the specified period. This requirement positively enacts that the proceedings before the Commissioner are quasi judicial. This clause further provides that the Commissioner has to be satisfied as to the correctness, legality, or propriety of the order under revision. He can also examine the question as to the regularity of the proceedings held before the District Magistrate. In our opinion, it is impossible to escape the conclusion that these provisions unambiguously suggest that the proceedings before the District Magistrate as well as before the Commissioner are quasi judicial in character 226 Further, the revisional power has to be exercised and a revisional order has to be passed by the Commissioner to serve the purpose of justice, because the clause provides that the Commissioner may make such other order as may be just and proper. Thus, we are satisfied that when the District Magistrate exercises his authority under s 3(2) and the Commissioner exercises his revisional power under section 3(3), they must act according to the principles of natural ' justice. They are dealing with the question of the rights of the landlord and the tenant and they are required to adopt a judicial approach. If that be the true position in regard to the proceedings contemplated by sub section 3(2) and sub section 3(3), it is not difficult to hold that the revisional proceedings which go before the State Government under section 7 F, must partake of the same character. It is true that the State Government is authorised to call for the record suo motu, but that cannot alter the fact that the State Government would not be in a position to decide the matter entrusted to its jurisdiction under section 7 F, unless it gives an opportunity to both the parties to place their respective points of view before it. It is the ends of justice which determine the nature of the order which the State Government would pass under section 7 F, and it seems to us plain that in securing the ends of justice, the State Government cannot but apply principles of natural justice and offer a reasonable opportunity to both the parties while it exercises its jurisdiction under section 7 F. We have already referred to the general policy of the Act. In that connection, we may mention two other sections of the Act. Section 14 provides that no decree for the eviction of a tenant from any accommodation passed before the date of commencement of this Act, shall, in so far as it relates to the eviction of such tenant, be executed against him so long as this Act remains in force, except on any of the grounds mentioned in section 3. This section emphatically brings out the main object of the Act which is to save the tenants from eviction. That is why it prescribes a bar against the execution of the decrees which may have been passed for the eviction of tenants before the Act came into force, unless the landlords are able to show one or the other ground mentioned ins 3. A similar provision is made by section 15 in regard to pending suits. It lays down that in all suits for eviction of tenants from any accommodation pending on the date of commencement of this Act, no decree for eviction shall be passed except on one or more of the grounds mentioned in section 3. The provision also emphasises the importance attached by the Act to the protection of the tenants from eviction. The right conferred on the tenant no to be evicted, except on the specified grounds enumerated by clause (a) t,9 (g) of section 3(1), is a statutory right of great significance and it is this statutory right of which the tenants would be deprived when the landlord obtains the sanction of the District Magistrate. That is 227 why we think the Act must be taken to require that in exercising their respective powers under section 3(2) and section 3(3), the appropriate authorities have to consider the matter in a quasi judicial manner. and are expected to follow the principles of natural justice before reaching their conclusions. We have already indicated that the Allahabad High Court had consistently taken the contrary view and held that the functions discharged by the appropriate authorities under section 3(2) and section 3(3) are administrative and an obligation to follow the principles of natural justice cannot be imposed on the said authorities vide Narettam Saran vs State of U.P.(1). Indeed. after the learned single Judge had held in the present proceedings that the view taken by the earlier decisions of the Allahabad High Court was erroneous. a Division Bench of the said High Court considered the same question once again and re affirmed its earlier view vide: Murlidhar vs State of U.P.(2). We have carefully considered the reasons given by the learned Judges when they re affirmed the earlier view taken by the High Court of Allahabad on this point. With respect, we are unable to agree with the decision in Murlidhar 's(2) case. In this connection, we may refer to the decisions of this Court in Laxman Purshottam Pimputkar 's(3) case on which the learned single Judge partly relied in support of his conclusion. In that case, this Court was called upon to consider the question whether the revisional jurisdiction conferred on the State Government under section 79 of the Satan Act was purely administrative. and it came to the conclusion that in exercising the said revisional jurisdiction. the State Government is not acting purely as an administrative authority; its decision is judicial or quasi judicial, and so, it is essential that the State Government should follow the principles of natural justice before reaching its conclusion under that section. The scheme of the relevant provisions of the Watan Act cannot. however, be said to be exactly similar to the scheme of the Act with which we are concerned; whereas section 3 of the Act with which we are concerned in the present appeal deals with the statutory rights conferred on the tenants, the relevant sections of the Watan Act dealt with the right of possession of the Watan property itself. That being so, it cannot be said that the decision in Laxman Purshottam Pimputkar 's(3) case can be deemed to have overruled by necessary implication the view taken by the Allahabad High Court in regard to the nature of the power conferred on the appropriate authorities by sections 3 and 7 F of the Act. Before we part with this appeal, however, we ought to point out that it would have been appropriate if the learned single Judge had not taken upon himself to consider the question as to whether the earlier decisions of the Division Benches of the High Court (1) A.I.R. 1954 All. 232. (2) [1964] 1964 All.148. (3) [1964] 1 S.C.R.200. (N) 3 SCI 2 228 needed to be re considered and revised. It is plain that the said decisions had not been directly or even by necessary implication overruled by any decision of this Court; indeed, the judgment delivered by the learned single Judge shows that he was persuaded to re examine the matter himself and in fact he had substantially recorded his conclusion that the earlier decisions were erroneous even before his attention was drawn to the decision of this Court in Laxman Purshottam Pimputkar 's(1) case. It is hardly necessary to emphasis that considerations of judicial propriety and decorum require that if a learned single Judge hearing a matter is inclined to take the view that the earlier decisions of the High Court, whether of a Division Bench or of a single Judge, need to be reconsidered, he should not embark upon that enquiry sitting as a single Judge, but should refer the matter to a Division Bench or, in a proper case, place the relevant papers before the Chief Justice to enable him to constitute a larger Bench to examine the question. That is the proper and traditional way to deal with such matters and it is rounded on healthy principles of Judicial decorum and propriety. It is to be regretted that the learned single Judge departed from this traditional way in the present case and chose to examine the question himself. The result is, the appeal fails and is dismissed. There will be no order as to costs. Appeal dismissed.

IN-Abs

The appellants applied to the Rent Controller and Eviction Officer under section 3 of the U.P. (Temporary) Control of Rent and Eviction Act, 1947, for permission to file a suit in ejectment against the predecessors in interest of the respondents who were the present tenants of certain premises in Agra. After a series of proceedings before the Officer and the appellate authority, the latter eventually ordered that the permission applied for should be granted. The respondent then moved the Commissioner of Agra in revision and the order granting permission was set aside by him; but upon an application made to it under section 7 F of the Act, the State Government directed the Commissioner to revise his order. Accordingly the latter cancelled his previous order and confirmed the order granting permission passed by the appellate authority. The appellants ' ejectment suit, in which one of the issues was whether the permission granted to sue the respondents was valid, was decreed in favour of the appellants and an appeal against this decree to the First Additional Civil Judge was dismissed. However, on appeal to the High Court, the single Judge, differing from the view expressed in earlier decisions of the High Court that the revisional order which the State Government was authorised to pass under section 7 F is a purely administrative order, came to the conclusion that the permission granted was invalid because the State Government, vhen exercising its authority under section 7 F of the Act was required to decide the matter in a quasi judicial manner and by following principles of natural justice and should have given the respondents an opportunity of being heard. On appeal to this Court: HELD ': The revisional proceedings which go before the State Government under section 7 F are, like the proceedings before the District Magistrate under section 3(2) as well as before the Commissioner under section 3(3), quasi judicial in character and all these three authorities must act according to the principles of natural justice. [226 B, C]. The right conferred on the tenant not to be evicted. except on the specified grounds enumerated in cls. (a) to (g) of section 3(1) is a statutory right of great significance and it is this statutory right of which the tenant would be deprived when the landlord obtains ' the permission of the District Magistrate. Therefore the Act must be taken to require that in exercising their respective powers to grant the permission, the appropriate authorities have to consider the matter in a quasi judicial manner and to follow the principles of natural justice before reaching their conclusion. [226H 227B]. The Associated. Cement Companies Ltd. vs Bhupendra Cement Works, Surajpur P.N. Sharma; , and Ridge vs Baldwin & Ors. ; , referred to. 219 Narottam Saran vs State of U.P. A.I.R., 1954, All. 232 and Murlidhar vs State of U.P. A.I.R. 1964 All. 148, disapproved. Laxman Purshottam Paimputkar vs State of Bombay [1964] 1 S.C.R. 200, considered. Obiter:Considerations of judicial propriety and decorum require that if a learned single Judge hearing a matter is inclined to take the view that the earlier decisions of the High Court, whether of a Division Bench or of a single Judge, need to be reconsidered, he should not embark upon that enquiry sitting as a single Judge, but should refer the matter to a Division Bench or, in a proper case, place the relevant papers before the Chief Justice to enable him to constitute a larger Bench to examine the question. That is the proper and traditional way to deal with such matters and it is rounded on healthy principles of judicial decorum and propriety. [228B D]

Criminal Appeal No. 53 of 1951. Appeal by special leave from the judgment and order dated November 25, 1960 of the Punjab High Court in Criminal Appeal No. 86 D of 1959. T.R. Bhasin, S.C. Malik, Sushma Malik and Rant Behja Lal Malik, for the appellant. R.N. Sachthey, for respondent No. 1. Ram Lal Anand, Ajit Singh Johar, S.K. Mehta, and K.L. Mehta, for respondent No. 2. The, Judgment of the Court was delivered by Gajendragadkar,C. J.,By this appeal, which has been brought to this Court by special leave, the appellant Harbhajan Singh challenges the correctness of his conviction for an offence under section 500 07 the Indian Penal Code, and the sentence imposed on him for the said offence. The criminal proceedings against the appellant were started on a complaint filed by Surinder Singh Kairon, son of section Partap Singh Kairon, who was at the relevant time the Chief Minister of the State of Punjab. In his complaint, the complainant Surinder Singh alleged that the appellant had published in the Press a statement against him which was highly defamatory of him. The said statement was published in the "Blitz", 237 which is a weekly magazine of Bombay, on July 23, 1957, and extracts from it were given publicity in the "Times of India" and certain other papers. According to the, complaint, the defamatory statement was, absolutely untrue and by publishing it, the appellant had rendered himself liable to be punished under section 500, I.P.C. It appears that on July 2,2/23, 1957, the punjab Government issued a Press note in which it was averred that certain Urdu Dailies from Jullundur were indulging in mischief and false propaganda, alleging complicity of a Minister 's son in smuggling on the border. The Press note alleged that this was done with a view to malign the Government and to cause suspicion in the mind of public. The Punjab Government categorically denied the said allegation. The Press note added that the papers which were publishing the said false reports should come out openly with the name of the son of the Minister instead of repeatedly publishing things in a vague and indirect manner, and that they should not take shelter behind anonymity and should net be afraid of the consequences of the publication of these allegations. The Press note concluded with the statement that the Punjab Government had already taken steps to curb smuggling and they were determined to put it down with a firm hand. It was in response to the challenge thus issued by the Punjab Government in its Press note that the appellant published impugned statement which reads: "My attention has been drawn to a Punjab Government Press Note categorically denying the complicity of a Minister 's son in smuggling. That Press Note also throws a challenge to some Urdu Dailies "to come out openly with the name of the son of the Minister" and then base the consequences. I don 't know whether the newspapers concerned will take up this is challenge of the Punjab Government or not, but as one of those who have been naming that son of the Minister as one of the leaders of the smugglers from Public platform, I hereby name that so, as Surinder Singh Kairon son of section Partap singh Kairon, Chief Minister. And I do so determined to faceless consequences of the charge being openly levied by me. I further allege that the son of our Chief Minister is not only a leader of smugglers but is responsible for a large number of crimes being committed in the Punjab. But because the culprit happens to be Chief Minister 's son the cases are always shelved up. If the Punjab Government accepts this challenge, it should do so by appointing an independent committee of impartial Judges from outside the Punjab and then let us see who has to face the consequences. If the Punjab Government dare not do so, I would not mind serving a term in Jail for having had the courage to come out with the 238 truth. May I bring it to the notice of Punjab Government that Chief Minister 's son is being discussed in almost every Punjabi house. but people are afraid of talking about him in public lest they be punished for that. " It is this statement which has given rise to the present criminal proceedings. After this statement was published, Mr. Ajaib Singh, Senior Superintendent of Police, Amritsar, issued a statement on the 25th July, 1957, which was published in the "Tribune" on the 26th July. By this statement, Mr. Ajaib Singh assured the people that persons concerned in smuggling cases had been interrogated and he was satisfied that the allegation that some Minister 's son was involved in smuggling was false and inaccurate. To this statement, the appelLant issued a rejoinder which was published in the "Hind Samachar", which is an Urdu Daily of Jullundur, on July 27, 1957. Then, followed the complaint which was filed by the complainant on August 17, 1957. That, shortly stated, is the background of the present criminal proceedings. The complaint was filed in the court of the Magistrate, First Class, Tar, Taran. Thereafter, the appellant moved this Court under section 527 of the Criminal Procedure Code for the transfer of the said case from the court of the Magistrate where it had been tiled. This Court directed on October 4, 1957, that the case in question should be remitted to the Punjab High Court so that it should be transferred by the said High Court from the court of the Magistrate at Tarn Taran to a court of Sessions in Delhi. That is how the case was transferred to the court of the Additional Sessions Judge, Delhi, and was tried by him. In support of his complaint, the complainant examined himself and led evidence of three other witnesses. The purport of the oral evidence led by the complainant was to show that the complainant was a person of status and good reputation, was carrying on business and had suffered in reputation and character by the defamatory statement published by the appellant. When the appellant was examined under section 342, Cr. P.C., he told the learned Judge that he would prefer to file a detailed written statement. Later, he did file his written statement and made several pleas against the charge levelled against him by the complainant. In substance, he alleged that the allegations made by him in his impugned statement were true and he had published the said allegations in the interest of public good. In other words, he claimed the protection of the First Exception to section 499, IPC. He also pleaded that the imputation which he had made against the complainant had been made in good faith and for public good. Thus, he also claimed the protection of the Ninth Exception to section 499, IPC. In support of his defence the appellant wanted to summon 328 witnesses and a large number of documents. The trial court allowed 239 him to summon 35 witnesses in all, but eventually he examined only 20 defence witnesses. He also produced several documents. After considering the oral and documentary evidence produced before him, the learned trial Judge came to the conclusion that the words used by the appellant in his statement, which was published in the Papers, were defamatory per se, and he held that the appellant had failed to make out a case either under the First Exception or under the Ninth Exception. In the result, he convicted the appellant and sentenced him to one year 's simple imprisonment. The appellant then preferred an appeal before the Punjab High Court, challenging the correctness and propriety of the order of conviction and sentence passed against him by the learned trial Judge. Before the appellate Court, the appellant claimed the protection of the Ninth Exception only and did not press his case that he was entitled to the protection of the First Exception as well. He also urged that he had been materially prejudiced inasmuch as the trial Judge had not given him a fair and proper opportunity to lead his evidence both oral and documentary. The learned single Judge, who heard his appeal, considered the arguments urged before him on behalf of the appellant and came to the conclusion that the appellant had failed to prove his claim that the impugned statement fell within the scope of the Ninth Exception to section 499, IPC. He took the view that the appellant had "completely failed to substantiate the plea of good faith. " The material which had been placed before the trial Judge in support of defence of good faith was, according to the High Court, of a very flimsy character and could not sustain the plea. It may be pointed out at this stage that the High Court found that in case the appellant had proved good faith, it would not have felt any difficulty in coming to the conclusion that the publication of the impugned statement was for the public good. But since, according to the High Court, good faith had not been proved, the appellant was not entitled to claim the protection of the Ninth Exception. Then, as regards the grievance made by the appellant that he had not been given a reasonable opportunity to lead his evidence, the High Court held that the said grievance was not well founded. In that connection, the High Court referred to the fact that though the trial Judge had allowed the appellant to examine 35 witnesses, the appellant examined only 20 witnesses, and it observed that the large mass of documentary evidence which had been produced by the appellant did not serve any useful or material purpose even for the defence of the appellant; and so the contention that prejudice had been caused to him by the failure of the learned trial Judge to give him a reasonable opportunity to lead evidence was rejected by the High Court. In the result, the High Court confirmed the order of conviction passed against the appellant by the trial Judge, but ordered that instead of undergoing one year 's simple imprisonment, the appellant shall undergo three months ' simple imprisonment and pay a fine of Rs. 2,000. In default of payment of fine, he was directed to 240 undergo three months ' simple imprisonment. It is against this order that the appellant has come to this Court by special leave. Norma1ly. we would not have examined the correctness of the finding recorded by the High Court in respect of the appellant 's plea of good faith. because that is a finding made by the High. Court on appreciating oral and documentary evidence and as it happens. the said finding confirms the view taken by the trial Judge himself. Whether or not good faith has been proved by an accused person who. pleads in his defence the Ninth Exception to a charge of defamation under section 500. would be a question of fact and even if it is assumed to be a mixed question of fact and law, if the courts below make a concurrent finding on such a question. this Court generally does not re examine the matter for itself while exercising its jurisdiction under article 136 of the Constitution. But in the present case. we cannot accept the finding of the High Court. because it is plain that in dealing with the question of good faith the High Court has misdirected itself materially on point of law. Section 499 of the Code defines defamation. It is unnecessary to set out the said definition. because it is common ground that the impugned statement published by the appellant is per se defamatory. and so. we must proceed to deal with the present appeal on the basis that the said statement would harm the reputation of the complainant. Exception 9 to section 499 provides that it is not defamation to make an imputation on the character of another. provided the imputation be made in good faith for the protection of the interest of the person making it. or for any other person. or for the public good. In the present case. the ingredient of public good is satisfied. and the only question which arose for decision in the court below and which arises before us. is whether the imputation can be said to have been made in good faith. There is no doubt that the requirements of good faith and public good have both to be satisfied. and so. the failure of the appellant to prove good faith would exclude the application of the Ninth Exception in his favour cven if the requirement of public good is satisfied. This position is not disputed by Mr. T.R. Bhasin who appears for the appellant. Mr. Bhasin, however. contends that in appreciating the evidence of the appellant and his arguments in respect of his good faith. the High Court has clearly misdirected itself. because it has expressly observed that in discharging the onus of providing good faith. it is necessary to remember that the pica of good faith must be proved "as strictly as if the complainant were being tried for the offenses imputed to him. " The High Court has added that the accused pleading justification virtually becomes the accuser. and that is why the burden has been placed by law upon him both in England and in India. The learned Judge of the High Court made his point still clearer with the observation that in cases of criminal defamation. an accused has not only to justify the whole of his libel. but the plea taken has to be proved as strictly as if the complainant 241 was being prosecuted for the offence. The same observations have been repeated by the learned Judge in several places in his judgment. Mr. Bhasin contends that the approach which the learned Judge has adopted in dealing with the plea raised by the appellant under Exception 9 is clearly erroneous. In cur opinion, Mr. Bhasin is right. It is true that under section 105 of the Evidence Act, if an accused person claims the benefit of Exceptions, the burden of proving his plea that his case falls under the Exceptions is on the accused. But the question which often arises and has been frequently considered by judicial decisions is whether the nature and extent of the onus of proof placed on an accused person who claims the benefit an exception is exactly the same as the nature and extent of the onus placed on the prosecution in a criminal case; and there is consensus of judicial opinion in favour of the view that where the burden of an issue lies upon the accused, he is not required to discharge that burden by leading evidence to prove his case beyond a reasonable doubt. no doubt. is the test prescribed while deciding whether the prosecution has discharged its onus to prove the guilt of the accused; but that is not a test which can be applied to an accused person who seeks to prove substantially his claim that his case falls under an Exception. Where an accused person is called upon to prove that his case falls under an Exception, law treats the onus as discharged if the accused person succeeds "in proving a preponderance of probability. " As soon as the preponderance of probability is proved, the burden shifts to the prosecution which has still to discharge its original onus. It must be remembered that basically, the original onus never shifts and the prosecution has at all stages of the case, to prove the guilt of the accused beyond a reasonable doubt. As Phipson has observed, when the burden of an issue is upon the accused, he is not. in general, called on to prove it beyond a reasonable doubt or in default to incur a verdict of guilty; it is sufficient if he succeeds in proving a preponderance of probability, for then the burden is shifted to the prosecution which has still to discharge its original onus that never shifts, i.e., that of establishing, on the whole case, guilt beyond a reasonable doubt. It will be recalled that it was with a view to emphasising the fundamental doctrine of criminal law that the onus to prove its case lies on the prosecution, that Viscount Sankey in Woolmington vs Director of Public Prosecutions(1) observed that "no matter what the charge or where the trial, the principle that the prosecution must prove the guilt of the prisoner is part of the common law of England and no attempt to whittle it down can be entertained. " This principle of common law is a part of the criminal law in this country. That is not to say that if an Exception is pleaded by an accused person, he is not required to justify his plea; but the degree and character of proof which the accused is expected 242 furnish in support of his plea, cannot be equated with the degree and character of proof expected from the prosecution which is required to prove its case. In this connection, it may be relevant to refer to the observations made by Humphreys J. in R.v. Carr Braint(1): "Lord Hailsham, L.C., [in Sodeman vs R. [1936] 2 All E.R. 1138] was in agreement with the decision of the majority of the Supreme Court of Canada, in R.v. Clark [(1921) 61 S.C.R. 608] where Duff J. in the course of his judgment, expressed the view that the necessity for excluding doubt contained in the rule as to the onus upon the prosecution in criminal. cases might be regarded as an exception rounded upon considerations of public policy. There can be no consideration of public policy calling for similar stringency in the case of an accused person endeavoring to displace a rebuttable presumption. " In R.v. Corr Braint(1), a somewhat similar question arose before the Court. In that case, the appellant was charged with the offence of corruptly making a gift or loan to a person in the employ of the War Department as an inducement to show, or as a reward for showing, favour to him. This charge was laid under the Prevention of Corruption Act, 1916, and in respect of such a charge, section 2 of the Prevention of Corruption Act, 1916, had provided that a consideration shall be deemed to be given corruptly unless the contrary is proved. The question which arose before the Court was; what is the accused required to prove if he wants to claim the benefit of the exception? At the trial, the Judge had directed the jury that the onus of proving his innocence lay on the accused and that the burden of proof resting on him to negative corruption was as heavy as that ordinarily resting on the prosecution. In other words, the Judge in substance told the jury that the accused had to prove his innocence beyond a reasonable doubt. The Court of Criminal Appeal held that this direction did not correctly represent the true position in law. According to the Court of Appeal, the onus on the accused was only to satisfy the jury of the probability of that which he was called upon to establish, and if he satisfied the jury that the probability was that the gift was made innocently, the statutory presumption was rebutted and he was entitled to be acquitted. What the Court of Criminal Appeal held about the appellant in the said case before it is substantially true about the appellant before us. If it can be shown that the appellant has led evidence to show that he acted in good faith, and by the test of probabilities that evidence proves his case, he will be entitled to claim the benefit of Exception Nine. In other words, the onus on an accused person may well be compared to the onus on a party in civil proceedings. and just as in civil proceedings the court trying an issue makes its decision by adopting the test of probabilities, so must a criminal court hold that the plea made by the accused is proved if a pre 1 243 ponderance of probability is established by the evidence led by him. We are, therefore, satisfied that Mr. Bhasin is entitled to contend that the learned Judge has misdirected himself in law in dealing with the question about the nature and scope of the onus of proof which the appellant had to discharge in seeking protection of Exception Nine. There is another infirmity in the judgment of the High Court, and that arises from the fact that while dealing with the appellant 's claim for protection under the Ninth Exception, the learned. Judge has inadvertently confused the requirements of Exception One with those of Exception Nine. The First Exception to section 499 is available to an accused person if it is shown by him that the impugned statement was true and had been made public for the public good. In other words, the two requirements of the First Exception are that the impugned statement must be shown to be true and that its publication must be shown to be for public good. The proof of truth which is one of the ingredients of the First Exception is not an ingredient of the Ninth Exception. What the Ninth Exception requires an accused person to prove is that he made the statement in good faith. We will presently consider what this requirement means. But at this stage, it is enough to point out that the proof of truth of the impugned statement is not an element of the Ninth Exception as it is of the First; and yet, in dealing with the appellant 's case under the Ninth Exception, the learned Judge in several places, has emphasised the fact that the evidence led by the accused did not prove the truth of the allegations which he made in his impugned statement. The learned Judge has expressly stated at the commencement of his judgment that the appellant had not pressed before him his plea under the First Exception, and yet he proceeded to examine whether the evidence adduced by the appellant established the truth of the allegations made in his impugned statement as though the appellant was arguing before him his case under the First Exception. In dealing with the claim of the appellant under the Ninth Exception, it was not necessary, and indeed it was immaterial, to consider whether the appellant strictly proved the truth of the allegations made by him. That takes us to the question as to what the requirement of good faith means. Good faith is defined by section 52 of the Code. Nothing, says section 52, is said to be done or believed in 'good faith which is done or believed without due care and attention. It will be recalled that under the General Clauses Act, "A thing shall be deemed to be done in good faith where it is in fact done honestly whether it is done negligently or not. " The element of honesty which is introduced by the definition prescribed by the General Clauses Act is not introduced by the definition of the Code; and we governed by the definition prescribed by section 52 of the Code. So, in considering the question as to whether the appellant acted in good faith in publishing his impugned statement, we have to enquire whether he acted with due care and attention. There is /B(N)3SCI 3 244 no doubt that the mere plea that the accused believed that what he stated was true by itself, will not sustain his case of good faith under the Ninth Exception. Simple belief or actual belief by itself is not enough. The appellant must show that the belief in his impugned statement had a rational basis and was not just a blind simple belief. That is where the element of due care and attention plays an important role. If it appears that before making the statement the accused did not show due care and attention, that would defeat his plea of good faith. But it must be remembered that good faith does not require logical infallibility. As has held by the Calcutta High Court in the matter of the Petition of Shibo Prosad Pandah(1), in dealing with the question of good faith, the proper point to be decided is not whether the allegations put forward by the accused in support of the defamation are in. substance true, but whether he was informed and had good. reason after due care and attention to believe that such allegations were true. Another aspect of this requirement has been pithily expressed by the Bombay High Court in the case of Emperor vs Abdool Wadood A htned(2). "Good faith", it was observed "requires not indeed logical infallibility, but due care and attention. But how far erroneous actions or statements are to be imputed to want of due care and caution must, in each case, be considered with reference to the general circumstances and the capacity and intelligence of the person whose conduct is in question. " "It is only to be expected", says the judgment, "that the honest conclusions of a calm and philosophical mind may differ very largely from the honest conclusions of a person excited by sectarian zeal and untrained to habits of precise reasoning. At the same time, it must be borne in mind that good faith in the formation or expression .of an opinion, can afford no protection to an imputation which does not purport to be based on that which is the legitimate subject of public comment. " Thus, it would be clear that in deciding whether an accused person acted in good faith under the Ninth Exception, it is not possible to lay down any rigid rule or test. It would be a question to be considered on the facts and circumstances of each case what is the nature of the imputation made; under what circumstances did it come to be made; what is the status of the person who makes the imputation; was there any malice in his mind when he made the said imputation; did he make any enquiry before he made it; are there reasons to accept his story that he acted with due care and attention and was satisfied that the imputation was true? These and other considerations would be relevant in deciding the plea of good faith made by an accused person who claims the benefit of the Ninth Exception. Unfortu (1) I.L.R. (2) I.L.R. 31 Born. 245 nately, the learned Judge has rejected the plea of the appellant that he acted in good faith, at least partly because he was persuaded to take the view that the evidence led by him did not tend to show that the allegations contained in his impugned statement were true. This naturally has, to some extent, vitiated the validity of his finding. It also appears that the learned Judge was inclined to take the view that the elaborate written statement filed by the appellant nearly ten months after he had been examined under section 342, should not be seriously considered, and that the appellant failed to make out his case of good faith at the early stage of the trial. Indeed. the learned Judge has passed severe strictures against the contents of the written statement and has blamed the appellant 's lawyer for having advised him to make these contentions. In support of his finding that written statements of this kind should be discouraged and cannot be seriously taken into account, the learned Judge had referred to two decisions of this Court. One is the case of Tilkeshwar Singh and others vs The State of Bihar(1), where this Court was called upon to consider the validity of the argument urged before it that there had not been a proper examination of the appellants under section 342, and so, their conviction should be quashed. In rejecting this argument, this Court pointed out that when the appellants were examined under section 342, they said they would. file written statements, and in the statements subsequently tiled by them, they gave elaborate answers on all the points raised m the prosecution evidence. That is why this Court observed that the appellants had not at all been prejudiced by reason of the fact that all the necessary questions were not put to them under section 342. It is in this connection that this Court incidentally, observed that section 342 contemplates an examination in court and the practice of filing statements is to be deprecated. But that is not a ground for interference unless prejudice is established. The learned Judge has read this observation as laying down a general principle that the filing of a written statement by an accused person should be deprecated and the plea made by him in such a written statement need not, therefore, be seriously considered, because they are generally the result of legal advice and are no better than afterthoughts. We do not think that the observation on which the learned Judge has based himself in making this criticism justifies his view. In many cases, the accused person would prefer to file a written statement and give a connected answer to the questions raised by the prosecution evidence. Indeed, section 256(2)of the Cr. P.C., provides that if an accused person puts in a written statement, the magistrate shall file it with the record. If the written statement is filed after a long delay and contains pleas which can otherwise be legitimately regarded as matters of after thought, that no doubt would affect the value of the pleas taken in the (1) ; 246 written statement. But we do not think that it would be possible to lay down a general rule that the written statement filed by an accused person should not receive the attention of the court because it is likely to have been influenced by legal advice. In our opinion, such a distrust of legal advice would be entirely unjustified. The other decision the learned Judge has referred to is in the case of Sidheswar Ganguly vs State of West BengalC). In that case, this Court has observed that there is no provision in the Code of Criminal Procedure for a written statement of the accused being filed at the Sessions stage, and it is in respect of written statements filed at the Sessions stage that it has made the further cornmeal that in a case tried by the learned Sessions Judge with the help of the Jury, if such a statement is allowed to be used by the Jury, it may throw the door open to irrelevant and inadmissible matter and thus throw an additional burden on the presiding Judge to extricate matter which was admissible from a mass of inadmissible statements which may have been introduced in the written statement. In the present case, we are not dealing with a statement filed at the Sessions trial properly so called, and so, we need not pause to consider the effect of these observations. In the present case, the written statement is an elaborate document and it gives the version of the appellant in great detail. In considering the question as to whether the allegations made in the written statement could be dismissed as no more than an afterthought, we cannot ignore the fact that at the very commencement of the proceedings, the appellant gave a list of 328 witnesses and called for a large number of documents, and as we will presently point out the witnesses whom he examined and some of the documents which he had produced, tend to show that the appellant had received information at the relevant time which supported his plea that the allegations which he was making against the complainant appeared to him to be true; otherwise, it is not easy to understand how the appellant could have given a list of witnesses and called for documents to show either that the allegations made by him were true, or that in any event. in making the said allegations he acted in good faith and for the public good. If the evidence led by the appellant as well as the nature of the cross . examination to which he subjected the complainant and his witnesses are taken into account, it would be difficult. we think to reject his plea of good faith on the ground that the written statement was filed very late and the pleas taken in it are an after thought. It is because of these infirmities in the judgement under appeal that we allowed Mr. Bhasin to take us through the evidence in this case. We ought to add that Mr. Anand, who appeared for the complainant, fairly conceded that having regard to the fact that the learned Judge had misdirected himself in law, the appellant would be entitled to request this Court to examine the evidence for itself before it accepted the conclusion of the learned Judge on the question of appellant 's good faith. (1)[1958] S.C.R. 749. 247 Before we proceed to refer to the broad features of the evidence, it would be relevant to mention one fact. The appellant was at the relevant time the State Secretary of the Punjab Praja Socialist Party. He is a public worker and belongs to an active political party. He had stated that there was no animns in his mind against the complainant and his father, and that is not seriously disputed. Malice in that sense must, therefore. be eliminated in dealing with the appellant 's plea. It is quite true that even if the appellant was not actuated by malice, it would not be possible to sustain his plea of good faith merely because he made the impugned statement as a public worker and he can claim that he was not actuated by personal malice against the complainant. Absence of personal malice may be a relevant fact in dealing with the appellant 's plea of good faith, but its significance or importance cannot be exaggerated. Even in the absence of personal malice. the appellant will have to show that he acted with due care and attention. There is another fact which must also be borne in mind. The statement which the accused published was in response to the challenge issued by the Government of Punjab. It is not early to understand why the Punjab Government thought it necessary to issue a Press statement in regard to allegations which were made by the Urdu papers against a Minister 's son. But the Punjab Government appears to have entered the arena and issued a challenge to the newspapers in question, and it was in response to this challenge that the appellant published the impugned statement. In this statement, the appellant requested the Punjab Government to appoint an independent Committee of impartial Judges to investigate the matter, and he undertook to prove the truth of his charge if an independent committee was appointed. In that connections. he stated that he wished to bring it to the notice of the Punjab Government that the Chief Minister 's son is being discussed in almost every Punjabi house, but people were afraid of talking about him in public lest they be punished for that. That is the genesis of the impugned statement. The two defamatory statements made by the appellant are that the complainant is the person against whom the allegations are made in the Press, and that he is not only a "leader of smugglers but is responsible for a large number of crimes being committed in the Punjab. " The statement added that "because the culprit happens to be the Chief Minister 's son, the cases are always shelved up." The question which calls for our decision is: has the appellant shown that he acted in good faith when he made an imputation against the complainant that he was the leader of the smugglers and was responsible for a large number of crimes being committed in Punjab '? In dealing with this question, we ought to take a broad survey of the evidence led by the appellant and the background in which the impugned statement came to be made. It appears that before the impugned state 248 ment was made, newspapers had been publishing reports against a Minister 's son without naming him. Some Members of the Punjab Legislative Assembly had also made similar statements on the floor of the House. The appellant examined some witnesses. Jagat Narain, who is an M.L.A. was one of them. He stated that in the year 1956,gold smuggling had increased on the Amritsar border and that he derived his knowledge from the newspapers. He said he had received complaints orally and in writing about the gold smuggling on the border and these suggested the complicity of a Minister 's son in smuggling. When he was asked whether he could name the informants, he stated that he would not like to name them lest they get into trouble. Sajjan Singh is another witness whom the appellant examined He was the Parliamentary Secretary of the Praja Socialist Party. He stated that the appellant had visited Amritsar area in 1957 and he had told the appellant about the large scale smuggling in the border area. He had also told him that Hazara Singh, Shinghara Singh, Budha Singh and Tara Pandit were smugglers and some of the Members of the Legislative Assembly were helping the smugglers and that the police did not take any action against Hazara Singh because of his connection with the complainant This witness had seen Hazara Singh and the complainant moving together in connection with the election campaigns of 1952 and 1957. The election of 1957 took place some time in February,1957; and sO, the evidence of this witness shows that he had given the information about the complainant 's conduct in respect of Hazara Singh and other matters in about February, 1957. That takes us to the evidence of Kulwant Rai of village Sirhali, District Amritsar. Against this witness, cases were pending under section 8(1) of the Foreign Exchange Regulation Act, section 5(3) of the Land Customs Act and section 19 of the Sea Customs Act. It has also been alleged against him that 140 to las of smuggled gold had been found in his possession. He was also prosecuted by Mr. Dhir, Magistrate, Tarn Taran, under the Indian Arms Act. ,red prosecution under the Indian Opium Act was also pending against him. It appears that two cases against him were withdrawn because a communication dated May 18, 1957, was addressed by the Home Secretary to the Punjab Government to the District Magistrate Amritsar, directing him to withdraw the two cases pending against him. The letter required the District Magist:ate to take action in that behalf immediately. It is remarkable that an affidavit was filed by Kulwant Rai dated May 21, 1957, wherein he stated that the Chief Minister had passed an order on May 7, 1957, for the withdrawal of the cases against him and that the Government order in that behalf would be received by the court very soon. This means that Kulwant Rai knew about the decision of the Government to withdraw cases against him even before the said decision was communicated to the District Magis 249 trate and then to the trial Magistrate. It is also significant that on June 9, 1957, when the proceedings under section 514 Cr. P.C., were fixed for hearing against Kulwant Rai, he was absent from court and a telegram was received by the Magistrate that Kulwant Rai was ill and his absence should be excused. This telegram was sent not by Kulwant Rai but by the complainant. The complainant no doubt denied that he had sent such a telegram, but the High Court has found that in all probability, the telegram had been sent by the complainant. The complainant also did not admit that he was a friend of Kulwant Rai. There again, the High Court was not prepared to accept the complainant 's version. On this evidence, it seems plain that the complainant knew Kulwant Rai very well and did not stop short of helping him actively by sending a telegram to the Magistrate to excuse Kulwant Rai 's absence on the date of hearing of the case against him. From the evidence of Kulwant Rai whom the appellant had to examine to support his plea of good faith. it is not difficult to infer that Kulwant Rai was charge sheeted in respect of several offences, and an allegation had been made against him that he was connected with gold smuggling. If the appellant knew that the complainant was friendly with such a character, would he be justified in claiming that in giving expression to his belief that the complainant was hand in glove with Kulwant Rai, a gold smuggler, he was acting in good faith '? That is the question which has to be answered in the present case. In dealing with this aspect of the matter, the learned Judge no doubt found that the material on the record was enough to justify the conclusion that there was friendship between Kulwant Rai and the complainant and ' that the complainant had sent a telegram to the Magistrate on Kulwant Rai 's behalf, but he thought it had not been proved that in fact, Kulwant Rai had been engaged in gold smuggling. No doubt, a case was pending against him for gold smuggling; but the learned Judge held that the pendency of a criminal case does not necessarily prove that the charge levelled against Kulwant Rai was in fact true. It is this approach which is substantially responsible for the learned Judge 's conclusion that good faith is not proved in respect of the allegations made by the appellant that the complainant was a friend and leader of gold smugglers. The learned Judge overlooked the fact that in dealing with this aspect of the matter, the pertinent enquiry is not whether, in fact, the charge of gold smuggling had been proved against Kulwant Rai and whether it is shown satisfactorily that the complainant was assisting him in that behalf. What is pertinent to enquire is, if the appellant knew about this evidence at the relevant time and he believed that the complainant was assisting Kulwant Rai in respect of his gold smuggling activities, could he be said to have acted in good faith or not when he published the statement in that behalf? We may incidentally point out that we cannot overlook the 250 fact that the appellant experienced some difficulty in proving his case in the present proceedings, because witnesses were not willing to come out and give evidence, though they may have given that information to the appellant before he made his statement. Take for instance, the case of Hardin Singh of village Patti. It appears that this witness was arrested by the police on June 19, 1959 as a suspect smuggler and he was kept in the lock up from June 19 to June 25, 1959 and was thereafter let off. According to him, he was arrested because he had been summoned as a defence witness in the present case. Let us then consider the case of Hazara Singh and the association of the complainant with him. Hazara Singh comes from the same village to which the family of the complainant belongs, and yet, he was not prepared even to admit that he knew the complainant or his family. The learned Judge realised that Hazara Singh was not prepared to speak the truth at least on some points, and so, he observed that he was willing to accept the appellant 's case that the complainant, Sadhu Singh and Major Naurang Singh, Senior Superintendent of Police were on friendly terms. He, however, thought that it was not clearly shown on the record whether Hazara Singh was entered as a badminton in the police registers and that there was also no convincing evidence on record to show that Hazara Singh was a gold smuggler. The learned Judge referred to the evidence which showed that the complainant and Hazara Singh were moving together during the election days and were friendly with each other; but that. according to the learned Judge, did not prove the truth of the statement that Hazara Singh was a gold smuggler and that the complainant was his friend. This approach again is partly based upon importing into the discussion the consideration about the truth of the statement which would be relevant under the First Exception but which is not material under the Ninth Exception. In connection with Hazara Singh, and Kulwant Rai, there are two documents to which our attention has been invited by Mr. Bhasin. These documents show that Kulwant Rai was treated on the Police record as a notorious smuggler and habitual offender, and Hazara Singh was treated as a bad character and his name was borne on register No. 10, and his history sheet was opened at No. 110 A Basra Alif. There has been some argument before us at the Bar on the question as to whether these two documents are duly proved. Mr. Art and for the complainant has strongly urged that these documents are not proved. and in any event. no reliance was placed on them in the courts below. This latter contention is undoubtedly true; but the contention that the documents were not proved in the present case strikes us as none too strong, because these documents have been included in the paper book after the lists made by the respective advocates for the parties were exchanged and the index was finally settled with their approval in the Punjab High Court. The learned Advocate for the State or the complainant did not object to the inclusion of these two documents in 251 the record, and this showed that they were treated as duly forming part of the record. It does appear that Mr. Dhir, the Resident Magistrate, Kaithal (D.W. 27) has produced the whole file of the case in respect of the proceedings taken under s.5/4. Cr. P.C., and Mr. Bhasin contends that along with the file, the two documents in respect of Kulwant Rat were received. Mr. Anand no doubt suggested that it was not shown under what statutory provisions. these documents are kept; but since the admissibility of these documents does not appear to have been challenged in the courts below, we think oil is too late to raise this technical point at this stage. However. in dealing with the appeal. we are prepared to exclude from our consideration evidence furnished by these two documents. Even without them. there is enough evidence to show that the complainant was friendly with Kulwant Rat and Hazara Singh, and on the whole. we are inclined to take the view that if the appellant knew about the complainant 's friendship and active association with these two persons and had other information about the activities of these two persons. it cannot be said that he did not act in good faith when, in response to the challenge issued by the Punjab Government. he came up with the impugned statement and sent it for publication in the Press. Then, in regard to the other allegation that the complainant was concerned with the commission of offences in Punjab, we may refer to the evidence led by the appellant to show that in making this charge, he acted in good faith. The witness to whose evidence reference has been made by Mr. Bhasin in respect of this part of the case is Mr. K.K. Dewett, who was the Principal of the Punjab University College, Hoshiarpur, between June, 1952 and April, 1958. The incident to which this witness deposed ' took place in 1953. At this time. the complainant had left the college at Hoshiarpur. On January 19, he went to that college to get his certificate Principal Dewett in his evidence did not support the appellant in his suggestion that the complainant had behaved in a criminal way and had threatened to assault the students in the college on that occasion. But the confidential report made by him on January 22 shows that in the witness box Principal Dewett hesitated to disclose the whole truth. This report unambiguously indicates that the complainant threatened several students with a stick. and it speaks of two or three incidents that took place which created a considerable excitement and commotion among the student community in the college. In this report, the Principal, in fact, describes the situation as very ugly. and he refers to the fact that the students went on strike and passed resolutions, demanding the rustication of the complainant from the University and also protesting against inaction and partiality of the Principal himself. This confidential report was further inquired into, and the documents in respect of this enquiry are also on the record. The students seem to have demanded that the complainant should be arrested. because they were afraid ' that he would collect his friends and cause mischief to them. 'Ultimately, the Vice Chancellor made a report to the Chancellor 252 that having examined the matter, he came to the conclusion that the complainant was "a bit bumptious and throws his weight about in a way which fellow students find irritating". He added "How one wishes that the sons of men holding exalted offices in the State would behave in a way consistent with the dignity of their parents". The learned Judge does not appear to have taken into account these reports, but has substantially relied on the oral evidence of the Principal himself. Even so, he has recorded his conclusion that the evidence shows juvenile indiscretion on the part of the complainant but no juvenile delinquency and certainly no "crime in the sense of the libelous imputation made". In dealing with this part of the imputation again, the learned Judge should have asked himself the question as to whether on the material of the kind disclosed by the confidential report made by the Principal, would a person of ordinary prudence acting bonafide in good faith be not justified in coming to the conclusion that the complainant was not only throwing his weight about, but was also threatening assaults in the college, because he thought he would be immune from legal process by virtue of his position? The fact that the appellant called for several documents and gave a list of witnesses as soon as he entered on his defence, shows what he knew at the relevant time, and his plea that he acted in good faith has to be judged on the basis that he made the imputations because he had material of this kind in his possession. It is true that the appellant has stated in his written statement that several persons came and reported to him against the complainant, and amongst them were included some high police officials as well; but having regard to the fact that the complainant 's father occupied the position of the Chief Minister of Punjab. they were not willing to come forward and_ give evidence in court. In fact, the appellant had requested the Punjab Government in his impugned statement to appoint a commission of inquiry and had stated that if a commission of inquiry was appointed, he would prove his charges against the complainant. It is in the light of these circumstances, that we have to decide whether the appellant has proved that he acted in good faith or not. In dealing with this question. we cannot overlook or ignore the probabilities on which the appellant relies, the surrounding circumstances to which he has referred and the actual evidence which he has led. Incidentally, we may mention two other documents on which Mr. Bhasin has relied. On February 20, 1957. the complainant wrote a letter to 'Major Sahib ' (SSP). In that letter, he told the Major Sahib to grant leave to section Gurdial Singh No. 1725 posted at Chowki Khosa Burj, and he added that it was very urgent, and asked him to do it immediately. Similarly, on June 3, 1956, the complainant wrote a letter to the Executive Officer, Taran Taran, in which he stated "our 10/12 trucks loaded with wood will be reaching Taran Taran one or two daily. Therefore, you please instruct your Moharrir on the Jandiala Amritsar road that he 253. should not create any obstruction regarding octroi". It would be noticed that the complainant had been writing to Government servants in respect of matters falling within their authority as such servants; and that shows, according to Mr. Bhasin. that the complainant was throwing his weight about even in matters with which he had no connection at all. We have carefully considered the evidence to which our attention was drawn by Mr. Bhasin as well as Mr. Anand, and we have come to the conclusion that the High Court was in error in holding that the appellant had failed to show that he acted in good faith when he published the impugned statement. As we have already stated, it has been found by the High Court and it is not disputed before us that the publication of the impugned statement was for the public good; and so, our conclusion is that the appellant is entitled to claim the protection of the Ninth Exception. Before we part with this appeal, we ought to add that this matter came before this Court for hearing on the 1st September, 1964, and an interlocutory judgment was delivered by which certain documents were called for. On that occasion, Mr. Bhasin had pressed before this Court his contention that the trial Judge was in error in not calling for certain documents which the appellant wanted to rely on, and in upholding the plea of privilege made by State Govt. in respect of certain other documents. We wanted to satisfy ourselves whether the documents on which Mr. Bhasin wanted to rely were relevant and whether the plea of privilege claimed by the State was justified. Some of these documents have been received by this Court in pursuance of our interlocutory judgment. But we do not think it necessary to consider this matter, because the documents which Mr. Bhasin wanted to be produced or proved might at best. if they are admitted, be of help to him to show that the allegations made by the appellant are true. to him however is a plea which fails under the First Exception and since the appellant did not claim the benefit of that Exception in the High Court, we do not think it would be open to the appellant to press his point that we should examine the question as to whether the trial Judge erred in not allowing the appellant to bring these documents on the record. That is why we did ' not look at these documents and have not considered the question raised by Mr. Bhasin at the time when the interlocutory judgment was delivered in this case. In other words, the appellant is not allowed to raise his plea that the allegations made by him in the impugned statement are true. Even so. in view of our conclusion that the appellant has succeeded in showing that he is entitled to the protection of the Ninth Exception to section 499, the appeal must be allowed and the order of conviction and sentence passed .against the appellant set aside.the fine imposed on the appellant has been paid by him, the same should be refunded to him. Appeal allowed.

IN-Abs

The Government of Punjab issued a press note stating that certain dailies in the States were publishing false reports alleging the complicity of a Minister 's son in smuggling, that the allegations were made with a view to malign the Government, and, that the name the son should be openly mentioned. In response to that challenge the appellant, who was a public worker, published a statement in the press, naming the Chief Minister 's son as the leader of the smugglers, and as also responsible for a large number of crimes. He also requested that the Government should appoint a committee of independent Judges to inquire into the matter. The Chief Minister 's son then filed a complaint of defamation against the appellant. After the complainant and his witnesses were examined, the appellant filed a detailed written statement in answer to the questions under section 342, Criminal Procedure Code, ten months after he was questioned under that section. He claimed therein the protection of both the First and Ninth Exceptions to section 449 of the Indian Penal Code, 1860. At the very commencement of the proceedings, he gave a list of 328 witnesses. to be examined on his behalf. He was allowed to summon only 35 and eventually he examined 20 defence witnesses. He also produced several documents. After considering the oral and documentary evidence, the trial Court convicted the appellant. In his appeal to the High Court, he claimed only the protection of the Ninth Exception that is, that he published the statement in good faith and for public good. The High Court dismissed the appeal, with a modification in the sentence. In his appeal to this Court, the appellant contended that, in appreciating his evidence in respect of good faith, the High Court had misdirected itself. HELD: A broad survey of the evidence led by the appellant and the background in which the impugned statement was made, show that the High Court was in error in holding that the appellant had failed to show that he acted in good faith when he published the statement. [253 B C] (ii) The High Court had misdirected itself in dealing with the question about the nature and scope of the onus of proof which the appellant had to discharge in seeking the protection of the Ninth Exception, because, it held that in discharging the onus, the plea should be proved by the appellant as strictly as if the complaints was being prosecuted for the offence. Where the burden of an issue lies upon the accused under section 105 of the Evidence Act, he is not required to discharge the burden by leading evidence to prove his case beyond a reasonable doubt. It is sufficient if he succeeds in proving a preponderance of probability, for then, the burden is shifted ' to the prosecution which has still to discharge its original onus that never shifts, that is, to establish on the whole case the guilt beyond a reasonable doubt. [240 H; 241 C G; 243A B] R.V. Carr Braint,, , referred (ii) While dealing with the appellant 's claim for protection under the Ninth Exception, the High Court had confused the requirements 236 of the First Exception with those of the Ninth. It was not necessary to consider whether the appellant had strictly proved the truth of the allegation made by him, because, proof of truth of the impugned statement is not an element of the Ninth Exception as it is of the First. What the Ninth Exception requires an accused person to prove is that he made the statement in good faith. The question as to whether the accused acted in good faith would depend on the facts and circumstances of each case, What is the nature of the imputation made; under what circumstances did it co.me to be made; what is the status of the person who makes the imputation; was there any malice in his mind when he made the imputation; did he make any ,enquiry before he made it; are there reasons to accept his: story that he acted with due care and attention and was satisfied that the imputation was true; these, and other considerations would be relevant in deciding the question. [243 B E; 244 G H] (iii) The High Court also erred in holding that the appellant 's written statement should not be seriously considered, as he did not make out his case of good faith at the early stage of the trial, and that the written statement was likely to have been influenced by legal advice. If the written statement filed after a long delay contained pleas which could otherwise be legitimately regarded as matters of after thought, that no doubt, would affect the value of the pleas taken in the written statement. But, the fact that at the very commencement of the proceedings, the appellant called for a large number of witnesses and documents, and the evidence led by him as well as the nature of the cross examination to which he subjected the complainant and his witnesses, make it difficult to reject his plea of good faith, on the ground that the written statement was filed very late and the pleas taken in it might be an after thought. [245 H. B C: 246 E F] Tilkeshwar Singh and others vs State of Bhar, A.I.R. 1956. section C.239 explaired

Appeals Nos. 565 566 of 1963. Appeals by special leave from the judgment and order dated January 31, 1962 of the Mysore High Court in Writ Petitions Nos. 940 and 1056 of 1961. G.S. Pathak and M/s. Rajinder Narain and Co. for the appellants. R. Gopalakrishnan, for the respondent. The Judgment of the Court was delivered by Shah, J. These appeals raise the question whether the Academic Council of the Mysore University was competent in exercise 230 of the powers conferred by sections 22, 23 and 43 of the Mysore University Act 23 of 1956 to frame cl. 3(c) of the Regulations relating to the grant of the degree for Bachelor of Veterinary Science (B.V.Sc.). The Mysore University Act 23 of 1956 hereinafter referred to as 'the Act ' was enacted to provide for the reorganisation of the University of Mysore and other incidental matters. The powers of the University are described in section 4. Section 21 provides for the constitution of the Academic Council which is one of the authorities of the University designated under section 13 and section 22 sets out the powers of the Academic Council. It provides: "The Academic Council shall, subject to the provisions of this Act, have the control and general regulation of teaching, courses of studies to be pursued, and maintenance of the standards thereof and shall exercise such other powers and perform such other duties as may be prescribed." By section 23 other powers of the Academic Council are prescribed. Insofar as it is material, the section provides: "In particular and without prejudice to the generality of the powers specified in section 22, the Academic Council shall have, subject to the provisions of this Act, the following powers, namely: (a) x x x x (b) x x x x (c) to make Regulations relating to courses, schemes of examinations and conditions on which students shall be admitted to the examinations, degrees, diplomas, certificates and other academic distinctions;" Section 43 of the Act sets out the scope of the Regulations. enacts: "Subject to the provisions of this Act, the Regulations may provide for the exercise of all or any of the powers, enumerated in "sections 22 and 23 of this Act and for the following matters, namely: (i) the admission of students to the University; (ii) the recognition of the examinations and degrees of other Universities as equivalent to the examinations and degrees of the University; (iii) the University courses and examinations and the conditions on which students of the University and affiliated colleges and other University institutions shall be admitted to examinations for the degrees, diplomas and certificates of the University; and 231 (iv) the granting of exemptions. " In exercise of the powers conferred by sections 22, 23 and 43, Academic Council made Regulations relating to the grant of a degree for Bachelor of Veterinary Science. Clause 3(c) of the Regulations is as follows: "No candidate who fails four times shall be permitted to continue the course. " The Mysore Veterinary College, Hebbal, Bangalore, is one of the colleges affiliated to the University of Mysore for training students for the degree course in Bachelor of Veterinary Science (B.V.Sc.). These two appeals arise on facts which are closely parallel. Gopala Gowda respondent in C.A. No. 565 of 1963 was admitted in the year 1958 as a student in the First Year Course in the Mysore Veterinary College. Gopala Gowda was declared unsuccessful in four successive First Year Course examinations. The Controller of Examinations, Mysore University, then informed Gopala Gowda by letter dated August 2, 1961 that he "had lost" his right to continue studies for the Bachelor of Veterinary Science (B.V.Sc.) course under Regulation 3(c) of the Regulations governing the course of study framed by the University leading to the degree of the Bachelor of Veterinary Science (B.V.Sc.). Gopala Gowda then presented a petition in the High Court of Mysore praying that, for reasons set out in his affidavit, the High Court do issue a writ quashing the order communicated by the Controller of Examinations in his letter dated August 2, 1961 and do further direct the University of Mysore and the Controller of Examinations to permit him to appear for the subsequent examinations and to prosecute his training for the Bachelor of Veterinary Science Course. The other respondent Bheemappa Reddy had also failed to satisfy the examiners in four successive First Year Course examinations commencing from April 1959, and on being intimated by the Controller of Examinations that he will not be permitted to continue his training for the Bachelor of Veterinary Science (B.V. Sc.) course under Regulation 3(c), he flied a similar writ petition in the High Court. The High Court of Mysore held that Regulation 3(c) of the Regulations governing the course of study leading to conferment of the degree of Bachelor of Veterinary Science of the Mysore University could not be said "to subserve the purpose of maintaining the standards mentioned in section 22 of the Mysore University Act" and on that account was beyond the competence of the Academic Council or the University and those bodies had no power to prevent Gopala Gowda and Bheemappa from prosecuting their studies and from appearing at the subsequent examinations. With special leave. the University of Mysore, the Controller of Examinations and the Principal of the Mysore Veterinary College, have appealed. In the view of the High Court, under section 22 of the Act the Academic Council could prescribe minimum qualifications for 232 admission to a degree course in an affiliated college, and also could prescribe standards which qualify a candidate .for admission to the degree or academic distinction, but the Council had not the power to prescribe a condition on the 'satisfaction of which a student:admitted to the Course could prosecute his study in the course to which he had been admitted. Power to frame Regulations for "maintenance of standards" within the meaning of section 22 and prescribing conditions on which a student shall be admitted to an examination within the meaning of section 23(3) (c)did not. in the opinion. of the High Court, import power to make Regulation preventing a student admitted to a course from prosecuting his study, for the only consequence of failure in an examination is that the student does not qualify himself for admission to the degree sought by him. and the University would be entitled to withhold conferment of the degree. but not to obstruct the prosecution of the course of study. The expression "maintenance of standards" in the view of the High Court could only take in considerations such as undergoing a course of study and keeping a prescribed minimum attendance to an institution maintained or recognised by the University, but it does not and "cannot be taken to mean that by reason only of the fact that a student has not attained the standard of knowledge or proficiency required for passing the examination within that period, he can be said to be for all times incapable of attaining that standard. " The High Court proceeded to observe "The power to maintain certain standards before a degree or other academic distinction is conferred upon a person involves the power to withhold the conferment of that degree unless a person attains the necessary standard, but it cannot either in logic or in justice involve the power to refuse to permit a person to attain that standard. That power can and should be exercised at the time of admission into the course of study if the University is of the opinion that the applicant for .admission into the course does not even possess the minimum suitability for taking that course of study. Once it admits him into the course of study, it must be held to have entertained the opinion that he does have the minimum suitability to take that course which means that he has the capacity by undergoing the course of study to attain the standard necessary for receiving the degree. " We are unable to agree with the view expressed by the high Court. The Academic Council is invested with the power of controlling and generally regulating teaching,. courses of studies to be pursued. and maintenance of the standards thereof. and for those purposes the Academic Council is competent to make regulations. amongst others, relating to the courses, schemes of examination and conditions on which students shall be admitted to the examinations. degrees. diplomas. certificates and other academic distinctions. The Academic Council is thereby invested with power to control the entire academic life of the student from the stage of 233 admission. to a course of study to the. ultimate conferment of a degree or academic distinction. Admission to a course or branch of study depending upon possession of the minimum qualifications prescribed does not divest the Academic. Council of its control over the ' academic career of the student, for the Council has for maintaining standards the power to prescribe schemes of examinations, arid also to prescribe conditions on which students. Shall be admitted to the examinations. "Power to prescribe conditions, On which, a student may be admitted to the examinations, in our opinion, necessarily implies the power to refuse to admit a student in certain contingencies, for the power to admit to an examination implies the power to weed out students who have on the application of a reasonable test proved themselves to be unfit to continue the course or persecute training in that course. If on account of general inaptitude for being trained in a course or on account of supervening disability to prosecute a course of study, a student admitted to that course is found by the Academic Council to be unfit to prosecute his training, it would, in our judgment, be within the power of the Academic Council, in exercise of its authority to control and maintain standards, and also of its authority to prescribe conditions on which students may be admitted to examinations, to direct that the student shall discontinue training in that course. And failure by a student to qualify for promotion or degree in four examinations, is certainly a reasonable Lest of such inaptitude or supervening disability. If after securing admission to an institution imparting training for professional courses, a student may be held entitled to continue indefinitely to attend the institution without adequate application and to continue to offer himself for successive examinations, a lowering of academic standards would inevitably result. Power to maintain standards in the course of studies. in our judgment, confers authority not merely to prescribe minimum qualifications for admission, courses of study, and minimum attendance at an institution which may qualify the student for admission to the examination, but also authority to refuse to grant a degree, diploma, certificate or other academic distinction to students who fail to satisfy the examiners at the final examination, and to direct that a student who is proved not to have the ability or the aptitude to complete the course within a reasonable time to discontinue the course. There is no warrant for restricting the expression "maintenance of the standards" only to matters such as minimum attendance, length of the course and prescription of minimum academic attainments. The High Court was therefore in error in holding that the Academic Council had no power to prescribe Regulation 3(c). We are informed at the Bar, however, that since the High Court decided. the case on January 31, 1962, the two respondents were permitted to continue their courses of study and they have appeared for the subsequent examinations and they were declared to have duly 234 passed their second and third year examination and have been permitted to keep terms for the degree examination. Even though, the view taken by the High Court was erroneous, we do not think. having regard to the fact that the respondents were permitted to continue their course of study, the University not having applied for any interim orders pending disposal of these appeals, that any order should be passed in these appeals so as to deprive the respondents of the training they have received. These appeals are filed with special leave, and in the exceptional circumstances of the case, we do not think we would be justified, merely because we disagree with the interpretation of the High Court of the relevant regulation, in making an effective order against the respondents so as to nullify the results declared by the University concerning them in respect of the second and third year examinations. The appeals are therefore dismissed. There will be no order as to costs. Appeals dismissed.

IN-Abs

Under Sections 22, 23, and 43 of the Mysore University Act, the Academic Council of the University was empowered, inter alia, to control and operate the teaching, courses of study, to secure maintenance of standards, etc., and to make necessary regulations including those relating to examinations and conditions on which students may be admitted to examinations, degrees, diplomas, etc. In exercise of these powers, the Academic Council made certain Regulations relating to the grant of a degree of Bachelor of Veterinary Science and by clause 3(c of these Regulations, it was provided that no candidate who failed an examination four times, would permitted to continue the course. The respondents were declared unsuccessful in four successive First Year Course examinations and the Controller of Examinations informed each respondent that he had lost their right to continue studying for the degree. The respondents thereupon filed petitions in the High Court, praying for the issue of writs quashing the orders communicated to them and directing the University to permit them to appear for the subsequent examinations and to continue their studies. The High Court held that Regulation 3(c) was beyond the competence of the Academic Council and the University. On appeal to this Court: HELD: that power to maintain standards in the course of studies confers authority not merely to prescribe minimum qualifications for admission, courses of study, minimum attendance at an institution which may qualify the student for admission to the examination, etc.,but also authority to refuse to grant a degree, diploma, or other academic distinction to students who fail at the final examination and to direct that a student, who is proved not to have the ability or the aptitude to complete the course within a reasonable time,discontinue the course. There is no warrant for restricting the expression "maintenance of standards" only to matters such as minimum attendance, length of the course and prescription of minimum academic attainments. [233F H]

Civil Appeal No. 50 of 1965. Appeal by special leave from the order dated January 6, 1965 of the Circuit Bench of the Punjab High Court at Delhi in Civil Writ No. 8 D of 1965. M.C. Setalvad, Ravinder Narain, J.B. Dadachanji and O.C. Mathur, for the appellant. C.K. Daphtary, Attorney General, S.V. Gupte, Solicitor General, B.R.L. lyengar and R.H. Dhebar, for the respondent No. 1. Santosh Chatterjee B. B. Ratho and M.L. Chhibber, for respondent No. 2. The Judgment of the Court was .delivered by Gajendragadkar, C.J. The principal question which this appeal by special leave raises for our decision relates to the construction of Article 192 of the Constitution. The said question arises in this way. The appellant Brundaban Nayak was elected to the Legislative Assembly of Orissa from the Hinjili 23 Constituency in Ganjam district in 1961, and was appointed one of the Ministers of the Council of Ministers in the said State. On August 18, 1964, respondent No. 2, P. Biswal, applied to the Governor of Orissa alleging that the appellant had incurred a disqualification subsequent to his election under article 191(1)(e) of the Constitution read with section 7 of the Representation of the People Act, 1951 (No. 43 of 1951) (hereinafter called the Act). In his application, respondent No. 2 made several allegations in support of his contention that the appellant had become disqualified to be a member of the Orissa Legislative Assembly. On September 10, 1964, the Chief Secretary to the Government of Orissa forwarded the ,said complaint to respondent No. 1, the Election Commission of India, under the instructions of the Governor. In this communication, the Chief Secretary stated that a question had arisen under Article 191(1) of the Constitution whether the member in 55 question had been subject to the disqualification alleged by respondent No. 2 and so, he requested respondent No. 1 in the name of the Governor to make such enquiries as it thinks fit and give its opinion for communication tO the Governor to enable him to give a decision on the question raised. On November 17, 1964, respondent No. 1 served a notice on the appellant forwarding to him a copy of the letter received by it from respondent No. 2 dated the 4th November, 1964. The notice intimated to the appellant that respondent No. 1 proposed to enquire in the matter before giving its opinion on the Governor 's reference, and, therefore, called upon him to submit on or before the 5th December, 1964, his reply with supporting affidavits and documents, if any. The appellant was also told that the parties would be heard in person or through authorised counsel at 10 30 A.M. on the 8th December, 1964. in the office of respondent No. 1 in New Delhi. On December 1, 1964, the appellant sent a telegram to respondent No. 1 requesting it to adjourn the hearing of the matter. On the same day, he also addressed a registered letter to respondent No. 1 making the same request. Respondent No. 2 objected to the request made by the appellant for adjourning the hearing of the complaint. On December 8, 1964. respondent No. 1 took up this matter for consideration. Respondent No. 2 appeared by his counsel Mr. Chatterjee, but the appellant was absent. Respondent No. 1 took the view that an enquiry of the nature contemplated by article 192(2) must be conducted as expedtiously as possible, and so, it was necessary that whatever his other commitments may be, the appellant should arrange to submit at least his statement in reply to the allegations made by respondent No. 2, even if he required some more time for filing affidavits and/or documents in support of his statement. Even so, respondent No. 1 gave the appellant time until the 2nd January, 1965, 10 30 A.M. when it ordered that the matter would be heard. On January 2, 1965, the appellant appeared by his counsel Mr. Patnaik and respondent No. 2 by his counsel Mr. Chatterjee. On this occasion, Mr. Patnaik raised the question about the maintainability of the proceedings before respondent No. 1 and its competence to hold the enquiry. Mr. Chatterjee repelled Mr. Patnaik 's contention. Respondent No. 1 over ruled Mr. Patnaik 's contention and recorded its conclusion that it was competent to hold the enquiry under article 192(2). Mr. Patnaik then asked for adjournment and made it clear that he was making the motion for adjournment without submitting to the jurisdiction of respondent No. 1. In view of the attitude adopted by Mr. Patnaik, respondent No. 1 took the view that it would be pointless to adjourn the proceedings. and so, it heard Mr. Chatterjee in support of the case of respondent No. 2. After hearing Mr. Chatterjee. respondent No. 1 reserved its orders on the enquiry and noted that its 56 opinion would be communicated to the Governor as early as possible. When matters had reached this stage before respondent No. 1, the appellant moved the Punjab High Court under article 226 of the Constitution praying that the enquiry which respondent No. 1 was holding, should be quashed on the ground that it was incompetent and without jurisdiction. This writ petition was summarily dismissed by the said High Court on January 6, 1965. Thereafter, the appellant applied to this Court for special leave on January 8, 1965, and special leave was granted to him on January 14, 1965. The appellant then moved this Court for stay of further proceedings before respondent No. 1, and the said prayer was granted. When special leave was granted to the appellant, this Court had made an order that the preparation of the record and the filing of statements of the case should be dispensed with and the appeal should be heard on the paper book filed along with the special leave petition and must be placed for hearing within three weeks. That is how the matter has come before us for final disposal. Since the Punjab High Court had dismissed the writ petition filed by the appellant in limine, neither of the two respondents had an opportunity to file their replies to the allegation made by the appellant in his writ petition. That is why both respondent No. 1 and respondent No. 2 have filed counter affidavits in the present appeal setting out all the relevant facts on which they wish to rely. The appellant has filed an affidavit in reply. All these documents have been taken on the record at the time of the hearing of this appeal. It appears from the affidavit filed by Mr. Prakash Narain. Secretary to respondent No. 1, that when notice issued by respondent No. 1 on the 17th November, 1964, was served on the appellant, through oversight the original complaint flied by respondent No. 2 before the Governor of Orissa and the reference made by the Governor to respondent No. 1 were not forwarded to the appellant. At the hearing before us, it is not disputed by the appellant that a complaint was in fact made by respondent No. 2 before the Governor of Orissa and that the Governor had then referred the matter to respondent No. 1 for its opinion. Let us then refer to Article 192 which fails to be construed in the present appeal. Before reading this articl, it is relevant to refer to article 191. Article 191(1) provides that a person shall be disqualified for being chosen as, and for being, a member of the Legislative Assembly or Legislative Council of a State if, 57 to the Governor. As we have already indicated, respondent No. 2 's case is that the appellant has incurred the disqualification under article 191(1)(e) read with section 7(d) of the Act, and this disqualification has been incurred by him subsequent to his election. It is well settled that the disqualification to which article 191(1) refers, must be incurred subsequent to the election of the member. This conclusion follows from the provisions of article 190(3)(a). This Article refers to the vacation of seats by members duly elected. Sub Article (3)(a) provides that if a member of a House of the Legislature of a State becomes subject to any of the disqualifications mentioned in clause (1) of article 191, his seat shall thereupon become vacant. Incidentally, we may add that corresponding provisions with regard to the disqualification of members of both Houses of Parliament are prescribed by Articles 101,102 and 103 of the Constitution. It has been held by this Court in Election Commission, India vs Saka Venkata Subba Rao and Union of lndia Intervener/that Articles 190(3) and 192(1) are applicable only to disqualifications to which a member becomes subject after being elected as such. There is no doubt that the allegations made by respondent No. 2 in his complaint before the Governor, prima facie, indicate that the disqualification on which respondent No. 2 relies has arisen subsequent to the election of the appellant in 1961. Reverting then to article 192, the question which we have to decide in the present appeal is whether respondent No. 1 is entitled to hold an enquiry before giving its opinion to the Governor as required by article 192(2). Let us read article 192: "(1) If any question arises as to whether a member of a House of the Legislature of a State has become subject to any of the disqualifications mentioned in clause (1) of Article 191, the question shall be referred for the decision of the Governor and his decision shall be final. (2) Before giving any decision on any such question. the Governor shall obtain the opinion of the Election Commission and shall act according to such opinion". Mr. Setalvad for the appellant contends that in the present case. no question can be said to have arisen as to whether the appellant has become subject to any of the disqualifications mentioned in clause (1) of article 191, because his case is that such a question can be raised only on the floor of the Legislative Assembly and can be raised by members of the Assembly and not by an ordinary citizen or voter in the form of a complaint to the Governor. Mr. Setalvad did not dispute the fact that this contention has not been taken by the appellant either in his writ petition before the High Court or even in his application for special leave before this Court. In fact, the case sought to be made out by the appellant in the present proceedings appears to be that though a question may have arisen about (1)[1953]S.C.R.1144. 58 his disqualification, it is the Governor alone who can hold the enquiry and not respondent No. 1. Even so, we have allowed Mr. Setalvad to raise this point, because it is purely a question of law depending upon the construction of article 192(1). In support of his argument, Mr. Setalvad refers to the fact that article 192 occurs in Chapter III of Part VI which deals with the State Legislature, and he invited our attention to the fact that under article 199(3) which deals with a question as to whether a Bill introduced in the Legislature of a State which has a Legislative Council is a Money Bill or not, the decision of the Speaker of the Legislative Assembly of such State thereon shall be final. He urges that just as the question contemplated by article 199(3) can be raised only on the floor of the House, so can the question about a subsequent disqualification of a member of a Legislative Assembly be raised on the floor of the House and nowhere else. He concedes that whereas the question contemplated by article 199(3) has to be decided by the Speaker and his decision is final, the authority to decide the question under article 192(1) is not vested in the Speaker. but is vested in the Governor. In other words, the context in which article 192(1) occurs is pressed into service by Mr. Setalvad in support of his argument. Mr. Setalvad also relies on the fact that article 192(1) provides that if any question arises, it shall be referred for the, decision of the Governor and this clause, says Mr. Setalvad, suggests that there should be some referring authority which makes a reference of the question to the Governor for his decision. According to him, this referring authority, by necessary implication, is the Speaker of the Legislative Assembly. There is another argument which he has advanced before us in support of this construction. Article 192(2) requires that whenever a question is referred to the Governor, he shall obtain the opinion of the Election Commission and Mr. Setalvad suggests that it could not have been the intention of the Constitution to require the Governor to refer to the Election Commission every question which is raised about an alleged disqualification of a member of a Legislative Assembly even though such a question may be patently frivolous or unsustainable. We are not impressed by these arguments. It is significant that the first clause of article 192(1) does not permit of any limitations such as Mr. Setalvad suggests. What the said clause requires is that a question should arise; how it arises, by whom it is raised, in what circumstances it is raised, are not relevant for the purpose of the application of this clause. All that is relevant is that a question of the type mentioned by the clause should arise; and so, the limitation which Mr. Setalvad seeks to introduce in the construction of the ' first part of article 192(I) is plainly inconsistent with the words used in the said clause. 59 Then as to the argument based on the words "the question shall be referred for the decision of the Governor", these words do not import the assumption that any other authority has to receive the complaint and after a prima facie and initial investigation about the complaint, send it on or refer it to the Governor for his decision. These words merely emphasise that any question of the type contemplated by clause (1) of article 192 shall be decided by the Governor and Governor alone; no other authority can decide it, nor can the decision of the said question as such fall within the jurisdiction of the Courts. That is the significance of the words "shall be referred for the decision of the Governor". If the intention was that the question must be raised first in the Legislative Assembly and after a prima facie examination by the Speaker it should be referred by him to the Governor, article 192(1) would have been worded in an entirely different manner. We do not think there is any justification for reading such serious limitations in article 192(1) merely by implication. It is true that article 192(2) requires that whenever a question arises as to the subsequent disqualification of a member of the Legislative Assembly, it has to be forwarded by the Governor to the Election Commission for its opinion. It is conceivable that in some cases, complaints made to the Governor may be frivolous or fantastic; but if they are of such a character, the Election Commission will find no difficulty in expressing its opinion that they should be rejected straightaway. The object of article 192 is plain. No person who has incurred any of the disqualifications specified by article 191(1), is entitled to continue to be a member of the Legislative Assembly of a State, and since the obligation to vacate his seat as a result of his subsequent disqualification has been imposed by the Constitution itself by article 190(3)(a), there should be no difficulty in holding that any citizen is entitled to make a complaint to the Governor alleging that any member of the Legislative Assembly has incurred one of the disqualifications mentioned in article l 91 (1) and should, therefore, vacate his seat. The whole object of democratic elections is to constitute legislative chambers composed of members who are entitled to that status, and if any member forfeits that status by reason of a subsequent disqualification, it is in the interests of the constituency which such a member represents that the matter should be brought to the notice of the Governor and decided by him in accordance with the provisions of article 192(2). Therefore, we must reject Mr. Setalvad 's argument that a question has not arisen in the present proceedings as required by article 192(1). The next point which Mr. Setalvad has raised is that even if a question is held to have arisen under article 192(1), it is for the Governor to hold the enquiry and not for the Election Commission. He contends that article 192(1) requires the question to be referred to the Governor for his decision and provides that his decision shall be final. It is a normal requirement of the rule of law that a person 60 who decides should be empowered to hold the enquiry which would enable him to reach his decision, and since the Governor decides the question, he must hold the enquiry and not the Election Commission. That, in substance, is Mr. Setalvad 's case. He concedes that article 192(2) requires that the Governor has to pronounce his decision in accordance with the .opinion given by the Election Commission; that is a Constitutional obligation imposed on the Governor. He, however, argues that the Election Commission which has to give an opinion, is not competent to hold the enquiry, but it is the Governor who should hold the enquiry and then forward to the Election Commission all the material collected in such an enquiry to enable it to form its opinion and communicate the same to the Governor. We are satisfied that this contention also is not well founded. The scheme of Article 192(1) and (2) is absolutely clear. The decision on the question raised under article 192(1) has no doubt to be pronounced by the Governor, but that decision has to be in accordance with the opinion of the Election Commission. The object of this provision clearly is to leave it to the Election Commission to decide the matter, though the decision as such would formally be pronounced in the name of the Governor. When the Governor pronounces his decision under article 192(1), he is not required to consult his Council of Ministers; he is not even required to consider and decide the matter himself; he has merely to forward the question to the Election Commission for its opinion, and as soon as the opinion is received, "he shall act according to such opinion". In regard to complaints made against the election of members to the Legislative Assembly. the jurisdiction to decide such complaints is left with the Election Tribunal under the relevant provisions of the Act. That means that all allegations made challenging the validity of the election of any member, have to be tried by the Election Tribunals constituted by the Election Commission. Similarly, all complaints in respect of disqualifications subsequently incurred by members who have been validly elected, have, in substance, to be tried by the Election Commission, though the decision in form has to be pronounced by the Governor. If this scheme of article 192(1) and (2) is borne in mind, there would be no difficulty in rejecting Mr. Setalvad 's contention that the enquiry must be held by the Governor. It is the opinion of the Election Commission which is in substance decisive and it is legitimate to assume that when the complaint is received by the Governor, and he forwards it to the Election Commission. the Election Commission should proceed to try the complaint before it gives its opinion. Therefore, we are satisfied that respondent No. 1 acted within its jurisdiction when it served a notice on the appellant calling upon him to file his statement and produce his evidence in support thereof. Mr. Setalvad faintly attempted to argue that the failure of respondent No. 1 to furnish the appellant with a copy of the complaint made by respondent No. 2 before the Governor and of the 61 order of reference passed by the Governor ,forwarding the said complaint to respondent No. 1, rendered the proceedings before respondent No. 1 illegal. This contention is plainly misconceived. As soon as respondent No. 1 received the complaint and the order of reference which was communicated to it by the Chief Secretary to the Government of Orissa, it was seized of the matter and it was plainly acting within its jurisdiction under article 192(2) when it served the notice on the appellant. As we have already indicated, it was through oversight that the two documents were not forwarded to the appellant along with the notice, but that cannot in any sense affect the jurisdiction of respondent No. 1 to hold the enquiry. In fact, as respondent No. 2 has pointed out in his affidavit, the fact that a reference had been made by the Governor to respondent No. 1 was known all over the State, and it is futile for the appellant to suggest that when he received the notice from respondent No. 1, he did not know that a complaint had been made against him to the Governor alleging that subsequent to his election, he had incurred a disqualification as contemplated by article 191(1)(e) of the Constitution read with section 7(d) of the Act. It would have been better if the appellant had not raised such a plea in the present proceedings. In this connection, we ought to point out that so far the practice followed in respect of such complaints has consistently recognised that the enquiry is to be held by the Election Commission both under article 192(2) and article 103(2). In fact, the learned Attorney General for respondent No. 1 stated before us that though on several occasions, the Election Commission has held enquiries before communicating its opinion either to the President under article 103(2) or to the Governor under article 192(2), no one ever thought of raising the contention that the enquiry must be held by the President or the Governor respectively under article 103(1) and article 192(1). He suggested that the main object of the appellant in taking such a plea was to prolong the proceedings before respondent No. 1. In the first instance, the appellant asked for a long adjournment and when that request was refused by respondent No. 1, he adopted the present proceedings solely with the object of avoiding an early decision by the Governor on the complaint made against the appellant by respondent No. 2. We cannot say that there is no substance in this suggestion. There is one more point to which we may refer before we part with this appeal. Our attention was drawn by the learned Attorney General to the observations made by the Chief Election Commissioner when he rendered his opinion to the Governor on May 30, 1964, on a similar question under article 192(2) in respect of the alleged disqualification of Mr. Biren Mitra, a member of the Orissa Legislative Assembly, "Where, as in the present case", observed the Chief Election Commissioner, "the relevant facts are in dispute and can only be ascertained after a proper enquiry, the Commission finds itself in the unsatisfactory position of having to give a decisive L/B(D)2SCI 6 62 opinion an the basis of such affidavits and documents as may be produced before it by interested parties. It is desirable that the Election Commission should be vested with the powers of a commission under the Commissions of Enquiry Act, 1952, such as the power to summon witnesses and examine them on oath, the power to compel the production of documents, and the power to issue commissions for the examination of witnesses". We would like to invite the attention of Parliament to these observations, because we think that the difficulty experienced by the Election Commission in rendering its opinion under article 103(2) or article 192(2) appears to be genuine, and so Parliament may well consider whether the suggestion made by the Chief Election Commissioner should not be accepted and appropriate legislation adopted in that behalf. The result is, the appeal fails and is dismissed with costs. In view of the fact that the present proceedings have unnecessarily protracted the enquiry before respondent No. 1, we suggest that respondent No. 1 should proceed to consider the matter and forward its opinion to the Governor as early as possible. It is hardly necessary to point out that in case the allegations made against the appellant are found to be valid, and the opinion of respondent No.1 is in favour of the case set out by respondent No. 2, complications may arise by reason of the Constitutional provision prescribed by article 190(3). In view of the said provision, it is of utmost importance that complaints made under article 192(1) must be disposed of as expeditiously as possible. Appeal dismissed.

IN-Abs

The appellant was elected to the Orissa Legislative Assembly in 1961. In 1964 respondent No. 2 made a complaint to the Governor alleging that the appellant had incurred a disqualification subsequent to his election as contemplated in article 191(1)(e) of the Constitution read with section 7 of the Representation of the People Act (Act 43 of 1951). The Chief Secretary Orissa forwarded the said complaint ,to respondent No. 1, the Election Commission of India, under the instructions of the Governor, requesting it to make enquiry into the complaint and give its opinion. Accordingly respondent No. 1 served notice on the appellant and called upon him to submit his reply. The appellant challenged the jurisdiction of respondent No. 1 to conduct the enquiry and filed a writ petition in the High Court. On its being dismissed he appealed to this Court by special leave. It was contended on behalf of the appellant that no question under article 192(1) had arisen in the case as a question relating to the disqualification of a member under article 191(1)(e) could not be raised by an ordinary citizen. It was urged that considering the context of article 192 and the provisions of article 199 the question could only be raised on the floor of the House and thereafter referred to the Governor by the Speaker of the Assembly. It was further contended that only the Governor who had to give the decision could hold the enquiry, and the Election Commission was only to give its opinion on the materials forwarded to it by the Governor. HELD: (i) The argument t that no question had arisen under article 192(1) could not be accepted. What Art 192(1) requires is that a question should arise; how it arises, by whom it is raised, in what circumstances it is raised are not relevant for the purpose of the application of this clause. [59 H] The words in article 192(1) that "the question shall be referred for the decision of the Governor" merely emphasise that any question of the type contemplated in the said clause shall be decided by the Governor and Governor alone; no other authority, including the courts, can decide it. Ii the intention was that the question must b.e raised first in the legislative Assembly and after a prima facie examination by the Speaker it should be referred by him to the Governor, article 192(1) would have been worded in an entirely different manner. [59 B C] The object of Art 192 is that no member who has incurred a disqualification under article 191(1) should b.e allowed to continue as a member. The Constitution itself in Art 190(3) provides for the vacation of the seat of such a member. Further it is in the interests of the member 's constituency that no longer being entitled to the status of a member. he should be removed. In view 54 of these considerationS a citizen is certainly entitled to make a complaint to the Governor about the disqualification incurred by a member under article 191(1). E G] (ii) The enquiry for the purpose of the decision under article 192 has to be held by the Election Commission and not by the Governor. When the Governor pronounces his decision under article 192(1) he is not required to consult his Council of Ministers; he has merely to forward 'the question to the Election Commission for its opinion, and as soon as the opinion is received, "he shall act according to such opinion". It is the opinion of the Election Commission which is in substance decisive, and it is legitimate that the Commission should proceed to try the complaint before it gives its opinion. [60 D H] [Legislation to vest Election Commission with powers of a Commission under the Commissions of Enquiry Act, 1952, recommended.] [62 B]

Appeal No. 12 of 1953. Appeal from the Judgment and Decree dated the 31st March, 1949, of the High Court of Judicature at Bombay (Chagla C.J., Weston and Dixit JJ.) in First Appeal No. 175 of 1946, arising out of the Judgment and Decree dated the 28th February, 1946, of the Court of the Civil Judge, Senior Division at Broach in Special Suit No. 9 of 1941. K. section Krishnaswamy Aiyangar (H. J. Umrigar, with him) for the appellants. C. K. Daphtary, Solicitor General for India (J. B. Dadachanii, with him) for respondents Nos. I and 2. 1953. November 18. The Judgment of the Court was delivered by MUKHERJEA J. This appeal is directed against a judgment and decree of the Bombay High Court, dated the 31st March, 1949, confirming, on appeal, the decision of the Civil Judge, Senior Division, at Broach, in Special Suit No. 9 of 1941. The facts of the case, though a bit long, are not in controversy at the present stage and the entire dispute bet ween the parties centres round certain points of law relating to the rights of the reversioners, in whose favour a deed of surrender was executed by a Hindu widow, to recover 341 possession of the properties, belonging to the last male owner, during the lifetime of the widow from persons who acquired title to the same by adverse possession against the widow. To appreciate the contentions that have been raised by the parties before us, it will be convenient to give a brief narrative of the material facts in their chronological order. A reference to the short genealogical table given below will show at once the relationship between the parties to the present litigation. Jijibhai | | | | | | Tribhovan Kashibhai | (died in 1914) | | Mathurbhai | | (diedin 1924) Shankarabhai Rukmini== ==Hirabai (died in 1922) Manubhai | ==Bai Kashi (husband) | (widow) | unjabhai (Deft. No. 3) | (died in 1931) | | | | | | | | | Natvarlal Ravajibhai Dadubhai RajiniKant (Deft. No. 1) (Deft. No. 2) (Piff.1) (Plff. 2) One Jijibhai, whose name appears at the head of the table, had two sons, Tribhovan and Kashibhai. Tribhovan had a son named Mathurbhai who died in 1924 leaving, behind him, his widow Hirabai and a son Punjabhai. Kashibhai died in 1914 leaving a son Shankarbhai and a daughter Rukmini. Shankarbhai, whose property is the subject matter of dispute in the present case, died without any issue in 1922, leaving his widow Bai Kashi who is defendant No. 3 in the suit. It is said, that there was a notional partition between Kashibhai and Mathurbhai in 1913 which effected a severance of their joint status without any actual division of properties by metes and bounds. Mathurbhai died on 26th January, 1924, and on the 2nd of June following Hirabai, his widow, made an application to the District Judge for appointment of a guardian of the person and property of her minor son Punjabhai, alleging, inter alia, that the minor was the sole owner of the entire joint estate by right 342 of survivorship. On the 1st of July, 1924, Bai Kashi, the widow of Shankarbhai, was served with a notice of this application. On the 17th of July following, she purported to adopt a son named Sivabhai and in answer to the notice in the guardianship proceeding served upon her, put forward the claim of her adopted son. The District Judge regarded the adoption to be invalid and by his order dated November 29, 1924, appointed the Deputy Nazir of his court as guardian of the properties of the minor Punjabhai, the properties including the share of Shankarbhai in the joint estate. The Deputy Nazir took possession of all the properties on behalf of the minor and it is not disputed that Bai Kashi never got possession of any portion of these properties since then. In 1926 Bai Kashi as the guardian of her infant adopted son Sivabhai brought a Title Suit, being Suit No. 180 of 1926, claiming partition of the joint family properties on the allegation that, by adoption, Sivabhai became a co owner to the extent of a half share in them. The suit was resisted by Punjabhai represented by his court guardian and the main contention put forward on his behalf was that the adoption, by the widow, of Sivabhai was invalid in law. This contention was given effect to by the trial judge and by his judgment dated the 4th July, 1927, the suit was dismissed. An appeal was taken against this decision, on behalf of Sivabhai, to the High Court of Bombay, but the appeal was withdrawn on the 25th July, 1927. Thereafter in 1930, Rukmini, the sister of Shankarbhai and the mother of the present plaintiffs, instituted a suit, being Suit No. 350 of 1930, for a declaration that the joint status of the family was disrupted by the notional partition effected between Mathurbhai and Kashibhai in 1913 and she, as the next heir of Shankarbhai, was entitled to succeed to Shankarbhai 's share of the properties on the death of Bai Kashi. The trial judge was of opinion that there was, in fact, a severance of joint status by an informal partition between Mathurbhai and Kashibhai, but he dismissed the suit on the ground that a suit of this character was not maintainable in law. 343 Rukmini died soon after that and her two sons, who were then minors, represented by their father as next friend, pre ferred an appeal to the High Court against this order of dismissal. The High Court allowed the appeal and gave a declaration in favour of the appellants to the effect that there was disruption of the joint family in the year, 1913. This judgment is dated the 8th of February, 1939, and there after on the 30th of January, 1941, Bai Kashi executed a deed of surrender in favour of the plaintiffs relinquishing her widow 's estate in favour of the husband 's nearest rever sioners. On the basis of this deed of surrender the plaintiffs brought the suit, out of which this appeal arises, in the Court of the Civil Judge, Broach, claiming possession of the disputed properties as the next heirs of Shankarbhai against the defendants who are the sons and heirs of Punjabhai. Bai Kashi was impleaded as defendant No. 3 in the suit. The suit was resisted by defendants I and 2 who raised a number of pleas in answer to the plaintiffs ' claim. The material defence was of a, three fold character. It was contended in the first place that there was no partition between Mathurbhai and Kashibhai as alleged by the plaintiffs and the family being still joint when Shankarbhai died, the entire joint estate vested in Mathurbhai by right of survivorship. It was alleged in the second place, that even if the family had separated, the adopted son of Bai Kashi being a nearer heir the plaintiffs had no title to the property. The last and the main defence was that the defendants having acquired a title by adverse possession against the widow, and the widow having lost whatever interest she had in her husband 's property, the deed of surrender was invalid, and even if it was valid, the surrenderees could not claim possession so long as the widow was alive. The trial court overruled all these contentions and decreed the plaintiff 's suit. The defendants I and 2 preferred an appeal against this decision to the High Court of Bombay and the appeal first came up for hearing before a Division Bench consisting of Chagla C.J., and Dixit J. The learned Judges, by their judgment 344 dated the 23rd January, 1948, which has been described as an interlocutory judgment, disposed of the first two points mentioned above and affirmed the decision of the trial court thereon. It was held that the decision in Rukmini 's Title Suit No. 350 of 1930, to which the defendants were made parties, precluded them from challenging the fact of there being a partition between Mathurbhai and Kashibhai in 1913 and also from contending that Sivabhai was a validly adopted son. There remained the only other question, namely, as to whether the plaintiffs could, on the basis of the deed of surrender, lay a claim for possession of the properties during the lifetime of the widow, as against persons, who had acquired title by adverse possession against her. In regard to this point, a contention was raised on behalf of the appellants that the deed of surrender was not duly proved and as there was no definite finding on this point, the learned Judges sent the case back for findings on the two following issues which they themselves framed: (i)Whether the plaintiffs proved the deed of surrender dated 30th January, 1941 ? and (ii)Whether Bai Kashi surrendered the whole of her husband 's interest in the whole property of her husband? The trial court recorded its findings on both these issues after taking additional evidence and its findings were in favour of the plaintiffs. After the findings were returned to the High Court, the appeal was heard by a Full Bench con sisting of Chagla C.J. and Weston and Dixit JJ. The Full Bench confirmed the decree of the trial court and dismissed the appeal. It was held by the learned Judges that even though the defendants acquired by adverse possession a title against the Hindu widow, the deed of surrender executed by her did not become infructuous or inoperative thereby; and as there was acceleration of inheritance in favour of the plaintiffs who were the next heirs of Shankarbhai, they were competent to recover possession of the properties at once by 34 5 evicting the defendants and were not bound to wait till the widow actually died. It is the propriety of this decision that has been challenged bedore us by the defendants 1 and 2 in this appeal. The arguments advanced by Mr. Krishnaswami Ayyangar, who appeared in support of the appealcan be conveniently considered under two heads. The first branch of his contention is, that as the widow 's estate was in this case completely extinguished by adverse possession exercised by the defendants, she had, in fact, no interest left in her, which she could make a surrender of in favour of the reversions. What is said is, that the widow, by suffering the trespassers to remain in possession of her husband 's estate for more than the statutory period, had placed it ab solutely beyond her power to deal with it any further; and her title being already extinguished by adverse possession, no further extinction by any act of surrender on her part was possible. The other branch of the learned counsel 's contention is, that assuming, that the widow could make a surrender, such surrender could not prejudice the rights of persons, acquired by grant from the widow or by prescription against her prior to the date of surrender and these rights would, in law, endure during the entire period of the widow 's natural life. Whatever rights the reversions could assert, they could assert only after the widow 's death and not during her lifetime. A number of decided authorities have been canvassed before us in this connection by the learned counsel and it cannot be disputed that judicial opinion on these points is not at all uniform. It seems to us that for a proper determination of the questions, it is necessary first of all to formulate as clearly as possible the precise nature and effect of what is known as "surrender" by a Hindu widow. The word "surrender" cannot be said to be free from ambiguity. It connotes nothing more than the English doctrine of merger and a Hindu widow, whose interest is usually, though incorrectly, likened to that of a life tenant under the English law, merely accele 346 rates the reversion by surrendering her limited interest in favour of the reversioner, undoubtedly no surrender can be effective if the widow has already parted with her interest in the property by a voluntary act of her own or her rights therein have been extinguished by adverse possession of a stranger. The English doctrine of merger, though it may have influenced some of the judicial pronouncements in our country has really speaking no application to a Hindu widow 's estate. The law of surrender by a Hindu widow as it stands at present, is for the most part, judge made law, though it may not be quite correct to say that there is absolutely no textual authority upon which the doctrine could be founded, at least, impliedly. So far as the Dayabhag law is concerned, its origin is attributed to Jimutabahan 's commentary on the well known text of Katyayana which describes the interest of a childless widow in the estate left by her husband and the rights of the reversioners after her death(1). While commenting on Katyayana 's text, Jimutabahan lays down that the persons who should be the next heirs on failure of prior claimants would get the residue of the estate after her use on the demise of the widow in whom the succession had vested, as they would have succeeded if the widow 's rights were non existent or destroyed (in otherways) [jatadhikaraya ; patnya: adhikikara pradlvamsspi bhogavasishtam dhanam grrhiyu : ] (2). It was observed by Ashutosh Mookerjee J. in Debi Prosad vs Golap Bhagat(3) that the theory of relinquishment or surrender was foreshadowed in these remarks of Jimutabahan. This much is clear from the passage referred to above that the commenta tor had in mind other modes of extinction of the widow 's interest in her husband 's properties besides the natural death of the widow, which would have the effect of letting in her husband 's heirs. There is indeed no mention of surrender or renunciation in the text and it was not on the basis of any textual authority that the law of surrender developed in (1) Vide Dayabhag Chap. II, section 1, paragraph 56. (2) Dayabhag Chap. II, section I, paragraph 59. (3) at 771. 347 India. But it Must be noticed that though certain terms and expressions of English law have been made use of in a some what loose sense, yet the radical idea involved in the doctrine of surrender by a Hindu widow is totally different from what is implied in the merger of a life interest in the reversionary estate under the English law. In English law the reversioner or remainderman has a vested interest in the property and his rights are simply augmented by the surrender of the life estate. In the Hindu law, on the other hand, the widow, so long as she is alive, fully represents her husband 's estate,. though her powers of alienation are curtailed and the property after her death goes not to her but to her husband 's heirs. The presumptive reversioner has got no interest in the property during the lifetime of the widow. He has a mere chance of succession which may not materialise at all. He can succeed to the property at any particular time only if the widow dies at that very moment. The whole doctrine of surrender is based upon this analogy or legal fiction of the widow 's death. The widow 's estate is an interposed limitation or obstruction which prevents or impedes the course of suc cession in favour of the heirs of her husband. It is open to the widow by a voluntary act of her own to remove this obstruction and efface herself from the husband 's estate al together. If she does that, the consequence is the same as she died a natural death and the next heirs of her husband then living step in at once under the ordinary law of inheritance. In spite of some amount of complexity which is unavoidable in a law evolved by judicial decisions, this fund. mental basis of the doctrine of surrender can be said to be established beyond doubt. Thus Lord Dunedin in Gounder, v Gounden(1) enunciated the law in clear terms as follows: "It is settled by long practice and confirmed by decision that a Hindu widow can renounce in favour of the neares, reversioner if there be only one or of all the reversioners (1) 46 I.A. 72 at 79. 348 nearest in degree if more than one at the moment. That is to say, she can, so to speak, by voluntary act operate her own death. " Again in repudiating the suggestion that there could be any such thing as a partial surrender, His Lordship observed: "As already pointed out, it is the effacement of the widow an effacement which in other circumstances is effected by actual death or by civil death which opens the estate of the deceased husband to his next heirs at that date. Now, there cannot be a widow who is partly effaced and partly not so. " Thus surrender is not really an act of alienation of the widow of her rights in favour of the reversioner. The rever sioner does not occupy the position of a grantee or transferee, and does not derive his title from her. He derives his title from the last male holder as his successor in law and the rights of succession are opened out by the act of self effacement on the part of the widow which operates in the same manner as her physical death. It is true that a surrender may and in the majority of cases does take the form of transfer, e.g., when the widow conveys the entire estate of her husband. without consideration and not as a mere device to share the estate with the reversioner, in favour of the latter. But "it is the self effacement by the widow that forms the basis of surrender and not the ex facie transfer by which such effacement is brought about"(2). The true nature and effect of a surrender by a Hindu widow of her husband 's estate have been thus summoned up, and in our opinion quite correctly, by a Division Bench of the Madras High Court(3): "It is settled that the true view of surrender under the Hindu law is that it is a voluntary act of self effacement by the widow having the same consequences as her death, in opening up the succession to the next heirs of the last male owner. The intermediate stage is merely extingushed and (1) I.L.R. 39 Mad. 1035. (2) See Vytla Sitanna vs Mariwada 61 I.A. 200, 207 ; Mumareddi vs Pitti Darairaja , 661. (3) Vide Damaraju vs T.Narayana I.L.R.1941 Mad.551,557. 349 not transferred and the law then steps in to accelerate succession so as to let in the next reversioner. The surrender conveys nothing in law; it is purely a self effacement which must of necessity be complete; for, as the Privy Council has said, there cannot be a widow partly effaced and partly not just as there cannot be a widow partly dead and partly alive. The fiction of a civil death is thus assumed when a surrender takes place; and when the reversioners come in they come in their own right as heirs of the last owner and not as transferees from the widow. " As surrender conveys nothing in law and merely causes extinction of the widow 's rights in her husband 's estate, there is no reason why it should be necessary that the estate must remain with the widow before she could exercise her power of surrender. The widow might have alienated the property to a stranger or some one might have been in adverse possession of the same for more than the statutory period. If the alienation is for legal necessity, it would certainly be binding upon the estate and it could not be impeached by any person under any circumstance. But if the alienation is not for legal necessity, or if a squatter has acquired title by adverse possession against the widow, neither the alienation nor the rights of the adverse possessor could affect the reversioners ' estate at all. These rights have their origin in acts or omissions of the widow which are not binding on the husband 's estate They are in reality dependent upon the widow 's estate and if the widow 's estate is extinguished by any means known to law, e.g., by her adopting a son or marrying again, these rights must also cease to exist. The same consequences should follow when the widow withdraws herself from her husband 's estate by an act of renunciation on her part. Whether any equitable principle can be invoked in favour of a third party who has acquired rights over the property by any act or omission of the widow may be a matter for consideration. But the learned counsel for the appellants is not right when he says that as adverse possession extinguished the rights of the widow, no fresh extinction by an act of surrender was possible. As the rights acquired by adverse possession are 350 available only against the widow and not against the hus band 's heirs, the husband 's estate still remains undestroyed and the widow may withdraw herself from that estate leaving it open to the reversioners to take possession of it at once as heirs of the last male holder unless there is any other rule of law or equity which prevent them from doing so. The first branch of the appellants ' contention cannot, therefore, succeed. This leads us to the other branch of the appellants ' contention and the question arises whether in case of sur render by a Hindu widow, a person, who has, prior to the date of surrender, acquired, by adverse possession, an inte rest in the widow 's estate, can be ousted from possession of the property so long as the widow remains alive? This question, Mr. Ayyangar argues, should be answered in the negative. His contention, in substance, is, that by reason of adverse possession for more than 12 years the title of the limited owner became extinguished under article 28 of the Limitation Act and the possessor acquired good title against the widow. This title, it is said, cannot be displaced by the surrenderee who gets the property by reason of a, subsequent voluntary act on the part of the widow. In support of this contention the learned counsel has placed reliance upon a number of cases, principally of the Madras High Court, where it has been held that a reversions in whose favour a surrender has been made by the widow cannot challenge the right of a prior alienee from the widow, even though the alienation was not for legal necessity, so long as the widow remains alive; and the same protection could be claimed by one who acquired the limited interest of a widow by adverse possession against her. It is undisputed that there is considerable divergence of judicial opinion on this point and in these circumstances it is necessary to examine briefly the different lines of reasoning adopted by the different High Courts in dealing with the subject. In Subbamma vs Subramanyam(4), which can be taken to be the leading pronouncement of the Madras High Court (1) I.L.R. 39 Mad. 351 on the point, it was held that a surrender by a Hindu widow could not affect prior alienations made by her, and even though such alienations might not be binding on the reversions as not being made for a proper or necessary purpose, they are binding on the widow for her life time or at any rate during the period of her widowhood. In deciding this case the learned Judges relied mainly upon an earlier decision of the same court in Sreeramulu vs Kristamma(1), where the view taken was that an alienation, not for legal necessity, made by a Hindu widow, prior to adopting a son, could not be challenged by the adopted son so long as the widow remained alive. In other words, the effect of a surrender by a Hindu widow was treated to be the same as that of an act of adoption by her. Two years later, a Full Bench(2) of the Madras High Court overruled the decision in Sreeramulu vs Kristamma(1) and held that where a Hindu widow alienated property for a purpose not binding on the inheritance and thereafter adopt ed a son, the right of the adopted son was not prejudiced by the unauthorised transfer and he could sue for possession at once. Although the Full Bench overruled the decision in Sreeramu vs Kristamma(1) which was relied on as an authority in Subbamnia 's case(3), yet the law enunciated in the latter case as regards the effect of surrender on previous alienations made by the widow was not dissented from, and Kumaraswami Sastriyar J., who was one of the Judges com posing the Full Bench. in the course of his judgment, expressed the view that the adoption of a son by a Hindu widow to her husband was quite different from surrender in favour of the reversions, and to a relinquishment by the widow, based on no consideration of duty to her husband or his spiritual benefit, courts could very properly refuse to annex rights to defeat prior alienations made by her. (1) (2) Vide Vaidyanatha Sastri vs Savithri I.L.R. (3) I.L.R. 39 Mad. 352 This view was approved in Sundarasiva vs Viyyamma(1) and has been accepted since then as good law in all the subsequent cases(2) of the Madras High Court. The Madras High Court has also expressly held that the position of a person, who has acquired by adverse possession the limited interest of a Hindu widow is exactly the same as that of an alienee from her and if the title of such person has been completed already, it could not be defeated by a surrender made by the widow(1). These decisions undoubtedly support the appellants ' case. In the Calcutta High Court the question was raised in Prafulla Kamini vs Bhabani(4) as to whether a gift made by widow prior to surrendering her husband 's estate could be challenged by the reversioner during the period of the widow 's life. The two Judges, constituting the Bench, differed in their opinion; and whereas Walmsley J. held that the gift was valid for the period of the widow 's life, Page J., on the other hand, after an elaborate discussion of the law relating to the legal affect of a widow 's surrender, came to the conclusion that the reversioner became immediately entitled to recover possession from the donee. In view of the difference of opinion between the two Judges, there was an appeal filed under clause 15 of the Letters Patent, but the point in controversy was not decided by the Letters Patent Bench. The matter again came up before another Bench of the Calcutta High Court consisting of D. N. Mitter and Rao JJ.(5). Both the Judges concurred in holding that the view expressed by Page J. in the earlier case was right and that on a surrender by the Hindu widow of her husband 's estate and the consequent extinguish (1) I.L.R. (2) Vide the oases collected in Arunachala vs Arumugha I.L.R. (3) Vide Kamiraju vs Singaraju A.I.R. 1935 Mad. 664; Korabala vs Ratala A.I.R. 1951 Mad. 753. (4) (5) Vide Ram Krishna vs Kausalya 353 ment of her interest therein all prior alienations in excess of her power were liable to be challenged by the reversioner immediately on the surrender taking effect just as they could be impeached if the widow died a natural death. In the judgment under appeal the Bombay High Court has substan tially accepted the view taken by the Calcutta Judges in the case referred to above. In the Allahabad High Court a Division Bench, consisting of Boys and Sulaiman JJ. took a view similar to that of the Madras High Court, in Lachmi vs Lachho(1). Boys J. in course of his judgment observed: "The doctrine of surrender having been imported into the Hindu law by judicial decision, we are entitled to import the complementary rule essential to the prevention of fraud that the widow cannot by making a surrender defeat rights created by herself and creation of which was within her authority." Sulaiman J., on the other hand, was very critical of this view and he expressed his own opinion(2) as follows: "I find great difficulty in discovering any true basis for holding that though the reversioner in whose favour the surrender has taken place has succeeded to the estate of the last male owner and derives title from him, he is nevertheless 1stopped from challenging any alienations made by the Hindu widow during her lifetime as if he were a grantee from her." In spite of these observations, however, the learned Judge agreed with Boys J. in the conclusion arrived at by the latter, principally on the ground that it would not work any hardship if the reversioner, in whose favour the surrender is made, were to take the property subject to the transfers made by the widow so as to allow the transfers to remain valid for her lifetime. There has however been a definite change in the (1) I.L.R. 49 All. 334. (2) I.L.R. 49 All 334 346. 354 view taken by the Allahabad High Court since then, and in a very recent pronouncement(1) of that court the learned Judges have expressly approved of the decision of the Calcutta High Court which is in entire agreement with the opinion actually expressed by Sulaiman J. as stated above. So far as the Patna High Court is concerned, the case of Basudeo vs Baidyanath(2) was decided sometime before the case of Ram Krishna vs Kausalya(3) was heard by the Calcutta High Court and the learned Judges, without examining the principles of law independently, followed the Madras autho rities which had at that time been accepted by the Allahabad High Court. An analysis of the Madras decisions, referred to above, upon which the learned counsel for the appellant places his reliance, will show that the grounds upon which they purport to be based are of a threefold character. The first is that an alienation of property by a Hindu widow, in excess of her powers, though not binding on the inheritance, creates in the alience an interest commensurate with the period of her natural life. A part of the interest, it is said, is severed from the husband 's estate when there is an alienation by the widow, and the reversioner when he takes the estate on surrender, takes it subject to the interest already created. A person, who has acquired the widow 's interest by adverse possession against her, occupies, according to the Madras decisions, as stated above, the same position as an alienee from the widow. The second ground is, that as the widow herself is in capable of disputing the title of the alienee or of the person who has acquired interest by adverse possession against her, a like disability attaches to the reversioner also who could not have obtained the properties but for the surrender made by the widow. The third ground assigned is that the law of (1) Vide Raghuraj Singh vs Raba Singh A.I.R. 1952 All. 875. (2) A.I.R. 1935 Pat. (3) 355 surrender being a judge made law, the courts in recognising the right of surrender by a Hindu widow can and ought to impose conditions on the exercise of her power based on considerations of justice, equity and good conscience, and surrender being a purely voluntary act on the part of the widow, she could not be allowed by her own act to prejudice the interests which she had already created. The first line of reasoning mentioned above is based upon the dictum of Bhashyam Ayyangar J. in Sreeramulu vs Kristamma(1), which though accepted in ubbamma 's case(1), was expressly dissented from in the subsequent Full Bench decision in Vaidyanatha vs Savithri(3). This view, in our opinion, proceeds upon a misconception regarding the true nature of a, Hindu widow 's estate and the rights and duties which vest in her under the Hindu law. Though loosely des cribed as a "life estate", the Hindu widow 's interest in her husband 's property bears no analogy to that of a "life tenant" under the English law. As was pointed out by the Judicial Committee(1) as early as 1861, the estate which the Hindu widow takes is a qualified proprietorship with powers of alienation for purely worldly or secular purposes only when there is a justifying necessity and the restrictions on the powers of alienation are inseparable from her estate. The restrictions, as the Judicial Committee pointed out, which are imposed on the Hindu widow 's powers of alienation, are not merely for the protection of the material interest of her husband 's relations, but by reason of the opinion expressed by all the Smriti writers that the Hindu widow should live a life of moderation and cannot have any power of gift, sale or mortgage except for religious or spiritual purposes. The Hindu law certainly does not countenance the idea of a widow alienating her property without any necessity, merely as a (1) (2) I.L.R. 39 Mad. 1035. (3) I.L.R. 41 Mgad. (4) Vide Collector of Masulipatam vs Cavaly Venkata 8 M.I.A. 529. 356 mode of enjoyment, as was suggested before us by Mr. Ayyangar. If such a transfer is made by a Hindu widow, it is not correct to say that the transferee acquires necessarily and in law an interest commensurate with the period of the natural life of the widow or at any rate with the period of her widowhood. Such transfer is invalid in Hindu law, but the widow, being the grantor herself, cannot derogate from the grant and the transfer cannot also be impeached so long as a person does not come into existence who can claim a present right to possession of the property. As in the majority of cases, persons with such rights come into existence only when the widow dies it is generally said that the alienee gets the estate for the term of the widow 's life. We think that the legal position has been correctly indicated by Kumaraswami Shastriyar J. in the Full Bench case(1) referred to above. On the one hand, a Hindu widow has larger rights than those of a life estate holder, inasmuch as, in case of justifying necessity she can convey to another an absolute title to the properties vested in her. On the other hand, where there is no necessity for alienation, the interest, which she herself holds and which she can convey to others, is not an indefeasible life estate, but an estate liable to be defeated on the happening of certain events which in Hindu law cause extinction of the widow 's estate. Remarriage by the widow is one such event which completely divests her of any interest in her husband 's property. Adoption of a son to her husband is another circumstance which puts an end to her estate as heir to her husband, the effect of adoption being to bring in a son who has prior claims to succession under the Hindu law. In both these sets of circumstances it is not disputed that prior rights derived from the widow, if not supported by legal necessity, could be defeated by the next heir of the husband or the adopted son as the case may be. If the effect of surrender, as explained above, is to destroy the widow 's estate in the same way as if she suffered physical or civil death, there is no conceivable reason why the reversioner should not, subject to any question of fraud or collusion that might arise, be in a position to recover possession of the properties from (1) Vide, Vaidyanatha vs Savithri, I.L.R. 357 an alienee from the widow or from one who has obtained title by adverse possession against her, as none of them could acquire rights except against the widow herself. Kumaraswami Shastriyar J. is of opinion(1) that a, surrender stands on a different footing from adoption by a widow. According to the learned Judge, the surrender by the widow and the acceptance of the estate by the reversioner are purely matters of contract. The widow is not bound to surrender the estate, nor is the reversioner bound to accept it, except on terms which would apply to any other transfer of immovable property so far as prior alienees are concerned. This, in our opinion, involves a total misapprehension of the nature and legal effect of surrender by a Hindu widow as we have already explained. Surrender is not alienation of an interest of the widow in favour of the reversioner, and no acceptance by the reversioner is necessary as a condition precedent to the vesting of the estate in him. The estate vests in the reversioner under operation of law without any act on his part. It is also difficult to see why the learned Judge looked upon surrender as a matter of contract between the widow and the reversioner. It is true that the widow at the time of surrendering her husband 's estate can, if she likes, stipulate for a right to be maintained out of the properties for her lifetime; but reservation of such small benefit absolutely necessary for her maintenance does not invalidate a surrender as has been held by the Privy Council in more cases than one(1). Mr. Ayyangar argues that a widow, who requires to be maintained out of her husband 's property, cannot be said to have suffered death. But this argument is fallacious. Nobody says that the surrendering widow actually dies. It is a fiction of law pure and simple and it is for the law to determine under what circumstances this fiction of natural or civil death would arise. There is such a legal fiction involved in adoption also when a son is adopted by a widow subsequent to the death of her husband. Such adopted son is given the rights of a posthumous son and the fiction is that he was in existence from before (1) Vide Vaidyanatha vs Savithri, I.L.R. at 99. (2) Vide Sureswar Misra vs Mahesarani, 47 T. A. 233. 358 the date of the proprietor 's death, although the fact is otherwise. So far as the legal consequences are concerned, there is no material difference between an adoption and an act of surrender by the widow. In our opinion, there is no warrant in Hindu law for the proposition that in case of alienation by a Hindu widow of her husband 's property without any justifying necessity, or in the case of a stranger acquiring title by adverse possession against her the interest created is to be deemed to be severed from the inheritance and if a surrender is made subsequently by the widow, the surrenders must take it subject to such prior interest. Sulaiman J. in the Allahabad case(1) cited above enunciated the law with perfect precision when he said that the effect of an alienation by a widow is not to spilt up the husband 's estate into two parts or to give to the alienee an interest necessarily co extensive with her lifetime. The reversionary right to challenge it is no part of the widow 's estate at all and, therefore, could not be surrendered to the reversioner. The first line of reasoning, therefore, seems to us to be of no substance. The second ground upon which the Madras decisions purport to be based is manifestly untenable. The widow her self may be incapable of derogating from her own grant and disputing the alienation which she has herself made; but as has been said already, surrender is not an alienation and as the reversioner does not derive his title from her, there is no principle of law under which the acts of the widow could bind him. As Sulaiman J. pointed out in the case just referred to, that if the reversion were a grantee from the widow, he would not only have been stopped from challenging the alienation during her lifetime, but would have been equally estopped from challenging it after her death; admittedly that is not the case(1). It is true that the surrender benefits the reversioner but the benefit comes to him under the provision of general law as a result of self effacement by the widow. No estoppel can possibly be founded on the receipt of such bene (1) Vide Lachini Chand vs Lachho, I.L.R. 49 All. (2) Vide I.L.R. 49 All. 334 at 346. 355 Coming now to the third ground, it is certainly true that a surrender is a voluntary act on the part of the widow and she is under no legal or moral obligation to surrender her estate. Instances do arise where an alienee has paid valuable and substantial consideration for a property on the expectation of enjoying it so long as the widow would remain alive and his expectations have been cut short by a surrender on the part of the widow, which no doubt benefits the reversioner in the sense that he gets the inheritance even during the widow 's lifetime. On the other hand, a person, who takes transfer from a Hindu widow, acts with his eyes open. If the transfer is without any legal necessity, there is a risk always attached to the transaction, and there is no law, as we have already ,explained, which secures to him necessarily an estate for life. A man making a purchase of this character is not expected to pay the same value which he would pay if the purchase were made from a full owner. Be that as it may, even assuming that the court is not incompetent to impose conditions on the reversions ' right of recovering possession of the property during the widow 's lifetime on grounds of equity, justice and good conscience in proper cases, it is clear that in the case before us no equitable considerations at all arise. The appellants are not alienees from the widow ; they came upon the land as trespassers with,out any right and it is the law of limitation that has legalised what was originally a clear act of usurpation. They have enjoyed their property since 1925, and as the title which they have acquired is not available against the reversionary interest, we do not see any reason sanctioned by law or equity for not allowing the reversions their full legal rights. The result is that in our opinion the decision of the High Court is right and this appeal must stand dismissed with costs. Appeal dismissed. Agent for respondents Nos. I & 2 : A. C. Dave.

IN-Abs

Where a Hindu widow surrenders her widow 's estate to the reversioners, after a third person has acquired title to the properties by adverse possession against her, the reversioners are entitled to recover possession of the properties from that person immediately as heir 's of the last male holder. The person in adverse possession is not entitled to remain in possession till the death of the widow. So far as the legal consequences are concerned there is no material difference in this respect between an adoption and an act of surrender by the widow. As a surrender by a Hindu widow does not convey any title to the reversioners, but is only a voluntary act of self effacement by the widow, she can make a valid surrender under Hindu law even after another person has acquired title by adverse possession against her. The reversioners do not take the property subject to the rights created by the widow. Surrender by the widow and acceptance by the reversioner are not matters of contract. The estate vests in the reversioner by operation of law without any act of acceptance on the part of the reversioner. L/B(D)2SCI 8(a) 340 The view that, as the widow herself is incapable of disput ing the title of alienee, or of the person who has obtained title by adverse possession, a like disability attaches to the reversioner, is also unsound as the reversioner does not derive title from the widow even in the case of a surrender. Assuming that the court has power to impose conditions on the reversioners ' right to recover possession during the lifetime of the widow on considerations of equity, justice and good conscience and to prevent the widow, by her own act, from prejudicing the interests she has created, no such equitable considerations arise in favour of persons who have come upon the land, as trespassers and claim title by adverse possession. Subbamma vs Subrahmanyam (I.L.R. 39 Mad. 1035), Sundrasiva vs Viyyamma (I.L.R. , Arunachala vs Arumuga (I.L.R. , Lachmi vs Lachho (I.L.R. 49 All. 334) and Basudeo vs Baidyanath (A.I.R. 1935 Pat. 175) disapproved. Ram Krishna vs Kausalya , Raghuraj Singh vs Babu Singh (A.I.R. 1952 All. 875) approved. Vaidyanatha vs Savitri (I.L.R. commented upon.

ivil Appeals Nos. 929. 930 and 931 of 1963. Appeals by special leave from the judgment and decree dated October 11, 1961 of the Punjab High Court in Regular First Appeals Nos. 136, 137 and 138 of 1959. Hans Raj Sawhney and B.C. Misra, for the appellant (in all the appeals). B.R.L. lyengar, S.K. Mehta and K.L. Mehta for the respondents (In C.A. No. 229 of 1963). V.D. Mahajan, for the respondent. (In C.A. No. 930 of 1963). Kanwar Rajendra Singh and Vidya Sagar Nayyar, for the respondent (In C.A. No. 931 of 1963). The Judgment of the Court was delivered by Subba Rao, J. These appeals by special leave raise a question, of limitation. The National Bank of Lahore Limited, hereinafter called the Bank, is a banking concern registered under the Indian Companies Act and having its registered office in Delhi and branches at different places in India. Though its main business is banking, it carries on the incidental business of hiring out lockers out of cabinets in safe deposit vaults to constituents for safe custody of their jewels and other valuables. It has one such safe deposit vault at its branch in Jullundur. The respondents herein hired lockers on rental basis from the Bank at Jullundur through its Manager under different agreements on different dates during the year 1950. in April 1951 the said lockers were tampered with and the valuables of the respondents kept therein were removed by the Manager of the Jullundur branch of the Bank. In due course the said Manager was prosecuted before the Additional District Magistrate, Jullundur, and was convicted under sections 380 and 409 of the Indian Penal Code. The respondents filed 3 suits in the Court of the Subordinate Judge, Jullundur, against the Bank for the recovery of different sums on account of the loss of the valuable contents of the lockers hired by them. The Bank denied its liability on various grounds and also contended that the suits were barred by Iimitation. The learned Subordinate Judge held that the Bank was liable to bear the loss incurred by the plaintiffs and that the suits were not barred by limitation. On appeal, the High Court of Punjab accepted the findings of the learned Subordinate Judge on both the questions and dismissed the appeals. The present appeals arise out of the said judgment of the High Court. The only question raised in these appeals is one of limitation. Before considering the question of limitation it is necessary 295 notice briefly the findings of fact arrived at by the High Court. The High Court summarized its findings thus: (1) The whole object of a safe deposit vault in which customers of a Bank can rent lockers for placing their valuables is to ensure their safe custody. The appellant Bank had issued instructions and laid down a detailed procedure for ensuring that safety but in actual practice the Manager alone had been made the custodian with full control over the keys of the strong room and a great deal of laxity had been observed in having no check whatsoever on him. (2) The lockers had been rented out to the plaintiffs by the Manager Baldev Chand, who was entrusted with the duty of doing so. It was he who had intentionally rented OUt such lockers to the plaintiffs which had been tampered with by him. This constituted a fraud on his part there being an implied representation to the plaintiffs that the lockers were in a good and sound condition. (3) Although the Bank authorities were not aware of what Baldev Chand was doing. but the fraud, which he perpetrated, was facilitated and was the result of the gross laxity and negligence on the part of the Bank authorities. (4) The lockers were indisputably being let out by the Manager to secure rent for the Bank. Having found the said facts, the High Court held that the fraud was committed by the Manager acting within the scope of his authority and therefore, the Bank was liable for the loss incurred by the respondents. Then it proceeded to consider the question of limitation from three aspects, namely. (i) the loss was caused to the respondents. as the Manager of the Bank committed fraud in the course of his employment; (ii) there was a breach of the implied condition of the contract. namely, that only such lockers would be rented out which were safe and sound and which were capable of being operated in the manner set out in the contract; and (iii) there was a relationship of bailor and bailee between the respondents and the Bank, and therefore the Bank would be liable on the basis of the contract of bailment. It held that from whatever aspect the question was approached article 36 of the First Schedule to the Limitation Act would be out of place and the respondents ' claims would be governed by either article 95 or some other article of the Limitation Act. Learned counsel for the appellant accepted the findings of fact, but contended that on the facts found the suits were barred by limitation. Elaborating the argument the learned counsel pointed out that the theft of the valuables by the Manager was a tort committed by him dehors the contracts entered into by the appellant with the respondents and. therefore, article 36 of the First Schedule 296 to the Limitation Act was immediately attracted to the respondents ' claims. The scope of article 36 of the First Schedule to the Limitation Act is fairly well settled. The said article says that the period of limitation "for compensation for any malfeasance, misfeasance or nonfeasance independent of contract and not herein specifically provided for" is two years from the time when the malfeasance, misfeasance or nonfeasance takes place. If this article applied, the suits having been filed more than 2 years after the loss of the articles deposited with the Bank, they would be dearly out of time. Article 36 applied to acts or omissions commonly known as torts by English lawyers. They are wrongs independent of contract. Article. e 36 applies to actions "ex delicto" whereas article 115 applies to actions "ex contractu". "These torts are often considered as of three kinds, viz. non feasance or the omission of some act which a man is by law bound to do, misfeasance, being the improper performance of some lawful act, or malfeasance, being the commission of some act which is in itself unlawful". But to attract article 36 these wrongs shall be independent of contract. The meaning of the words "independent of contract" has been felicitously brought out by Greer, L.J. in Jarvis vs Moy, Davies, Smith, Vanderveil and Co.(1) thus: "The distinction in the modern view, for this purpose, between contract and tort may be put thus. Where the breach of duty alleged arises out of a liability independently of the personal obligation undertaken by contract it is tort and it may be tort even though there may happen to be a contract between the parties, if the duty ' in fact arises independently of that contract. Breach of contract occurs where that which is complained of is a breach of duty arising out of the obligations undertaken by the contract. " If the suit claims are for compensation for breach of the terms of the contracts, this article has no application and the appropriate article is article 115, which provides a period of 3 years for compensation for the breach of any contract, express or implied, from the date when the contract is broken. If the suit claims are based on a wrong committed by the Bank or its agent dehors the contract, article 36 will be attracted. Let us now apply this legal position to the claims in question. One of the contracts that was entered into between the plaintiffs and the Bank is dated February 5, 1951. It is not disputed that the other two contracts, with which we are concerned, also are of the same pattern. Under that contract the Bank, the appellant herein, and Sohanlal Sehgal, one of the respondents herein, agreed "to hire, subject to the conditions endorsed, the company 's safe No. 1651/ 405. 297 2203 Class lower for one year from this day at a rent of Rs. 40". The relevant conditions read as follows: It is agreed that the connection of the renter of the safe and the Bank (and it has no connection) is that of a lessor and lessee for the within mentioned safe and not that of a banker and customer. The liability of the company in respect of property deposited in the said safe is limited to ordinary care in the performance by employees and officers of company of their duties and shall consist only of (a) keeping the safe in vault where located when this rental contract is entered into or in one of equal specifications, the door to which safe shall be locked at all time except when an officer or an employee is present, (b) allowing no person access to said safe. except hirer or authorised deputy, or attorney in fact having special power to act identification by signature being sufficient or his/her legal representative in the case of death, insolvency or other disability of Hirer, except as herein expressly stipulated. An unauthorised opening shall be presumed or inferred from proof of partial or total loss of contents. The company shall not be liable for any delay caused by the failure of the vault doors or locks to operate. The company shall not be liable for any loss etc. The only purpose of the contract was to ensure the safety of the articles deposited in the safe deposit vault. It was implicit in the contract that the lockers supplied must necessarily be in a good condition to achieve that purpose and, therefore, that they should be in a reasonably perfect condition. It was an implied term of such a contract. Condition 15 imposed another obligation on the Bank to achieve the same purpose, namely, that the Bank should not allow access to any person to the safe except the hirer or his authorised agent or attorney. If the articles deposited were lost because one or other of these two conditions was broken by the Bank, the renter would certainly be entitled to recover damages for the said breach. Such a claim would be ex contractu and not ex delicto and for such a claim article 115 of the First Schedule to the Limitation Act applied and not article 36 thereof. Learned counsel for the appellant contended that the suits were not based upon the breach of a contract committed by the Bank but only the theft committed by its agent dehors the terms of the contract. This leads us to the consideration of the scope of the plaints presented by the respondents. It would be enough if we take one of the plaints as an example, for others also run on the same lines. Let us take the plaint in Civil Suit No. 141 of 1954, i.e., the suit flied by Sohanlal Sehgal and others against the Bank for the recovery of d sum of Rs. 26,500. We have carefully gone through 298 the plaint, particularly paragraphs 8, 9 and 10 thereof. It will be seen from the plaint that though it was not artistically drafted the relief was claimed mainly on two grounds, namely, (i) that it was an implied term of the contract that the locker rented was in a good condition, and (ii) the valuables were lost because the Manager, on account of the negligence of the Bank in not taking all the necessary precautions, committed theft of the articles in the course of his employment. In the written statement the defendant denied its liability both under the terms of the contract and also on the basis that it was not liable for the agent 's fraud. The High Court found that at the time when the lockers were rented out they were in a defective condition and that the Bank, in actual practice, made the Manager the sole custodian with full control over the keys of the strong,room and permitted a great deal of laxity in not having any check whatsoever on him. In this state of the pleadings and the findings it is not possible to accept the contention of the learned counsel ' for the appellant that the plaintiffs did not base their claims on the branch of the conditions of the contracts. This argument is in the teeth of the allegations made in the plaint, evidence adduced and the arguments advanced in the Courts below and the findings arrived at by them. While we concede that the plaint could have been better drafted and couched in a clearer language, we cannot accede to the contention that the plaints were solely based upon the fraud of the Manager in the course of his employment. We, therefore. hold that there were clear allegations in the plaints that the defen dant committed breach of the contracts in not complying with some of the conditions thereof and that the defendant understood those allegations in that light and traversed them. The suit claims, being ex contractu were clearly governed by article 115 of the First Schedule to the Limitation Act and not by article 36 thereof. If article 115 applied, it is not disputed that the suits were within time. Even if the claim was solely based on the fraud committed by the Manager during the course of his employment. we do not see how such a claim fell under article 36 of the First Schedule to the Limitation Act. To attract article 36. the misfeasance shall be independent of contract. The fraud of the Manager committed in the course of his employment is deemed to be a fraud of the principal, that is to say the Bank must be deemed to have permitted its manager to commit theft in violation of the terms of the contracts. While under the contracts the Bank was under an obligation to give to the respondents good lockers ensuring safety and protection against theft, it .gave defective ones facilitating theft; while under the contracts it should not permit access to the safe to persons other than those mentioned in the contracts. in violation of the terms thereof it gave access to its Manager and enabled him to commit theft. In either case the wrong committed was not independent of the contract. but it directly arose out of the breach of the contract. 299 1n such circumstances article 36 is out of place. The competition between articles 115 and 120 to take its place need not be considered. for neither of those Articles hits the claim, as the suits are within 3 years. which is the shorter of the two periods of limitation prescribed under the said two Articles. In this view it is not necessary to express our view on the question whether the contracts in question were of bailment. In the result, the appeals fail and are dismissed with costs one hearing fee. Appeals dismissed.

IN-Abs

The respondents hired lockers in the safe deposit vaults from the appellant bank at Jullundur through its manager under different agreements on various dates during 1950. In April 1951, the lockers were tampered with and the valuables of the respondents kept in them were removed by the Manager. In due course the Manager was prosecuted and convicted for theft. The respondents filed three suits against the bank for the recovery of different sums being the value of the contents of the lockers which had been removed. The bank denied its liability on various grounds and also contended that the suits were, barred by limitation. The trial court held that the Bank was liable to bear the loss incurred by the respondents and that the suits were not barred by limitation. On appeal, the High Court accepted the findings of the trial court on both the questions and dismissed the appeals. In the appeal before the Supreme Court, only the question of limitation was raised. It was contended of behalf of the appellants on the facts found that the suit was barred by limitation as the theft of the valuables by the Manager was a tort committed by him dehors the contracts entered into by the appellant with the respondents and, therefore, Article 36 of the Limitation Act which required that a suit must be instituted within two years applied, and not article 115, which provided for a period of limitation of three years; that the suits were, not based on a breach of contract committed by the bank but only the theft committed by its agent dehors the terms of the contract. HELD: The suit claims, being ex contractu, were clearly governed by Article 115 of the First Schedule to the Limitation Act and by Article 36. [298F] There were clear allegations in the plaint that the appellant committed breach of contract in not complying with some of the contitions thereof and that the appellant understood those allegations in that light and traversed them. [298 E] Even ii the respondents ' claim was solely based on the fraud committed by the manager during the course of his employment, such a claim could not fall under article 36. To attract article 36, the misfeasance must be independent of contract. The fraud of the manager committed in the course of his employment must be deemed to be a fraud of the principal, i.e. the Bank must be deemed to have permitted manager to commit theft in violation of the terms of the contracts. While under the contracts the bank was under an obligation to provide good lockers and not to permit access to the safe except to persons mentioned in the contracts, in violation of these terms the bank gave defective lockers and gave access to the manager, thus facilitating the theft. In either case the wrong committed was not independent of the contract but directly arose out of the breach of contract. [298 G, H]

vil Appeals Nos. 474 and 475 of 62. Appeal from the judgment and decree dated January 10. 1958, of the Bombay High Court in Appeal No. 375 of 1953. J.C. Bhatt, B.R.Agarwala and H.K. Puri, for 'the appellants (in C.A. No. 474 of 1962) and respondent (in C.A. No. 475 of 1962). Niren De, Additional Solicitor General, N.D. Karkhanis, B.R.G.K. Achar, for R.N. Sachthey, for Respondent (in C.A. No. 474 of 1962) and appellant (in C.A. Nos. 475 of 1962). The judgment of SUBBA RAO, DAYAL and BACHAWAT JJ. was delivered by SUBBA RAO, J. The dissenting Opinion of MUDHOLKAR and RAMASWAMI JJ. was delivered by RAMASWAMI J. Subba Rao, J. On October 4. 1949, M/s. Harshadrai Mohanlal & Co. a firm doing business at Thana, Bombay. hereinafter called the firm, entrusted 4 boxes alleged to have contained menthol crystals to the then G.LP. Railway for carriage from Thana to Okhla near Delhi under a railway receipt bearing No. 233/27. On October 11, 1949, the firm consigned 2 more such boxes to Okhla from Thana under 2 railway receipts bearing Nos. 233/35 and 233/36. All the said 6 boxes were marked with the name of the said firm and were consigned to "self". The said firm endorsed the relevant railway receipts in favour of Morvi 'Mercantile Bank Ltd., hereinafter called the Bank, against an advance of Rs. 20,000 made by the Bank to the firm. The said consignments did not reach Okhla. The railway company offered to deliver certain parcels to the Bank, but the Bank refused to take delivery of the same on the ground that they were not the goods consigned by the firm. As the railway failed to deliver the boxes, the Bank, as the endorsee of the said railway receipts for valuable consideration, filed Civil Suit No. 50 of 1950 in the Court of the Civil Judge, Senior Devision. Thana, against the Union of India through the General Manager, Central Railway, Bombay, for the recovery of Rs. 35,500, being the value of the goods contained in the said consignments as damages. The defendant in the written statement averred that on February 1. 1950, the railway company offered to deliver all the consignments to the Bank, but the latter wrongfully refused to take delivery of the same on the ground that the consignments were not identical to the ones consigned from Thana; it put the plaintiff to strict proof of the allegation that the consignments contained menthol crystals as alleged or that the aggregate value of the said consignments was Rs. 35,500. or that the railway receipts were endorsed in favour of the plaintiff for valuable consideration. The learned Civil Judge found as follows: (1) The boxes consigned by the firm contained menthol crystals and by the wrongful conduct of the employees of the railway administration the contents of the boxes were lost; (2) the said consignments were not offered 257 for delivery to the Bank, but what was offered were different consignments containing caustic soda; (3) the relevant railway receipts were endorsed by the firm in favour of the Bank for valuable consideration; and (4) the Bank, as endorsee of the railway recepts, was not entitled to sue the railway company on the railway receipts for loss of the consignments. On those findings the suit filed by the Bank was dismissed with costs. The Bank preferred ' an appeal to the High Court against the decision of the learned Civil Judge, being First Appeal No. 375 of 1953. The appeal was heard by a Division Bench of the Bombay High Court, consisting of J.C. Shah and Gokhale, JJ. The learned Judges agreed with the learned Civil Judge on the first 3 findings; but on the 4th finding they took a different view. They held that the Bank, as endorsee of the said railway receipts, was entitled to sue for compensation for the loss suffered by it by reason of the loss of the consignments, but. as pledgees of the goods, it suffered the loss only to the extent of the loss of its security. On that view, the learned Judges gave a decree to the Bank for a sum of Rs. 20,000 advanced by it with interest and proportionate costs in both the Courts. The plaintiff as well as the defendant preferred, by certificate, cross appeals to this Court. Learned Additional Solicitor General raised before us the following points: (1) In law the endorsement of a railway receipt does not constitute a pledge; (2) an endorsement of a railway receipt for consideration constitutes at the most a pledge of the railway receipt and not the goods covered by it. and, therefore, in the present case the Bank acquired only a right to receive the goods covered by the relevant receipts from the railway; and (3) if the endorsement of the railway receipts does not constitute in law a pledge of the goods, the Bank has no right to sue for compensation, as, though the proprietary right in the goods was transferred to it, the right to sue trader the contracts did not pass to it. The decision on the first point depends upon the scope of the legal requirements to constitute a pledge under the Indian law. That calls for a careful scrutiny of all the relevant provisions of the Indian Contract Act, the Indian and the . for their combined consideration yields the answer to the problem raised. Under the Contract Act, delivery of goods by one person to another under a contract as security for payment of a debt is a pledge. Ordinarily delivery of tangible property is essential to a true pledge; but where the law recognizes that delivery of tangible symbol involves a transfer of possession of the property symbolized, such a symbolic possession takes the place of physical delivery. The short but difficult question, therefore. is whether the Indian law equates the railway receipts with the goods covered by them for the purpose of constituting delivery of goods within the meaning 258 of the Contract Act. Before the amendment of section 178 of the Contract Act and the passing of the , the scope of railway receipts vis a vis the goods covered by them came up for consideration before the Judicial Committee in Ramdas Vithaldas Durbar vs S.Amarchand & Co., C). The head note of that case succinctly gives the following facts: Sellers of cotton consigned it to the buyer in Bombay, and forwarded to him receipts issued by the railway company which had undertaken the carriage. The receipts provided that they should be given up at the destination by the consignee, and that if he did not himself attend to take delivery he must endorse on the receipt a request for delivery to whom he wished it to be made. The evidence showed that similar receipts for cotton were used in the ordinary course of business in Bombay as proof of the possession and control of the goods therein referred to or as authorising the holder to receive or transfer the goods. The consignee endorsed and delivered the receipts as security for advances made specifically upon them in good faith. The sellers sought to stop the cotton in transit. The Judicial Committee held that the railway receipts were instruments of title within the meaning of the , s.103, and that the sellers were therefore not entitled to stop the goods except upon payment or tender to the pledgees of the advances made by them. This decision lays down 3 propositions, namely, (i) the railway receipts in question in that case were used in the ordinary course of business in Bombay as proof of possession and control of the goods therein referred to, or as authorising the holder to receive or transfer the goods; (ii) such railway receipts were documents of title and a valid pledge of the goods covered by the receipts could be made under the Contract Act before it was amended in 1930. by endorsing and delivering the same as security for advances made. to the owner of the goods. It may be noticed at this stage that under the Contract Act before it was amended in 1930 there was no definition of the expression "documents of title", but there. was one in the Indian Factors Act (XX of 1844) which. with certain modifications, made the provisions of the English Factors Act. 1842, applicable to British India. The last mentioned Acts defined the expression "documents of title to goods as including any bill of lading, dock warrant. ware housekeeper certificate, whar finger 's certificate. warrant or order for the delivery of goods and any other document used in the ordinary course of business as proof of the possession or control of goods. or authorising or purporting to authorise, either by endorsement or by delivery the possessor of the document to transfer or receive goods thereby represented '. Railway receipt was so nominee not included in the detinition. But the Privy Council, on the basis of the evidence adduced in that case, brought the railway receipts under that part of the definition describing generally the documents of title to goods. It may also be noticed that the Judicial Committee. though (1) T. A. 164. 259 its attention was called to the provisions of sections 4 and 137 of the , preferred to decide that case decors the said provisions. In the Explanation to section 137 of the , which was introduced by the Amending Act 2 of 1900, the definition of the expression "mercantitle document" is practically the same as that found in the Indian Factors Act noticed by the Judicial Committee in the decision cited supra, with the difference that it expressly includes therein railway receipt. Under s.4 thereof the Chapter and the sections of the Act shall be taken as part of the . In 1930 Parliament in enacting the Indian , presumably borrowed the definition of "documents of title to goods" from the Indian Factors Act and the English Factors Act noticed by the Judicial Committee, but expressly included in the definition the railway receipt. This indicates the legislative intention to accept the mercantile usage found by the Judicial Committee in Ramdas Vithaldas Durbar vs section Amerchand & Co.(1). The same definition was incorporated by reference in the Explanation to s.178 of the Contract Act as amended in the year 1930. This definition is also in accord with the definition of "mercantile document of title to goods" in the Explanation to s.137 of the . The Judicial Committee had another occasion to consider the question of pledge of railway receipt in Official Assignee of Madras vs Mercantile Bank of India. Ltd.(2). The facts in that case were as follows: The insolvents did a large business in groundnuts, which they purchased from the up country growers; the nuts were then dispatched by rail and arrived in Madras by one or other of the two railways, the Madras & Southern Maharatta Railway or the South Indian Railway. Under an arrangement between the said Railways and the Madras Port Trust, the consignments of nuts when received were deposited in the go downs of the Madras Port Trust. The general course of business was for the insolvents to obtain from the railway companies in respect of each consignment or wagon had a railway receipt. The insolvents obtained loans from the respondent Bank after sending to the said Bank the railway receipts duly endorsed in blank and also after executing a promissory note for the amount a letter of hypothecation. When the goods arrived at the port, delivery was taken from the Port Trust against the railway receipts. At the time the insolvents were adjudicated the bags of ground nuts in question in that case were either in transit on the railway or in the transit sheds or godowns of the Port Trust. On those facts. the main question was whether the pledge of the railway receipt was a pledge of the goods represented by them or merely a pledge of the actual documents. If there was a valid pledge before the insolvency, the Bank would be entitled to receive the amount realised by the sale of the goods; if not, the Official Assignee would be entitled to it. The Judicial Committee, after considering (1) (1) (1934) L.R. 51 I.A. 416, 423. 260 its earlier decision in Ramdas Vithaldas Durbar 's case (1) and all the relevant provisions which we have noticed earlier, came to the conclusion that there was a valid pledge of the goods represented by the receipts. It may be noticed that this decision also turned upon the relevant provisions of the Contract Act before its amendment in 1930, though at the time the decision was made the amendment came into force. On the question whether a pledge of a document is a pledge of the goods as distinct from the document, the Judicial Committee observed: "Their Lordships likewise in the present case see no reason for giving a different meaning to the term (documents of title to goods) in s.178 from that given to the terms in sections 102 and 103; in addition a railway receipt is specifically included ' in the definition of mercantile document of title to goods by section 137 of the , which, in virtue of s.4 of the Act, is to be taken as part of the Contract Act as being a section relating to contracts. A railway receipt is now included in the definition of documents of title to goods in section 2, sub section 4, of the Indian . " On the construction of the expression "person" in section 178 of the Contract Act, it was argued that the said expression took in only a mercantile agent and that the law in India was the same as in England. Rejecting that plea, the Judicial Committee remarked at p. 426 thus: "Their Lordships did not in that case see any improbability in the Indian Legislature having taken the lead in a legal reform. It may well have seemed that it was impossible 'to justify a restriction on the owner 's power to pledge which was not imposed on the like powers of the mercantile agent. The same observation may well be true m regard to the words now being considered. The reasonableness of any such change in the law is well illustrated by the facts of the present case, where it was clearly intended to pledge the goods, not merely the railway receipts, and the respondents have paid in cash the advances they made on that footing. In these circumstances, it would be indeed a hardship that they should lose their security. " These pregnant observations show that there is no justification to the distinction that is being maintained in England between pledge of a bill of lading and the pledge of documents of title of the than a bill of lading. The Judicial Committee in this decision clearly laid down, after noticing all the relevant provisions of the Contract Act, the and the that railway receipts were documents of title and the goods cover (1)(1916) L.R. 43 I.A. 164. ed by the documents could be pledged by transferring the documents. This decision is in accord with the view expressed by us on a fair reading of the said provisions. Even so, it is contended that by the amendment of section 178 of the Contract Act in 1930, the Legislature has taken away the right of an owner of goods to pledge the same by the transfer of documents of title to the said goods. Under the old section "a person" who was in possession of any goods etc. might make a valid pledge of such goods, whereas under the present section "a mercantile agent", subject to the conditions mentioned therein, is authorized to make a pledge of the goods by transferring the documents of title. Therefore, the argument proceeds, a person other than a mercantile agent cannot make a valid pledge of goods by transferring the documents representing the said goods. This argument appears to be plausible and even attractive; but, if accepted, it will lead to anomalous results. It means an owner of goods cannot pledge the goods by transferring the documents of title, whereas his agent can do so. As the Privy Council pointed out it is impossible to justify a restriction on the owner 's power to pledge when there is no such restriction imposed on the like powers of a mercantile agent. A careful scrutiny of section 178 of the Contract Act and the other relevant provision thereof indicates that the section assumes the power of an owner to pledge goods by transferring documents of title thereto and extends the power even to a mercantile agent. A pledge is delivery of goods as security for payment of a debt. If a railway receipt is a document of title to the goods covered by it, transfer of the said document for consideration effects a constructive delivery of the goods. On that assumption if we look at section 178 of the Contract Act, the legal position is apparent. The material part section 178 of the Contract Act reads: "Where a mercantile agent is, with the consent of the owner. in possession of goods or the documents of title to goods, any pledge made by him, when acting in the ordinary course of business of a mercantile agent, shall be as valid as if he were expressly authorised by the owner of the goods to make the same; provided that the Pawnee acts in good faith and has not at the time of the pledge notice that the pawner has not authority to pledge. " The section emphasizes that a mercantile agent shall be in possession of documents of title with the consent of the owner thereof; if he is in such possession and pledges the goods by transferring the documents of title to the said goods, by fiction, he is deemed to have expressly authorized by the owner of the goods to make the same. The condition of consent and the fiction of authorization indicate that he is doing what the owner could have done. So too. 262 section 30 of the Indian discloses the legislative mind. The relevant part of the said ' section reads: "Where a person, having sold goods, continues or is in possession of the goods or of the documents of title to the goods, the delivery or transfer by that person or by a mercantile agent acting for him, of the goods or documents of title under any sale, pledge or other disposition thereof to any person receiving the same in good faith and without notice of the previous sale shall have the same effect as if the person making the delivery or transfer were expressly authorised by the owner of the goods to make the same." This sub section shows that a person who sold the goods as well as a mercantile agent acting for him can make a valid pledge in the circumstances mentioned therein. If an owner of goods or his mercantile agent after the owner has sold the goods, can make a valid pledge by transferring the documents of title to the goods, it would lead to an inconsistent position if we were to hold that an owner who has not sold the goods cannot pledge the goods by transferring the documents of title. Sub section (2) of section 30 of the Indian relevant to the present enquiry reads: "Where a person. having bought or agreed to buy goods. obtains, with the consent of the seller, possession of the goods or the documents of title to the goods. the delivery or transfer by that person or by a mercantile agent acting for him. of the goods or documents of title under any sale, pledge or other disposition thereof to any person receiving the same in good faith and without notice of any lien or other right of the original seller in respect of the goods shall have effect as if such lien or right did not exist. " This sub section clearly recognizes that a buyer or his mercantile agent can pledge goods by transferring the documents of title thereto: it protects a bona fide pledgee from the buyer against any claim by the original owner based on the lien or any other right still left in him. If the owner the purchaser becomes the owner cannot pledge the goods at all by transfer of documents of title. the protection given under sub section (2) of section 30 of the to a bona fide purchaser is unnecessary. The material part of section 53(1) of the reads: "Subject to the provisions of this Act, the unpaid seller 's right of lien or stoppage in transit is not affected by any sale or other disposition of the goods which the buyer may have made, unless the seller has assented thereto: Provided that where a document of title to goods has been issued or lawfully transferred to any person as buyer or owner of the goods, and that person transfers the document to a person who takes the document in good faith 263 and for consideration, then, if such last mentioned transfer was by way of sale, the unpaid seller 's right of lien or stoppage in transit is defeated, and, if such last mentioned transfer was by way of pledge or other disposition for value, the unpaid seller 's right of lien or stoppage in transit can only be exercised subject to the rights of the transferee. " This sub section protects a bona fide pledgee from an owner against any rights still subs sting in his predecessor in interest. This assumes that the owner can pledge the goods by transfer of the relevant documents of title. The said sections embody statutory exceptions to the general rule that a person cannot confer on another a higher title than he possesses. The argument that section 178 of the Contract Act, as amended in 1930. restricts the scope of the earlier section and confines it only to a mercantile agent was noticed by the Judicial Committee in Official Assignee of Madras vs Mercantile Bank of India, Ltd. (1) and it observed therein: "The Indian Legislature may well have appreciated in 1872 the exigencies of business, even though in 1930 they recanted. Or perhaps they did not appreciate fully the effect of the actual words of the section. " These observations indicate that the Judicial Committee did not express any final opinion on the construction of the amended section 178 of the Contract Act as the question in the appeal before it related to the unamended section. Further, it did not notice the other sections referred to earlier which throw a flood of light on the true meaning of the terms of section 178 of the Contract Act, as it now stands. This conclusion also accords with the view expressed by Bachawat. J. in Commissioner for the Port Trust of Calcutta vs General Trading Corporation Ltd.(2). The Indian decisions cited at the Bar do not deal with the question whether a valid pledge of goods can be effected by transfer of documents of title, such as a railway receipt, representing the goods; they were mainly concerned with the question whether an endorsee of a railway receipt for consideration could maintain an action on the basis of the contract embodied in the said receipt: see the firm of Dolatram Dwarakdas vs The Bombay Baroda and Central India Railway Co. C); Shah Muji Deoii vs Union of India(4) Commissioner for the Port Trust of Calcutta vs General Trading Corporation Ltd. (2); and Union of India vs Taherali (2). These raise a larger question on which there is a conflict of opinion. In the view we have taken on the question of pledge, it is not necessary to express our opinion thereon in these appeals. (1) , 423. A.I.R. 1964 cal. (3) (1914) I.L.R,. 38 .Rom. (4) A.I.R. 1957 Nag. (5) (1956) 58 Born. L.R. 650. 264 The law on the subject, as we conceive it, may be stated thus: An owner of goods can make a valid pledge of them by transferring the railway receipt representing the said goods. The general rule is expressed by the maxim nemo dat quod non habet, i.e., no one can convey a better title than what he had. To this maxim, to facilitate mercantile transactions, the Indian law has grafted some exceptions, in favour bona fide pledgees by transfer of documents .of title from persons, whether owners of goods or their mercantile agents who do not possess the full bundle of rights of ownership at the time the pledges are made. To confer a right to effect a valid pledge by transfer of documents of title relating to goods on owners of the goods with defects in title and mercantile agents and to deny it to the full owners thereof is to introduce an incongruity into the Act by construction. On the other hand, the real intention of the Legislature will be carried out if the said right is conceded to the full owner of goods and extended by construction to owners with defects in title or their mercantile agents. We are glad that, on a reasonable construction of the material provisions of the relevant Acts, we have been able to reach this conclusion To accept the contentions of the respondents to the contrary would be a retrograde step and would paralyse the entire mechanism of finance of our internal trade. In this vast country where goods are carried by railway over long distances and remain in transit for long periods of time, the railway receipt is regarded as a symbol of the goods for all purposes for which a bill of lading is so regarded in England. The next question is whether the plaintiff would be entitled to recover the full value of the consignments amounting to Rs. 35,500/ or, as the High Court held, only the amount of Rs. 20,000/ with interest, i.e., the amount secured under the pledges. The answer to this question depends upon the construction of section 180 of the Contract Act, it reads: "If a third person wrongfully deprives the bailee of the use or possession of the goods bailed, or does them any injury, the bailee is entitled to use such remedies as the owner might have used in the like case if no bailment had been made; and either the bailor or the bailee may bring a suit against a third person for such deprivation or injury " Under this section, a pledge being a bailment of goods as security for payment of a debt, the pledgee will have the same remedies as the owner of the goods would have against a third person for deprivation of the said goods or injury to them. If so, it follows that the Bank, being the pledgee, can maintain the present suit for the recovery of the full value of the consignments amounting to Rs. 35,500/ . 265 The last question is whether the Bank was the pledgee of the goods or was only the pledgee of the documents of title whereunder they could only keep the documents against payment by the consignee as contended on behalf of the Railway. The firm borrowed a sum of Rs. 20,000/ from the Bank and executed a promissory note, exhibit 104, dated October 6, 1949, in its favour. It also endorsed the railway receipts Nos. 233/27, 233/35 and 233/36 in favour of the Bank. The Accountant of the Bank deposed that the railway receipts were endorsed in favour of the Bank, which had.advanced the said amount to the firm on the security of the said railway receipts. The evidence of this witness was not challenged in the High Court. The Bank.advanced alarge amount of money to the firm. The three transactions, namely the advancing of loan the execution of the promissory note and the endorsement of the railway receipts, together form one transaction. Their combined effect is that the Bank would be in control of the goods till the debt was discharged. This is a well known practice followed by Banks. The Judicial Committee both in Ramdas Vithaldas Durbar vs section Amerchand & Co.(1), and the Official Assignee of Madras vs The Mercantile Bank of India, Ltd.(2) heId that such a transaction was a pledge. We, therefore, hold on the facts of this case that the firm by endorsing the railway receipts in favour of the Bank for consideration pledged the goods covered by the said receipts to the Bank. In this view it is not necessary to express our opinion on the question whether if the transaction was not a pledge of the goods,the Bank would be entitled to sue on the basis of the contract entered into between the firm and the Railway. No other question was raised. In the result, Civil Appeal No. 474 of 1962 filed by the Bank is allowed; and Civil Appeal No. 475 of 1962 filed by the Railway is dimissed. The plaintiff 's suit is decreed with costs throughout. Ramaswami, J. We regret we are unable to agree with the judgment pronounced by our learned brother Subba Rao J. On October 4, 1949, M/s. Harshadrai Mohanlal & Co., (hereinafter referred to as the firm) entrusted 4 boxes containing "menthol crystal" to the then G.I.P. Railway for carriage from Thana railway station to Okhla near Delhi. On October 11, 1949, the firm consigned 2 more boxes also alleged to have contained "menthol crystal" to Okhla from Thana railway station. The Railway Receipts issued were numbered 233/27, 233/35 and 233/36. All the six boxes were consigned to "self". It is alleged that the Rail way Receipts with regard to these six boxes were endorsed in favour of Morvi Mercantile Bank Ltd. (hereinafter referred to as the plaintiff bank) against an advance of Rs. 20,000 by the plaintiff bank on security of the Railway Receipts. The G.I.P. Railway offered to deliver the boxes at Okhla rai1way station but the plaintiff bank declined to accept the same alleging that the boxes were not those (1) (1916) L.R. 43 I.A. 164. (2) (1934) L.R. 61 I.A. 416, 423. 266 which were consigned from Thana station. The plaintiff bank filed Civil, Suit No. 50 of 1950 in the Court of the Civil Judge, Senior Division, Thana, claiming a sum of Rs. 35,000 as damages for breach of contract. The suit was contested by the defendants on the ground that identical boxes which were consigned by the firm at Thana were offered to the plaintiff bank who declined to accept the same and the Railway Administration had, not committed an breach of contract and, therefore, the Union of India was not liable to pay any damages. The trial Judge held that the boxes Consigned by the firm contained "menthol crystals" and by the unlawful conduct of the employees of the railway administration the contents of the boxes were lost, but he took the view that the plaintiff bank. as endorsee of the railway receipts, was not entitled to sue for compensation for loss of the consignments. In taking that view the learned Civil Judge followed a decision of the Bombay High Court in Shamji Bhanji & Co. vs North western Railway Company(1). The Civil Judge accordingly dismissed the suit by a judgment and decree dated January 15, 1953. Against that decision the plaintiff bank preferred an appeal to the Bombay High Court which continued the findings of the Civil Judge that tile Railway failed ' to deliver the boxes at Okhla and the boxes contained "menthol crystals". The High Court also held that the plaintiff bank assignees of the railway receipt was entitled to bring a suit for damages for breach of contract against the Union of India though the damages would be limited to the loss of its security. In taking this view the Bombay High Court relied upon its previous decision in The Union of India vs Taherali Isaji(2). The first question for determination in this case is whether there was a valid pledge of boxes of "menthol crystals" in favour of the plaintiff bank by endorsement on the railway receipts by the firm. In English Law a pledge arises when goods are delivered by one person called the 'pledgor ' to another person called the 'pledgee" to be held as security for the payment of a debt or for discharge of some other obligation upon the express or implied understanding that the subject matter of the pledge is to be restored to the pledgor as soon as the debt or other obligation is discharged. It is essential for the creation of a pledge that there should be a delivery of the goods comprised therein. In other words, a pledge cannot be created except by delivery of the possession of the thing pledged, either actual or constructive. It involved a bailment. If 'the pledgor had actual goods in his physical possession, he could effect the pledge by actual delivery; but in other cases he could give possession by some symbolic act, such as handing over the key of the store in which they were. however, the goods were in the actual physical possession of a third person, who held for the bailor so that in law his possession was that of the bailor, this pledge could ' be effected by a change of the character of the possession of the (1) A.I.R. 1947 Bomb.169. (2)(1956)58 Bomb L.R. 650. 267 third party, that is by an order to him from the pledgor to hold for the pledgee, the change being perfected by the third party attorning to the pledgee, thus acknowledging that he thereupon held for ' the latter. There was thus a change of possession and a constructive delivery; the goods in the hands of the third party came by this process constructively in the possession of the pledge. But. where goods were represented by documents the transfer of the documents did not change the possession of the goods, save for ' one exception, unless the custodian (carrier, warehouseman or ' such) was notified of the transfer and agreed to hold in future as bailee for the piedgee. The one exception was the case of bills of lading, the transfer of which by the law merchant operated as a transfer of the possession of, as well as the property in, the goods. , This exception has been explained on the ground that the goodsbeing at sea the master could not be notified; the true explanation was perhaps that it was a rule of the law merchant, developed in order to facilitate mercantile transactions, whereas the process of pledging goods on land was regulated by the narrower rule of the common law. The position in English Law, therefore, was that in the case of delivery of documents of title other than bills of lading, a pled of the documents is merely a page of the ipsa corpora of them, for the transfer of documents does not change the possession of the goods unless the custodian (carrier, warehouseman or such) was not filed of the transfer and agreed to hold in future as bailee for the pledgee. In Inglis vs Robertson and Baxter(1). It was held by the House of Lords that where goods are lodged in warehouses in Scotland a pledgee of the goods must, to make effective all real rights which depend on the constructive delivery of the goods, give notice of the pledge to the warehouse keeper. The Factors Act 1889 enacts: "S.3. A pledge of the documents of title to goods shall be deemed to be a pledge of the goods."; and section 1: 'For the purposes of this Act ' (sub section 5). The expression 'pledge ' shall include any contract, pledging, or giving a lien or security on, goods, whether in consideration of an original advance or of any further or continuing advance or of any pecuniary liability '. 9 prescribes that the effect of delivery or transfer of the documents of title of the goods under any pledge &c., by a person who having bought the goods obtains with the consent of the seller possession of the goods or documents of title, shall have the same effect as if the person making the delivery or transfer were a mercantile agent in possession of the goods or documents of title with the consent of the owner. " Goods were stored by G, a domiciled Englishman, in a bonded warehouse in Glasgow, transferred into the name of G as owner; and the Warehouse keeper issued to G delivery orders showing that (1) ; 268 the goods were held to G 's order or assigns by endorsement 'hereon '. G obtained a loan from I an English merchant, and delivered to him in England a letter of hypothecation stating that he deposited a part of the goods with him in security, with power of sale, and G endorsed and handed to I the delivery warrants. I did not intimate or give notice of the right he had acquired to the warehouse keeper. R. & B., claiming as personal creditors of G, .arrested the goods in the hands of the warehouse keeper and then raised an action against him in the Scottish Court claiming through the arrestment a preferable right thereto. It was held by the House of Lords that section 3 of the Factors Act, 1889, was merely intended to define the full effect of the pledge of the documents of title made by a mercantile agent, and that it had no application to the case .of the pledge of the documents of title by one in the position of G, 'who was not a mercantile agent within the meaning of the Act; nor was G a pledgor within section 9 of the same Act. At pages 625 to 627 Lord Watson states: I can see no reason to doubt that, by Scottish law as 'well as English, the endorsement and handing over of delivery orders in security of a loan, along with a letter professing to hypothecate the goods themselves, is sufficient in law, and according to mercantile practice, to constitute a pledge of the documents of title, whatever may be the value and effect of the right so constituted. In my opinion, the right so created, whether in England or in Scotland, will give the pledgee a right to retain the ipso corpora of the documents of title until his advance is repaid. The crucial question in this case is whether the right goes farther, and vests in the pledgee of the documents, not a jus ad rein merely, but a real interest in the goods to which these documents relates. It was not disputed by the appellant 's counsel, and it is hardly necessary to repeat, that by the common law of Scotland the indorsation and hypothecation of delivery .orders, although it may give the pledgee a right to retain the documents, does not give him any real right in the goods which they represent. He can only attain to that right by presenting the delivery orders to the custodier by whom they were granted, and obtaining delivery of the goods from him, or by making such intimation of his right to the custodier as will make it the legal duty of the latter to hold the goods for him. His right, which in so far as it relates to the goods is in the nature of jus ad rem, will be defeated if, before he has either obtained delivery or given such intimation, the goods are validly attached in the hands of the custodier by a creditor of the person for whom the custodier holds them. " 269 The principle is reiterated by the House of Lords in Dublin City Distillery Ltd. vs Doherty(1). in which the plaintiff advanced moneys to a distillery company on the security of manufactured whisky of the company stored in a ware house. Neither the company nor the excise officer could obtain access to the warehouse without the assistance of the other, and the whisky could only be delivered out on presentation to the excise officer of a special form of warrant supplied by the Crown. On the occasion of each advance the company entered the name of the plaintiff in pencil in their stock book opposite the particulars of the whisky intended to be pledged and delivered to the plaintiff (1) an ordinary trade invoice and (2) a document called a warrant, which described the particulars of the whisky and stated that it was deliverable to the plaintiff or his assigns. It was held by the House of Lords that the plaintiff was not entitled to a valid pledge on the whisky comprised in the warrants. At pages 843 and 847 of the Report Lord Atkinson states the law on the point as follows: "As to the second question, it was not disputed that, according to the law of England, and indeed of Scotland. a contract to pledge a specific chattel, even though money be advanced on the faith of it, is not in itself sufficient to pass any special property in the chattel to the pledgee. Delivery is, in addition, absolutely necessary to complete the pledge; but of course it is enough if the delivery be constructive, or symbolical, as it is called, instead of actual. The example of constructive delivery frequently given is the delivery of the key of the store or house in which the goods have been placed; but that is because, in the words of Lord Hardwicke, 'it is the way of coming at the possession, or to make use of the thing ', Ward vs Turner (1751) 2 Ves. Sen. 431 at P. 443). The giving by the owner of goods of a delivery order to the warehouse man does not, unless some positive act be done under it, operate as a constructive delivery of the goods to which it relates: Mc Ewan vs Smith ; And the delivery of a warrant such as those delivered to the respondent in the present case is, in the ordinary case, according to Parke B., no more than an acknowledgment by the warehouse man that the goods are deliverable to the person named therein or to any one he may appoint. The warehouseman holds the goods as the agent of the owner until he has attorney in some way to this person, and agreed to hold the goods for him; then, and not till then, does the warehouseman.become a bailee for the latter; and then, and not till then, is there a constructive delivery of the goods. The delivery and ' (1) 270 receipt of the warrant does not per se amount to a delivery and receipt of the goods: Farina vs Home ; ; Bentall vs Burn ((1824) ; In our opinion, the position in Indian Law is not different Section 172 of the Contract Act which defines a 'pledge ' affirms the English Common Law. Section 172 states that "the bailment of goods as security for payment of a debt or performance of a promise" is called ' a "pledge". The bailor is in this case called the "pawnor" and the bailee is called the "pawnee". According to section |48 of the Contract Act "a bailment is the delivery of goods by one .person to another for some purpose, upon a contract that they shall, when the purpose is accomplished, be returned or otherwise disposed of according to the directions of the person delivering them. The person delivering the goods is called the 'bailor '. The person to whom they are delivered is called the 'bailee '. Section 149 states that the delivery to the bailee may be made by doing anything which has the effect of putting the goods in the possession of the intended bailee or of any person authorised to hold them on his behalf. Reference should also be made to section 178 of the Contract Act, as it stood before the . The original section 178 states: "A person who is in possession of any goods, or of any biII of lading, dock warrant, warehouse keeper 's certificate wharfinger 's certificate, or warrant or order for delivery, or any other document of title to goods, may make a valid pledge of such goods or documents: Provided that the pawnee acts in good faith and under circumstances which are not such as to raise a reasonable presumption that the pawnor is acting improper Provided also that such goods or documents have not been .obtained from the lawful owner, or from any person in lawful custody of them, by means of an offence or fraud. " By the the section was repealed and the subject matter of that section is now spread over the present sections 178 and 178A of the Contract Act and section 30 of the Indian . The new section 178 of the Contract Act states: "Where a mercantile agent is, with the consent of the owner, in possession of goods or the documents of title to goods, any pledge made by him, when acting in the ordinary course of business of a mercantile agent, shall be as valid as if he were expressly authorised by the owner of the goods to make the same; provided* that the pawnee acts in good faith and has not at the time of the pledge notice that the pawnor has no authority to pledge. Explanation in this section the expressions mercantile agent ' and 'documents of title shall have the meanings assigned to them in the Indian ." 271 Section 30 of the Indian provides as follows: "30(1) Where a person, having sold goods, continues or is in possession of the goods or of the documents of title to the goods, the delivery or transfer by that person or by a mercantile agent acting for him, of the goods or documents of title under any sale, pledge or other disposition thereof to any person receiving the same in good faith and without notice of the previous sale shall have the same effect as if the person making the delivery or transfer were expressly authorised by the owner of the goods to make the same Where a person, having bought or agreed to buy goods, obtains, with the consent of the seller. possession cf the goods or the documents of title to the goods, the delivery or transfer by that person or by a mercantile agent acting for him. of the .goods or documents of title under any sale, pledge of ' other disposition the thereof to any person receiving the same in good faith and without notice of any/ten or other right of the original seller in respect of the goods shall have effect as if such lien or right did not exist." Section 178A of the Contract Act states: "178A. When the pawnor has obtained possession of the goods pledged by him trader a contract voidable under section 19 or section 19A, but the contract has not been rescinded at the time of the pledge, the pawnee acquires a good ' title to the goods. provided he acts in good faith and without notice of the pawnor 's defect of title." After the passing of the the legal position with regard to the pledge of railway receipts is exactly the same in Indian law as it is in English law and consequently the owner of the goods cannot, pledge the goods represented by the railway receipts in the present case unless the railway authorities are notified of the transfer and they agree to hold the goods as bailee for the piedgee. On behalf of the appellants Mr. Bhatt placed strong reliance upon the decision of the Judicial Committee in Official Assignee of Madras vs Mercantile Bank of India, Limited (1) in which it was held that a railway receipt, providing that delivery of the consigned goods is to be made upon the receipt being given up by the consignee or by a person whom he names by endorsement thereon, is a document of title within the meaning of the , (section 178 for which a new section was substituted. by the amending Act IV of 1930), and a pledge of a railway receipt operated under the repealed section as a pledge of the goods. But this decision is not of much assistance to the appellants, because it was concerned with the interpretation and legal effect of section 178 of the Contract Act as it stood before the Indian Contract (Amending) (1) (1934) 61 I.A. 416. 272 Act (Amending Act IV of 1930). It was held by the Judicial Committee in that case that under the repealed section 178 the owner of the goods could obtain a loan on security of a pledge of the goods by the pledge of the documents of title. But it is significant to note that section 178 has been amended by the Amending Act, 1930 and under the present section statutory power to pledge goods or documents of title is expressly confined to mercantile agents while acting in the customary course of the business. There are two other instances in which a person other than the owner of the goods may make a valid pledge of the goods and these two instances are dealt with in section 178A of the Contract Act and section 30 of the Indian . The result, therefore, under the amended law is that a valid pledge can no longer be made by every person "in possession" of goods. It can only be made by a mercantile agent as provided in the new section 178 of the Contract Act or by a person who has obtained possession of the goods under a contract voidable under section 19 or section 19A of the Contract Act as provided in section 178A, or by a seller or by a buyer in possession of goods after sale as provided in section 30 of the Indian . Learned Counsel for the appellants also referred to the decision of the Judicial Committee in Ramdas Vithaldas Durbar vs section Amerchand & Co.(1) in which the Judicial Committee explained the legal effect of section 103 of the Contract Act, as it originally stood. It was held by Lord Parker that the railway receipts are instruments of title within the meaning of the , section 103, and that the sellers were therefore not entitled to stop the good 's in transit except upon payment or tender to the pledgees of the advances made by them. It is manifest that the decision cannot afford assistance to the appellants. because, in the first place, it related to the construction of old section 103 of the Contract Act in regard to the right of stoppage of goods in transit, and, in the second place, there has been a significant change in the law in view of the legislative amendment of section 178 of the Contract Act by the . In the present case, therefore, our concluded opinion is that there is no valid pledge of the consignments of menthol crystals represented by the railway receipts in favour of the plaintiff bank and the finding of the High Court on this point is erroneous in law We shall next deal with the question whether the plaintiff can sue on the contract of bailment even though there is no valid pledge of the goods in favour of the plaintiff. It was contended on behalf of the appellants that the plaintiff bank was the endorse of railway receipts and, therefore, it was entitled to sue the defendants for compensation for the loss of the goods. We are unable to accept this argument as correct. At Common law a bill of lading was not negotiable like a bill of exchange so as to enable the endorsee to maharaja an action upon it in his own name, the effect of the (1914) 43 I.A. 164. 273 of the endorsement being only to transfer the property in the goods but not the contract itself. It was observed by Alderson, B. in Thompson vs Dominy (1) as follows: "This is another instance of the confusion, as Lord Ellenborough in Waring vs Cox expresses it, which 'has arisen from similitude reasoning upon this subject Because, in Lickbarrow vs Mason, a bill of lading was held to be negotiable, it has been contended that instrument possesses all the properties of a bill of exchange; but it would lead to absurdity to carry the doctrine to that length. The word 'negotiable ' was not used in the sense in which it is used as applicable to a bill of exchange, but as passing the property in the goods only. " Delivery orders, warrants, written engagements to deliver goods and similar documents are in the same position as the bills of lading were before the Bills of Lading Act, 1855 (18 & 19 Vic. c. 111 ). They are mere promises by the seller, being the issuer or transferor, to deliver, or authorise the buyer to receive possession. It is only by reason of the enactment of the Bills of Lading Act, 1855 (18 & 19 Vic. c. 111) that the issue or transfer of a bill of lading operates as a delivery to the buyer of the goods shipped, and the consignee of the bill of lading is entitled to sue upon the contract contained in the same. The same provisions are contained in the Bills of Lading Act (Act IX) of 1856 in India. It is true that the railway receipt and all other documents enumerated in section 2, sub section (4), , are assimilated to bills of lading for the purposes of the right of stoppage in transit under section 103, Contract Act and a pledge under section 178, Contract Act as explained by the Judicial Committee in Ramdas Vithaldas vs section Amerchand& Co.(2) and Official assignee of Madras vs Mercantile Bank of India(1). But the effect of these decisions is not to assimilate the railway receipt to a biIl of lading for all purposes whatsoever. The legal position of the railway receipt is the same as it was in English law and that position is not affected at all by the enactment of section 2, sub. section (4) of ' the , or the enactment of provisions analogous to sections 103 and 178 of the Contract Act. As stated in Halsbury 'section Laws of England, Hailsham Edition, Vol. 29, at p. 143, article 179: "Such documents, although they may purport to be, or may commonly be treated as, transferable, are not negotiable instruments, unless there be a trade usage to that effect. Accordingly, subject to the provisions of the Factors Act 1889, the owner cannot claim delivery of the goods except from the seller who is the issuer or immediate transferor of the document. " It is manifest that there are no rights created merely by reason of the endorsement of a Railway Receipt between the endorsee and (1) ; (2) (1916) LIt. 43 I.A. 164. (3) (1934) L.R. 61 I.A. 416, 423. 274 the railway company which has issued the railway receipt to the .consignee, the only remedy of the endorsee being against the endorser. This was the position in English law, except in the case of .bills of lading the transfer of which by the Law Merchant operated as a transfer of the possession of as well as the property in 'the goods as observed by Lord Wright in Official Assignee of Madras vs Mercantile Bank of India, Limited(1) at page 422. The endorsee may bring an action as an assignee of the contract of carriage but then the assignment has to be proved as in every other case. It is true that by reason of section 137 of the , the provisions relating to the transfer of an actionable claim do not apply to a railway receipt, and the assignment need not be according to any particular form, but a railway receipt is not like d negotiable instrument (See Mercantile Bank of India Ltd. vs Centarl Bank of India Ltd.(2). It is also apparent that subject to the exceptions mentioned in sections 30 and 53 of the Indian . 1930, and s 178 of the Contract Act, 1872. its possessor cannot give a better title to the goods than he has. The negotiation of the railway receipt may pass the property in the goods. but it does not transfer the contract contained in the receipt or the statutory contract under section 74 E of the Indian Railways Act. Negotiability is a creature of statute or mercantile usage, not of judicial decisions apart from either. So, in the absence of any usage of trade or any statutory provision to that effect, d railway receipt cannot be accorded the benefits which flow from negotiability under the Negotiable Instruments Act. so as 10 entitle the endorsee as the holder for the time being of the document of title to sue the carrier the railway authorities in his own name. If file claim of the plaintiff is as an ordinary assignee of the contract of carriage, then the plaintiff has to prove the assignment 'in his favour. In the present case the plaintiff bank has furnished no such proof of assignment in its favour. In view of cl. (3) of the notice printed at the back of the railway receipt it is clear that an endorsement made on the face of the railway receipt by the consignee is meant to indicate the person to whom the consignee wishes delivery of the goods to be made if he himself does not attend to take delivery. An endorsement made by the consignee on the face of the railway receipt requesting the railway company to deliver the goods to the endorsee merely conveys to the railway company that the person in whose favour the endorsement is made by the consignee is constituted by him a person to whom he wishes that delivery of the goods should be made on his behalf. Clause (3) of the notice printed at the back of the railway receipt states: "That the railway receipt given by the railway company for the articles delivered for conveyance, must be given up at destination by the consignee to the railway company, otherwise the railway may refuse to deliver and that the signature of the consignee or his agent in the delivery (1) (1934) L.R. 61 I ,A. 416. (2) (1937) 65 I.A. 75. 275 book at destination shall be evidence of complete delivery. If the consignee does not himself attend to take delivery he must endorse on the receipt a request for delivery to the person to whom he wishes it made, and if the receipt is not produced, the delivery of the goods may, at the discretion of the railway company, be withheld until the person entitled in its opinion to receive them has given an indemnity to the satisfaction of the railway company. " In the present case the plaintiff has not proved by proper evidence an assignment of the Contract of Carriage. In our opinion, the law on the point has been correctly stated by Bhagwati, J. in Shamji Bhanji & Co. vs North Western Rly. Co.(1). It follows, therefore, that the plaintiff has no right to bring the present suit against the Union of India. Counsel for appellant has referred to the practice of merchants in treating a railway receipt as a symbol of goods and in making pledge of goods by pledge of railway receipts, but no such practice or custom has been alleged or proved on behalf of the plaintiff in the present case. In the absence of such allegation or proof it is not open to the Court to take any judicial notice of any such practice. Counsel for appellant also referred to possible inconvenience and hardship to merchants if such a practice is not judicially recognised, but the argument from inconvenience and hardship is a dangerous one and is only admissible in construction where the meaning of the statute is obscure. In Sutters vs Briggs(2). Lord Birkenhead stated: "The consequences of this view of section 2 of the Gaming Act, 1835 will no doubt be extremely inconvenient to many persons. But this is not a matter proper to influence the House unless in a doubtful case affording foothold for balanced speculation as to the probable intention of the legislature. " In the present case the language of section 178 of the Contract Act is clear and explicit and if any hardship and ' inconvenience is felt it is for Parliament to take appropriate steps to amend the law and not for the courts to legislate under the guise of interpretation. For the reasons expressed, we hold that Civil Appeal 474 of 1962 brought by the plaintiff bank should be dismissed and Civil Appeal 475 of 1962 brought by the Union of India through the General Manager, Central Railway should be allowed with costs and ' the suit of the plaintiff bank should be dismissed with costs throughout. ORDER BY COURT In accordance with the majority Judgment. Civil Appeal 474 of 1962 is allowed and Civil Appeal 475 of 1962 is dismissed,plaitiff 's suit is decreed with costs throughout. (1) A.I.R. 1947 Bom. 169. I.A.C. 1. (2) [1922] I.A.C.1.

IN-Abs

A firm doing business in Bombay entrusted goods worth Rs. 35,500 the Railway for delivery in Delhi. The goods were consigned to "self" and the firm endorsed the railway receipts to a Bank against an advance of Rs. 20,000 made by the Bank to the firm. The firm also executed a promissory note in favour of the Bank for that amount. When the goods reached the destination, the Bank refused to take delivery, on the ground that they were not the goods consigned by the firm. The Bank, thereafter filed a suit for the recovery of the value of the goods. The trial court dismissed the suit. On appeal by the Bank, the High Court allowed the appeal and decreed the claim for Rs. 20,000 on the ground that as pledgee of the goods, the Bank suffered loss only to the extent of the loss of its security. Both the Bank and the Railway appealed to this Court, and it was contended on behalf of the Railway that the endorsement of the railway receipt in favour of the Bank, did not constitute a pledge of the goods covered by the receipt and that the Bank had no right to sue for compensation. HELD: (Per Subba Rao, Raghubar Dayal and Bachawat, J J): The firm by endorsing the railway receipts in favour of the Bank, for consideration. pledged the goods covered by the said receipts, to the Bank, and the Bank being the pledgee could maintain the suit for the recovery of the full value of consignment amounting to Rs. 35,500. [264 H; 265 D E] On a reasonable construction of section 178 of the Contract Act, 1872, sections 4 and 137 of the , and sections 30 and 53 of the Indian , an owner of goods, can make a valid pledge of them by transferring the railway receipt representing the said goods. To the general rule expressed by the Maxim nemo dat quod non habet (no one can convey a better title than what he had), to facilitate mercantile transactions. the Indian Law has grafted some exceptions, in favour of bonafide pledgees by transfer of documents of title from persons. whether owners of goods who do not possess the full bundle of rights of ownership at the time the pledges are made, or their mercantile agents. To confer a right to effect a valid pledge by transfer of document of title relating to goods on persons with defects in their title to the goods. and on mercantile agents, and to deny it to the full owners thereof, is to introduce an incongruity into the Act. On the other hand, the real intention of the legislature will be carried out if the said right is conceded to the Full owner of goods and extended by construction to persons with defects in their title to the goods or to mercantile agents. A pledge being a bailment of goods under section 172 of the Contract Act, the pledgee, as a bailee. will have the same remedies as the owner of the goods would have against a third person for deprivation of the said goods or injury to them under section 180 of the Act. [264 A C, H] 255 Ramdas Vithaldas Durbar vs section Amarchand and Co., (1916) L.R. 43 I.A. 164 and The Official Assignee of Madras vs The Mercantile Bank of India, Ltd. (1934) L.R. 61 I.A. 416, referred to. Per Mudholkar and Ramaswami JJ. (dissenting): There was no valid pledge of the consignments of goods represented by the railway receipt in favour of the Bank and the Bank was not entitled to sue the Railway for compensation for the loss of goods, relying upon the endorsements of the railway receipts in its favour. [272 G H] After the passing of the , the legal position with regard to the pledge of railway receipts, is exactly the same in Indian Law as it is in English Law, and consequently, the owner of the goods cannot pledge the goods represented by a railway receipt, by endorsing the railway receipt, unless the railway Authorities were notified of the transfer, and they agreed to hold the goods as bailee of the pledgee. Under the amended law a valid pledge can no longer be made by ever.v person "in possession" of goods. It can only be made by a mercantile agent as provided in section 178 of the Contract Act (after amendment in 2930) or by a person who has obtained possession of goods under a contract voidable under section 19 or section 19A of the Contract Act, as provided by section 178 0 the Act. or by a seller or buyer in possession of goods, after sale. as provided in section 30 of the Indian . [271 F G; 272 C D] Further, though a railway receipt and all other documents enumerated in section 2(4) of the are assimilated to bills of lading for the purpose of the right to stoppage in transit and a pledge under section 178 of the Contract Act, its legal position is the same as in English law, so that, no rights are created, merely by reason of the endorsement of a railway receipt by the consignee between the endorses and the railway company which had issued the receipt to the consignee the only remedy of the endorsee being against the endorser. The negotiation of the receipt may pass the property m the goods, but it does not transfer the contract contained in the receipt or the statutory contract under section 74E of the Indian Railways Act. Negotiability is a creature of a statute or mercantile usage, not of Judicial decisions apart from either. So, in the absence of any usage of trade or any statutory provision to that effect, a railway receipt cannot be accorded the benefits which flow from negotiability under the Negotiable Instruments Act, so as to entitle the endorsee, as the holder for the time being of the document of title, to sue the carrier the railway authority in his own name. If the claim of the Bank was as an ordinary assignee of the contract of carriage, then it had to prove the assignment. In the absence of proof of such assignment, or of the existence of any practice of merchants treating a railway receipt as a symbol of goods making a pledge of the receipt a pledge of goods, and in view of cl. (3) of the notice printed at the back of the receipt that an endorsement made on the face of the receipt by the consignee was only meant to indicate the person to whom the consignee wished delivery of goods to be made if he himself did not attend to take delivery, the Bank had no right to sue the Railway. [273 E G; 274 D G] Since the language of section 178 of the Contract Act is clear and explicit, if any hardship and inconvenience is felt because such a practice of treating the receipt as a symbol of goods were not recognised. it is for Parliament to take appropriate steps to amend the law and it is not for courts to legislate under the guise of interpretation. [275 G] 256

Appeal No. 69 of 1964. Appeal by special leave from the judgment and decree dated October 10, 1961, of the Andhra Pradesh High Court in Second Appeal No. 872 of 1958. A.V. Viswanatha Sastri, K. Rajendra Chaudhuri and K. R. Chaudhuri, for the appellants. S.V. Gupte, Solicitor General, and T. Satyanarayana. for respondent No. 1. T.V.R. Tatachari and B.R.G.K. Achar, for respondent No. 2. The Judgment of the Court was delivered by Subba Rao, J. On November 22, 1927, the Government of Madras, in exercise of its powers under section 3(1) of the (IX of 1910), hereinafter called the Act, issued a licence to the Bezwada (now Vijayawada) Municipal Council for the supply of electric energy within the municipal limits of Bezwada at rates not exceeding the maximum charges given in 'the third annexure to the said licence. The appellants, who are some of the consumers of electric energy for domestic and industrial purposes, entered into agreements with the licensee for the supply of electric energy to them for domestic, industrial and other purposes, agreeing to pay the current official scale of rates. On December 13, 1940, the Municipality passed a resolution bringing into force new rates for the supply of electric energy from April 1, 1940. The consumers paid the rates so fixed ' till the year 1956. On April 30, 1956, the Municipal Council passed another resolution enhancing the rates from 1 4 1956. The appellants filed a representative suit against the Vijayawada Municipality in the Court of the District Munsif, Vijayawada, for a declaration that the said resolution dated April 30, 1956, passed by the Municipal Council was illegal, invalid and unenforceable and for an injunction restraining the said Municipality from collecting charges from the consumers of electric energy in the licensee 's area at the new revised rates in pursuance of the impugned ' resolution. The learned District Munsif held that the demand of enhanced rate was legal and valid and dismissed the suit. On appeal, the learned Subordinate Judge held that the levy from the date of the said resolution was good, but it could ' not be given retrospective operation. He further held that the claim for duty at half an anna per unit was invalid. In the result he modified the decree of the District Munsif. On a further appeal, a Division Bench of the Andhra Pradesh High Court confirmed the decree of the Subordinate Judge. By special leave the present appeal has been filed in this Court. Mr. A.V. Viswanatha Sastri, learned counsel for the appellants raised before us the following two contentions: (1) The rates agreed upon between the consumers and the Municipality cannot be unilaterally altered and increased by the Municipality to the prejudice of the consumers and, therefore, the said resolution dated 278 April 30, 1956, was invalid and unenforceable; and (2) as the said resolution was passed without obtaining the previous sanction of the State Government under section 21(2) of the Act, it was void for that reason also. The first contention turns upon the relevant clauses of the agreement entered into between the Municipal Council and the consumers. exhibit B 4 is one such agreement dated May 27, 1932, between the Municipality and one of the appellants herein. The material clauses of the agreement read: Para, IV. The consumer shall pay to the licensee for all electrical energy so supplied at the rates and in accordance with the terms, given in the licensee 's Current Official Scale of rates and ' the signing of this Agreement is held to imply concurrence in the terms of the said Scales of rates. Provided that the minimum rates as specified therein shall be paid irrespective of whether energy to the extent has been consumed or not. Para, V. A consumer under this Agreement is required to state (see Schedule) under which of the rates set out in the licensee 's Official Scale of energy Rates, he desires to be charged. Para, X. This Agreement shall be read and construed as subject in all respects to the provisions of the Bezwada Municipal Electric Licence, 1927, and to the provisions of the , and of any modification or re enactment thereof for the time being in force thereunder so far as the same respectively may be applicable. The supply of electrical energy under this agreement is subject to following among other provisions of law, namely: The schedule above referred to. (2) Purposes to which the supply is to be given, and in the case of domestic supply under which rate to be charged, as referred to in paragraph V: (a) (Supply) Domestic Purposes. (b) (Rate) Rs. 0 6 0 per unit. (3) Maximum electrical power required by the consumer:0 54 K.W. (4) Minimum monthly charge: Rs. 2 8 0 in accordance with (a) class rate in the Schedule of Rates. The Schedule of Rates mentioned in this agreement presumably refers to scale of rates fixed by the resolution of the Municipality. The conflicting arguments centre on the question whether the words "current official scale of rates" in para. IV relate to the scale of rates current on the date when the agreement was entered into 279 or refer to the scale of rates current from time to time in accordance with the resolution passed by the Municipality. The expression "current" means "vogue or prevalent"; and "current rate" may mean the rate obtaining at a particular time or at a future time or from time to time. The term goes well with the present, future and recurrent. It is capable of different meanings depending upon the context or setting in which it appears. As the meaning of the word is ambiguous, it is legitimate, in order to ascertain its true meaning, not only to study the document as a whole but also to ascertain its meaning from the circumstances whereunder the said agreement came into existence. Under para. X of the agreement the said agreement shall be subject to the provisions of the licensee and the provision of the Indian Electricity Act, 1940, that is to say the said provisions are incorporated by reference into this agreement. Under the licence the licensee is precluded from charging rates higher than those prescribed thereunder. On April 1, 1940, the Electricity Department of the Vijayawada Municipality prepared a document styled as "Conditions and Rates of Supply". It does not contain any statutory rules, but only administrative directions in regard to providing, inter alia. for the method of entering into agreements and for charging rates for the energy supplied. This embodies the administrative practice of the Municipality in the matter of charging rates for the energy supplied. Paragraph is thereof, under the heading "Method of charging for current". reads: "The price and method of charging for current supplied shall be such as may from time to time be fixed by the licensee in accordance with the provisions of the Act and of his licence, or such as may be made subject of Special agreement between the consumers and the licensee. " This makes a distinction between the official rate and the contractual rate. The official rate is that fixed by the licensee from time to time and the contractual rate is that fixed by special agreement between the parties. It may be assumed that this dual method is followed by the Municipality in the matter of entering into agreements. The form of application prescribed for the supply of electric energy contains the following clause: "I agree to pay for the said ' energy, service connection and other dues including the deposit of such security as may be demanded in accordance with the scale of rates and the rules of the licence. " The scale of rates in the context means the official scale of rates that may be fixed by the Municipality. When an application is filed an obligation is imposed trader s.22 of the Act on the licensee to supply energy, except in so far as is otherwise provided by the terms and ' conditions of the licence, on the same terms as those on which any other person i.n the same area is entitled in similar 280 circumstances to corresponding supply. Section 23 of the Act says that a licensee shall not, in making any agreement for the supply of energy, show undue preference to any person. The combined operation of these provisions is that the licensee cannot discriminate between the applicants in the matter, among others, of rates chargeable for the energy supplied. Unless the Municipality enters into an agreement with a consumer enabling it to charge him at a rate fixed by it from time to time, it would be very difficult for the Municipality to maintain equality of treatment between the consumers in the matter of rates. To illustrate, if under certain agreement a rate obtaining at a particular date is agreed upon and the rate is binding on the Municipality even if it is raised later on, the Municipality may be guilty of discrimination which it is asked to avoid by statute if it charges other consumers at a higher rate. 'this difficulty can be avoided if there is a term in the agreement executed by every consumer that he will pay the official rate fixed by the Municipality from time to time subject to the maximum fixed by the licence. That apart, a public body like the Municipality in supplying energy to different consumers cannot run the risk of incurring loss by agreeing to fixed rates, for the Government may increase the licence fee, as it has done in the present case, or there may be a rise in the cost of distribution. On the other hand, if the term in the agreement is flexible to meet the said ' eventualities, 'the maintenance of continuous supply of electric energy may be assured without any loss to the public body. The circumstances obtaining at the time when the agreements between the consumers and the Municipality were entered into were these: The licensee had power to fix the rates subject to the maximum prescribed by the Government. The administrative directions provided for charging for the current supplied at rates that may be fixed from time to time. The Municipality was in practice fixing the rates from time to time having regard to the relevant circumstances. The said rates fixed by the Municipality from time to time were the "Official Scale of Rates". The consumers applied to the Municipality for supply of energy, agreeing to pay for the energy supplied at the scale of rates fixed by the Municipality. With this background if we look at paragraphs IV and V of Ex. B 4 the meaning of the expression "current official scale of rates" will be clear. Paragraph IV speaks of "current official scale of rates" whereas para. V mentions "official scale of energy rates". These two paragraphs bring out the distinction between the official scale of rates and the official scale of energy rates: the former refers to the scale of rates maintained by the Municipality as modified from time to t;me by appropriate resolutions, and the latter refers to the different rates payable in respect of energy supplied for different purposes. Under para. IV the consumer specifically agreed to abide by the official scale of rates. If the intention of the parties is that the consumer shall pay only the scale of energy rates obtaining at the time the agreement is entered into, there is no necessity for this 281 specific agreement, for para. V serves that purpose. On the other hand, the said express condition and the use of the word "current" make it clear that the consumer agrees to pay at the official scale of rates current from time to time. The adjective "current" will become a surplusage, if the intention is to pay the rates obtaining at the time the agreement is entered into, for the agreement itself gives the existing rates. The use of the adjective "current" emphasizes the fact that the official scale of rates is not the existing rates, but the scale of rates current from time to time. We have. therefore, on a reasonable construction of the ambiguous expression "current" having regard to the entire document and the surrounding circumstances, come to the conclusion that the words "current official scale of rates" in para. IV of the agreement mean the official scale of rates current or prevalent from time to time during the currency of the agreement. If so, it follows that the appellants were under a contractual liability to pay the enhanced rates covered by the impugned resolution. The next question turns upon section 21(2) of the Act, which, as it then stood read: "Subject to the provisions of sub section (1), a licensee may, with the previous sanction of the State Government given after consulting the local authority, make conditions not inconsistent with this Act or with his licenee or with any rules made under this Act, to regulate his .relations with persons who are or intend to become consumers, and may with the like sanction given after the like consultation add to or alter or amend any such conditions; and any conditions made by a licensee without such sanction shall be null and void." Under this sub section the licensee cannot make conditions to regulate his relations with the consumers or amend any such conditions without the sanction of the State Government. Mr. Viswanatha Sastri argued that to enhance the rates was to alter a condition within the meaning of sub section (2) of section 21 of the Act and as admittedly the sanction of the State Government was not obtained before such alteration, the said resolution was void. The learned Solicitor General contended that section 21 (2) of the Act was a general provision relating to conditions, whereas section 23 thereof was a specific provision in regard to fixing of rates and that section 23 would, therefore, prevail over section 21 and that section 23 did not prescribe the sanction of the Government as a condition precedent for fixing the rates, Mr. Tatachari, while supporting this argument, added that on the interpretation of para. IV of the agreement suggested by the respondents there was no alteration in the conditions at a11 and ', therefore, there was no scope for invoking section 21 of the Act. It is not necessary to express our opinion in this case on the question whether section 23 excludes the operation of section 21(2) of the Act in the matter of fixation of rates, for we are satisfied that there is no alteration of any condition of 282 the agreement within the meaning of section 21(2) thereof. We have held that under para. IV of the agreement that was entered into between the consumers and the licensee, the consumers agreed to pay the rates that were fixed by the Municipality from time to time. If the said term was a condition within the meaning of section 21(2) of the Act, there was no change at all in that condition, for the change in the rates was not in derogation of the condition but in terms of it. To state it differently, the same condition embodied in para. IV of the agreement continued to operate between the parties even after the rates were enhanced under the impugned resolution. Therefore, no sanction of the State Government was necessary for enhancing the rates. No other point was raised before us. In the result, the appeal fails and is dismissed with one set of costs. Appeal dismissed.

IN-Abs

The Government of Madras issued a licence to the respondentMunicipality, under s.3(1) of the , for the supply of electric energy within its municipal limits at rates not exceeding the maximum charges given in the licence. The appellants, some consumers of the electric energy, entered into agreements with the Municipality for the supply and agreed to pay the "current official scale of rates". The rates were increased by resolutions of the Municipality twice and on the second occasion the appellants filed a representative suit for a declaration that the later resolution was illegal, and for an injunction restraining the Municipality from collecting charges at the new rates. The trial court dismissed the suit and the dismissal was confirmed on appeal by the High Court. In appeal by special leave the appellants contended that (i) the rates agreed between the consumers and the Municipality could not be unilaterally altered and increased by the Municipality to the prejudice of the consumers and, therefore, the impugned resolution was invalid and unenforceable; and (ii) as the impugned resolution was passed without obtaining the previous sanction of the State Government under section 21(2) of the Act, it was void. HELD: (i) The consumers were under a contractual liability to pay the enhanced rates covered by the impugned resolution. Under sections 22 and 23 of the Act the Municipality cannot discriminate between consumers in the matter of rates chargeable for the energy supplied. Unless the Municipality enters into agreement with the consumer enabling it to charge him at a rate fixed from time to time, it would be difficult for the Municipality to maintain equality of treatment between the consumers. That difficulty can be avoided if there is a term in the agreement executed by every consumer that he will pay the official rate fixed by the Municipality from time to time subject to the maximum fixed by the licence. Further, a public body in supplying electric energy to different consumers cannot run the risk of incurring loss by agreeing to fixed rates, for the Government may increase the licence fee as had been done in the instant case, or there may be a rise in the cost of distribution. [280 A D] Therefore, having regard to the entire document and the surrounding circumstances, the words "current official scale of rates" in the agreement mean the official scale of rates current or prevalent from time to time during the currency of the agreement. [281 C] (ii) No sanction of the State Government was necessary for enhancing the rates. There was no alteration of any condition of the agreement within the meaning of section 21(2) of the Act. The consumers had agreed to .pay the rates that would be fixed from time to time. and if that term was a condition within the meaning of that section, there was no change at all in that condition, for the change in the rates was not in derogation of the condition but in terms of it. [282 A B] 277

Criminal Appeal No. 60 of 1963. Appeal by special leave from the judgment and order dated August 24, 1962 of the Allahabad High Court in Government Appeal No. 1379 of 1962. B.C. Misra and O.P. Rana, for the appellant. 1. P. Goyal, for the respondent. The Judgment of the Court was delivered by Sikri, J. This appeal by special leave is directed against the judgment of the Allahabad High Court dismissing the appeal of the State against the judgment of the Sessions Judge allowing the appeal of the respondent and acquitting him. The respondent obtained permits under the Iron and Steel (Control) Order, 1956 hereinafter referred to as the Control Order for about 28 tons of iron, including 6 tons of rods, 151/2 tons of joints and 2 tons of G.C. Sheets. He is alleged to have purchased these articles on the basis of the above permits between July 1957 and March 1958. The permits were obtained on three applications made by the respondent. Only two applications are in the printed record. The first application is dated May 23, 1957, and is addressed to the Provincial Iron and Steel Controller, Kanpur, through the District Magistrate, Deoria. In this application the respondent stated that he was a political sufferer and he was constructing a public temple for which he required five tons of M.S. Round and eight tons of Girder. He further stated that the requirements were nor available at Deoria and as such the application should be considered and forwarded to the Controller for consideration and orders. It appears that this application was forwarded, duly recommended, by the District Supply Officer. Deoria, and ultimately a permit was given to him by the Controller. He made another application dated September 7, 1957. In this application he again stated that he was a political sufferer and he was constructing a public temple and dharamshala for which he required certain quantities of iron. He further stated that the requirements were not available at Deoria and as such the application should be forwarded to the Controller. This application was also recommended and forwarded and ultimately a permit was given to him. On January 2, 1958, the accused made another application (exhibit Ka 9 not available in the printed record) and a permit was given to him by the District Supply Officer himself. We may mention that the original permits are not printed in the record, and, therefore, we have not been able to see for ourselves as to what are the exact conditions contained in the permits. It is the case of the prosecution that the respondent after obtaining the materials sanctioned to him under the permits did not construct any temple or dharamshala building at Barhaj Bazar or at any other place. We may mention that Barhaj Bazar is the place where he lives and the applications which are in the record also mention this address. 163 Before the Magistrate who tried the case the respondent was put the following question: "It is alleged that the iron obtained under the permits mentioned in questions 2, 3 and 4 was not utilised for the purpose for which it was taken. What have you to say in this respect?" The respondent 's reply was: "No. Whatever iron 1 got, I used it in the temple situate in mauza Tinbari, P.S. Madhubam district Azamgarh, which is my place of residence as well. " Before the Magistrate the accused had admitted to have purchased about 17 tons of iron. The Magistrate held it proved that the accused had atleast purchased one ton more from one Mishri Lal, P.W. 7. Thus, he came to the conclusion that the accused had purchased at least 18 tons of iron. He further held that on the evidence it was clear that only 3/4 ton of rods had been utilised in the building constructed at Tinhari, but as the building had been constructed between 1943 52, no portion of the iron obtained by the accused had been utilised for the purpose for which it was procured. He further held that the accused had disposed of the iron wrongfully at Kanpur and did not even bring the same to Barhaj Bazar or Tinhar. Accordingly he held that the respondent had contravened the provisions of cl. 7 of the Control Order. The respondent filed an appeal before the Sessions Judge. The Sessions Judge held that barring a very small quantity of iron, the remaining quantity that was received by the respondent had not been utilised in the temple or dharmashala at Tinhari. Differing from the Magistrate, he held that it was not proved by any evidence that the respondent had actually sold the excess quantity at Kanpur. He then observed that "in the absence of any such evidence the possibility of the appellant retaining the iron at some other place is not completely excluded. " Then construing d. 7 of the Control Order, he observed that "in the aforesaid section there is no mention that the iron purchased should be utilised at any particular place or within a particular period. The condition in the various permits granted to the appellant was simply this that he should utilise the iron in creecting a temple or dharamshala in the town of Barhai. It may be noted that the main purpose was the construction of a temple and dharamshala; the place where it was to be constructed does not appear to have much significance. Further no time limit is given during which the entire quantity of iron should be utilised. " Accordingly he held that there had been no contravention of cl. 7 of the Control Order. The State appealed to the High Court. Srivastava, J. dismissed the appeal holding that there had been no contravention of cl. 7 of the Control Order. According to him, two essentials are necessary before there can be contravention of el. 7. "In the 164 first place the iron and steel should be 'used '; secondly it should be used otherwise than in accordance with the conditions contained or incorporated in the document which was the authority for the acquisition." He held that the first condition had not been fulfilled because it had not been proved that the respondent had used the iron which he had obtained on the basis of the permit. It appears that the findings of the learned Sessions Judge, as well as the Magistrate, that he had not used or utilised the remaining portions of the iron and steel at all were not questioned before him. According to him, if the remaining quantity of iron was still unutilised or unused, then the respondent could not be said to have done anything contrary to cl. 7. He further held that the second condition had also not been fulfilled because the permit itself contained only one condition printed on its back. This condition was "that the materials required against the permit will be used only for the purpose for which it was asked for and has been given." According to him, it is not permissible to refer to the application made for the permit because the only document that can be looked at is the permit. He was, however, prepared to concede that "it is also open to the officer to mention in the permit that it is being granted for the purpose mentioned in the application. That may be a short cut for avoiding the trouble of entering in the permit the details of the purpose. In that case it may be permissible to refer to the application. " In spite of this concession, he concluded that "when even that is not done in fact no condition is mentioned in the permit at all about the manner in which the iron or steel is to be utilised it cannot be said that a condition of the permit has been broken because the assurance given in the application has not been carried out." Mr. B.C. Misra, learned counsel for the appellant. has urged before us that on the facts found by the learned Sessions Judge. cl. 7 of the Control Order has been contravened. He says that the word "use" in el. 7 includes "kept for eventual use for another purpose." He says that if one stores iron and steel. one uses it and the word "use" does not imply consumption only. Relying on Maxwell on Interpretation of Statutes, Eleventh Edition, p. 266. he says that we should give a wide construction to the word ' "use" in cl. 7. Clause 5 and the relevant portion of cl. 7 of the Control Order are as follows: "5. Disposals. No person, who acquires iron or steel under clause 4. or no producer shall dispose of or agree to dispose of or export or agree to export from any place to which this Order extends any iron or steel, except in accordance with the conditions contained or incorporated in a special or general written order of the Controller. 165 7. Use of Iron and Steel to conform to conditions governing acquisition. A person acquiring iron or steel in accordance with the provisions of el. 4 shall not use the iron or steel otherwise than in accordance with any conditions contained or incorporated in the document which was the authority for the acquisition . " We are unable to accede to the above contentions. There is no provision in the Control Order requiring that iron or steel acquired under the Control Order should be utilised within a specified time. If it had been the intention to include keeping or storing within the word 'use ' there would have been some provision regarding the period during which it would be permissible to keep or store the iron, for it is common knowledge that building operations take some considerable time and are sometimes held up for shortage of material or other reasons. Further the word 'use ' must take its colour from the context in which it is used. In cl. 7 the expression "use. in accordance with the conditions contained" suggests something done positively, e.g. utilisation or disposal. Mere 'non use ', in our opinion, is not included in the word 'use '. The passage relied on by the learned counsel in Maxwell is as follows: "Wide Sense given to words: The rule of strict construction, however, whenever invoked, comes attended with qualifications and other rules no less important, and it is by the light which each contributes that the meaning must be determined. Among them is the rule that the sense of the words is to be adopted which best harmonises with the context and promotes in the fullest manner the policy and object of the legislature. The paramount object, in construing penal as well as other statutes, is to ascertain the legislative intent, and the rule of strict construction is not violated by permitting the words to have their full meaning, or the more extensive of two meanings, when best effectuating the intention. They are, indeed, frequently taken in the widest sense, sometimes even in a sense more wide than etymological belongs or is popularly attached to them, in order to carry out effectually the legislative intent, or, to use Sir Edward Coke 's words, to suppress the mischief and advance the remedy. " But this passage does not warrant the giving of a meaning to a word apart from the context in which it is used. There is no doubt that the legislative intent of the Control Order is that this essential commodity should be utilised in accordance with the conditions contained in the permit, but no clause in this Control Order evinces a legislative intent that a mere non user is also prohibited and made punishable. 166 The learned counsel referred to London County Council vs Wood(1), but we do not derive any assistance from that case. The head note brings out the point decided in that case as follows: "The Highways and Locomotives Act, 1878, provides by section 32 that "A country authority may. make. by laws for granting annual licences to locomotives used within their country. " And by a by law made by the London County Council under that section it was provided that "No locomotive shall be used on any highway within the county of London until an annual licence for the use of the same shall have been obtained from the council by the owner thereof": Held, that a steam roller which was not at the time being employed in road making, but was merely passing through the county to a destination outside was being "used within the country" within the meaning of the section and the by law." In the context, the word "used" was, with respect, properly construed. Collins, J., held that "the object of the Act was evidently to protect the highways, and the effect of a steam roller upon the highways may be just the same whether it be engaged in mending the roads or not". In conclusion we hold that it has not been established that the respondent had used the iron acquired by him in contravention of cl. 7 of the Control Order. The learned council further urges that the High Court erred in holding that the application cannot be referred to for the purpose of construing the conditions appearing in the permit, the condition being that "the materials acquired against a permit will be used only for the purpose for which it was asked for and has been given." He says that the expression "the purpose for which it was asked for" refers back to the application, and the expression "has been given" refers back to the Order. There is some force in what he urges. We are unable to sustain the finding of the High Court that it is not permissible to refer to the application and the order to find out the purpose for which the iron was obtained. But even if we look at the applications, which are in the printed record, the purpose mentioned is only construction of a temple, in the application dated May 23, 1957, and temple and dharamshala in the application dated September 7, 1957. These applications do not disclose that the respondent wanted to construct the temple and dharamshala at any particular place. It is urged that the sentence which occurs in both the applications, namely that the requirements are not available at Deoria, shows that the purpose for which the iron and steel was required was for construction (1)[1897] 2 QB 482. 167 of a temple and dharamshala in the district of Deoria. This argument is sought to be reinforced by asserting that a District Magistrate was not empowered to recommend applications for iron required for works to be constructed outside the District, and therefore it must be held that the purpose was construction of a temple and dharamshala in the district of Deoria. However, no orders showing the jurisdiction of the District Magistrate in respect of this matter has been shown to us, and we are unable to conclude from the applications that the purpose was construction of a temple and dharamshala in the district of Deoria alone. Accordingly we hold that the respondent has not contravened cl. 7 of the Control Order. The appeal accordingly fails and is dismissed Appeal dismissed.

IN-Abs

The respondent obtained permits under the Iron and Steel (Control) Order, 1956 on the representation that he wanted to purchase iron goods for the purpose of building a temple and a dharamshala. The permits were obtained from the authorities of District Deoria in U.P. At the back of the permit a condition was printed tematerials required against the permit will be used only that "h.q for the purpose for which it was asked for and has been given". The respondent was tried for the contravention of cl. ? of the aforesaid order on the allegation that he had not used the goods purchased under the permits for the purpose for which ,they were issued. The trial Magistrate found him guilty. In appeal, however, the Sessions Judge acquitted him on the ground that the possibility of his retaining the iron at some other place was not entirely excluded. The High Court in appeal by the State confirmed the acquittal holding that it had not been proved that the respondent had "used" the iron which he had obtained on the basis of the permit. The High court further held that it was not possible to look into the application in order to see for what purpose the applicant took the permit and no condition actually printed at the back of the permit had been broken. By special leave the State appealed to the Supreme Court, On behalf of the appellant it was urged: (1) the word "use" in cl. 7 of the order includes "kept for eventual use for another purpose." (2) The High Court erred in holding that the application cannot be referred to for the purpose of construing the conditions appearing in the permit. HELD: The respondent could not be held guilty of a contravention of cl. 7 of the order. (i) No doubt the legislative intent of the Iron & Steel (Control) Order is that this essential commodity should be utilised in accordance with the conditions contained in the permit, but no clause in the Control Order in question evinces a legislative intent that a mere non user is also prohibited and made punishable. [165 H] The word 'use ' must take its colour from the context in which is used. In cl. ? the expression "use. in accordance with the conditions contained" suggests something done positively e.g. utilisation or disposal. Mere "non use" is not included in the word "use". 165 D] (ii) The High Court was wrong in holding that it is not permissible to look at the application to determine the purpose for which permit is obtained. However in the present case the applications did not disclose that the respondent wanted to build a temple or dharamshala at any particular place. From the mere fact that the applications were made to the authorities in Deoria District, or the fact that in the applications it was mentioned that the goods were not available in Deoria District, it did not necessarily follow that the goods were intended to be used in that District. [166 H] 162

ivil Appeal No. 871 of 1962. Appeal by special leave from the judgment and decree dated August 13, 1959, of the Madhya Pradesh High Court in Second Appeal No. 294 of 1959. S.P. Sinha and M. 1. Khowaja, for the appellant. S.T. Desai and A. G. Ratnaparkhi, for the respondent. This appeal arises from a suit filed by the appellants who are the representatives of residents of Nayapara Ward in particular and of the Muslim community of Raipur in general, in which they claimed an injunction restraining the respondent, Municipal Committee of Raipur, from committing acts of encroachment on their rights and the rights of 301 the Muslim community in holding Urs and other ceremonies on the plot in suit. It appears that at Raipur, there is a piece of land called "Fazle Karim 's Bada" Khasra No. 649 measuring 4.62 acres. Inside this Bada, there are three or four Municipal Schools. The office of the Electric Power House is also located in one corner of the land. Behind the School, there is a Pakka platform known as "Syed Baba 's Mazar". Near the Electric Power House, there is a raised earth platform on which there is a flag. This flag is called "Madar Sahib 's Jhanda". Surrounding this land. there is a brick wall which was made by the respondent several years past. According to the plaint, Urs function is held every year in front of Syed Baba 's Mazar for the last several years. On or about the 22nd October, 1956, the employees of the respondent started digging foundation at the places A, B, C and D shown on the map attached to the plaint. These digging operations were commenced under the directions of the respondent. because the respondent intended to construct another school building on the plot. The appellants then served a notice on the respondent to desist from carrying on the digging operations on the ground that the property on which the said operations were being carried out, was a part of the wakf property. When the respondent did not comply with the requisition contained in the said notice, the present suit was filed by the appellants on October 29, 1956. This suit has been flied under O.1 r. 8 of the Code of Civil Procedure. The case of the appellants is that the plot of land in suit was old Kabrasthan known as "Chuchu 's Takia", and is a permanent inalienable wakf property. On this plot are tombs of renowned saints like Syed Baba. and Madar Sahib 's Jhanda. On a part of the plot. every year Urs and other religious functions are performed. In fact, the land has been registered under the Madhya Pradesh Public Trusts Act (No. 30 of 1951) (hereinafter called the Act) as trust property; as such, the respondent can claim no right or title to the said land. That is the basis on which the appellants claimed injunction against the respondent. The respondent disputed this claim. It was urged in the written statement filed by the respondent that the land was never and could never be wakf property. There was no tomb on the land. There are only two so called tombs. but they have no significance. The Urs is of very recent origin and it is allowed to be held with the licence of the respondent. The plot originally, belonged to private persons and had been acquired by the Government in land acquisition proceedings in 1910 11. The respondent got the said land from the Government in 1922. In 1932 33. the Deputy Commissioner fixed rent of the land which is being paid by the respondent eversince. On this land, the respondent has constructed some schools, and a part of the land which is lying vacant is allowed to be used by the people of the neighbourhood for traffic. The respondent thus has full right to 302 construct on its own plot of land. The representative character of the appellants was disputed by the respondent and their right to file the present suit was challenged. On these pleadings, several. issues were framed by the learned trial Judge. They covered the title of appellants, the title of the respondent, and the right of the appellants to file the suit. The issue with which we are concerned in the present appeal related to the registration of the plot in the register kept under the relevant provisions of the Act and its effect. The appellants ' contention was that the said registration was conclusive against the respondent and in favour of the appellants ' claim. This contention was rejected by the trial Judge, with the result that the appellants ' suit was dismissed. With the findings recorded by the learned trial Judge on the other issues we are not concerned in the present appeal. The matter then went in appeal. and the appellate Court confirmed the conclusions recorded by the trial Court and dismissed the appeal. The appellants challenged the correctness of the said appellate decree by preferring a second appeal in the High Court of Madhya Pradesh. but the second appeal also failed. and that has brought the appellants to this Court by special leave. Thus. it would be noticed that the appellants have failed on the merits of their claim in all the courts below. and the technical point raised by them that the registration of the plot under the relevant provisions of the Act concluded the matter. has also been rejected. It is this last point which has been urged before us by Mr. Sinha on behalf of the appellants. Before we deal with this point. however, it would be relevant to mention how the property came to be entered in the register kept under the relevant provisions of the Act. The record shows that the Masjid Nayapara. Raipur had been entered in the register as a public trust on June 25. 1954 in Case No. 23XXXiii/7 of 1952 53. certain properties were entered in the said register in respect of this trust. In 1956. Abdul Karim. Mutawali Masjid Naypara Raipur applied to the SubDivisional Officer. Raipur alleging that the property now in suit also belonged to the public trust and should be included amongst its properties. On this application, public notice was issued calling upon persons interested in the property to show cause why it should not be added to the properties of the wakf. No objection was. however. received and on October 23. the Sub Divisional Officer reported that the poperty be shown against the trust. The said report was sanctioned by the Registrar. Public Trusts on April 22. That is how the property came to be registered as belonging to the public trust. and it is on this entry that the whole argument of the appellants is based. In considering the validity of the contention raised by Mr. Sinha before us. it is necessary to examine broadly the scheme 303 of the Act and the material provisions on which Mr. Sinha relies. The Act was passed in 1951 to regulate and to make better provision for the administration of public religious and charitable trusts in the State of Madhya Pradesh. Section 2(4) of the Act defines a "public trust", and section 2(8) defines a "wakf". 'Working trustee ' is defined by section 2(9). Section 3(1) provides that the Deputy Commissioner shall be the Registrar of public trusts in respect of every public trust; and section 3(2) imposes on the Registrar the obligation to maintain a register of public trusts, and such other books and registers and in such form as may be prescribed. Section 4(1) deals with the registration of public trusts and in requires that within three months from the date on which the said section comes into force in any area or from the date on which a public trust is created, whichever is later, the working trustee of every public trust shall apply to the Registrar having jurisdiction for the registration of the public trust. Section 4(3) lays down the particulars which have to be stated by the application which is required to be made under section 4(1). All these particulars are in relation to the nature of the trust, its properties, the mode of succession to the office of the trustees, and other allied matters. Section 4(4) empowers the Registrar to decide the merits of the application, while section 4(5) provides for an appeal against his decision which is required to be filed within 30 days of the order. Mr. Sinha relies on a specific provision contained in section 4(5) which says that subject to the decision in such appeal. the order of the Registrar under sub section (4) shall be final. Section 4(6) requires the signing and verification of the application in the manner laid down in the code of Civil Procedure for signing and verifying plaints. That takes us to section 5 which deals with the enquiry to be held by the Registrar on the application made before him under section 4(1). Eight points are set down under section 5(1) which the Registrar has to consider. Section 5(2) lays down that the Registrar shall give in the prescribed manner public notice of the inquiry proposed to be made under sub section (1) and invite all persons interested in the public trust under inquiry to prefer objections, if any, in respect of such trust. Under section 6, the Registrar has to make his findings on the point specified by section 5(1); and under section 7, the Registrar causes entries to be made in the Register in accordance with his findings. Section 7(2) naturally lays down that the entries made under section 7(1) shall be final and conclusive. Section 8(1) allows a civil suit to be filed against the findings of the Registrar within six months from the date of the publication of the notice under section 7(2); such a suit can be filed by a working trustee or a person having interest in a public trust or any property found to be trust property. Section 9 permits applications to be made for change in the entries recorded in the register. It will be recalled that the application which was made in 1956 by Abdul Karim was under the provisions of section 9(1). If an application is made for change in 304 the entries as, far instance, for adding to the list of properties belonging to the trust, a proceeding has to be taken for making the said change and this is prescribed by section 9(2). Section 9(3) makes the provisions of section 8 applicable to any finding under section 9 as they would apply to a finding under section 6. These provisions are contained in Chapter II of the Act. Chapter III deals with the management of trust property; Ch. IV with the problem of audit; Ch. V with control; and Ch. VI contains miscellaneous provisions, including section 35 which confers the rule making power on the State Government. That, broadly stated, is the nature of the scheme of the Act and the material provisions which fall to be considered in the present appeal. Mr. Sinha relies on the fact that under section 4(5) of the Act, the decision of the Registrar is made final, subject to the appellate decision, if any; and he also refers to the right of instituting a suit reserved by section 8. His argument is that if any person who claims interest in the property which is alleged to be trust property fails to satisfy the Registrar about his claim, he can file a suit under section 8(1). Section 8(1) allows a suit to be filed, subject to the conditions prescribed by it, and the right to file such a suit is given to a working trustee, or a person having interest in a public trust or any property found to be trust property. The respondent is interested in the property in suit which is found to be trust property, and since it did not avail itself of the right to file a suit within the specified time, the order passed by the Registrar must be held to be final and conclusive against its claim. If finality does not attach to such an order even after six months have expired within the meaning of section 8(1), then the provision contained in section 4(5) will serve no purpose whatever. That is the manner in which Mr. Sinha has presented his case before us. We are not impressed by this argument. In testing the validity of this argument, we must bear in mind the important fact that the Act is concerned with the registration of public, religious and charitable trusts in the State of Madhya Pradesh, and the enquiry which its relevant provisions contemplate is an enquiry into the question as to whether the trust in question is public or private. The enquiry permitted by the said provisions does not take within its sweep questions as to whether the property belongs to a private individual and is not the subject matter of any trust at all. It cannot be ignored that the Registrar who, no doubt, is given the powers of a civil court under section 28 of the Act, holds a kind of summary enquiry and the points which can fall within his jurisdiction are indicated by clauses (i) to (x) of section 4(3). Therefore, prima facie. it appears unreasonable to suggest that contested questions of title, such as those which have arisen in the present case, can be said to fall within the enquiry which the Registrar is authorised to hold under section 5 of the Act. Besides, it is significant that the only persons who are required to file their objections in response to a notice issued by the 305 Registrar on receiving an application made under section 4(1), are persons interested in the public trust not persons who dispute the existence of the trust or who challenge the allegation that any property belongs to the said trust. It is only persons interested in the public trust, such as beneficiaries or others who claim a right to manage the trust, who can file objections, and it is objections of this character proceeding from persons belonging to this limited class that fall to be considered by the Registrar. It cannot be said that the respondent falls within this class; and so, it would be idle to contend that it was the duty of the respondent to have filed objections under section 3(2). It is true, section 8(1) permits a suit to be filed by a person having interest in the public trust or any preperty found to be trust property. The interest to which this section refers must be read in the light of section 5(2)to be the interest of a beneficiary or the interest of a person who claims the right to maintain the trust or any other interest of a similar character. It is not the interest which is adverse to the trust set up by a party who does not claim any relation with the trust at all. That is why we think the finality on which Mr. Sinha 's argument is based cannot avail him against the respondent inasmuch the respondent was not a party to the proceedings and could not have filed any objections in the said proceedings. Then again, the right to file a suit to which section 8(1) refers is given to persons who are aggrieved by any finding of the Registrar. Having regard to the fact that the proceedings before the Registrar are in the nature of proceedings before a civil court, it would be illogical to hold that the respondent who was not a party to the proceedings can be said to be aggrieved by the findings of the Registrar. The normal judicial concept of a person aggrieved by any order necessarily postulates that the said person must be a party to the proceedings in which the order was passed and by which he feels aggrieved. It is unnecessary to emphasise that it would be plainly unreasonable to assume that though a person is not a party to the proceedings and cannot participate in them by way of filing objections, he would still be bound to file a suit within the period prescribed by section 8(1) if the property in which he claims an exclusive title is held by the Registrar to belong to a public trust. Similarly, the right to prefer an appeal against the Registrar 's order prescribed by section 4(5) necessarily implies that the person must be a party to the proceedings before the Registrar; otherwise how would he know about the order? Like section 8(1), section 4(5) also seems to be confined in its operation to persons who are before the Registrar, or who could have appeared before the Registrar under section 5(2). The whole scheme is clear, the Registrar enquires into the question as to whether a trust is private or public, 306 and deals with the points specifically enumerated by section 4(3). Therefore, we have no hesitation in holding that the courts below were right in coming to the conclusion that the fact that the property now in suit was added to the list of properties belonging to the wakf, cannot affect the respondent 's title to it. On the merits, all the courts below have rejected the appellants ' case and have upheld the pleas raised by the respondent in defence. The result is, the appeal fails and is dismissed with costs. Appeal dismissed.

IN-Abs

The first appellant, who was the Mutawalli of a public trust, filed a representative suit for an injunction restraining the respondent from committing acts of encroachment on the suit property, on the ground that the property was that of the trust and had been so registered by the Registrar of Public Trusts, under the Madhya Pradesh Public Trusts Act, 1951. The suit was dismissed by the trial court and also on appeal. In their appeal to the Supreme Court the appellants contended that, since the respondent did not avail itself of the ,right to file a suit within the specified time, the order passed by the Registrar must be held to be final and conclusive against the respondent. HELD: The fact that the property in suit was added to the list of the properties belonging to the trust, could not affect the respondent 's title to it. [306 A B] The enquiry which the Act contemplates is an enquiry into the question as to whether a trust is public or private and does not take within its sweep questions as to whether a property belongs to a private individual and is not the subject matter of any trust at all. The only persons who are required to file their objections in proceedings before the Registrar are persons interested in the public trust not persons who dispute the existence of the trust or who challenge the allegation that any property belongs to the said trust. Inasmuch as the respondent was not a party to the proceedings and could not have filed any objections in the proceedings the respondent was not bound to file an appeal under section 4(5) of the Act or a suit under section 8(1), challenging order of the Registrar. Therefore, the finality given to the finding of the Registrar could not be availed of by the appellant as against the respondent. [304 G; 305 A B, D E]

vil Appeal No. 536 of 1962. Appeal from the judgment and decree dated March 26. 1958, of the High Court at Patna in First Appeal No. 340 of .1951. 147 Niren De, Additional Solicitor General, N.D. Karkhanis and B.R.G.K. Achar, for the appellant. Bishan Narain, P. D. Himmatsinghka section Murthy and B.P. Maheshwari, for the respondent. The judgment of the Court was delivered by Wanchoo, J. This is an appeal on a certificate granted by the Patna High Court. The respondent sued the Union of India as representing G.I.P. Railway, Bombay and E.I.R. Calcutta for recovery of damages for non delivery of 31 bales of piece goods, out of 60 bales which had been consigned to Baidyanathdham from Wadibundar. This consignment was loaded in wagon No. 9643 on December 1. 1947. It is not in dispute that the consignment reached Mughalsarai on the morning of December 9, 1947 by 192 On goods train. After reaching Mughalsarai, the wagon was kept in the marshaling yard till December 12, 1947. It wag sent to Baidyanadham by 214 On goods train from Mughalsarai at 6 40 p.m. on December 12, 1947 and eventually reached Baidyanathdham on December 21, 1947. The respondent who was the consignee presented the railway receipt on the same day for delivery of the consignment. Thereupon the railway delivered 29 bales only to the respondent and the remaining 31 bales were said to be missing and were never delivered. Consequently on August 311948, notice was g:yen under section 80 of the Civil Procedure Code and this was followed by the suit out of which the present appeal has arisen on November 20, 1948. The consignment had been booked under risk note form Z which for all practical purposes is in the same terms as risk note form B. The respondent claimed damages for non delivery on the ground that the non delivery was due to the misconduct of the servants of the railway, and the claim was for a sum of Rs. 36,461/12/ . The suit was resisted by the appellant and a number of defences were taken. In the present appeal we are only concerned with two defences. It was first contended that the suit was barred by section 77 of the Indian Railways Act, No. IX of 1890, (hereinafter referred to as the Act), inasmuch as notice required therein was not given by the respondent. Secondly it was contended that the consignment was sent under risk note form Z and under the terms of that risk note the railway was absolved from all responsibility for loss, destruction or deterioration of goods consigned thereunder from any cause whatsoever except upon proof of misconduct of the railway of its servants. and that the burden of proving such misconduct subject to certain exceptions was on the respondent and that the respondent had failed to discharge that burden. Further in compliance with the terms of the risk note, the railway made a disclosure in the written statement as to how the consignment was dealt with throughout the period it was in its possession or control. The case of the railway in this connection was that there was a theft in the running train between Mughalsarai and 148 Buxar on December 12, 1947 and that was how part of the con signment was lost. As the loss was not due to any misconduct on the part of the railway or its servants and as the respondent had not discharged the burden which lay on him after the railway had given evidence of how the consignment had been dealt with, there was no liability on the railway. On the first point, the trial court held On the basis of certain decisions of the Patna High Court that no notice under section 77 was necessary in a case of non delivery which was held to be different from loss. On the second point relating to the responsibility of the railway on the ' basis of risk note form Z, the trial court held that it had not been proved that the loss was due to misconduct of the railway or its servants. It therefore dismissed the suit. Then followed an appeal by the respondent to the High Court. The High Court apparently upheld the finding of the trial court on the question of notice under s.77. But on the second point the High Court was of opinion that there was a breach of the condition of disclosure provided in risk note Z under which the consignment had been booked, and therefore the appellant could not take advantage of the risk note at all and the liability of the railway must be assessed on the footing of a simple bailee. It therefore went on to consider the liability of the railway as a simple bailee and held on the ' evidence that the railway did not take proper care of the wagon at Mughalsarai and that in all probability the seals and rivets of the wagon had been allowed to be broken there and all arrangements had been completed as to how the goods would be removed from the wagon when the train would leave that station and this could only be done either by or in collusion with the servants of the railway at Mughalsarai. In this view of the matter the High Court allowed the appeal and decreed the suit with costs As the judgment was one of reversal and the amount involved was over rupees twenty thousand, the High Court granted a certificate. and that is how the matter has come up before us. We .shall first deal with the question of the notice. We are in this case concerned with the Act as it was in 1947 before its amendment by Central Act 56 of 1949 and Central Act No. 39 of 1961 and all references in this judgment must be read as applying to the Act as it was in 1947. Now section 77 inter alia provides that a person shall not be entitled to compensation for the loss, destruction or deterioration of animals or goods delivered to be carried ' by railway, unless his claim to compensation has been preferred in writing by him or on his behalf to the railway administration within six months from the date of the delivery of the animals or goods for carriage by railway. There was a conflict between the High Courts on the question whether non delivery of goods carried by railway amounted to less within the meaning of section 77. Some High Courts (including the Patna High Court) held that a case of non delivery was distinct from a case of loss and no notice under section 77 was necessary .in the case of non delivery. Other High Courts however took a contrary view and held that a case of non delivery also was a case of loss. This conflict has now been resolved by the decision of this Court in Governor General in Council vs Musaddilal (1) and the view taken by the Patna High Court has been overruled. This Court has held that failure to deliver goods is the consequence of loss or destruction and the cause of action for it is not distinct from the cause of action for loss or destruction, and therefore notice under section 77 is necessary in the case of non delivery which arises from the loss of goods. Therefore notice under section 77 was necessary in the present case. It is true that the respondent stated in the plaint in conformity with 'the view of the Patna High Court prevalent in Bihar that no notice under s.77 was necessary as it was a case of non delivery. But we find in actual fact that a notice was given by the respondent to the railway on April 10, 1948 to the Chief Commercial Manager, E.I.R. in which it was stated that 60 bales of cloth were booked for the respondent but only 29 bales had been delivered and the balance of 31 bales had not been delivered. Therefore the respondent gave notice that if the bales were not delivered to him within a fortnight, he would file a suit for the recovery of Rs. 36,461/12/ , and the details as to how the amount was arrived at were given in this notice. It is true that the notice was not specifically stated to be a notice under section 77 of the Act but it gave all the particulars necessary in a notice under that section. This notice or letter was sent within six months of the booking of the consignment. A similar case came up before this Court in Jetmull Bhojraj vs The Darjeeling Himalayan Railway Co. Ltd.(2) and this Court held that the letter to the railway in that case was sufficient notice for the .purpose of section 77 of the Act. 'Following that decision we hold that the letter in the present case which is even more explicit is sufficient notice for the purpose of S: 77 of the Act. We may add that the learned Additional Solicitor General did not challenge this in view of the decision in Jetmull Bhojraj 's case(2). This brings us to the second question raised in the appeal. We have already indicated that the High Court held that as the burden of disclosure which was on the railway had not been discharged there vas a breach of one of the terms of the risk note Z and therefore the risk note did not apply at all and the responsibility of the railway had to be assessed under ' section 72 (1) of the Act. This view of the law has been contested on behalf of the appellant and it is urged that after the risk note is executed either in form Z or in form B, the responsibility of the railway must be judged in accordance with the risk note even if there is some breach of the condition as to disclosure. It may be mentioned that risk note form Z and risk note form B are exactly similar in their terms insolar as the responsibility of the railway is concerned for risk note 150 form B applies to individual consignment while form Z is executed by a party who has usually to send goods by railway in large numbers. Risk note form Z is general in its nature and applies to all consignments that a party may send after its execution. It is proved that the consignment in this case was covered by risk note form Z. The main advantage that a consignor gets by sending a consignment under from Z or form B is a specially reduced rate as compared t3 the ordinary rate at which goods are carried by the railway and it is because of this specially reduced rate that the burden is thrown on the consignor in a suit for damages to prove misconduct on the part of the railway or its servants in the case of loss etc.of the goods, subject to one exception. On the other hand the argument on behalf of the respondent is that the view taken by the Patna High Court is right and it is the duty of the railway administration under the risk note, as soon as there is non delivery and a claim is made on the railway for compensation, to disclose how the consignment was dealt with throughout while it was in its possession or control and that its failure to do so results immediately in breach of the contract with the result that the responsibility of the railway has to be judged solely on the basis of section 72 (1) of the Act ignoring the risk note altogether. Section 72 (1) defines the responsibility of the railway administration for the loss, destruction or deterioration of animals or goods delivered to the administration to be carried by railway to be the same as that of a bailee under sections 152 and 161 of the , subject to other provisions of the Act. Sub section (2) of section 72 provides that an agreement purporting to limit the responsibility under section 72 (1) can be made subject to two conditions, namely, (i) that it is in writing signed by or on behalf of the person sending or delivering to the railway administration the animals or goods, and (ii) that it is in a form approved by the Governor General. Sub section (3) of section 72 provides that nothing in the common law of England or in the Carriers Act 1865 regarding the responsibility of common carriers with respect to carriage of animals or goods shall affect the responsibility as in this section defined of the railway administration. So the responsibility of the railway for loss etc. is the same as that of a bailee under the Indian Contract Act. But this responsibility can be limited as provided in section 72 (2). For the purpose of limiting this responsibility risk notes form B and form Z have been approved by the Governor General and where goods are booked under these risk notes the liability is limited in the manner provided thereunder. It is therefore necessary to set out the relevant terms of the risk note, for the decision of this case will turn on the provisions of the risk note itself. The risk note whether it is in form B or form Z provides that where goods are carried at owner 's risk on specially reduced rates, the owner agrees or undertakes to hold the railway administration 151 "harmless and free from all responsibility for any loss, deterioration or destruction of or damage to all or any of such consignment from any cause whatever, except upon proof that such loss, destruction, deterioration or damage arose from the misconduct on the part of the railway administration or its servants". "thus risk notes B and Z provide for complete immunity of the railway except upon proof of misconduct. But to this immunity there is a proviso and it is the construction of the proviso that arises in the present appeal. The proviso is in these terms: "Provided that in the following cases: (a) Non delivery of the whole of a consignment packed in accordance with the instruction laid .down in the tariff or where there are no instructions, protected otherwise than by paper or other packing readily removable by hand and fully addressed, where such non delivery is not due to accidents to train or to fire; (b) . . . "The railway administration shall be bound to disclose to the consignor how the consignment was dealt with throughout the time it was in its possession or control, and if necessary, to give evidence thereof before the consignor is called upon to prove misconduct, but, if misconduct on the part of the railway administration or its servants cannot be fairly inferred from such evidence, the burden of proving such misconduct shall lie upon the consignor". It is not in dispute that the present case comes under cl(a) of the risk note. An exactly similar provision in risk note form B came up for consideration before the Privy Council in Surat Cotton Spinning & Weaving Mills vs Secretary Of State for India in Council, ( ') and the law on the subject was laid down thus at pp.181 182: "The first portion of the proviso provides that the Rail way Administration shall be bound to disclose to the consignor 'how the consignment was dealt with through out the time it was in its possession or control, and, if necessary to give evidence thereof, before the consignor is called upon to prove misconduct '. In their Lordships ' opinion, this obligation arises at once upon the occurrence of either of cases (a) or (b), and is not confined to the stage of litigation. Clearly one object of the provision is to obviate, if possible, the necessity for litigation. On the other hand, the closing words of the obligation clearly apply to the litigious stage. As to the extent of the disclosure, it is confined to the period during which the (1) [1927] L.P LXIV: 152 consignment was within the possession or control of the Railway Administration; it does not relate, for instance, to the period after the goods have been the fatuously removed from the premises. On the other hand, it does envisage a precise statement of how the consignment was dealt with by the Administration or its servants. The character of what is requisite may vary according to the circumstances of different cases, but, if the consignor is not satisfied that the disclosure has been adequate, the dispute must be judicially, decided. As to the accuracy or truth of the information given, if the consignor is doubtful or unsatisfied, and considers that these should be established by evidence, their Lordships are of opinion that evidence before a Court of law is contemplated, and that as was properly done in the present suit, the Railway Administration should submit their evidence first at the trial. "At the close of the evidence for the Administration two questions may be said.to arise, which it is important to keep distinct. The first question is not a mere question of.procedure, but iS whether they have discharged their obligation of disclosure, ' and, in regard to this, their Lordships are of opinion that the terms of the Risk Note require a step in procedure, which may be said to :be Unfamiliar in the practice of the Court; if the consignor is not satisfied with the ' disclosure made their Lordships are clearly of opinion that is for him tO say so, and to call on the Administration to fulfill their obligation .Under the contract, and that the Administration should then have the opportunity to meet the demands of the consignor before their case is closed; any question as to whether the consignor 's demands go beyond the obligation should be then determined by the Court. If the Administration fails to take the opportunity to satisfy the demands of the consignor so far as endorsed by the Court, they will be in breach of their contractual obligation of disclosure. "The other question which may be said to arise at this stage is whether misconduct may be fairly inferred from the evidence of the Administration; if so, the consignor is absolved from his original burden of proof. But, in this case, the decision of the Court may be given when the evidence of both sides has been completed. It is clearly for the Administration to decide for themselves whether they have adduced all the evidence which they consider desirable in avoidance of such fair "inference of misconduct". They will doubtless keep in mind the provisions of s.114 of the Indian Evidence Act". With respect we are of opinion that this exposition of the law relating to risk note B applies also to risk note Z and we accept it 153 as correct. Thus the responsibility of the railway. administration to disclose to the consignor how the consignment was dealt with thrOughOut the time it Was in its possession or control arises at once under the agreement in either of the cases (a) or (b) and is not confined to the stage of litigation. But we are not prepared to accept the contention on behalf of the respondent that this responsibility to make full disclosure arises immediately the claim is made by the consignor and if the railway immediately on such claim being made does not disclose all the facts to the consignor, there is immediately a breach of this term of the contract contained in the risk note. It is true that the railway is bound to disclose to the consignor how the Consignment was dealt with throughout the time it was in its possession even before any litigation starts; but we are of opinion that such disclosure is necessary only where the consignor specifically asks the railway to make :the disclosure. If no such disclosure is asked for, the administration need not make it before the ' litigation. In the present case there is ' no proof that any disclosure was asked for in this behalf by the consignor at any time before the, suit was filed. Therefore if the railway did not disclose how the consignment was dealt with throughout before the suit was filed, it cannot be said to have committed breach of this term of the contract. The disclosure envisages a precise statement of how the consignment was dealt with by the railway or its servants. if the disclosure is asked for before the litigation commences and is not given or the disclosure is given but it is not considered to be sufficient by the consignor, the dispute has to be judicially decided and it is for the court then to say if a suit is brought whether there has been Ia breach of this term ' of the contract. After this, comes the stage where the consignor or the consignee ' being dissatisfied brings a suit for compensation. At that stage evidence has to be led by the railway in the first instance to substantiate the disclosure which might have been made before the litigation to the Consignor or which might have been made in the written statement in reply to the suit. When the railway administration has given its evidence in proof of the disclosure and the plaintiff is not satisfied with the disclosure made in the evidence, the plaintiff is entitled to ask the court to call upon the railway to fulfil its obligation under the contract and the railway should then .have the opportunity of meeting the demands of the plaintiff before its case is closed. Thus in addition to the evidence that the railway may adduce on its own and in doing so the railway has necessarily to keep in mind the provisions of section 114 of the Indian Evidence Act, the plaintiff can and should draw the attention of the court if he feels that full disclosure has not been made. , In .that case he can ask the court to require the railway to make further disclosure and should tell the court what further disclosure he wants. It is then for the court to decide whether the further disclosure .desired by the plaintiff should be made by the railway, and if the court decides that such further disclosure 154 should be made the railway has to make such further disclosure as the court orders it to make on the request of the plaintiff. If the railway fails to take the opportunity so given to satisfy the demands of the plaintiff, endorsed by the court, the railway would be in breach of its contractual obligation of disclosure. It is at this stage therefore that the railway can be truly said to be in breach of its contractual obligation of disclosure, and that breach arises because the railway failed to disclose matters which the court on the request of the plaintiff asks it to disclose. The question then is what is the effect of this breach. It is remarkable that the Privy Council did not lay down that as soon as the breach is made as above the risk note comes to an end and the responsibility of the railway is that of a bailee under section 72 (l) of the Act. In the observations already quoted, the Privy Council has gone on to say that after this stage is over, the question may arise whether misconduct may be fairly inferred from the evidence of the railway. It seems to us therefore that even if there is a breach of the term as to full disclosure it does not bring the contract to an end and throw the responsibility on the railway as if the case was a simple case of responsibility under section 72(1) of the Act; the case is thus not assimilated to a case where the goods are carried at the ordinary rates at railway risk. The reason for this seems to be that the goods have already been carried at the reduced rates and the consignor has taken advantage of that term in the contract. Therefore, even though there may be a breach of the term as to complete disclosure by the railway the consignor cannot fall back on the ordinary responsibility of the railway under section 72 (1) of the Act as if the goods had been carried at railway 's risk at ordinary rates, for he has derived the advantage of the goods having been carried at a specially reduced rates. The risk note would in our opinion continue to apply and the court would still have to decide whether misconduct can be fairly inferred from the evidence of the railway, with this difference that where the railway has been in breach of its obligation to make full disclosure misconduct may be more readily inferred and section 114 of the Indian Evidence Act more readily applied. But we do not think that the conditions in the risk note can be completely ignored simply because there has been a breach of the condition of complete disclosure. The view of the Patna High Court that as soon as there is breach of the condition relating to complete disclosure the risk note can be completely ignored and the responsibility of the railway judged purely on the basis of section 72 (1) as if the goods were carried at the ordinary rates on railway 's risk cannot therefore be accepted as correct. We may point out that in Surat Cotton Spinning and Weaving Mills Limited 's case, (I) the plaintiffs wanted the guard of the train to be examined and he was undoubtedly a material witness. Even so the witness was not examined by the railway. Finally therefore the Privy council allowed the appeal with these observations at p. 189: "While their Lordships would be inclined to hold that the respondent, by his failure to submit the evidence of Rohead, was in breach of his contractual obligation to give the evidence necessary for disclosure of how the consignment was dealt with, they are clearly of opinion that the failure to submit the evidence of Rohead, in the circumstances of this case, entitles the court to presume, in terms of section 114 (g) of the Evidence Act, that "Rohead 's evidence, if produced, would be unfavorable to the respondent, and that, in consequence, misconduct by complicity in the theft of some servant, or servants of the respondent may be fairly inferred from the respondent 's evidence". These observations show that even though there may be a breach of the obligation to give full disclosure that does not mean that the risk note form Z or form B can be ignored and the responsibility of the railway fixed on the basis of section 72 (1) as a simple bailee. If that was the effect of the breach, the Privy Council would not have come to the conclusion after applying section 114 (g) of the Evidence Act in the case of Rohead that misconduct by complicity in the theft of some servant or servants of the railway may be fairly inferred from the railway 's evidence. The appeal was allowed by the Privy Council after coming to the conclusion that misconduct by the servant or servants of the railway might be fairly inferred from the evidence including the presumption under section 114(g) of the Evidence Act. It seems to us clear therefore that even if there is a breach of the obligation to make full disclosure in the sense that the railway does not produce the evidence desired by the plaintiff in the suit even though the request of the plaintiff is endorsed by the court, the effect of such breach is not that the risk note is completely out of the way, the 'reason for this as we have already indicated being that the consignor has already taken advantage of the reduced rates and therefore cannot be allowed to ignore the risk note altogether. But where there is a breach by the railway of the obligation to make full disclosure the court may more readily infer misconduct on the part of the railway or its servants or more readily presume under section 114 (g) of the Evidence Act against the railway. This in our opinion is the effect of the decision of the Privy Council in Surat Cotton Spinning and Weaving 'Mills Limited 's case(1). As we have already said we are in respectful agreement with the law as laid down there. So far as the present appeal is concerned, there was no de by the consignor for disclosure before the suit. Even after the suit was filed there was no statement by the respondent at any (1) [1937] L.R. 64 I.A. 176. 156 stage that the disclosure made by the appellant in the evidence was in any way inadequate. The respondent never told the court after the evidence of the railway was over that he was not satisfied with the disclosure and that the railway be asked to make further disclosure by producing such further evidence as the respondent wanted. In these circumstances it cannot be said in the present case that there was any breach by the railway of its responsibility to make full disclosure. In the circumstances we are of opinion that the risk note would still apply and the court would have to decide whether misconduct on the part of the railway can be fairly inferred from the evidence produced by it. If the court cannot fairly infer misconduct from the evidence adduced by the railway, the burden will be on the respondent to prove misconduct. that burden, if it arises, has clearly not been discharged for the respondent led no evidence on his behalf to discharge the burden. We therefore turn to the evidence to see whether from the evidence produced by the railway a fair inference of misconduct of the railway or its servants can be drawn on the facts of this case. It is not in dispute in this case that the wagon containing the consignment arrived intact at Mughalsarai on December 9, 1947. Besides there is evidence of Damodar Prasad Sharma, Assistant Trains Clerk, Mughalsarai, P.W. 14, who had the duty to receive trains at the relevant time that 192 Dn. goods train was received by him on line No. 4 and that there were two watchmen on duty on that line for examining the goods train and they kept notes of the same. He also produced the entry relating to the arrival of the train and there is nothing in the entry to show anything untoward with.this wagon when the train arrived at Mughalsarai. His evidence also shows that the train was sent to the marshaling yard on December 11, 1947. Finally there is the evidence of Chatterji (P.W. 8) who is also an Assistant Trains Clerk. It was his duty to make notes with respect to goods trains which left Mughalsarai. He stated that this wagon was sent by train No. 214 on December 12, 1947 in the evening. He also stated that the wagon was in good condition and produced the entry relating to this wagon. It appears however from his evidence that rivets and seals are examined by the watch and ward staff and they keep record of it. Apparently therefore he did not actually inspect the wagon before it left though he says that it was in good condition. The relevance of his evidence however is only this that in his register showing the dispatch of trains there is no entry to the effect that there was any thing wrong with this wagon when it was dispatched. The most important evidence however is of the guard of the train, Ram Prasad Ram (P.W. 2). He stated that before the train started from Mughalsarai he patrolled both sides of it and the place from where the train started was well lighted and watch and ward staff also patrolled the area. He also stated that the rivets and seals of all the wagons in the train were checked at Mughal sarai and there was apparently nothing wrong with them. Now if 157 the evidence of the guard is believed it would show that the wagon containing the consignment was intact at Mughalsarai upto the time 214 goods train including this wagon left Mughalsarai. If so there would be no reason to hold that anything was done to the wagon before the train left Mughalsarai. It may be mentioned that the trial court accepted the evidence of the guard while the High Court was not prepared to believe it. On a careful consideration of the evidence of the guard we see no reason why his evidence should not be believed. It is obviously the duty of the guard to see that the train was all right, when he took charge of it. It appears that in discharge of his duty the guard patrolled the train on both sides and looked at rivets and seals to see that they were intact. It is, however, urged that the guard 's evidence does not show that the seals which he found intact were the original seals of Wadibundar and the possibility is not ruled out that the original seals might have been tampered with and new seals put in while the train was in the marshaling yard at Mughalsarai for two days, as the evidence of the watch and ward staff had not been produced. It would perhaps have been better if the evidence of the watch and ward staff had been produced by the railway; but if the evidence of the guard is believed that the seals and rivets were intact when the train left Mughalsarai, the evidence of the watch and ward staff is ' not necessary. It is true that the guard does not say that the seals were the original seals of Wadibundar but it appears from the evidence of Jagannath Prasad (P.W. 9) who was the Assistant Station Master at Dildarnagar that he found when the train arrived there that the northern flapdoors of the wagon were open while southern flapdoors were intact with the original seals. This evidence suggests that the original seals could not have been tampered with when the train left Mughalsarai and that the guard 's evidence that seals and rivets were intact shows that nothing had happened to the wagon while it was at Mughalsarai. Further it is also in evidence that there is ample light in the marshalling yard at Mughalsarai and that watch and ward staff is posted there as well. So the chances of tampering with the seals and rivets in the marshalling yard in the circumstances are remote. As such the evidence of the guard that the seals and rivets were intact when he left with the train on the evening of December 12, would apparently exclude the possibility that there was any tampering with the wagon before it left Mughalsarai. It is true that on the last day when the evidence for the railway was recorded and the guard had been recalled for further cross examination it was suggested to him that the railway servants at Mughalsarai had removed the bales and were responsible for the theft. He however denied that. But it is remarkable that if the respondent was dissatisfied with the evidence of the guard which was to the effect that the wagon was all right when he left Mughalsarai with the train on December 12, it did not ask the court to order the railway to produce the evidence of the watch and ward staff with respect to this wagon while it was in the marshalling yard at Mughalsarai. The respondent could ask for such disclosure. If the court L/B(D)2SCI 12 158 had accepted the request and the railway had failed to produce the evidence of the watch and ward staff it may have been possible to use section 114 of the Evidence Act and hold that the watch and ward staff having not been produced their evidence, if produced, would have gone against the railway. But in the absence of any demand by the respondent for the production of the watch and ward staff which he could ask for, we see no reason why the statement of the guard to the effect that seals and rivets of the wagon were intact when he left Mughalsarai with the train should not be accepted. In the absence of any demand by the respondent for the production of watch and ward staff his mere suggestion that the railway servants at Mughalsarai might have committed the theft cannot be accepted. There is the further evidence of the guard as to what happened between Mughalsarai and Buxar. It appears between these two stations the train stops only at Dildarnagar. The evidence of the guard however is that the train suddenly stopped between the warner and home signals before it reached Dildarnagar. He therefore got down to find out what the trouble was. He found that the hosepipe between two wagons had got disconnected and this resulted in the stoppage of the train. The evidence further is that the hosepipe was intact when the train started from Mughalsarai. He made a note of this in his rough memo book which was produced. It is noted by him that the northern flap door of this wagon was open. He reconnected the hosepipe and went up to Dildarnagar. There he reported the matter to the station staff. His further evidence is that there were three escorts with the train and that they were guarding the train when the train was standing between the warner and the home signals before it reached Dildarnagar. Nothing untoward was reported to him by these escorts. It was at this stop between the two signals that the guard noticed that the rivets and seals of this wagon on one side had been broken. The case of the railway is that there was theft in the running train between Mughalsarai and Buxar and that is how part of the consignment was lost. The evidence of the guard does suggest that something happened between Mughalsarai and Dildarnagar and then between Dildarnagar and Buxar. In addition to this the evidence of the station staff at Dildarnagar is that the flapdoors of this wagon were found open when the train arrived at Dildarnagar. The contents were not checked at Dildarnagar as there was no arrangement for checking at that station. The wagon was resealed at Dildarnagar, and the fact was noted in the station master 's diary. It may be mentioned that the evidence of the station staff was that the wagon was resealed though the guard says that it was riveted also at Dildarnagar. The entry in the guard 's rough memo however is only that the wagon was resealed. The guard certainly says that it was rivetted also at Dildarnagar but that is not supported by the station staff and the entry in the guard 's rough memo. It seems that the statement of the guard may be due to some error on his 159 part. That may also explain why, when the train arrived at Buxar, the flapdoor again was found open, for it had not been rivitted at Dildarnagar. Then the evidence of the Buxar station staff is that the northern flapdoors of this wagon were open when the train arrived at Buxar. It was then resealed and rivetted and was detached for checking. The checking took place on December 14th at Buxar. It was then found that one side had the original seals of Wadibun dar while the other side had the seals of Buxar. On checking the wagon, 27 bales were found intact, covering of one bale was torn and one bale was found loose and slack. This evidence asto what happened between Mughalsarai and Buxar thus makes it probable that there was theft in the running train between Mughalsarai and Buxar and that may account for the loss of part of the consignment. It is however contended on behalf of the respondent that no evidence was produced from Mughalsarai asto what happened while the wagon was in the marshalling yard and that the seal book which is kept at every railway station containing entries of resealing when a wagon is resealed was not produced from Mughalsarai and an adverse inference should be drawn from this non production. We are however of opinion that the evidence of the guard to the effect that the seals were intact when he left Mughalsarai with the train is sufficient to show that the wagon was in tact with the original seals when it left Mughalsarai and there fore it is not possible to draw any adverse inference from the non production of the watch and ward staff or the seal book of Mughalsarai in the circumstances of this case. It would have been a different matter if the respondent had asked for the production of the seal book as well as the evidence of the watch and ward staff. But the respondent contented itself merely with the suggestion that a theft might have taken place at Mughalsarai which was denied by the guard and did not ask the court to order the railway to produce this evidence. In these circumstances in the face of the evidence of the guard and the fact that one seal on the southernside of the door was of the original station. we do not think that it is possible to draw an adverse inference against the railway on the ground that the evidence of the watch and ward staff and the seal book at Mughalsarai were not produced. The seal book would have been of value only if the wagon had been resealed at Mughalsarai but there is in our opinion no reason to think that the wagon had been resealed at Mughalsarai after the evidence of the guard that he found the seals and rivets intact when he left Mughalsarai with the train. On a careful consideration of the evidence therefore we are of opinion that a fair inference cannot be drawn from the evidence of the railway that there was misconduct by the railway or its servants at Mughalsarai during the time when the wagon was there. If the evidence of the guard is accepted, and we do accept it, there can be no doubt that the loss of the goods took place be case of theft in the running train between Mughalsarai and 160 Buxar. There is no evidence on behalf of the respondent to prove misconduct and as misconduct cannot fairly be inferred from the evidence produced on behalf of the railway, the suit must fail. We therefore allow the appeal, set aside the judgment and decree of the High Court and restore that of the Additional Subordinate Judge. In the circumstances of this case we order parties to bear their own costs throughout. Appeal allowed.

IN-Abs

Out of a consignment of 60 bales of piece goods despatched by the Railway, under risk note Form Z, only 29 bales were delivered to the respondent who was the consignee. By sending the consignment thus, the consignor got a specially reduced rate but the burden was thrown on him, of proving misconduct on the part of the railway or its servants, if there was a loss of goods. The risknote also imposed an obligation on the Railway, to disclose how the consignment was dealt with by it, during the time the consignment was in its possession or control. The respondent wrote a letter to the Chief Commercial Manager of the Railway stating that 60 bales were booked but only 29 bales had been delivered, and that a suit for damages would be filed. The letter was sent within 6 months of the booking of the consignment ,and contained the details as to how the amount of damage was arrived at. Later on, a notice was given under section 80 of the Civil Procedure Code, 1908, and a suit was filed for damages. But, before the filing of the suit, there was no demand by the consignor for a disclosure as to how the consignment was dealt with by the Railway throughout the period it was in its possession or control. The Railway however, made a disclosure in its written statement as. to how the consignment was, dealt with throughout that period. Its defence was that, there was a theft in the running train and that was how part of the consignment was lost and not due to any misconduct on the part of the Railway or its servants. Even after the suit was filed and evidence let in at the trial, by the railway there was no statement by the respondent at any stage that the disclosure made by the Railway in the written statement or in the evidence, was in any way inadequate. The resplendent never told the court after the evidence of the Railway w.as over, that he was net satisfied with the disclosure and that the Railway should be asked to make a further disclosure. The suit was dismissed by the trial court but decreed on appeal, by the High Court. In the appeal to the Supreme Court it was contended that, (i) the, suit was barred by section 77 of the Indian Railways Act, 1890, inasmuch as notice required therein was not given by the respondent, and (ii) under the terms of the risk note the Railway was absolved from all responsibility for the less of the goods consigned thereunder, from any cause whatsoever. except upon proof of misconduct of the Railway or its servants, that the burden of proving such misconduct was on the respondent and that the respondent had failed to discharge the burden. HELD: (i) A notice under section 77 of the Act is necessary in the case of non delivery which arises from the loss of goods. Though the letter, written by the respondent to the Chief Commercial Manager, was not specifically stated to be a notice under the section it gave all 'the 'particulars necessary for such a notice and it was also given within time prescribed. Therefore, the letter was sufficient notice for the purpose of the Act, [149 D F] 146 Governor General in Council vs Musaddilal [1961]3 S.C.R. 647 and Jatmull Bhojraj vs The Darjeeling Himalayan Railway Co.Ltd. ; , followed. (ii) The view of the High Court, that there was a breach of the condition relating to complete disclosure, and that on such breach the risk note could be completely ignored and the responsibility of the Railway judged purely on the basis of section 72(1) of the Act, as if the goods were consigned at the ordinary rates on the Railway 'srisk, was not correct. [154 H] The responsibility of the railway administration to disclose to the consignor as to how the consignment was dealt with throughout the time it was in its possession or control arises at once, under the risk note, in either of the cases referred to therein, and is not confined to the stage of litigation. But such disclosure is necessary only where a consignor specifically asks the railway to make the disclosure. If no such disclosure is asked for, the administration need not make it before the litigation. Therefore, if the Railway did not make the disclosure, before the suit was filed, it could not be said to have committed a breach of the term of the contract [153 A D] The disclosure envisages a precise statement of how the consignment was dealt with by the railway or its servants. If the disclosure is asked for before litigation commences and is not given, or the disclosure is given but it is not considered to be sufficient by the consignor, the dispute has to be judicially decided and it is for the court to say, if a suit is filed, whether there .has been a breach ,of the term. At that stage, evidence has to be led by the railway in the first instance to substantiate the disclosure which might have been made before the litigation, to, the consignor, or which might have been made in the written statement. When the administration has given its evidence in proof of the disclosure, if the plaintiff is not satisfied with the disclosure made in evidence, he is entitled to ask the court to call upon the railway to fulfill its obligation under the contract, and the railway should then have the opportunity of meeting the demands of the plaintiff. It is then for the court to decide whether the further disclosure desired by. the plaintiff should be made by the railway, and if the court decides that it should be made, the railway has to make such further disclosure as the court orders. If the railway fails to take that opportunity to satisfy the demands of the plaintiff endorsed by the court, the railway, at that stage, would be in breach of its contractual obligation of disclosure. [153 E 154 B] The effect of the breach however is not to bring the contract to an end and throw the responsibility on the railway, as if the case was a simple case of responsibility under s.72(1). The risk note would continue to apply and the court would have to decide whether the misconduct can be fairly inferred from the evidence of the railway, with the difference that, where the railway has been in breach of its obligation to make full disclosure, misconduct may be more readily inferred and section 114 of the Evidence Act more readily applied. But the conditions of the risk note cannot be completely ignored, simply because there has been a breach of the condition of complete disclosure.[154 D G] Surat Cotton Spinning & Weaving Mills vs Secretary of State for India in Council [1937] 64 I.A. 176, applied.

Civil Miscellaneous Petition Nos. 2402 of 1964. Applications for substitution for condonation of delay. AND Civil Appeal No. 430 of 1963. Appeal by special leave from the judgment and decree dated April 8, 1959, of the Bombay High Court in First Appeal No. 666 of 1954. S.G. Patwardhan and A.G. Ratnaparkhi, for the appellant. Naunit Lal, for the respondents. ORDER Subba Rao, J. These are two applications, one for the substitution of the legal representatives of respondent No. 7 in Civil Appeal No. 430 of 1963 on the file of this Court and the other for the condonation of delay in filing the first application. The first question is whether there is sufficient ground for excusing the delay in filing the application for bringing the legal representatives of the 7th respondent on record. The facts are as follows: Sakharam Maruti Jedhe and others filed Special Suit 10 of 1964 in the Court of the Civil Judge, Senior Division Poona, against Rangubai Kom Shanker Jagtap for possession of the plaint schedule property and for mesne profits and obtained a decree therein. Against the said decree defendant preferred an appeal to the High Court of Bombay. The High Court by its judgment dated April 8, 1959, dismissed the appeal. The defendant filed an application for special leave to prefer an appeal to this Court and the same was granted on June 16, 1959. The appeal was admitted on July 27, 1961. Between these two dates, on November 12, 1959, the 7th respondent, Keshavarao Marutirao Jedhe died. Thereafter. on March 7, 1964, the defendant filed Civil Application No. 1118 of 1964 in the High Court of Bombay for bringing on record the legal representatives of the 7th respondent and for necessary certificate to that effect. On August 11, 1964, a Division Bench of the High Court granted the certificate. On February 19, 1964, the defendant filed in this Court Civil Miscellaneous Petition No. 2401 of 1964 for bringing on record the legal representatives of the 7th respondent and on October 8, 1964, filed Civil Miscellaneous Petition No. 2402 of 1964 for condoning the delay of 4 years and 19 days in filing the aforesaid first petition. In the said petition the petitioner gave two reasons for condoning the delay. namely, (i) the petitioner is a poor widow living in Poona with her daughters and there is no male member in the family of the petitioner to look after the proceedings, and (ii) after the preliminary decree in the proceedings for the determination of the mesne profits, the plaintiffs brought the heirs and legal representatives of the deceased 7th respondent on record within the time prescribed and 213 as the legal representatives were brought on record at one stage of the suit, no question of abatement would arise in respect of the appeal. The respondents filed a counter affidavit pointing out that there were no grounds for excusing the inordinate delay, that the appellant had been conducting this long drawn litigation from the year 1946, that she had a son in law who was helping her, that the deceased was a prominent man of Poona whose death was published in all the newspapers and that the appellant was living in the same locality and she must have had knowledge of his death soon after it occurred. It was further pleaded that the fact that the legal representatives of the 7th respondent were brought on record in the final decree proceedings could not in law prevent the abatement of the appeal, if they were not brought on record in the appeal in time. Under O.XVI, r. 14, of the Supreme Court Rules, 1950, an application to bring on record the legal representatives of a deceased appellant or respondent shall be made within 90 days of the death of the said appellant or respondent. Under the proviso thereto. in computing the said period the time taken in obtaining a certificate from the High Court shall be excluded. Even if the said time is excluded, there will be a delay of about 31/2 years in filing the application to bring the legal representatives of the deceased 7th respondent on record. From the counter affidavit filed by the respondents it is clear that the 7th respondent was a prominent citizen of Poona and the fact of his death was published in all newspapers; and the petitioner resides very near the place where the 7th respondent was living. She has been conducting this litigation from the year 1946 and was in cop, tact with her Advocates from time to time in connection with the appeal. She has also a son in law who is helping her in the litigation. She had also the knowledge of the fact that the legal representatives of the 7th respondent were brought on record in the final decree proceedings. In the circumstances the fact that she is an illiterate woman cannot possibly be a ground for excusing this inordinate delay in bringing the legal representatives of the 7th respondent on record in the appeal. therefore, hold that there is no sufficient ground for excusing the delay in bringing the legal representatives of the 7th respondent on record. The next question raised is an interesting one of law. From the aforesaid narration of facts it will be seen that the legal representatives of the 7th respondent were brought on record within the prescribed time in the final decree proceedings. The question is whether it would enure for the benefit of the appeal; that is to say whether by reason of that fact there is no abatement of the appeal. The relevant provisions of the Supreme Court Rules, 1950, reads thus: We have already given the gist of O.XVI, r. 14 of the said Rules. Rule 14 A thereof reads: 214 "The provisions of Order XXII of the Code relating to abatement and of Article 171 in the First Schedule to the Indian Limitation Act. 1908 (IX of 1908), shall, so far as may be applicable, apply to appeals and proceedings under rule 12 and rule 13 in the High Court and in the Supreme Court. " Rule 14 A by reference incorporates the rules of abatement in the Code of Civil Procedure and also article 171 in the First Schedule to the Indian Limitation Act in the Supreme Court Rules. Under O.XXII, rr. 3 and 4 of the Code of Civil Procedure, if the plaintiff or the defendant dies and the right to sue does not survive to the surviving plaintiff or against the surviving defendant, as the case may be, his legal representatives shall be brought on record within the prescribed time; and where within the time limited by law no application is made the suit shall abate so far as the deceased plaintiff is concerned or against the deceased defendant, as the case may be. Under r. 11 thereof. "in the application of this Order to appeals, so far as may be, the word "plaintiff" shall be held to include the appellant. the word "defendant" a respondent, and the word "suit" an "appeal". The result is that for the purpose of abatement a suit and an appeal are treated as different proceedings and the suit or the appeal, as the case may be, abates if the legal representatives of the deceased plaintiff or defendant are not brought on record within the time prescribed. Under article 171 of the First Schedule to the Limitation Act, an application to set aside an order of abatement shall be made within 60 days from the date of abatement. The result of these provisions is that if an application to bring on record the legal representatives of a respondent is not made within 90 days from the date of death of the said respondent, the appeal abates; but an application to set aside that abatement can be made within 60 days from the date of abatement. But, if by reason of the fact that the legal representatives of the deceased 7th respondent were brought on record in the final decree proceedings, there was no abatement, this Court no doubt will exercise its discretion liberally in condoning the delay in not formally getting the legal representatives of a deceased party, recorded in appeal in time. The main contention therefore, is that by reason of the fact that they were brought on record in the final decree proceedings, there was no abatement of the appeal. It is said that the final decree proceeding is a stage in the suit and the appeal is another stage in the suit and, therefore, the bringing on record of the legal representatives in one stage of the suit will enure for all stages of the suit including the appeal. This conclusion, the argument proceeds, flows from the reasoning of the judgment of the Judicial Committee in Brij Inder Singh vs Kanshi Ram(1). The relevant facts of that case were these: Pending a suit an application was made for ,directing a party to produce (1) [1917] L.R. 44 I.A. 218, 228. 215 certain books and that was ordered by the District Judge. Thereafter an application was made to the Chief Court to revise the order of the District Judge. Pending the revision the plaintiff and the 2nd defendant died. Within the prescribed time their legal representatives were brought on record in the revision. Subsequently that revision was dismissed as withdrawn. The legal representatives of the plaintiff and the 2nd defendant were not brought on record in the suit within the time prescribed. The question was whether the suit had abated. The Judicial Committee held that the suit did not abate and the following reasons were given for that view: "The plaintiff as representative of the original plaintiff, and the defendant 's representatives of Joti Lal, had been introduced in the Chief Court. No doubt that was only done in the course of an interlocutory application as to the production of books. But the introduction of a plaintiff or a defendant for one stage of a suit is an introduction for all stages, and the prayer, which seems to have been made ab majorem cautelam, by the plaintiff, in his application to the District Judge Prenter under section 365, was superfluous and of no effect. Coates, the judgment debtor, was only formally called, and the nonpresence of his representatives would afford no ground for the abatement of the suit. " This judgment is an authority for the position that if the legal representatives of a deceased plaintiff or defendant are brought on record in an appeal or revision from an order made in the suit. that would enure for all subsequent stages of the suit. The same principle was sought to be extended in a Madras decision to a cross appeal: see Shankaranaraina Saralaya v, Laxmi Hengsu(1). There, two appeals were independently filed against the decree in a suit one was flied by the plaintiff and the other by the defendant. The plaintiff appellant died and in the appeal filed by him his legal representatives were brought on record in time, whereas it was not so done in the appeal filed by the defendant respondent. It was argued that by reason of the fact that the legal representatives of the plaintiff were brought on record in the appeal filed by him there was no abatement in the appeal filed by the defendant. The Court negatived the contention and when the aforesaid decision of the Privy Council was cited, it was distinguished on the following grounds: "Their Lordships have held that the introduction of a plaintiff or a defendant for one stage of a suit is an introduction for all stages. When the subject matter of the interlocutory application was pending in the appellate Court it was deemed to be one stage of the suit and therefore there was no need to put in a fresh application at a further stage of the suit when it came on for trial before the first Court. Can it be said in the present case that (t) A.I.R. 1931 Mad. 277, 278. 216 what was done in one appeal could enure for the benefit of another appeal unless the latter appeal can be deemed to be a continuation or a further stage of the appeal in which the legal representatives were brought on record? I am constrained to say that it is difficult to extend the principle of the decision of the Privy Council to the facts of this case. " This decision accepts the principle laid down by the Privy Council but distinguishes the case before it on the ground that the interlocutory appeal is not a continuation or a further stage of the appeal in which the legal representatives were brought on record. Many other decisions were cited at the Bar, but they only support the position that in bringing the legal representatives of a deceased party on record in one appeal will not enure for the benefit of a cross appeal. Let us now consider the question on principle. A combined reading of Order XXII, rr. 3, 4 and 11, of the Code of Civil Procedure shows that the doctrine of abatement applies equally to a suit as well as to an appeal. In the application of the said rr. 3 and 4 to an appeal, instead of "plaintiff" and "defendant", "appellant" and "respondent" have to be read in those rules. Prima facie. therefore, if a respondent dies and his legal representatives are not brought on record within the prescribed time, the appeal abates as against the respondent under r.4, read with r.11, of O.XXII of the Code of Civil Procedure. But there is another principle recognized by the Judicial Committee in the aforesaid decision which softens the rigour of this rule. The said principle is that if the legal representatives are brought on record within the prescribed time at one stage of the suit, it will enure for the benefit of all the subsequent stages of the suit. The application of this principle to different situations will help to answer the problem presented in the present case. (1) A flied a suit against B for the recovery of possession and mesne profits. After the issues were framed. B died. At the stage of an interlocutory application for production of documents, the legal representatives of B were brought on record within the time prescribed. The order bringing them on record would enure for the benefit of the entire suit. (2) The suit was decreed and an appeal was filed in the High Court and was pending therein. The defendant died and his legal representatives were brought on record. The suit was subsequently remanded to the trial Court. The order bringing the legal representatives on record in the appeal would enure for the further stages of the suit. (3) An appeal was flied against an interlocutory order made in a suit. Pending the appeal the defendant died and his legal representatives were brought on record. The appeal was dismissed. The appeal being a continuation or a stage of the suit. the order bringing the legal representatives on record would enure for the subsequent stages of the suit. This would be so whether in the appeal the trial Court 's 217 order was confirmed, modified or reversed. In the above 3 illustrations one fact is common, namely, the order bringing on record the legal representatives was made at one stage of the suit. be it in the suit or in an appeal against the interlocutory order or final order made in the suit, for an appeal is only a continuation of the suit. Whether the appellate order confirms that of the first Court, modifies or reverses it replaces or substitutes the order appealed against. It takes its place in the suit and becomes a part of it. It is as it were the suit was brought to the appellate Court at one stage anti the orders made therein were made in the suit itself. Therefore, that order inures for the subsequent stages of the suit. But the same legal position cannot be invoked in the reverse or converse situation. A suit is not a continuation of an appeal. An order made in a suit subsequent to the filing of an appeal at an earlier stage will move forward with the subsequent stages of the suit or appeals taken therefrom; but it cannot be projected backwards into the appeal that has already been filed. It cannot possibly become an order in the appeal. Therefore, the order bringing the legal representatives of the 7th respondent on record in the final decree proceedings cannot enure for the benefit of the appeal filed against the preliminary decree. We, therefore, hold that the appeal abated so far as the 7th respondent was concerned. In the result, the petitions are dismissed. Petitions dismissed.

IN-Abs

The respondents filed a suit against the petitioner in 1954 for the possession of certain property and for mesne profits and obtained decree in their favour. The petitioner 's appeal to the High Court was dismissed in April 1959 and a petition for special leave to appeal to this Court was granted in June, 1959. Thereafter, the 7th respondent died in November 1959. The petitioner filed the present applications in October 1964 for bringing on record the legal representatives of the 7th respondent and for condonation of delay on various grounds. It was also contended on behalf of the petitioner that in view of the fact that after the preliminary decree for mesne profits had been passed, the respondents/plaintiffs brought the heirs and legal representatives of the deceased 7th respondent on record in the final decree proceedings within the time prescribed, and as the legal representatives were brought on record at one stage of the suit on the basis of the rule laid down by the Privy Council in Brij Inder Singh vs Kanshi Ram, 44 I.A. 218, no question of abatement would arise in respect of the appeal; that the final decree proceedings are a stage in the suit and the appeal is another stage in the suit and, therefore, the bringing on record of the legal representatives in one stage of the suit will enure for all stages of the suit. HELD: (i) On the facts of the case there were no sufficient grounds for condoning the delay in bringing the legal representatives of the 7th respondent on the record. (ii) The order bringing the legal representatives of the respondent on record in the final decree proceedings cannot enure for the benefit of the appeal filed against the preliminary decree. The appeal therefore abated so far as the 7th respondent was concerned. [217D] An order bringing the legal representatives of a deceased party on the record passed at the stage of an interlocutory application in a suit, or passed while an appeal is pending where the suit is subsequently remanded to the trial court or if passed while an appeal is pending against an interlocutory order in passed while an appeal the subsequent stages of the suit ' in all that suit, would enure for made at one stage of the suit be it the suit these. cases the order is final appeal against the interlocutory order or final order in the suit, for here the appeal is only a continuation of the suit. But the same legal position cannot be invoked where an order is made in a suit subsequent to the filing of an appeal at an earlier stage. Such an order cannot be Projected,backwards into the appeal that has already been filed so as to become an order in that appeal [216F 217D] Brij Inder Singh vs Kanshi Ram, 44 I.A. 218 distinguished. Shankarnaraina Saralaya vs Laxmi Hengsu, A.I.R. 1931 referred to. N)3S.C.I. 1 212

vil Appeal No. 998 of 1963. Appeal from the judgment and decree dated January 12, 1962 of the Madras High Court in Appeal Suit No. 292 of 1958. A.V. Viswanatha Sastri, V.S. Ramaswami lyengar and R. Thiagarajan, for the appellants. S.V. Gupte, Solicitor General, and R. Ganapathy lyer, for the respondent. The Judgment of the Court was delivered by Bachawat J. One Sivasubramania Pillai died in the year 1924 leaving him surviving his mother. two widows, Thialaiachi and Karpagathachi, and a daughter, Nagarathinathachi (respondent herein) born of Thialaiachi. The two widows inherited the properties left by Sivasubramania. in July 1927, they divided the bulk of the properties and each entered into separate possession and enjoyment of the properties allotted to her. The partition is evidenced by two partition lists called partition deeds, Exs A I and B 45 dated July 14. 1927 and signed by both of them. Under this partition, two veils of land were set apart for the maintenance 336 of Sivasubramania 's mother, to be enjoyed ' by her during her lifetime, and on her death, to be taken and enjoyed by the two widows in separate portions as mentioned in the partition lists. On August 26. 1954, Thialaiachi died, and upon her death, the respondent took possession of the properties allotted to Thialaiachi under the partition of July, 1927. On December 8, 1954, Karpagathachi instituted against the respondent the suit, out of which this appeal arises, claiming possession of the suit properties. The respondent resisted the suit claiming that under the partition each widow gave up her right of survivorship in respect of the properties allotted to the other, and consequently on the death of Thialaiachi, the respondent as her daughter was entitled to take her share as her heir and to enjoy the same during the life of Karpagathachi. By his judgment dated August 18, 1958, the District Judge, East Thanjavur, rejected ' the defendant 's contention, and held that the division between the two widows was for convenience of enjoyment only, and decreed the suit in respect of the properties held by Thialaiachi under the partition of July, 1927. On appeal, the Madras High Court by its judgment dated January, 12, 1962 held that under the partition each widow gave up her life interest in the properties allotted to the other and consequently Karpagathachi was not entitled to recover possession of the properties allotted to Thialaiachi, set aside the decree of the District Judge, and dismissed the suit. Karpagathachi and several other persons impleaded as party respondents in the appeal before the High Court now appeal under a certificate granted by the High Court to this court under article 133 of the Constitution. Mr. Viswanatha Sastry appearing on behalf of the appellants contends that: (1) the right of survivorship of each widow in respect of her husband 's estate is the chance of the surviving widow to take the entire estate of her husband on the death of the cowidow, and in view of s.6(a) of the , the widows were not competent to enter into an arrangement transferring or relinquishing their right of survivorship; (2) the partition lists, Exs. A I and B 45 not being registered, are not admissible in evidence; (3) the partition between the widows was for convenience of enjoyment only, and the respondent has failed to establish that each co widow gave up her right of survivorship in respect of the properties allotted to the other. The learned ' Solicitor General appearing on behalf of the respondent disputed these contention. We are of opinion that the first contention of Mr. Viswanatha Sastry should be rejected. Under the Hindu law as it stood in 1924. two widows inheriting their husband 's properties took together one estate as joint tenants with rights of survivorship and equal beneficial enjoyment. They were entitled to enforce a partition of those properties so that each could separately possess and enjoy the portion allotted to her, see Bhugwan Deen Doobey vs Myna Baee (1) [1867] 11 M .I. A. 487 337 Gauri Nath Kakaji vs Gaya Kuar(1). Neither of them could without the consent of the other enforce an absolute partition of the estate so as to destroy the right of survivorship, see Commissioner of Income tax vs Smt. Indira Balakrishna(2) But by mutual consent they could enter into any arrangement regarding their respective rights in the properties during the continuance of the widow 's estate, and could absolutely divide the properties, so as to preclude the right of survivorship of each to the portion allotted to the other. See Ramakkal vs Ramasami Naickan(3), Sudalai Ammal vs Gomathi Ammal(4). Likewise, two daughters succeeding ,to their father 's estate as joint tenants with rights of survivorship could enter into a similar arrangement. See Kailash Chandra Chuckerbutty vs Kashi Chandra Chuckerbutty(5) Subbammal vs Lakshmana lyer (6), Ammani Ammal vs Periasami Udayan(7). Such an arrangement was not repugnant to s.6(a) of the . The interest of each widow in the properties inherited by her was property, and this property together with the incidental right of survivorship could be lawfully transferred. Section 6(a) of the prohibits the transfer of the bare chance of the surviving widow taking the entire estate as the next heir of her husband on the death of the co widow, but it does not prohibit the transfer by the widow of her present interest in the properties inherited by her together with the incidental right of survivorship. The widows were competent to partition the properties and allot separate portions to each, and incidental to such an allotment, each could agree to relinquish her right of survivorship in the portion allotted to the other. The first contention of Mr. Viswanatha Sastry must be rejected. The second contention of Mr. Viswanatha Sastry must also be rejected. A partition may be effected orally. By an oral partition, the two widows could adjust their diverse rights in the entire estate, and as part of this arrangement, each could orally agree to relinquish her right of survivorship to the portion allotted to the other. In the trial Court, the suit was tried on the footing that the partition was oral, and that the two partition lists were merely pieces of evidence of the oral partition, and no objection was raised with regard to their admissibility in evidence. In the High Court, the appellants raised the contention for the first time that the two partition lists were required to be registered. The point could not be decided without further investigation into questions of fact, and in the circumstances, the High Court rightly ruled that this new contention could not be raised for the first time in appeal. We (1) [1928] L.R. 55 I.A. 299. ; , 517. (2) Mad. (3) (4) Cal. (5) 338 think that the appellants ought not to be allowed to raise this new contention. We think that the third contention of Mr. Viswanatha Sastry is sound ' and should be accepted. Mere partition of the estate between the two widows does not destroy the right of survivorship of each to the properties allotted to the other. The party who asserts that there was an arrangement by which the widows agreed to relinquish the right of survivorship must establish this arrangement by clear and cogent evidence. The respondent has failed to discharge this onus. It is common case that the partition is evidenced by Exs. A 1 and B. 45. Exhibit B 45 is the list showing the properties allotted to Thialaiachi. The relevant portion of exhibit B. 45 reads: "In accordance with the chit cast, Theiyalai Achi. wife of Sivasubramania Pillai, residing at Karuppur, shall take the nanja, punja, house and ground, cattle shed, cattle, pathway for men, cattle and cart and shed where dried dung cakes are stored mentioned in the list and shall pay the Government kist for the aforesaid properties from the current fasli 1337 and enjoy them. " Exhibit A 1 showing the properties allotted to Karpagathachi contains similar words. Now the two lists show that each widow is to "take and enjoy" the properties allotted to her. The corresponding Tamil words are "adainthu anuhavithu. " These words do not either expressly or by necessary intendment exclude the right of survivorship of the other widow. The Tamil words "Sarva Swantantra Badyamayum" and "Santhathi pravesamayum" and other words indicating relinquishment of the right of survivorship are conspicuous by their absence. The words used in the two partition lists are wholly insufficient to show that the two widows relinquished their right of survivorship inter se. The fact that two separate partition lists were drawn up and each was signed by the two widows does not carry the matter any further. The two partition lists show that the two velis of land kept separately for the maintenance of the mother in taw were to be divided by metes and bounds on her death between the two widows. The division of the two velis on the death of the mother in law was agreed upon to avoid future disputes. The fact that Thialaiachi had a daughter and was older than Karpagathachi by 20 years does not show that Karpagathachi mush have agreed that Thialaiachi 's daughter should enjoy the properties allotted to Thialaiachi after her death. After the partition, the pattas in respect of all the lands continued to be in the joint names of both the widows. If there was an absolute partition between the two widows. it is not explained why there was no separate mutation in the name of each widow in respect of the lands allotted to her. The deeds executed by Thialaiachi. B 3, B 4. B 7 and B 8 to B 43 recite the partition, but they do not use words indicating that there was an absolute partition. The sale 339 deeds, Exs. A 3, A 4, and A 6 executed by both the widows are in respect of undivided properties and throw no light on the question at issue. The evidence on the record does not show clearly whether the sale deed ', exhibit B 44, executed by both the widows relates to undivided properties, or whether it relates to properties as separately allotted to Thialaiachi. From time to time, Thialaiachi executed three wills, Exs. B I, B 2 and A 5 giving to the legatees and particularly the respondent certain properties absolutely with full powers of alienation. The first two wills, Exs. B I and B 2, refer separately to Thialaiachi 's separate properties and to the properties obtained by her on partition. The recitals in the two wills do not indicate that Thialaiachi obtained her husband 's properties on partition with absolute rights. The third will, exhibit A 5, does not purport to dispose of specifically the properties obtained by her on partition. Karpagathachi knew that Thialaiachi had executed the wills, but it is not shown that she knew of the contents of the wills. By exhibit A 2, both Thialaiachi and Karpagathachi made a free gift of some of the properties allotted to Thialaiachi. D.W. 1 is unable to explain why Thialaiachi joined in this deed. By sale deed, exhibit B 5, Thialaiachi sold absolutely some of the properties allotted to her and a notice, exhibit A 22, regarding the proposed transfer of the patta in the name of the vendee was served upon Karpagathachi. It is not clear if the patta was actualy transferred in the name of the vendee. The explanation of Karpagathachi that she protested against the transfer and ultimately received ' one half of the sale price has not been believed. But assuming that Karpagathachi did not object to the transfer, this single circumstance does not establish that at the time of the partition, he had agreed to give up her right of survivorship in respect of he properties allotted to Thialaiachi. Karpagathachi (P.W. 1) denied that there was an absolute partition. She was not shaken in cross examination. Nataraja Pillai P.W. 2) said that there was no talk that each should take the properties absolutely and it was agreed that each would enjoy separately. We find nothing in the evidence of P.W. 2 to show that the widows agreed to partition the properties absolutely so as to destroy the right of survivorship. Manickam Pillai (D.W. 1) said that at the time of the partition, Thialaiachi said that she had a daughter and if what was allotted for her share was given to her absolutely she would agree to the partition and Karpagathachi also wanted to have absolute rights. The District Judge rightly rejected evidence of D.W. 1. The partition lists were drawn up after consulting lawyers. D.W. 1 is unable to explain why words indicating absolute partition were not used in the partition lists. D.W. 1 had been in management of the properties of the respondent, yet he falsely denied this fact. He had intimate dealings with Thialaiachi and the respondent. On a meticulous examination of the oral and documentary evidence, the learned District Judge rejected the respondent 's case that the widows had orally agreed to relinquish their 3 SCI 9 340 right of survivorship. We think that this finding is correct, and the High Court was in error in reversing this finding. In the result, the appeal is allowed, the decree and judgment passed by the High Court are set aside and those of the trial Judge restored '. In all the circumstances, we direct that the parties will pay and bear their own costs throughout, in this Court and also in the Courts below.

IN-Abs

Two co widows divided their husband 's property and each entered into separate possession of her share. on the death of one of the widows her daughter the respondent took possession of her mother 's share. The appellant the surviving widow filed a suit against the respondent claiming possession of that share. The Trial Court decreed the suit, which on appeal was set aside by the High Court. In appeal by certificate: HELD: (i) Under the Hindu Law the widows were competent to partition the properties and allot separate portions each, and incidental to such allotment each could agree to relinquish her right of survivorship in the portion allotted to the other. Such an arrangement was not repugnant to section 6(a) of the . [337 C D]. Case law referred to. (ii) Mere partition of the estate between the two widows does not destroy the right of survivorship of each to the properties allotted to the other. The party who asserts that there was an arrangement by which the widows agreed to relinquish the right of survivorship must establish this arrangement b.v clear and cogent evidence. [338 B]. The respondent, in the instant case, had failed to discharge this onus. [338 B C].

Appeal No. 245 of 1964. Appeal by special leave from the judgment and order dated February 13, 1963, of the Calcutta High Court in Award Case No. 8 of 1963. A.V. Viswanatha Sastri and D.N. Gupta, for the appellant. S.T. Desai and P.K. Mukherjee, for the respondent. The Judgment of the Court was delivered by Subba Rao, J. On or about October 2, 1879, the Corporation of the town of Calcutta incorporated under Bengal Act IV of 1876 entered into an agreement in writing with Dillwyn Parrish, Alfresh Parrish and Robinson Souttar, hereinafter called the grantees 355 whereunder the Corporation granted to the said grantees the right to construct, maintain and use certain tramways in Calcutta on payment of certain rents as provided in the said agreement. The agreement contained an arbitration clause which provided for referring any disputes arising under the said agreement to arbitration in the manner prescribed thereunder. The said agreement further provided in cl. 28 that the words "the said Corporation" would include the Corporation and its successors. Different agreements were entered into between the successors of the Corporation of Calcutta and the grantees from time to time, namely, on November 22, 1879, September 2, 1893 and December 9, 1899, and were confirmed by appropriate Acts. In all these agreements the appellant 's predecessor in interest agreed to pay the rents to the respondent 's predecessors in interest in respect of the tramways constructed, maintained and used by them. All the said agreements contained an arbitration clause similar to that contained in the first agreement. The Corporation of Calcutta is now the successor of the properties of the Corporation of the town of Calcutta constituted under the Bengal Act IV of 1876. It was constituted by Bengal Act II of 1888. The appellant, i.e., the Calcutta Tramways Co. Ltd., is the successor or the assignee of the said grantees. On August 30, 1951, the State of West Bengal entered into an agreement with the appellant whereby the Government agreed to purchase the undertaking of the appellant as provided in the said agreement. The said agreement was subject to an Act being passed by the appropriate Legislature ratifying the agreement and giving effect to it. The Calcutta Tramways Act, 1951 (W.B. Act XXV of 1951) was passed and it came into effect on October 18, 1951. Under that Act the Government of West Bengal was practically substituted for the Corporation of Calcutta under the various agreements subject to a reservation that any sums payable under the said agreements shall be payable by the appellant to the Corporation. Disputes arose as regards the track rent payable by the appellant to the Corporation and the dispute was referred to arbitration in accordance with the terms of the arbitration clause. Though the parties appointed arbitrators in terms of the arbitration clause of the agreements, the appellant nominated its arbitrator without prejudice to its rights and filed on January 7, 1963, an application in the Original Side of the Calcutta High Court, inter alia, for the determination of the question whether there was a valid arbitration agreement between the appellant and the respondent and for other incidental reliefs. The application was heared by A.N. Ray, J. who held that there was an agreement between the appellant and the respondent and that the appellant was a party to the arbitration clauses contained in the relevant agreements, that the respondent could make a reference to arbitration in terms of the said agreements and that the reference to the arbitrators was valid, legal and effective. The appellant, by special leave, has filed the present appeal against the said order of the High Court. L/B(N)3SCI 10 356 Mr. A.V. Viswanatha Shastri, learned counsel for the appellant, contended that all the rights of the Corporation of Calcutta under the various agreements stood transferred under the Tramways Act, 1951, and vested in the Government of West Bengal except only in regard to the sums payable to the Corporation and that, therefore, the Corporation could not rely on the arbitration clauses of the agreements and refer the disputes arising in respect of the sums payable in terms of the said agreements to arbitration. The point raised is in a small compass and turns upon the relevant provisions of the West Bengal Act XXV of 1951, hereinafter called the Act. Under the Act the agreement entered into on August 30, 1951, between the Governor of West Bengal on the one part and the Calcutta Tramways Co. Ltd. on the other part was confirmed. Section 3 of the Act says, "The transfer agreement is hereby confirmed and made binding on the parties thereto and the several provisions thereof shall have effect as if the same had been enacted in this Act. " "Section 4 enacts that notwithstanding anything to the contrary in any other law, all the powers and duties of the Corporation of Calcutta. the Commissioners of the Howrah Municipality, the Commissioners of the South Suburban Municipality and the Commissioners for the New Howrah Bridge with respect to the construction, maintenance, use, leasing of or otherwise dealing with tramways are transferred to and vested in the Government". Section 5, which is the crucial section, reads: (1) The several agreements particulars whereof are set out in the Second Schedule to this Act 'shall have effect as if the Government were parties thereto in lieu of the respective bodies and persons set out in column 2 of the said Schedule and any reference in any such agreement to any of such bodies or persons shall unless the subject matter or the context otherwise requires be deemed to be a reference to the Government: Provided that any sums payable under any such agreement to any of such bodies or persons shall continue to be payable as if this Act had not been passed. The Second Schedule contains a list of the titles of the various agreements mentioned by us earlier. Under section 5 of the Act the Government is statutorily substituted for the respondent or its predecessors in interest in the various agreements stated supra. The fiction is a well defined one. The Government replaces the Corporation and its predecessors in interest as a party to the agreements unless the subject matter or the context otherwise requires. The natural presumption is that but for the proviso the enacting part of the section would have included the subject matter of the proviso also. The proviso to section 5 saves from the operation of the substantive section the sums payable under any such agreements to any such bodies mentioned therein: it excludes the operation of the 357 fiction in respect of such sums payable. In respect of the said sums payable the agreements entered into with the said bodies will remain intact as if the Act had not been passed; that is to say, the respondent would still continue to be a party to the said agreements for the said purpose. The relevant agreements provided for the recovery of the rents and also for the procedure for the recovery of the sums so payable in accordance with the terms of the arbitration clauses of the agreements. Had not the Act been passed and had the Government not been substituted in the place of the Corporation, it cannot be denied that the Corporation, if a dispute arose in regard to the rent, could have referred the dispute to arbitration. The substantive right to the payment of rent and the procedural one to have any dispute arising in respect of that right referred to arbitration embodied in the agreements are interconnected and are not severable. To preserve the substantive right and to withhold the procedural right to enforce it is to save the right and to deny the remedy. To accept the contention of the appellant is to make out a new agreement between the parties in respect of the sums payable. The acceptance of this suggestion compels the Corporation to give up its agreed remedy. The alternative suggestion, namely, that in respect of the amounts payable to the Corporation the arbitration clauses of the agreements could be enforced by the Government against the appellant introduces an incongruity. While the dispute would be between the appellant and the Corporation, the arbitration would be between the appellant and a third party. The argument that the Government would be acting as a trustee of the Corporation in respect of the sums payable to the Corporation is not supported by any of the provisions of the Act. A fair construction of the proviso to section 5 of the Act removes all the anomalies. Further, in the substantive part of section 5 of the Act the fiction takes effect unless the subject matter or the context otherwise requires. The proviso in terms as well as by necessary implication brings the subject matter of the sums payable under the agreements both under the substantive and procedural aspects within the scope of the said exception. The fiction in section 5 of the Act shall yield. to that extent, to the terms of the contract. On such a construction we hold, as we have indicated earlier, that both the right to the said sums payable and the procedure of arbitration are saved thereunder. In the result, we agree with the view expressed by the High Court and dismiss the appeal with costs. Appeal dismissed.

IN-Abs

By the enactment of Calcutta Tramways Act, 1951, the Government of West Bengal was substituted for the Corporation of Calcutta (Respondent) in various agreements entered into between the predecessors in interest of the appellant and the predecessors in interest of the respondent, subject to a reservation that any sum payable under the agreements shall be payable by the appellant to the respondent. All the agreements contained an arbitration clause which provided for refering any disputes arising under the agreements to arbitration in the prescribed manner. Disputes arose as regard the track rent payable by the appellant to the respondent and the dispute was referred to arbitration in accordance with the terms of the arbitration clause. The appellant nominated its arbitrator without prejudice to its rights, and filed an application in the High Court, for the determination of the question whether there was a valid arbitration agreement between the appellant and respondent. The High Court held that there was an agreement. In appeal by special leave: HELD: Both the right to the sums payable to the respondent and the procedure of arbitration were saved under the Act. The proviso to section 5 of the Act, in terms as well as by necessary implication brings the subject matter of the sums payable under the agreements both under the substantive and procedural aspects within the scope of the exception. The substantive right to the payment of rent and the procedural one to have any dispute arising in respect of that right referred to arbitration embodied in the agreements are interconnected and are not severable. To preserve the substantive right and to withhold the procedural right to enforce it is to save the right and deny the remedy. [357 C D, F G]

minal Appeal No. 154 of 1963. Appeal from the judgment and order dated May 2, 1963 of the Bombay High Court (Nagpur Bench) at Nagpur in Criminal Appeal No. 234 of 1962. M. N. Phadke and Naunit Lal, for the appellant. O. P. Rana, B. R. G. K. Achar and R. H. Dhebar, for the respondent. 359 The Judgment of the Court was delivered by Subba Rao, J. This appeal by certificate issued by the High Court of Judicature at Bombay raises the question of the construction of some of the provisions of the Bombay Prohibition Act, 1949, hereinafter called the Act. On June 12, 1961, Vijaysingh, the appellant, and one Namdeo Shinde drove in a jeep at an excessive speed and dashed it against the wall of the office of the District Superintendent of Police, Akola. Both of them appeared to be intoxicated. In the jeep there was also a bottle with a label on it as "Tincture Zingeberis". Vijaysingh was prosecuted before the Judicial Magistrate, First Class, Akola, under section 66(1)(b) and section 85(1) (1), (2), and (3) of the Act. The said Magistrate convicted the appellant both under section 66(1)(b) and section 85(1)(1), (2) and (3) of the Act, but sentenced him only under sections 66(1)(b) and 85(1)(1) of the Act. On appeal, the learned Sessions Judge, Akola, acquitted the appellant under section 66(1)(b) of the Act, but confirmed the conviction and sentence under section 85(1)(1) thereof. Against the judgment of the Sessions Judge acquitting the appellant under section 66(1)(b) of the Act the State of Maharashtra preferred an appeal to the High Court; and against the order of conviction under section 85(1) (1) of the Act the appellant preferred a revision to the High Court. The High Court heard both the matters together and allowed the appeal filed by the State and dismissed the revision petition preferred by the accused appellant. In the result it set aside the order of acquittal made by the Sessions Judge under section 66(1)(b) of the Act and sentenced the accused to rigorous imprisonment for 3 months and a fine of Rs. 500 and confirmed the conviction and sentence of the accused under section 85(1)(1) of the Act. Hence the present appeal. Learned counsel for the appellant raised before us several contentions for dislodging the judgment of the High Court. We shall now proceed to deal with them in the order in which they were addressed to us. The first contention may be put thus. Under section 66(2) of the Act all that an accused need prove is that he has consumed a medical preparation; if he established that, the burden of proving that the medicinal preparation is fit for use as an intoxicating liquor shifts to the prosecution. In the present case the accused has established that he had taken "tincture zingeberis", which is a medicinal preparation, but the prosecution failed to prove that it was fit for use as an intoxicating liquor. To appreciate this contention it is necessary to notice the relevant provisions. Under section 66(1) of the Act, "Whoever in contravention of the provisions of this Act, or of any rule, regulation or order made. . consumes. . any intoxicant shall, on conviction, be punished for a first offence, with imprisonment for a term which may extend to six months and with fine which may extend 360 to one thousand rupees." "Intoxicant" is defined to mean, among other things, any liquor; and "liquor" is defined to include, among others, all liquids consisting of or containing alcohol. Under section 13(b), no person shall consume or use liquor. Relevant part of section 24A enacts that nothing in Ch. III shall be deemed to apply to any medicinal preparation containing alcohol which is unfit for use as intoxicating liquor. The effect of these sections, in so far as they are material for the present case, is that if a person consumes liquor, i.e., any liquid consisting of or containing alcohol, he commits an offence under section 66(1) of the Act and, therefore, is liable to be convicted thereunder. But by reason of section 24A(2) of the Act if it is established that the liquor consumed is contained in any medicinal preparation which is unfit for use as intoxicating liquor, the consumption of such liquor is not an offence under the Act, for the Act itself does not apply to such medicinal preparations. We shall revert to the question of burden of proof a little later. The facts found in this case may now be noticed. The accused says that he consumed "tincture zingeberis" and produced before the police a sample bottle out of which he says he had consumed tincture zingeberis. A sample of the liquid was analysed by the Chemical Analyser. His report shows that the liquor was a weak Ginger Tincture B.P. 1959 (Tincture Zingeberis Mitis); absolute alcohol content was 89.1 per cent. The report further states as regards alcohol contents of the liquid that the sample contained 90.0 per cent. of V/V of ethyl alcohol though the B.P. limits were 86 to 90 per cent. V/V. "The analysis has also given the quantity of total solids as 0.62 per cent. weight per ml. at 20 degrees to be 0.825 g." In the opinion of the Chemical Analyser, the sample complied with pharmacopical specifications. On the basis of the report, the High Court found that the accused consumed a medicinal preparation which was listed in the British Pharmacopia, 1958 edition, and which had alcohol contents to the extent of 90 per cent. V/V of ethyle alcohol. The Chemical Analyser to the Govern ment of Maharashtra examined the sample blood taken from The body of the accused by applying "modified Cavette 's method" and gave his report to the effect that the sample blood of the accused contained 0.207 mg. w/v of ethyl alcohol. The High Court also found on the expert evidence that blood alcohol concentration on taking a normal dose of tincture zingeberis mitis would be about 0.007 per cent. W/V and the accused should have taken roughly about 125 c.c. of tincture zingeberis to induce an alcohol content of 0.207 per cent. found in his blood by the Chemical Analyser. On the basis of the evidence of Dr. Deshmukh, the High Court also found that Tincture Zingeberis Mitis was a preparation which might be consumed for intoxication and that intoxication would not be accompanied by any other harmful effects. On the either hand the accused has not adduced any evidence that the said medicine is a medicinal preparation unfit for use as intoxicating liquor. 361 The question whether the prosecution has discharged its burden of proof in this case will have to be considered on the basis of the said facts found by the High Court. Section 66(2) of the Act, which bears on the question of burden of proof, reads thus: "Subject to the provisions of sub section (3), where in any trial of an offence under clause (b) of sub section (1) for the consumption of an intoxicant, it is alleged that the accused person consumed liquor, and it is proved that the concentration of alcohol in the blood of the accused person is not less than 0.05 per cent. weight in volume then the burden of proving that the liquor consumed was a medicinal or toilet preparation. containing alcohol, the consumption of which is not in contravention of the Act or any rules, regulations or orders made thereunder, shall be upon the accused person, and the Court shall in the absence of such proof presume the contrary. " It has been proved in this case that the accused person consumed liquor and that the concentration of alcohol in his blood was more than 0.05 per cent. weight in volume. So in terms of sub section (2) of section 66 of the Act the burden of proving that the liquor consumed was a medicinal preparation containing alcohol, the consumption of which was not in contravention of the Act etc. or the rules made thereunder, shifted to the accused. He could have discharged this burden by proving, inter alia, that the medicinal preparation containing, alcohol which he had taken was unfit for use as an intoxicating liquor; if so much had been established, as under section 24A of the Act, the Act itself does not apply to such medicinal preparations, the accused would not have committed any offence under the Act. The High Court found that the accused had not placed any material to prove that tincture zincreberis mitis was unfit for use as an intoxicating liquor; indeed, it accepted the evidence adduced on behalf of the prosecution and held that it was fit for use as an intoxicating liquor. In this case not only the accused failed to discharge the burden so shifted to him by the statute, but the prosecution had also established that the said medicinal preparation was fit for use as an intoxicating liquor. Reliance is placed by the learned counsel for the appellant on the decision of this Court in The State of Bombay (now Gujarat) vs Narandas Mangilal Agarwal(1) wherein it was held, in the circumstances of the case, that it was for the State to prove that the medicinal preparation was not unfit for use as intoxicating liquor. But that decision was given on the relevant provisions of the Act before it was amended by the Bombay Act XII of 1959. Section 66(2) was added by the said Act which in express terms states that in the circumstances mentioned in the sub section the burden of proof shifts to the accused. The said (1) [1962] Supp. 1 S.C.R. 15. 362 decision cannot, therefore, be invoked in the changed circumstances. The present case falls to be decided on the interpretation of section 66(2) of the Act. We, therefore, hold that the High Court came to the correct conclusion on the question of burden of proof and gave its finding on the evidence adduced before it. It was then argued that even if the burden of proof in the circumstances of the case shifted to the accused that burden was discharged by reason of section 6A of the Act. Under section 6A of the Act for the purpose of enabling the State Government to determine whether any medicinal preparation containing alcohol is an article tit for use as intoxicating liquor, the State Government shall constitute a Board of Experts , and under sub section (6) thereof, it shall be the duty of the Board to advise the State Government on the question whether any article mentioned in sub section (1) of section 6A is fit for use as intoxicating liquor and upon determination of the State Government that it is so fit, such article shall, until the contrary is proved. be presumed to be fit for use as intoxicating liquor. Under sub section (7) thereof, "Until the State Government has determined as aforesaid any article mentioned in sub section (1) to be fit for use as intoxicating liquor, every such article shall be deemed to be unfit for such use. " On the basis of this section, the argument proceeded that the State Government did not determine under section 6A of the Act that 'Tincture Zingeberis Mitis ' was fit for use as intoxicating liquor and, therefore, the said article shall be deemed to be unfit for such use, with the result the burden which shifted to the accused under section 66(2) of the Act was statutorily discharged. There is considerable force in this argument; but unfortunately this point was raised only for the first time before us. There is nothing on the record to show that the State Government has not decided that the said article is fit for use as intoxicating liquor. If this question had been raised at the appropriate time, the relevant material would have been placed before the Court. Even though the argument was raised no attempt was made even after the filing of the appeal or even at the time of the arguments to place the relevant material before this Court to sustain the said legal argument. We cannot, therefore, permit the appellant to raise the point for the first time before us, particularly when there is utter lack of factual basis. The next argument 'of the learned counsel that the High Court came to the conclusion it did on irrelevant evidence has no force. It is said that the prosecution did not adduce any evidence to prove that "Tincture Zingeberis Mitis" was not unfit for use as an intoxicating liquor. To state it differently, the argument is that unless it was established by the prosecution that the consumption of a medicinal preparation had no harmful effects on the health of the person consuming it. it could not be said that it was not unfit for use as intoxicating liquor. In the present case the High Court found on the evidence that "Tincture Zingeberis Mitis" was a preparation 363 which might be consumed for intoxication and that intoxication would not be accompanied by any harmful effects. This contention, therefore, must be rejected. The last argument turns upon the provisions of section 85(1)(1) and 2) of the Act. The relevant part of section 85 reads: (1) Whoever in any street or thoroughfare or public place or in any place to which the public have or are permitted to have access (1) is drunk and incapable of taking care of himself, (2) In prosecution for an offence under sub section (1), it shall be presumed until the contrary is proved that the person accused of the said offence has drunk liquor or consumed any other intoxicant for the purpose of being intoxicated and not for a medicinal purpose. It was contended that section 85 of the Act laid down two condi tions, namely, that the accused should have been drunk and incapable of taking care of himself and also that he should have taken the drink for the purpose of being intoxicated and not for a medicinal purpose. This conclusion, the argument proceeded, would low from sub section (2), for otherwise, so it was said, the presumptive rule of evidence enacted in sub section (2) would be unnecessary and even relevant if the purpose mentioned therein was not an ingredient of the offence. This raises an interesting question of law, but, in view of the finding of fact arrived at by the High Court it does not call for a decision in this appeal. Assuming without deciding that the argument has some substance, the finding of the High Court satisfies the lest suggested by the argument. Whatever meaning is given to the Expression "drunk", in this case there is clear evidence that the accused had taken the drink for the purpose of intoxication and not for medication and that under the influence of drink he had rashly driven his jeep into the office of the District Superintendent of Police and dashed it against the wall of that office. He was drunk and was, therefore, incapable of taking care of himself. On the facts found the High Court rightly held that the accused committed an offence under section 85(1) of the Act. In the result, the appeal fails and is dismissed. Appeal dismissed.

IN-Abs

The appellant, drove a jeep at an excessive speed and dashed against a wall. In the jeep was also a bottle with a label on it as "Tincture Zingeberis". On medical examination the appellant was found to be intoxicated. He was prosecuted under sections 66(1)(b) and, 85(1)(1), (2) and (3) of the Bombay Prohibition Act, 1949; the Magistrate convicted him under the aforesaid sections and sentenced him under sections 66(1)(b) and 85(1) of the Act. On appeal the Sessions Judge acquitted the appellant under section 66(1)(b) but confirmed the sentence under section 85(1)(1). The respondent filed an appeal against the acquittal and the appellant filed a revision against the conviction, which the High Court heard together and allowed the respondent 's appeal and dismissed the revision of the appellant. In appeal by certificate; HELD Whatever meaning may be given to the expression "drunk", in this case there was clear evidence that the appellant had taken the drink for the purpose of intoxication and not for indication and that under the influence of drink he had rashly driven his Jeep. He was drunk and was, therefore, incapable of taking care of him self. [363 G] If a person consumes liquor, i.e. any liquid consisting of or containing alcohol, he commits an offence under section 66(1) of the Act and, therefore, is liable to be convicted thereunder. But by reason of section, 24A(2) of the Act, if it is established that the liquor consumed is contained in any medicinal preparation which is unfit for use as intoxicating liquor, the consumption of such liquor is not an offence under the Act, for the Act itself does not apply to such medicinal preparation. [360 B, C] In terms of section 66(2) of the Act, the burden of proving that the, liquor consumed was a medicinal preparation containing alcohol, the consumption of which was not in contravention of the Act etc., or the rules made thereunder, shifted to the accused. [361 E] In this case not only the accused failed to discharge the burden so shifted to him by the statute; but the prosecution had also established that the said medicinal preparation was fit for use as an intoxicating liquor. [361 G] State of Borabay (Now Gujarat) vs Naraindas Mangilal Agarwal, (1962] Supp. 1 S.C.R. 15, held inapplicable.

Appeal No. 165 of 1951. Appeal by special leave granted by the Supreme Court on the 27th March, 1951, from the Judgement and Order dated the 22nd March, 1950, of the High Court of Judicature at Bombay (Chagla C. J. and Tendolkar J.) in its Original Civil Jurisdiction in Income tax Reference No. 30 of 1947. M.C. Setalvad, Attorney General for India (G. N. Joshi, with him) for the Commissioner of Income tax. B.J. M. Mackenna (P. N. Mehta, with him) for the res pondent. October 26. The Judgement of the Court was deli vered by DAS J. L/B(D)2SCI 5(a) 292 DAS J. This is an appeal, by special leave granted by this court, from the judgment and order pronounced by the High Court of Judicature at Bombay on the 22nd March, 1950, on a reference (I. T. Reference No. 30 of 1947) made by the Income tax Appellate Tribunal at the instance of the appellant under section 66(1) of the Income tax Act (XI of 1922). The facts necessary to be stated for the purpose of disposing of the present appeal are these: The Royal Western India Turf Club Ltd. (hereinafter referred to as the "com pany") was incorporated in 1925 under the Indian Companies Act, 1913. The objects for which the company was incorporated were, inter alia as follows: (a) To take over the assets, effects and liabilities of the then unincorported club known as the Western India Turf Club; (b) to carry on the business of a Race Course Company in all its branches. . . ; (c) to establish any Clubs, Hotels and other conveniences in connection with the property of the company; (d) to carry on the business of Hotel Keepers, Tavern Keepers,licensed victuallers and refreshment purveyors , (e) to sell, improve, manage, develop, lease, mortgage, dispose of or otherwise deal with all or any part of the property of the company, whether movable or immovable, with power especially to sell and distribute or to permit to be sold and distributed wines, spirits, tobacco and other stores. The liability of the members is limited by guarantee, each member undertaking to contribute to the assests of the company, in the event of its being wound up, such sum as May be required, not exceeding one rupee, for payment of the debts and liabilities of the company and the costs, charges and expenses of the winding up. Clause 6 of the memorandum provides that if upon the winding up or dissolution of the company there remains after the satisfaction of all debts and liabilities any property whatsoever, the same would be 293 paid to or distributed among the members of the club in equal shares. Under the company 's articles of association that were in force during the accounting year, besides Honorary Stand Members, Visiting Members and Temporary Members there were two main categories of members, namely, the Club Members and Stand Members. The number of Club Members was limited to 350, exclusive of four designated high dignitaries and the number of Stand, Members was liable to be limited by the committee at any time. Club Members and Stand Members had to be elected by ballot by the committee. On election every Club member had to pay an entrance fee of Rs. 150 and a stand member had to pay an entrance fee of Rs. 75 Members of either class had also to pay an annual subscription of Rs. 25. The entire management of the company and the control over its funds and property were left in the hands of a committee of nine Club Members elected as provided in the articles of association of the company. The company was and is the lessee of two plots of land,, one in Bombay and the other in Poona. Two race courses have been laid out on these plots of land. On each race course there are three enclosures known as Members ' Enclosure, First Enclosure and Second Enclosure. Each enclosure has a stand or stands from which races are watched. The Members ' Enclosure is for the exclusive use of the members, their wives and unmarried daughters above the age of 12 years and their guests. The First and Second Enclosures are open to the public. For admission into each of the three enclosures an admission fee is charged. In the Members ' Enclosure admission is by season tickets or daily admission gate tickets. Private Boxes in the Members ' Enclosure are avilable to members on payment according to the number of chairs in the box. In addition to the admission fees to the Members ' Enclosure, a member has to pay, in respect of his guests, an additional fee. In each of the enclosures there is a totalisator run on the parimutuel system at which 294 persons in that enclosure place their bets on each race. These several totalisators are linked by electric appliances, so that the moneys received from members and non members are included in one pool and distributed amongst the holders of the winning tickets in equal proportions. In each enclosure there is arrangement for the supply of refreshments on payment. The present disputes arose in connection with the assessment of the company 's income, profits or gains in the accounting year 1st July, 1938, to 30th June, 1939. The company received large sums of money on admission tickets from members as well as from non members besides other moneys on other accounts. The company claimed that in computing its total income, the following four items of receipts should be excluded: (1) Season admission tickets from members Rs. 23,635 (2) Daily admission gate tickets from members Rs. 51,777 (3) Use of private boxes by members Rs. 21,490 (4) Income from entries and forfeits received from the members whose horses did not run in the races durring the season Rs. 82,490 There was no dispute as to the liability of the company in respect of moneys received from non members and moneys received on all other accounts. The Income tax 0officer held that all the four items mentioned above were receipts from business falling under section 10(1) of the Income tax Act or, in the alternative, were receipts by an association performing specific services for its members for remuneration definitely related to those services within the meaning of section 10(6) of the Act and assessed accordingly. On appeal by the company the Appellate Assistant Commissioner dismissed the appeal. He held that the company was carrying ing on business and that all the above mentioned four on business and that all the above mentioned four items were receipts from business within the meaning of section 10(1), although none of those items fell within section 10(6). 295 On a further appeal by the company to the Income tax Appel late Tribunal the latter came to the conclusion that none of the sums in question could be said to be profits or gains of a business coming under section 10(1). The Tribunal also held that items 1, 2 and 3 did not also come within the ambit of section 10(6) of the Act. Apparently the Tribunal did not consider the applicability of section 10(6) with regard to the fourth item. On the application of the Commissioner of Income tax, Bombay, the Appellate Tribunal, under section 66(i) of the Act referred the following two questions for the opinion of the Bombay High Court, namely (1) whether on the facts found or admitted in the case, The Royal Western India Turf Club Ltd., Bombay, received the sums of Rs. 23,635, Rs. 51,777, Rs. 21,490 and Rs. 82,490 from a business carried on by it with the members within the meaning of section 10(1) of the Indian Income, tax Act? (2) whether on the facts found or admitted in the case, The Royal Western India Turf Club Ltd., Bombay, received the sums of Rs. 23,635, Rs. 51,777 and Rs. 21,490 [and Rs. 82,490 with regard to which sum the Tribunal did not consider the applicability of section 10(6)] as a trade, professional or similar association performing services for its members for remuneration definitely related to those services within the meaning of section 10(6) of the Indian Income tax Act? The reference having come up for hearing the High Court found that the statement of the case was insufficient and incomplete and accordingly it sent back the reference to the Appellate Tribunal with directions to submit a proper statement of facts. The Appellate Tribunal thereupon sub mitted a supplementary statement of the case setting forth in greater detail the facts necessary for the disposal of the reference. On further hearing of the reference in the light of this supplementary statement of the case the High Court held that the company performed two distinct functions, namely, the carrying on of the business of racing and the carrying on of the club and that the first three items of 296 Rs. 23,635, Rs. 51,777 and Rs. 21,490 were charged to the members in respect of the various amenities specified in the supplementary statement of the case which were given by the club only to its members namely, the use of the Members ' Enclosure on payment of admission fee, the use of the members ' totalisator, the right to watch the races from the lawn or from an unreserved seat in the Members ' stand, the use of a private box subject to payment and the use of the Guest House at Poona. Accordingly the High Court held that the said first three items did not fall either under section 10(1) or section 10(6) of the Act. With regard to the sum of Rs. 82,490 the High Court held that it did not come under section 10(6) but was a part of the income of the business of horse racing done by the company. Accordingly the High Court answered question No. I in the negative as regards the first three items of Rs. 23,635, Rs. 51,777 and Rs. 21,490 and in the affirmative as regards the fourth item of Rs. 82,490 and it answered question No. 2 in the negative in respect of the first three items and in the affirmative with regard to the fourth item. In effect the High Court held that the first three items were not taxable either under section 10 (1) or section 10(6) and that the fourth item was taxable under both the said sub sections of that section. The Bombay High Court having dismissed the application of the Commissioner of Income tax under section 66 A (2) to appeal to this court, the Commissioner applied for and obtained special leave to appeal to this court. The company has not appealed from that part of the order which declared that the fourth item of Rs. 82,490 was taxable. Therefore, the questions we have to decide in this appeal are: (1) whether the first three items are receipts from business carried on by the company, and (2) whether those three items are receipts by a trade or professional or similar association performing specific services for its members for remuneration definitely related to those services. On the first point our attention is drawn to the objects of the company as set forth in its memorandum of associa 297 tion. It appears that the objects of the company are, inter alia, to carry on the business of a Race Course company in all its branches and to carry on the business of Hotel Keepers, tavern keepers, licensed victuallers and refreshment purveyors. Although this circumstance may not be decisive, it cannot ,it the same time be overlooked altogether. It has to be noted as one of the material facts. Then we have the fact that so far as non members are concerned the company does carry on a horse racing business and the moneys it realises from nonmembers for admission into the First and Second Enclosures to watch the races from an unreserved seat therein and for the use of the totalisator and other amenities are income, profits or gains of that business. It is also to be noted that the rates of daily admission fee charged on the non members for ad mission into the First Enclosure and for the railway tickets are exactly the same as those charged from the members for admission into the Members ' Enclosure. Finally, it has been declared by the High Court by the order under appeal and it is now accepted by the company that the company derived the sum of Rs. 82,490 (the fourth item mentioned above) from the horse racing business carried on by it with its members within the meaning of section 10(1) of the Act. If this sum of Rs. 82,490 received from members represents, as held by the High Court, a part of the income of the horse racing business, why are not the first three items of receipts also parts of the income, profits or gains of that very business? On what principle or authority are those three items to be excluded from the computation of the total business, income of the company? In support of its claim for exemption from tax liability in respect of these three items the company relies on the principles laid down by the House of Lords in the much dis cussed case of The New York Life Insurance Co. vs Styles (Surveyor of Taxes)(1). The appellant in that case was an incorporated company. The company issued life policies of two kinds, namely, participating and non participating. There were no shares or shareholders in the ordinary sense of (1) ; L.R. 14 App. 298 the term but each and every holder of a participating policy became ipso facto a member of the company and as such became entitled to a share in the assets and liable for a share in the losses. A calculation was made by the company of the probable death rate among the members and the probable expenses and liabilities and calls in the shape of premia were made on the members accordingly. An account used to be taken annually and the greater part of the surplus of such premia over the expenditure referable to such policies was returned to the members i.e., (holders of participating policies) and the balance was carried forward as fund in hand to the credit of the general body of members. The question was whether the surplus returned to the members was liable to be assessed to income tax as profits or gains. The majority of the Law Lords answered the question in the negative. It will be noticed that in that case the members had associated themselves together for the purpose of insuring each other 's life on the principle of mutual assurance, that is to say, they contributed annually to a common fund out of which payments were to be made, in the event of death, to the representatives of the deceased members. Those persons were alone the owners of the common fund and they alone were entitled to participate in the surplus. It was, therefore, a case of mutual assurance and the individuals insured and those associated for the purpose of meeting the policies when they fell in and receiving the surplus, were identical and it was said that that identity was not destroyed by the incorporation of the company. Lord Watson even went to the length of saying that the company in that case did not carry on any business at all, which perhaps was stating the position a little too widely as pointed out by Viscount Cave in a later case; but, be that as it may, all the noble Lords who formed the majority were of the view that what the members received were not profits but were their respective shares of the excess amount contributed by themselves. The cases of The Cornish Mutual Assurance Co. Ltd. vs The Commissioners of Inland Revenue(1) and Jones vs South (1) ; ; 299 Wales Lanacashire Coal Owners ' Association Ltd.(1), both of which were cases of mutual assurance companies with the liability of the members limited by guarantee carry the mater no further. Indeed, the decision in the Cornish case as to the surplus of the contributions over the expenses would have been the same as in Styles ' case (supra) but for the special provisions of section 52(2)(b) according to which profit was made to include in the case of mutual trading concerns the surplus arising from transactions with members. Jones ' case also shows that the fact that under the rules the surplus was not distributable except on the winding up of the company makes no difference in the application of the principle laid down in Styles ' case (supra). Municipal Mutual Insurance Ltd. vs Hills(2) was relied on by the learned Attorney General as showing the real ground on which Styles ' case (supra) was decided. The appellant there was an incorporated company. It was formed by the representatives of various local authorities by co operation to insure against fire on favourable terms. Effective control was in the hands of the fire policy holders who alone were entitled, on winding up of the company, to participate in the surplus assets. In course of time the company undertook an extensive business in employers ' liability and miscellaneous insurance. The Crown admitted that fire insurance business which was a mutual business was not taxable. The company admitted that the employers ' liability and miscellaneous insurance business done with outsiders were liable to tax. The question was whether the employers ' liability and miscellaneous insurance business done with fire policy holders who were members of the company were liable to be brought to charge. It was held by Rowlatt J. that they were and this decision was upheld by the Court of Appeal and the House of Lords. The argument in that case was that where the person with whom employers ' liability or miscellaneous insurance business was done happened to be also a fire policy holder, the profit or surplus arising from that (1) ; (2) [1932] 16 Tax Cas. 430; 48 T.L.R. 301; 300 operation came back into a body of which he himself was a member. This circumstance, it was claimed, made it mutual and as such exempt from taxation under Styles ' case. This argument was repelled by Rowlatt J. on the ground, inter alia, that there was not the slightest distinction between what was made out of a member in respect of non fire busi ness and what was made out of a non member out of non fire business, for qua that business the member was a stranger. In other words, there was no identity in character of the contributor and the participator. Said Viscount Dunedin in the House of Lords: "In so far as the surplus arises from a fire policy they are really entitled to the money as being those who contri buted it and accordingly it has been admitted that any profit made on the fire policies is governed by the New York case. But as regards employers liability business and miscellaneous business it does not go to the contributors for, as fire policy holders in a body, they have not 00contributed and therefore the business is in the same position as business with complete outsiders, the surpluses in which are admitted to be profit. " Lord, Macmillan said at page 447 of the report in Tax Cases: "The cardinal requirement is that all contributors to the common fund must be entitled to participate in the surplus and that all the participators in the surplus must be contributors to the common fund; in other words there must be complete identity between the contributors and the participators. If this requirement is satisfied, the particular form which the association takes is immaterial. " Styles ' case (supra) has recently been examined and explained by the Judicial Committee in English & Scottish Joint Co operative Wholesale Society Ltd. vs Commissioner of Agricultural Income tax, Assam(1). After referring to various passages from the speeches of the different Law Lords in Styles ' case, Lord Normand, who delivered the judg ment of the Board, summarised the grounds of the decision in Styles ' case as follows: (1) ; 75 I.A. 196; 301 "From these quotations it appears that the exemption was based on (1) the identity of the contributors to the fund and the recipients from the fund, (2) the treatment of the company, though incorporated as a mere entity for the con venience of the members and policy holders, in other words, as an instrument obedient to their mandate and (3) the im possibility that contributors should derive profits from contributions made by themselves to a fund which could only be expended or returned to themselves." The Judicial Committee held that none of these grounds was available on the special facts of the case before them and, therefore, the principles laid down in Styles ' case (supra) were wholly inapplicable to that case. It is clear to us, taking the facts admitted or found in the case before us, that the principles of Styles ' case, as ex plained by subsequent decisions noted above, can have no application to this case. Here there is no mutual dealing between the members inter se in the nature of mutual insur ance, no contribution to a common fund put up for payment of liabilities undertaken by each contributor to the other contributors and no refund of surplus to the contributors. There being no mutual dealing the question as to the com plete identity of the contributors and the participators need not be raised or considered. Suffice it to say that in the absence, as there is in the present case, of any dealing between the members inter se in the nature of mutual insurance the principles laid down in Styles ' case and the cases that followed it can have no application here. The principle that no one can make a profit out of himself is true enough but may in its application easily lead to confusion. There is nothing per se to prevent a company from making a profit out of its own members. Thus a railway company which earns profits by carrying passengers may also make a profit by carrying its shareholders or a trading company may make a profit out of its trading with its members besides the profit it makes from the general public which deals with it but that profit belongs to the members as shareholders and does not come back to them as persons who had contribued 302 them. Where a company collects money from its members and applies it for their benefit not as shareholders but as per sons who put up the fund the company makes no profit. In such cases where there is identity in the character of those who contribute and, of those who participate in the surplus, the fact of incorporation may be immaterial and the incor porated company may well be regarded as a mere instrument, a convenient agent for carrying out what the members might more laboriously do for themselves. But it cannot be said that incorporation which brings into being a legal entity separate from its constituent members is to be disregarded always and that the legal entity can never make a profit out of its own members. What kinds of business other than mutual insurance may claim exemption from tax liability under section 10(1) of the Act under the principles of Styles ' case need not be here considered; it is clear to us that those principles cannot apply to an incorporated com pany which carries on the business of horse racing and realises money both from the members and from non members for the same consideration, namely, by the giving of the same or similar facilities to all alike in course of one and the same business carried on by it. Learned counsel for the company then contends that the carrying on of the business of horse racing is not the only function or activity of the company. It also runs a club, that is to say, an association of persons who co operate to provide for themselves social, sporting and similar amenities. If the contributions from the members of the club exceed the cost of providing the amenities and if the surplus is held for the benefit of the members such surplus, according to him, is not taxable. For this purpose no dis tinction, it is said, can be made between the entrance fees or the periodical subscriptions or any other sum (e.g., ad mission fee, daily or seasonal) paid by the members for the right to make use of the amenities provided by the club. For the purposes of this argument it is said to be immaterial whether the club is an incorporated company or an unregistered association. Finally it is urged that the fact that a 303 club has business dealings with the public in respect of which tax is payable does not render the club liable to tax in respect of the difference between the cost of providing amenities for its members and the contribution towards this cost which the club takes from its members either by way of subscription or of charges for the use of club amenities. The advantage of a member, it is pointed out, is that he can meet his fellow members in the Members ' Enclosure without having to rub his shoulders with the members of the public who have no right of entry in the Members ' Enclosure and he cart also have the various other amenities provided ex clusively for members which are listed in the supplementary statement of the case. Reference is made by learned counsel to several club cases, English and Indian, and other cases in support of his contentions. Styles ' case and other cases of mutual dealing have already been dealt with and need not be referred to again. It will suffice now to examine the club cases. The earliest club case cited before us is that of Carlisle and Silloth Golf Club vs Smith(1). In that case the club was an unincorporated association of members who paid subs cription and became entitled to play on the golf links of the club. There was no question of division of profits. Under the lease between the club and its lessors the club was bound to admit visitors on payment of "green fees". The only question was whether the profits arising out of the "green fees" collected from outsiders were taxable. In course of his judgment Buckley L. J. referred to Styles ' case and said that a man could not make a profit or loss out of himself and, that that was the ground of decision in Styles ' case. It should not, however, be overlooked that the question whether the profits arising out of the members ' subscription were assessable or not was not in issue in that case at all. That decision, therefore, does not help the company in this case. In the Royal Calcutta Turf Club vs Secretary of State(1) the assessee was an unincorporated club. It was held that (1) [1913]3 K.B. 75; (2) Cal. 841; A.I.R. (1921) Cal 633; 304 the club carried on business within the meaning of the Excess Profits Duty Act (X of 1919) and was liable to pay tax in respect of money received from the public by way of entrance fees to the stand, entry fees for race horses, book makers ' license fees and percentages of the totalisator. There, as in the Carlisle and Siiloth Golf Club case (supra), no question was raised as to the taxability of moneys paid by the members of the clubs. The case of the United Services Club, Simla vs The Crown(1) has been strongly relied on by learned counsel for the company. There the club was an incorporated company. it had no dealings with outsiders and derived no profit from outsiders. The question was directly raised as to whether the income derived from its members was taxable profit. It was held, on the authority of Styles ' case and the Carlisle & Silloth Golf Club case. that under the English law the in come derived by a society or club from its members was not liable to tax and that the same principle should be followed in India. The proposition so broadly stated overlooks the real grounds of the decision in Styles ' case as explained in later cases and cannot be accepted as an accurate statement of the English law. In Carlisle & Silloth Golf Club case as in the Royal Calcutta Turf Club case, as already stated, the question of the moneys received from members was not in issue at all. In this case, namely, in the United Services Club case, there was no dealing between the company and the outside public at all and the surplus was derived by the club only out of its dealings with its members. There was no mutual dealing between the members inter se and there was no question of distribution of any surplus amongst the members and, therefore, there could be no question of identity of contributors and participators and as such the company could not claim exemption from tax under the principles of either of the two cases relied on by Martineau J. His decision can only be supported on the ground that the (1) Lah. 109; A.I.R. 1921 Lab. 208; 1 I.T.C. 113. 305 club did not really carry on any business with its members with a view to earning profits and, therefore, the surplus of receipts from the members over the expenditure could not be said, to be profit of any business which could be assessed to tax. The next case is what is known as the Eccentric Club case(1). In that case a company limited by guarantee carried on a social club, its objects being to promote social intercourse amongst gentlemen connected (directly or indirectly) with literature, art, music, the drama, the scientific and liberal professions, sports and commerce, to establish a club and generally to afford to members the usual privileges and advantages of a club, to sell and deal in or arrange for supply of all kinds of provisions and refreshments. By its memorandum of association the profits made by it were not distributable among its members either before or even after its winding up. Payments were made by the members for services they received at the club premises, e.g., the provision of meals etc. The company 's account showed a surplus of income over expenditure. There was no receipt in the nature of trade from non members. It was held by the Court of Appeal that the company was not carrying on any undertaking of a similar character to that of a trade or business within the meaning of section 53(2)(h) of the Finance Act, 1920. Warington L.J. observed at pages 421 422 of the report in the Law Reports series: "The club proprietor, whether an individual or a company, carries on a business with a view to profit as an ordinary commercial concern. This the present company certainly does not do. I think the proper mode of regarding the company in the present case is as a convenient instrument for enabling the members to conduct a social club, the objects of which are immune from every taint of commerciality, the transactions of sale and purchase being purely incidental to the attainment of the main object. What is in fact being carried on, putting technicalities aside, is a members club and not a proprietary club nor any undertaking of a similar character. " (1) [ ; 12 Tax Cas, 05 8. 306 There was in that case no carrying on of any business with any outsider. The dealings with members were really not in the way of any trade or business and it is only on that basis that the profits were held not to fall within the Finance Act. The position of the company in the United Services Club case (supra) was similar and, as already stated, that decision can be supported only on this principle. The case of Dibrugarh District Club Ltd., vs Commissioner of Income tax, Assam(1), is, if anything, against the company. There an incorporated company carried on a club for the benefit of such persons as might become members. Under the articles of association no shareholder was entitled to the benefits and privileges of the club unless he was elected as a member. All shareholders were not members and all members were not shareholders. Profits were distributable only amongst the shareholders every year. It was held that the company was assessable on the full amount of its profits derived from shareholder members as well as from non share holder members as the company was not a mutual trading society making quasi profits by trading with its own members and returning such profits to its members. The absence of identity between the contributors and participators was quite obvious. The case of The Maharaj Bag Club Ltd. vs Commissioner of Income tax, C.P. & Berar(2) follows the Dibrugarh Club case and carries the matter no further. In Commissioners of Inland Revenue vs Stonehaven Recreation Ground Trustees(1) a recreation ground with facilities for tennis, bowls etc. was held on lease and managed. by 9 trustees. Admission to the ground was by daily, fort nightly, monthly or season tickets issued to any applicant. Of the 9 trustees 6 were elected by the season ticket holders and the remaining by the Local Town Council. The trustees were held assessable as carrying on a trade. The position of the trustees was akin to that of the owner 'of a proprietary club who carried on the club with a view to earning profits. (1) [1927]1.L. R. ; A.I.R.192S Cal. 577 ; 2I.T.C.521. (2) (3) 8 An n. Tax Cas. 307 National Association of Local Government Officers vs Watkins(1) was concerned with an unregistered trade union having for its object the protection of the interest of employees in Local Governments and the promotion of the physical and social welfare of its members. The Association 2purchased an existing holiday camp to provide cheap holiday facilities for its members. Bookings were, however, for a short time accepted from non members who had previously used the camp. By its rules the property of the Association belonged to the members and its profits enured for all members as a whole and not only for those members who used the camp. The Association contended that its liability should be confined to the profits made from non members. The Crown claimed, on the other hand, that as the users of the camp were not identifiable with the whole membership there was no mutual trading and the whole of the profits had been properly assessed. Finley J. gave effect to the contentions of the Association. The learned Judge laid emphasis on the fact that the Association was not a registered body and that, therefore, the property was the property, not of the Association but of the members themselves and that as the members owned the whole they had a right to participate in the whole and, therefore, there could not be any trade between the Association and a member or any sale to a member. The two decisions of the Judicial Commissioners ' Court, namely, Commissioner of Income tax, Bombay vs Karachi Chamber of Commerce(1) and Commissioner of Income tax, Bombay vs Karachi Indian Merchants Association(1) were concerned with mutual dealings between members who had put up money for their mutual benefit. The surplus went to them not as shareholders but as persons who had contributed in excess and was in no sense a profit and could not, therefore, be brought to charge. (1) , (2) I.L.R. (1940) Ear. 140; (3) ; L/B(D)2SCI 6(a) 308 As already stated, in the instant case there is no mutual dealing between the members inter se and no putting up of a common fund for discharging the common obligations to each other undertaken by the contributors for their mutual benefit. On the contrary, we have here an incorporated company authorised to carry on an ordinary business of a race course company and that of licensed victuallers and refreshment purveyors and in fact carrying on such a business. There is no dispute that the dealings of the company with non members take place in the ordinary course of business carried on with a view to earning profits as in any other commercial concern. It is further admitted that some of the dealings of the company with its members take place in the ordinary course of business and the profits arising out of those dealings, e.g, the fourth item of receipt of Rs. 82,490, are taxable. The company gives to its members the same or similar amenities as it gives to non members, namely, the use of an unreserved seat in a stand, the facility to watch the races and to bet on the horses in the races, use of the totalisator in that stand and the facility for refreshment. In fact the daily ticket fee for admission into the Members ' Enclosure is exactly the same as that for admission into the First Enclosure to which the public have access. The only difference is that a sepa rate enclosure with a separate totalisator is provided for the members where they can meet their fellow members and not be disturbed by the intrusion of non members. This privi lege is referable to their membership of the company for which they pay an entrance fee on their election as members and for which they pay the periodical subscriptions both of which are not sought to be brought to charge. The rest of the facilities mentioned above which the members get are in substance the same as those enjoyed by the public. Those facilities are given to members and non members alike for a price. The character of the charge made on members is precisely the same as or is similar to that of the charges made on non members, for the company receives moneys from both members and non members in return for the same or similar facilities given to both in the course of one and the 309 same business. The dealings in both cases disclose the same profit earning motive and are alike tainted with com merciality. In the circumstances, all the four items of receipts from members must be taken into account in com puting the total income of the company. In fact that the company has so long enjoyed exemption from taxation is neither here nor there, for there can be no question of acquiring any prescriptive right to exemption from taxation. The second question need not detain us long. The answer to that question depends on a true construction of section 10(6) of the Act. What is the meaning of "a trade or professional or similar association"? Does this company come within any of those descriptions? It is certainly not a professional association. Learned counsel for the company contends that a "trade association" is not the same thing as a "trading association". According to Webster 's New Inter national Dictionary, 2nd Edn., page 264 the meaning of a "trade association" is an association of tradesmen, businessmen or manufacturers for the protection and advancement of their common interest. In our view the company before us is not a "trade association" in this sense although it carries on a business. In this view of the matter it is unnecessary to discuss the further question whether the facilities or amenities given by the company to its members may be regarded as "services" within the meaning of section 10(6). We are of opinion that section 10(6) has no application, for the company is not a trade or professional or similar association within the meaning of that sub section. The result, therefore, is that we hold that all the items of receipts from members referred to in the questions were received by the company from business with its members within the meaning of section 10(1) and that none of them was received by the company as a trade, professional or similar association within the meaning of section 10(6). In our judgment the High Court should have answered question No. I in the affirmative and question No. 2 in the negative. 310 The appeal is allowed and we award to the Commissioner of Income tax the costs of this appeal and those of the pro ceedings in the High Court. Appeal allowed.

IN-Abs

The assessee, the Royal Western India Turf Club Ltd. was formed inter alia for the purpose of carrying on the business of a race course company in all its branches and to establish clubs, hotels and other convenience in connection with the property of the company. It had two classes of members, club members, whose number was limited to 350 and stand members who were elected by ballot. Every member Paid an entries fee and an annual subscription. The liability of the members was limited by guarantee and if there was any surplus on winding up, it was to be paid to the members in equal shares. An admission fee was levied from the members for admission to the Members ' Enclosure, and from non members for admission to the other Enclosures, and in each Enclosure there was a totalisator. The money 's received from members as well as non members were included in one pool and distributed amongst the holders of the winning tickets. In each Enclosure refreshments were supplied on payment. The company admitted that moneys realised from non members were receipts from business and taxable, but contended that the following items of receipts received from members were not assessable to income tax, viz., (1) season 0admission tickets from members, (2) daily admission gate tickets from members, (3) use of private boxes by members (4) income from entries and forfeits received from members whose horses did not run. The High Court of Bombay held that items 1, 2 and 3 did not fall either under section 10(1) or section 10(6) of the Income tax Act and were therefore not taxable, but item 4 fell within section 10(1) and section 10(6) and was taxable. The Commissioner of Income tax appealed; Held, (i) that the principles of Styles ' case as explained by subsequent cases had no application to the company as there was no mutual dealing between the members inter se in the nature of mutual insurance and no contribution to a common fund put up for payment of liabilities undertaken by each contributor to the other contributors, and no refund of surplus to the contributors, but on the other hand, the company realised moneys both from the members and non members for the same consideration, namely, by the giving of the same or similar facilities to all alike in the course of one and the same business carried on by it; (ii)that, as the company was formed for carrying on a business it had dealings with its members also in the ordinary course of business, and give the same or similar amenities to members and non members, and there were no mutual dealings between the members or a common fund for the discharge of common obligations to each other, the principle applicable to the surplus of contributions made by members of a club for Providing themselves with amenities was also not applicable to the case; (iii) a "trade association" means an association of tradesmen businessmen or manufacturers for their common protection and advancement, and the assessee was not therefore "a trade or similar association" within section 10(6) of the Income tax Act; 291 (iv) that all the abovementioned 4 item of receipts from members were received by the company from business carried on by it with its members within the meaning of section 10(1) and none of them was received by the company as a trade, profes sional or similar association within the meaning of section 10(6), and ail the items were accordingly assessable to income tax. The New York Life Insurance Co. vs Styles (Surveyor of Taxes) ; The Cornish Mutual Assurance Co. Ltd. vs The Commissioners of Inland Revenue L. R. ; , Jones vs South Wales Lancashire Coal Owners ' Association Ltd. L. R. Municipal Mutual Insurance Co. Ltd. vs Hills (1932) 16 Tax Cas. 430, English & Scottish Joint Co operative Wholesale Society Ltd. vs Commissioner of Agricultural Income tax, Assam [1948] A. C. 405; , Carlisle and Silhoth of Golf Club vs Smith , Royal Calcutta Turf Club vs Secretary of State Cal. 844, United Services Club, Simla vs The Crown Lah 109. Eccentric Club Case Dibrugarh District Club Ltd. vs Commissioner of Income tax, Assam Cal. 971, The Maharaj Bag Club Ltd. V. Commissioner of income tex, C.P. & Berar, (1931) 5 I.T.C. 201. Commissioners of Inland Revenue vs Stonehaven Recreation Ground Trustees The National Association of Local Government officers vs Watkins Commissioner of Income tax. Bombay vs Karachi Chamber of Commerce ; and Commissioner of Income tax. Bombay vs Karachi Indian Merchants Association , referred to.

vil Appeal Nos. 801 and 802 of 1962. Appeals from the judgment and d. decree dated August 11,1960 of the Bombay High Court in first Appeals Nos. 819, 820 of 1955. Purshottam Trikamdas, V.J. Jhaveri and S.N. Andley for the appellants (in both the appeals). K.H. Bhabha, lqbal Chagla and J.B. Dadachanji, for the respondent (in both the appeals). The Judgment of the Court was delivered by Bachawat, J. The Bank of Poona Ltd., (hereinafter referred to as the Company) now amalgamated with the SangIi Bank, Ltd. was incorporated in 1945. The Company was promoted by N.G. Parulekar and Murlidhar Chaturbhuj Loya. The authorised capital of the Company was Rupees fifty lakhs divided into 50,000 ordinary shares of Rs. 100/ each. By the end of April, 1946, the Company was able to find subscribers for 4,860 shares only. In view of section 277(1) of the Indian Companies Act, 1913, the Company was unable to carry on business unless the subscribed capital was not less than half the authorised capital. In order to comply with the requirements of section 277(1), the directors of the Company decided that they or their nominees would subscribe for a large number of shares. Narayandas Shriram Somani was one of the directors of the Company. Ramnath Shriram Somani is his brother. They carried on business in the name of Ramkisan Ramratan Somani. Jivanbai is the mother of Narayandas and Ramnath Goverjabai is the wife of Narayandas, and Kamalabai is the wife of Ramnath. Narayandas decided to subscribe for 2000 shares in the names of the three ladies. At a meeting held on May 25, 1946, the board of directors of the Company allotted 500 shares to Goverjabai, 500 shares to Kamalabai and 1000 shares to Jivanbai against three separate applications for shares signed by them. The applications were accompanied by three separate hundis dated May 25, 1946 for Rs. 25,000, Rs. 12,500 and Rs. 12,500 drawn by Narayandas in favour of the Company. The meeting of May 25, 1946 was attended by three directors, Murlidhar Loya, D. R,, Nayak and Narayandas. At that meeting, the directors also sanctioned a 779 loan of Rs. 60,000 to Ramnath. On May 28, 1946, Ramnath obtained from the Company the loan of Rs. 60,000 against his promissory note, and a separate loan account No. 1/18 was opened in his name in the books of the Company. The three hundis were honoured on May 29, 1946. The directors of the Company at a meeting held on June 8, 1946 resolved to give an overdraft of Rs. 40,000 to Ramnath. A separate overdraft account L.A./C No. 71 in the name of Ramnath was opened in the books of the Company, and Ramnath obtained the sanctioned overdraft by a cheque dated June 27, 1946 for Rs. 15,000/ and another cheque dated June 29, 1946 for Rs. 25,000. The balance of the application and allotment moneys amounting to Rs. 12,500, Rs. 12,500 and Rs. 25,000 in respect of the shares of Goverjabai, Kamalabai and Jivanbai were paid to the Company on June 22, June 28 and June 29 respectively. There is reason to believe that the subscription of the 2000 shares was financed. , by the advances to Ramnath. On December 28, 1948, Ramnath was indebted to the Company in his loan account for Rs. 65,743 6 6 and in his overdraft account for Rs. 41,909 10 0. On that date, both accounts were closed, and a new loan account No. 9 with a debit of Rs. 1,09,500/was opened in the name of Ramnath, who executed a promissory note. The Reserve Bank of India was pressing the Company to take steps in respect of the advances to Ramnath. In these circumstances, Ramnath repaid to the Company Rs. 18,500/ on December 29, 1950 and Rs. 1,500/ on January 2, 1951. At the same time, on January 6, 1951, the Company gave a new loan of Rs. 20,000/ to Ramkisan Ramratan Somani and Ramnath, and the borrowers executed a joint and several promissory note in favour of the Company for the sum of Rs. 20,000/ . In respect of this loan, a separate loan account was opened in the books of the Company. In his loan 'account No. 9, Ramnath repaid Rs. 1,00,000/ on December 27, 1951 and Rs. 4,198 8 0 on December 29, 195.1, and as a result of the last payment, the account was closed. The above sum of. 1,00,000/ was paid on behalf of Ramnath by Narayandas, who on the same date obtained a loan of Rs. 1,00,000/ from the Company. On the same date, Narayandas executed a promissory note for the sum of Rs. 1,00,000/ , a letter of pledge and trust receipt in respect of cloth, saris etc., valued at Rs. 1,50,000/ , and a separate loan account No. 6/184 in his name was opened, in the books Of the Company. In spite of demands, the Company was unable to realise its dues in respect of the outstanding loans. On March 18, 1954, the Company instituted Special Suit No. 39 of 1954 in the Court of the Civil Judge, Senior Division of Poona, against Ramkisan Ramratan Somani and Ramnath for the recovery of Rs. 22,964 13 0 due from them in respect of their loan account and the promissory note dated January 6, 1051. The suit was dismissed by the trial (N) 5SCI 11 780 Court on April 23, 1955, but in First Appeal No. 819 of 1955 preferred. by the Company, the High Court decreed the suit. Civil Appeal No. 801 of 1962 arises out of this claim. On April 24, 1954, the Company instituted Special Suit No. 78 of 1954 in the Court of the Civil Judge, Senior Division, Poona against Narayandas for the recovery of, Rs. 1;09,099 14 4 due from him in respect of the loan account No. 6/184 and the promissory note dated December 27, 1951. On April 23, 1955, the trial Court dismissed the suit, 'but in First Appeal No. 820 of 1955 preferred by the Company, the High Court decreed the suit. Civil Appeal No. 802 of 1962 arises out of this claim. On behalf of the appellants, Mr. Purushottam Tricamdas contended ' that the allotment of the 2000 shares and the several loans in the names of Ramnath and Narayandas were not genuine transactions, and that the parties did not intend that the allottees would be the holders 'of the shares or that Narayandas and Ramnath would be liable to repay the loans. It is to be noticed that the plea that the allotment of the 2000 shares was not intended to be operative, was not sufficiently raised in the pleadings. Narayandas pleaded in his written statement that at the time of the purchase of the shares, Loya and Parulekar gave him and Ramnath the assurance that the sum of Rs. 1,00,000/ required for the purchase of the shares would be paid by the Company on interest at 41/2 per cent per annum and Loya and Parulekar would not demand and recover the amount but they would sell the shares and credit the amount of the sale proceeds towards the principal and interest in the loan account and would not allow Narayandas and Ramnath to suffer loss with regard thereto. Narayandas swore that it was agreed between him, Parulekar and Loya that he would nominally take the 2000 shares which would be finally sold to others and he would be out of liability and he and Ramnath would not repay the loans nor take any benefit thereunder. He also suggested that he or Ramnath did not repay any moneys out of their own pocket, and all repayments in the accounts were made out of the moneys received by him from the Company. At the trial, the Company did not examine either Loya or Parulekar. It may be that Loya and Parulekar gave some understanding to Narayandas with regard to the disposal of. the shares, and in view of this understanding, they subsequently. executed in favour of Narayandas two letters dated December 27, 1951, whereby Parulekar agreed to buy from him 500 shares and Loya agreed to buy from him 800 shares. But these assurances, if any, were given to Narayandas by Parulekar and Loya in their individual capacity and not as directorS, of the Company. There is no record of any assurance given on behalf of the Company to; Narayandas in the minutes of the board meetings. Narayandas and ' his nominees, Goverjabai, Kamalabai and,. Jivanbai dealt with the shares on the footing that they. were the owners of. the shares some of the shares.were transferred to third parties under transfer 781 deeds executed by Jivanbai, and the sale proceeds were credited to the loan account of Narayandas Jivanbai received from the Company all the 1000 shares allotted to her and executed a receipt dated February 25, 1953. Narayandas obtained from Loya and Parulekar written undertakings dated December 27, 1951 for the purchase of 800 and 500 shares respectively. By letter dated June 28, 1954, Narayandas called upon Parulekar to fulfil his undertaking for the purchase of 500 shares. All these circumstances prove that the allotment of the 2000 shares was intended to be operative and the allottees were intended to be the holders of the shares. Ramnath out of his own funds paid several sums of money towards discharge of his indebtedness in the loan accounts. He paid Rs. 750 4 0 in the overdraft account towards interest on December 12, 1946 and Rs. 1,484 7 0 in the loan account No. 1/18 on April 21, 1947, and we are not satisfied that these sums were paid out of commission earned by Narayandas from the Company. Similarly, on December 29, 1951, he paid Rs. 4,198 8 0 in the loan account No. 9 and on January 4, 1954, Rs. 100/ was paid by Ramkisan Ramratan and Ramnath in their loan account. The loan accounts were secured by promissory notes. Moreover, the loan account of Narayandas was secured by a trust receipt and a letter of pledge. Even on March 3, 1953, Narayandas executed a letter in favour of the Company declaring that he held as security a stock of sarees valued at Rs. 1,50,000/ . In respect of other loan transactions, the Company charged the appellants interest at the rate of 6 per cent and those loans were repaid quickly. But the loan transactions in suit were intended to be of a more permanent nature, and in order to accommodate Narayandas and Ramnath, the Company agreed to charge interest at 41/2 per cent. We are satisfied that the allotment of the 2000 shares was intended to be operative and the allottees became the owners of the shares. We are also satisfied that the loans to Ramnath and Narayandas were intended to be operative, and the Company did not give any assurance to them that. they would not be called upon to repay the loans. The next contention of Mr. Purushottam Tricamdas arises in this way. Article 126 of the articles of association of the Company provides that the directors may determine the quorum necessary for the transaction of business, and unless and until otherwise determined, three directors shall be the quorum. The directors did not make any other determination with regard to quorum, and at all material times, a quorum of three was required for a directors ' meeting. The board meeting of May 25, 1946 was attended by three directors only, namely, M. C. Loya, D. R. Nayak and Narayandas. At this meeting, the directors resolved to allot 2000 shares to the nominees of Narayandas. Narayandas was dearly interested in the allotment of the shares. Section 91B(1) of the Indian Companies Act, 1913 provided that "No director shall, as a director, 782 vote on any contract or arrangement in which he is either directly or indirectly concerned or interested nor shall his presence count for the purpose of forming a quorum at the time of any such vote; and if he does so vote, the vote shall not be counted". The Poona Bank, Ltd. was a public company, and section 91B(1) applied to its directors. Narayandas, therefore, ought not to have. voted at the meeting of May 25, 1946. If his vote is excluded, there was no quorum for the meeting. Mr. Purushottam Tricamdas, therefore, contended that the allotment of 2000 shares to the nominees of Narayandas at this meeting was invalid and no title passed to the allottees in respect of the shares, and in the circumstances, there was a total failure of the consideration paid for the shares, and as the consideration was paid out of the loans, the appellants are not liable to repay the same. Now, a director of a company stands in a fiduciary position towards the company and is bound to protect its interests. For long, it has been an established rule of equity that he must not place himself in a position in which his personal interest conflicts with his duty, and unless authorised by the company 's articles, he must not vote as a director on any contract or arrangement in which he is directly or indirectly interested. Standard articles give effect to this rule of equity. See Palmer 's Company Precedents, 17th Edn, Part I, p. 553. If he votes in such a case, his vote would not be counted, and his presence would not count towards the quorum, that is to say, the minimum number fixed for the transaction of business by a board meeting, for a quorum must be a disinterested quorum, and must be comprised of directors who are entitled to vote on the particular matter before the meeting. See In re. Yuill vs Greymouth Point Elizabeth Railway and Coal Company, LimitedC). If an interested director votes and without his vote being counted there is no quorum, the meeting is irregular, and the contract sanctioned at the meeting is voidable by the company against the director and any other contracting party who has notice of the irregularity, see Transvaal Lands Company vs New Belgium (Transvaal) Land and Development CompanyC); but the company may waive the irregularity and affirm the transaction. The matter is put succinctly by Gore Browne in Handbook on Joint Stock Companies, 41st Edn., p. 363 thus: "According to the well established rule that an agent can not act on behalf of his principal in a matter in which the agent has a conflicting interest or duty, directors are precluded from taking part in any resolution under which they take a benefit or which adopts a contract that concerns them unless the Articles authorises their doing so. It must be here noted that if interested directors take part in any transaction there is an irregularity (1) [1904] 1 ch. (2) [1914] 2 Ch. 488. 783 which renders the transaction voidable by the company as against the directors and any persons who have knowledge of the facts". Section 91 B embodied the existing rule of equity in the form of a statutory provision. In Pratt (Bombay) Ltd. vs M.T. Ltd. and Sassoon & Co. Ltd. vs Pratt (Bombay) Ltd.(1), Sir George Rankin observed that the section is a concise statement of the general rule of equity explained in the Transvaal Lands Company 's caseC), and he pointed out that the impugned transactions on which the interested directors had voted, were voidable by the official liquidator of the company. The voting by the interested director, of itself, does not invalidate the contract. The effect of section 9lB is that the vote of the interested director must be excluded, and if as a result of such exclusion there is no quorum, the resolution sanctioning the contract is irregular and the contract is liable to be avoided by the company against the directors and any other contracting party having notice of the irregularity. Section 9lB is meant for the protection of the company, and the company may, if it chooses, waive the irregularity and affirm the contract. We think that the allotment of the 2000 shares to the nominees of Narayandas in the meeting of the directors of the company held on May 25, 1946 was not void. In view of the fact that Narayandas was not entitled to vote on the allotment and after exclusion of his vote there was no quorum, the allotment was irregular, and the Company was entitled to avoid the. allotment. Instead of avoiding the allotment, the Company has chosen to affirm it. The allotment is, therefore, valid and binding on the allottees. Moreover, Narayandas cannot be heard to say that there was no valid allotment of the shares. For the purpose of satisfying the requirement of section 277(I) it was necessary to allot the shares, and he allowed the Company to commence business on the footing that the shares had been subscribed. He was a director of the Company and a party to the resolution allotting the shares. He dealt with the shares on the footing that the allottees were the holders of the shares with a clear knowledge of the circumstances on which he might have rounded his present objection. He cannot now be heard to say that he was interested in the allotment and could not vote. Like the director in York Tramways Company vs Willows(3), he is now estopped from contending that the allotment is invalid. For all these reasons, we hold that the allotment is valid, and there is no failure of consideration. In the plaint in Suit No. 78 of 1954, the Company pleaded that ,on December 27, 1951 Narayandas took from it on loan a sum of (1) I.L.R. (2) [1914]2 Ch. (3) [1882] 8 QB.V. 685, 784 Rs. 1,00,000/ and executed an on demand promissory note for the amount. Mr. Purushottam Tricamdas contended that, as a matter of fact, no cash amount was paid and no loan was advanced by the Company to Narayandas on December 27, 1951, and consequently, the suit as framed is not maintainable. Now, at the relevant time, Ramnath was indebted to the Company for Rs. 1,04,198/ in respect of loan account No. 9. On December 27, 1951, at the request of Narayandas, the Company credited Ramnath with Rs. 1,00,000/ in his loan account and debited Narayandas with Rs. 1,00,000/ in a new loan account opened in his name. On the same date, Narayandas acknowledged in writing the receipt of Rs. 1,00,000/ and executed a promissory note for the amount in favour of the Company. Ramnath took full advantage of the credit of Rs. 1,00,000/ and on payment of the balance of Rs. 4,198 8 0 closed his loan account No. 9. Though no actual money passed, the two entries in the books of account amounted to payment of Rs. 1,00,000/ by the Company to Narayandas by way of a loan and repayment of the same amount by Narayandas to the Company towards discharge of the indebtedness of Ramnath in the latter 's loan account with the Company. The result was as if the Company had paid a sum of Rs. 1,00,000/ in cash to Narayandas and then Narayandas had returned the amount to the Company with instructions to credit it to Ramnath. To support a plea of payment, it is not necessary to show that cash passed. Illustration (a) to section 50 of the shows that payment may be made by means of transfer entries in books of account. The Company has sufficiently established a payment of Rs. 1,00,000/ by it to Narayandas by way of loan on December 27, 1951. Mr. Purushottam Tricamdas contended that the loans to Narayandas and Ramnath were financial assistance by the Company for the purpose of or in connection with the purchase of its shares by Narayandas or his nominees, and the loans being in contravention of section 54A(2) of the Indian Companies Act, 1913 were illegal and could not be recovered. Mr. K.N. Bhabha contended (1) that the appellants ought not to be allowed to take this new point in this appeal; (2) the lending of the money was a part of the ordinary business of a banking company and the loans to Ramnath and Narayandas were made by the Company in the course of its business; and (3) having regard to the decision in Re V.G.M. Holdings, Ltd(1), the word "purchase" in section 54A(2) did not include the acquisition of shares by subscription or allotment, and in this case, the loans were given in connection with the acquisition by Narayandas or his nominees of shares by subscription or allotment. and not in connection with acquisition of shares by :purchase, and consequently, section 54A(2) had no application. Now, it appears that in paragraph 15 of his written statement Narayandas pleaded that (1) 785 the advance of loans to him in connection with the purchase of shares was illegal, but no issue was raised on the question whether the loans were financial assistance in connection with the purchase of the shares and were in contravention of section 54A(2). There is a passing reference to this contention in paragraph 15 of the judgment of the trial Court, but there is no reference to it in the judgment of the High Court. We find also that this contention finds no place in the statement of the case filed on behalf of the appellants. Mr. Purushottam Tricamdas relied on ground No. 12 of the appellants statement of case, but, we think that this ground is wholly insufficient to raise this contention. In these circumstances, we think that it is not open to the appellants to urge this contention, and we indicated this to Mr. Purushottam Tricamdas in the course of the argument. In the Courts below, the appellants contended that Kamalabai was a minor, and, therefore, the allotment of 1000 shares to her was. invalid '. This contention is no longer pressed, and does not survive. No other contentions were advanced before us. In the result, the appeals are dismissed with costs, one hearing fee. Appeals dismissed.

IN-Abs

The respondent Bank was unable to carry on business after it was promoted, in view of section 277(1) of the Companies Act, 1913, because 'its subscribed capital was less than half the authorised capital. In order to comply with the requirements of the section, the directors decided that they or their nominees would subscribe for a large number of shares. The first appellant was a director of the Bank and the second appellant was the firm of the first appellant and his brother. The first appellant, decided to subscribe for 2000 shaves in the names of 3 ladies of his family, and the allotments of shares were made at a meeting of directors at which the first appellant also voted. At that meeting and subsequently various loans were advanced to the second appellant. A sum of Rs. 100,000 which was shown as a loan to the brother was later on adjusted by crediting his account with that item and debiting the account of the first appellant with that amount. The first appellant executed a promissory note and a letter of pledge for the amount, and the brother paid off the balance due from him after giving effect to the credit entry, and that loan account was closed. Suits were filed by the respondent against the appellants for realization of the sums due from them. The trial Court dismissed the suits but the High Court decreed them. In their appeals to this Court the appellants contended inter alia that: (i) if the vote of the first appellant be not counted as required by section 91B(1) of the Act because of his interestedness in the allotment, there would be no quorum for the meeting and therefore the allotment of shares to the nominees of the first appellant would be invalid, and as the consideration for the shares was paid out of the loans, the appellants would not be liable to repay those loans; (ii) since no cash amount was paid and no loan advanced by the respondent to the first appellant the suit to recover the sum of Rs. 100,000 as a loan was not maintainable. HELD: (i) The allotment of the shares at the meeting, to the nominees of the first appellant was not void. In view of the fact that the first appellant was not entitled to vote on the allotment and after the exclusion of his vote there was no quorum, the allotment was irregular and the respondent was entitled to avoid it. But, instead of avoiding the allotment the respondent has chosen to affirm it and so the allotment is valid and binding on the allottees. [783 E] 778 Moreover, the first appellant was a party to the resolution allotting shares and dealt with the shares on the footing that the allottees were the holders with a clear knowledge of all circumstances, and therefore, was estopped from contending that the allotment was invalid. [783 F G] (ii) To support a plea of payment, it is not necessary to show that cash passed. Illustration (a) to section 50 of the , shows that payment may be made by means of transfer entries in books of account. [784 E]

Criminal Appeal 151 of 1963. Appeal by special leave from the judgment and order dated March 27, 1962 of the Punjab High Court in Criminal Revision No. 1137 or 1961. Gopal Singh, for the appellant. The respondent did not appear. The Judgment of Wanchoo and Sikri JJ. was delivered by Wanchoo J. Mudholkar J. delivered a dissenting opinion. Wanchoo, J. This appeal by special leave raises the question of the interpretation of section 259 of the , No. 11 of 1924, (hereinafter referred to as the Act). The respondent was a tenant of the appellant. An application was made by the Cantonment Executive Officer, Ambala, on January 7, 1960, for realisation of a sum of Rs. 649.50 from the respondent under section 259 of the Act on the ground that the amount was due as arrears of rent on the basis of a lease in favour of the respondent. The respondent apparently questioned the jurisdiction of the magistrate to realise the amount. The magistrate held that he had jurisdiction and issued warrants for attachment of the movable property of the respondent on June 13, 1961. Thereupon the respondent went in revision to the Sessions Judge Ambala contending that the magistrate had no jurisdiction to realise the arrears of rent due under a lease 343 under section 259 of the Act and in any case that could not be done without taking into account the objections of the respondent. The Sessions Judge following certain earlier decisions of the Lahore High Court took the view that rent under a lease could not be recovered under section 259 of the Act and made a reference to the High Court under section 439 of the Code of Criminal Procedure. The High Court heard the reference and accepted the view of the Sessions Judge and set aside the order of the magistrate dated June 13, 1961. The High Court having refused the certificate, the appellant obtained special leave from this Court; and that is how the matter has come up before us. Two questions have been raised by learned counsel for the appellant in this appeal. In the first place, he urges that the magistrate when he is acting under section 259 of the Act is a persona designata and therefore his order is not revisable under sections 435/439 of the Code of the Criminal Procedure. The Sessions Judge and the High Court therefore had no jurisdiction to interfere with that order under sections 435/439 of the Code of Criminal Procedure. Secondly, it is urged that the view taken by the High Court that arrears of rent due under a lease cannot be recovered under section 259 of the Act is incorrect. The question as to the jurisdiction of the Sessions Judge and High Court was never raised before the appeal in this Court. Learned counsel, however, relies on the Dargah Committee,Ajmer vs State of Rajasthan(1) in support of his contention that the magistrate acting under section 259 of the Act acts as a persona designata and therefore his order under that section is not revisable under sections 435/439 of the Code of Criminal Procedure and the Sessions Judge and the High Court had no jurisdiction under those provisions to interfere with such an order. The case cited on behalf of the appellant certainly supports the contention put forward; but in the circumstances of this case we are not prepared to allow this contention to be raised at this stage. It is true that a question of jurisdiction, not depending upon facts to be investigated, can be allowed to be raised at any stage. Ordinarily if we were satisfied that the High Court had no jurisdiction at all to interfere we would have allowed this question to be raised even at this late stage. But we are of opinion that though the High Court may not have jurisdiction to interfere under sections 435/439 of the Code of Criminal Procedure it could certainly interfere with the order of the magistrate under article 227 of the Constitution. Now if this point had been raised before the High Court it may very well be that the High Court might have considered the reference as if it was an application before it under article 227 of the Constitution, in which case the High Court would have jurisdiction to interfere with the order or the magistrate if it came to the conclusion that the magistrate had 344 no jurisdiction in such circumstances under section 259 of the Act. In these circumstances we are not prepared to permit the appellant to raise this point before us at this late stage. This brings us to the interpretation of section 259 of the Act as it stood after amendment by Act II of 1954. The relevant part of the section now reads as follows : "Notwithstanding anything elsewhere contained in this Act, arrears of any tax, rent on land and buildings and any other money recoverable by a Board or a Military Estate Officer under this Act or the rules made thereunder may be recovered together with the cost of recovery either by a suit or. on application to a Magistrate having jurisdiction in the cantonment or in any place where the person from whom such tax, rent or money is recoverable may for the time being be residing, by the distress and sale of any movable property of, or standing timber, or growing crop belonging to such person which is within the limits of such magistrate 's jurisdiction, and shall if payable by the owner of any property as such, be a charge on the property until paid; provided. . . . . . . . . (2) * * * * . ' ' The first question that arises is whether rent on land and buildings mentioned ' in the section is governed by the words "recoverable b a Board or a Military Estates Officer under this Act or the rules made thereunder". There is no doubt that "any tax" and "any other money" mentioned in the section are governed by the words "recoverable by a Board etc. " It seems to us that the words "rent on land and buildings" which appear between the words "any tax" and "any other money" must equally be governed by the words "recoverable by a Board etc." Therefore the provisions of section 259 of the Act can be utilised for realisation of arrears of rent on land and buildings only if such rent is recoverable by a Board or a Military Estates Officer under the Act or the rules made thereunder. The word "recoverable" in the context obviously means "claimable". for section 259 itself provides for the manner of recovery. Therefore action for recovery can be taken under section 259 with respect to rent on land and buildings provided such rent is claimable by a Board under the Act or the rules framed thereunder. This view was taken by the Lahore High Court in Banarsi Das vs Cantonment Authority Ambala Cantonment (1) and is in our opinion correct. It may be added that in 1938. the words "rent on land ' and buildings" and "under the rules" did not appear in section 259. Even so. the Lahore High Court took the view with respect to the section as it then stood that the money to be recovered under 8. 259 must be claimable by the Board under the Act. (1) A.I.R. 1933 Lah. 345 The next question that arises is whether "rent on land and buildings" on lease can be said to be claimable by the Board "under the Act or the rules. made thereunder". It is urged on behalf of the appellant that cl. (p) of section 116 of the Act provides for "maintaining and developing the value of property vested in, or entrusted to the management of the Board", and section 116 A gives the Board power to manage any property entrusted to its management by the Central Government on such terms as to the sharing of rents and profits accuring from such property as may be determined by rule. Further reliance is placed on the Cantonment Property Rules, 1925. Rule 8 thereof provides that immovable property which vests in and belongs to the Cantonment Authority may be leased by the Cantonment Authority without a premium on the condition that a reasonable rent is reserved and made payable during the whole term of the lease and that the lease or the agreement for the lease is not made without the previous sanction of the Cantonment Authority by resolution at a general meeting, or the Officer Commanding in Chief of the Command or the Government of India as the case may be. It is urged that these provisions of the Act and the Rules show that the Board has the power to claim rent thereunder in respect of the leased property. Reliance is further placed on the Cantonment Land ' Administration Rules 1937 which provide how rents would be fixed when land is leased out by the Cantonment Authority. Rule 4 of these Rules provides for classification of land and r. 8 for standard table of rents; r. 9 (6) vests the management of class 'C ' land in the Board; r. 26 provides for disposal of land ' by private agreement; r. 28 for execution of leases, rr. 29 and 30 for maintenance of grants registers of building sites; r. 31 for leases for special periods and on special terms; r. 32 for agricultural land leases; r. 34 for record of agricultural leases; r. 35 for execution of agricultural leases; r. 37 for leases for miscellaneous purposes and r. 41 for special conditions in leases. It may be mentioned that originally there was a rule (r.42) in these terms : "Recovery of arrears All arrears of rent and other payment under these rules together with interest on such arreas at the rate of seven and a half per cent per annum from the date when they become due to the date of their realisation, shall, on the application of the person specified in sub section (2) of section 259 of the Act, or of the Military Estates Officers, as the case may be, recoverable in the manner provided in that section. " That rule however no longer exists as it was repealed in 1940. There is no doubt that in view of the provisions of the Act, the Property Rules and the Land Administration Rules to which we have referred above, the Board has the power to manage lands (1) A.I.R. 1933 Lab. 517, 346 and Buildings vested in it or entrusted to its management, lease them out and fix rents therefor. But the right of the Board to claim the rent on land and buildings does not arise from these provisions under the Act and the Rules referred to above. The right of the Board to claim rent only arises after the execution of the lease. Therefore rent on land and buildings is not claimable by the Board under the provisions of the Act or the Property Rules or the Land Administration Rules but under the lease. It follows therefore that section 259 (1) cannot be applied to a simple case of money due to the Board on a contract of lease. It is however urged on behalf of the appellant that the words "rent on land and buildings" which were added by the 1954 Amendment refer to something of that kind which is recoverable under section 259 as otherwise the amendment would be meaningless. That is undoubtedly so. We find however, that section 256 provides that in the event of non compliance with the terms of any notice, order or requisition issued to any person under this Act, or any rule or bye law made thereunder, requiring such person to execute any work or to do any act, it shall be lawful for the Cantonment Authority after giving notice in writing to such person, to take such action or such steps as may be necessary for the completion of the act or work required to be done or executed by him, and all the expenses incurred on such account shall be recoverable by the Cantonment Authority. Section 257 then provides that if any such notice as is .referred to in section 256 has been given to any person in respect of property of which he is the owner. the Cantonment Authority may require any occupier of such property or of any part thereof to pay to it, instead of to the owner, any rent payable by him in respect of such property, as it fails due, upto the amount recoverable from the owner under section 256 and it further provides that any amount recovered from any occupier instead of from an owner under sub section (1) shall. in the absence of any contract between the owner and the occupier to the contrary, be deemed to have been paid to the owner. Here at any rate we have an example of the Board 's power to claim rent from a tenant of an owner under section 257 of the Act read with section 256. So it cannot be said that there is no case where the Act does not provide for claim of rent by the Board. We may add that there may be other cases like this either under the Act or under the Rules. In our view it is in such cases where the Act or the Rules in terms make the rent on land and buildings claimable by the Board. that section 259 will apply. But where the liability to pay rent arises purely on the basis of a lease between the Board and the tenant, nothing in the Act or the Rules has been brought to our notice, particularly after r. 42 referred to above has been repealed, which makes such rent claimable by the Board under the Act or the Rules. We may add r. 42 was repealed long before 1954 when the words "rent on land and buildings" came in section 259. So it cannot be argued that the omission of r. 42 was due to the amendment of 1954. 347 It is urged that the section provides for recovery by suit also and as such it wilI not be possible for the Board to recover rent of land and buildings let out by it even by suit if the rent in the section refers only to rent directly claimable under the Act or the Rules. This is clearly incorrect. The section does not bar the right of the Board as an owner or holder of land and buildings to take action for recovery of rent thereof by suit under the general law of the land. Further by providing for recovery of rent of the kind we have indicated above by suit or by application rent of the kind we have indicated above by suit or by application to a magistrate the section does not affect the right of the Board to recover rent of its land and buildings by suit for such rents are entirely outside the section and the right of the Board under the general law of the land is not taken away by the section. It may be that the section provided for recovery by suit as an alternative as a matter of abundant caution to avoid an argument that the application to a magistrate was the only means open to the Board for recovery of sums covered by the section. In any case the view we are taking will not affect the right of the Board to recover by suit under the general law rent of its land and buildings given on lease. In the circumstances we agree with the High Court that the rent in this case was not claimable by the Board under the Act or the Rules but only under the lease in favour of the respondent. Therefore section 259 (1) insofar as it refers to recovery of such rent by application to a magistrate will not apply. In the circumstances the appeal fails and is hereby dismissed. Mudholkar, J. The question which falls for a determination in this appeal is whether under section 259 of the Cantonment Act, No. II of 1924 'rent ' on land or buildings under the management of the Cantonment Board can be recovered thereunder by a Magistrate. This question was raised by the respondent in a revision application made by him before the Sessions Judge under section 435 of the Code of Criminal Procedure against the order of the Magistrate, II Class, made under the aforesaid provision upon an application made to him by the Executive Officer, Ambala Cantonment for the recovery of Rs. 649.50 nP being the arrears of rent alleged to be due from the respondent to the Cantonment Board. the learned Sessions Judge made a reference to the High Court under section 438 of the Code of Criminal Procedure on the authority of the decisions in Municipal Committee, Delhi vs Hafiz Abdullah (1) and Guranditta Mal vs Emperor (2). The High Court, after referring to these cases and to Banarsi Das vs Cantonment Authority, Ambala Cantonment (2) accepted the reference and set aside the order of the Magistrate. By special leave the Cantonment Board has come up to this Court in appeal. (1) A.I.R 1994 Lah 699 (2) A.l. R. (3) A.l. R. 348 Two points were urged by Mr. Gopal Singh appearing for the appellant. The first is that the proceeding before the Magistrate was not one under the Code of Criminal Procedure and, therefore, neither could a reference be made by the Sessions Judge to the High Court under section 438. P.C. nor could an order be made by the High Court under section 439. The second point is that upon a correct interpretation of section 259 of the Act the Magistrate had the power to recover the rent due to the appellant in the manner provided for in the section. We did not allow the first contention to be raised for two reasons. In the first place the point was not raised in the High Court and in the second place it would not be fair to the respondent who is ex parte to have the appeal decided upon a new ground altogether. In so far as the second point is concerned it seems to me that the contention of Mr. Gopal Singh is correct and that the High Court was in error in setting aside the order of the Magistrate. The two cases upon which reliance was placed before the High Court arose under section 81 of the Punjab Municipal Act (III of 1911) which runs thus: "Any arrears of any tax, water rate, rent, fee or any other money claimable by a committee under this Act may be recovered on an application to a Magistrate." According to the Lahore High Court the operation of this section was controlled by the words "claimable by a committee under this Act" and that it was not any sum that could be described as rent or fee which could be recovered under summary provisions of that section. According to that High Court only a sum that was claimable by the Committee under the express provisions of that Act could be recovered by resort to summary procedure provided by that section. In Banarsi Das 's case(1) it was similarly held that the expression "recoverable by the Cantonment Authority under the Act" did not include money due under an ordinary contract between the Cantonment Authority and others and that section 259 of the Act applied only to such monies as were recoverable by that authority under express provisions of the Act. It is this last decision which was relied upon by the High Court and it pointed out that though the word rent did not occur in section 259 of the Act as it stood when Banarsi Das 's case(1) was decided the introduction of that word had not altered the position in so far as recovery of rent is concerned. Section 259 of the Act as it now stands runs thus: "Notwithstanding anything elsewhere contained in this Act, arrears of any tax, rent on land and buildings and any other money recoverable by a Board or a Military Estates Officer under this Act or the rules made thereunder may be recovered together with the cost of recovery (1) A.I.R. 1938 Lah. 349 either by a suit or on application to a Magistrate having jurisdiction in the cantonment or in any place where the person from whom such tax, rent or money is recoverable may for the time being be residing, by the distress and sale of any movable property of, or standing timber or growing crop belonging to such person which is within the limits of such magistrate 's jurisdiction, and shall, if payable by the owner of any property as such, be a charge on the property until paid for. " Then there is a proviso which need not be quoted. The aforesaid section deals with "Method of recovery". It sets out two methods: one is institution of a suit and the other is making of an application to a Magistrate. Therefore, where rent of land or building under the management of the Cantonment Authority falls to be recovered. resort could be had ' either to a suit or to summary proceeding as provided in the section. But if the expression "rent" is confined to money due under some express provision of the Act it will lead to a curious result. Thus in respect of rent of land or buildings under the management of the Board neither remedy would be available though the claim for the rent is ultimately traceable to those provisions of the Act and ' the Rules which empower the Board to let out the land or buildings upon the ground that it cannot be said to be claimable or recoverable under any express provision of the Act. Surely the Legislature could never have meant that even a suit for recovery of rent would be maintainable at the instance of the Board only if it was for the purpose of recovery of rent from a tenant who was liable under an express provision of the Act or the Rules to pay rent to the Board. Under sections 116 and 116A of the Act. read along with Cantonment Land Administration Rules, 1937, the Cantonment Board is entrusted with certain duties and is empowered to do certain acts in relation to the Cantonment property under its management. It is the duty of the Board, among other things, to maintain and develop the property vested in or entrusted to its management. Section 116 A provides as follows: "A Board may, subject to any conditions imposed by the Central Government, manage any property entrusted to its management by the Central Government on such terms as to the sharing of rents and profits accruing from such property as may be determined by rules made under section 280. " The Cantonment Land Administration Rules, 1937 contain detailed provisions as to the leasing of land, standardisation of rents, disposal of land by a private agreement, execution of leases etc. Powers are thus conferred upon the Board to let out property vested in it or which is under its management. It would follow from this that where in exercise of these powers the Board has let out any land or buildings it has the right as well as the duty to collect the rent from the tenant. Therefore, though, strictly speaking, the 350 rent due from the tenant cannot be said to be payable under any express provision of the Act the tenant 's liability to pay and the Board 's right to recover it is ultimately traceable to the Act inasmuch as this liability has arisen by reason of the exercise of a power exercised or performance of duty by the Board under express provisions of the Act and the Rules. Surely the Board cannot be deprived of the right to recover the rent or be absolved from the duty to recover it by resort to the normal remedy of suit. Yet upon the interpretation placed upon section 259 of the Act by the Lahore High Court and by the Court below a suit as well as a proceeding before a Magistrate have to be placed on the same footing. This will lead to an impossible position and it cannot for one moment be thought that this is what the Legislature had intended. What the expression "recoverable by a Board ' or the Military Estates Officer under this Act or the rules made thereunder" means is what the Act or the Rules permit the Board to recover or what the Act or the Rules permit the Military Estates Officer to recover. To put it in another way the words "recoverable by" and "under this Act or the Rules made thereunder" are meant to govern "a Board" or "a Military Estates Officer". It was necessary to make this provision because certain duties are imposed and powers conferred on the Board and certain other duties imposed and powers conferred upon the Military Estates Officer and the section makes it clear that the power to recover money is exercisable by such of these two authorities as performs the duty or exercises the power by reason of which the liability of another to pay the tax, rent or any other money arises. In support of the view which I have expressed I may refer to a decision of the Court of Appeal in Tideway Investment and Property Holdings Ld. vs Wellwood (1). There one of the questions which had to be considered related to awarding costs to the successful plaintiffs who were the landlords of the defendants. The suit was brought in the High Court and the plaintiffs contended that since the defendants have committed a breach of the provisions of the lease they had forfeited it and, therefore, were entitled to possession on forfeiture as also to damages for breach of the contract contained in the lease. The defendants claimed protection of the Rent Acts and Harman J., who heard the case held that the lease having already expired there could be no forfeiture and the tenant who was holding over became a statutory tenant entitled to the protection of the Rent Acts. Evershed M.R., however, said that the tenant became a trespasser or a statutory tenant and that the breach of the convenant was a continuing one. Therefore, he said, it was plain that all claims arising out of the breach of the convenant and consisting primarily of a claim for possession must be regarded as arising out of or under the Rent Restriction Act, 1920. Harman J., also held that the claim must be regarded as (1) 351 claims under the Rent Act and section 17(2) precluded ' him from awarding costs to the successful plaintiffs. Section 17(2) reads thus: "A county court shall have jurisdiction to deal with any claim or other proceedings arising out of this Act or any of the provisions thereof, notwithstanding that by reason of the amount of claim or otherwise the case would not but for this provision be within the jurisdiction of a county court, and, if a person takes proceedings under this Act in the High Court which he could have taken in the county court, he shall not be entitled to recover any costs. " The Master of the Rolls, with whom the other Lords Justices agreed, took the same view as Harman J. It may be mentioned that the suit was not instituted under any specific provision of the Rent Acts and the claim for possession was based on the breach of a covenant in the lease which the Court of Appeal treated as a continuing one and yet was treated as one under the Rent Restriction Act, 1922 because of the defence raised. This case thus illustrates that an expression such as the one found in section 259 of the Act must be construed liberally and not narrowly. In Stroud 's Judicial Dictionary, Vol. I, an Australian case, Winstone vs Wurlitzer Automatic Phonograph Co. of Australia Pty Ltd. C) on which could not lay my hands is cited. There it was held that 'authorise ' should be read in its ordinary sense of sanction, approve or countenance. I do not think that there is any substantial difference between "Authorised by the Act" and "under the Act". It would, therefore, be not right to construe the section in the way it was construed by the court below. On the other hand it must be held that where the liability to pay money arises against a person by reason of something done by the Board or the Military Estates Officer in exercise of a power or the performance of a duty under the Act that liability can be enforced by the authority concerned either by instituting the suit or by making an application to a Magistrate. Further, if the word 'rent ' in section 259 of the Act were to be given a restricted meaning that word itself would be rendered otiose because there is no provision whatsoever in the Act which expressly makes rent claimable or recoverable by either of the two authorities specified therein. Our attention was drawn to section 257(1) which with.out its proviso reads thus: "If any such notice as is referred to in section 256 has been given to any person in respect of property of which he is the owner, the Board may require any occupier of such property or of any part thereof to pay to it, instead of to the owner, any rent payable by him in respect of ; 352 such property, as it falls due, up to the amount recoverable from the owner under section 256. " It cannot, however, be said that what the Legislature had in contemplation when it am.ended section 259 by adding the word "rent" therein was "rent" to which reference is made in section 257(1). Section 257 is complementary to section 256. What section 256 provides is as follows: "In the event of non compliance with the terms of any notice, order or requisition issued to any person under this Act, or any rule or bye law made thereunder, requiring such person to execute any work or to do any act, it shall be lawful for the Board, whether or not the person in default is liable to punishment for such default or has been prosecuted or sentenced to any punishment therefor, after giving notice in writing to such person, to take such action or such steps as may be necessary for the completion of the act or work required to be done or executed by him, and all the expenses incurred on such account shall be recoverable by the Board. " Therefore, what the Board has the power to recover from the person is the expenses which it has incurred. One of the modes is to proceed against the occupier of any property belonging to the owner thereof and require that occupier to pay to the Board instead of to the owner the rent payable by him to the owner. What the Board thus recovers from the person cannot obviously be regarded as rent in so far as the Board is concerned. For, the Board is not the landlord of the occupier and what it recovers from his is not something which was due to the Board as rent from him. 'Rent ' as commonly understood and as defined in Jowitt 's Dictionary of English Law ' is a sum of money payable periodically by a tenant to a landlord as compensation for occupation of a building or land belonging to the landlord. It cannot thus include money payable by one person to another when they do not stand in the relationship of tenant and landlord. It is the Dictionary meaning which has to be given to the word 'rent ' in section 259. Giving it this meaning it would be clear that what is referred to in section 257(1) as rent was not intended to be included in that expression in section 259. Apart from section 257 no other provision has come to our notice which can support the view of the High Court as to the interpretation of section 259. It may be mentioned that before the year 1940 there was r. 42 in the Cantonment Land Administration Rules, 1937 which expressly authorised the Board to recover all arrears of rent and "other payments" under the Rules by resorting to section 259 of the Act. But that rule was repealed in 1940. It was represented to us by Mr. Gopal Singh that this was repealed because in view of the wide language of section 259 there was no need felt for the retention of the rule. Whatever that may be. the position ;,s, if I may repeat. 353 that if the word rent is given a restricted meaning as has been done by the High Court, that word would become purposeless. On the other hand if the expression is interpreted in the way suggested here it will serve a purpose for which it was intended. For these reasons I am of the view that the appeal should be allowed. ORDER BY COURT In accordance with opinion of the majority the appeal is dismissed.

IN-Abs

In 1954, the words "rent on land or buildings" were added to section 250 of the . After the amendment, the appellant (Cantonment Board), applied under the section to the concerned Magistrate, for realisation of arrears of rent from the respondent, on the basis of a lease in his favour. The Magistrate issued warrants for attachment of the movable property of the respondent. The respondent went in revision to the Sessions Judge. He made a reference to the High Court and the High Court set aside the Magistrate 's order. In its appeal to the Supreme Court, the appellant contended that, upon a correct interpretation of the section, the Magistrate had the power to order the recovery of rent due to the appellant. HELD: (Per Wanchoo and Sikri JJ.) ' The rent was not claimable by the appellant under the Act or the Rules but only under the lease in favour of the respondent. Therefore, section 259(1), in so far as It refers to recovery of such rent by application to Magistrate, would not apply. In view of the provisions of the Act, Cantonment Property Rules, 1925, and the Cantonment Land Administration Rules, 1937, a Cantonment Board has power, to manage the lands or buildings vested in it or entrusted to its management, to lease them out and to fix rents therefor. But section 259 can be utilised for realisation of arrears of rent on land and buildings, only if such rent is recoverable by a Board or a Military Estates Officer under the Act or the Rules made thereunder. The word "recoverable" means "claimable". Section 257 read with section 2.56 is an example of the Board 's power to claim rent from the tenant of an owner. There may be other such cases, and it is only in those cases, where the Act or the Rules, in terms, make the rent on land and buildings claimable by the Board, that the section will apply. But where the liability arises purely on the basis of a lease between the Board and the tenant, nothing in the Act or the Rules, particularly after r. 42 which provided for such recovery had been repealed, makes such rent claimable by the Board under the Act or the Rules. Since. the repeal was in 1940 before the section was amended, it cannot be argued that the rule was repealed because of the amendment of the section. [344 F H; 346 F H] The view taken, however, would not affect the right of the Board to recover by suit, under the general law, rent of its land and buildings given by it on lease. [347 B] Per Mudholkar, J. (dissenting): The High Court was in error in setting aside the order of the Magistrate. What the expression "recoverable by a Board or a Military Estates Officer under the Act or the Rules made thereunder," in section 259 means is, what the Act or the Rules permit the Board to recover, or what the Act or the Rules permit the Military Estates Officer to recover. The words "recoverable by" and "under this Act of the Rules made thereunder." are meant to govern "a Board" or "a Military Estates Officer." Thus under the section the power to recover money is exercisable by such of these two authorities as performs the duty or exercises the power by reason of which the liability of another 342 to pay the tax, rent or any other money arises. Powers are conferred upon a Board under the Act read with the Cantonment Land Ad ministration Rules, 1937. to let out property vested in it or which is under its management. Where, in exercise of those powers the Board has let out any land or buildings, it has the right as well as the duty to collect the rent from the tenant. Therefore, where the liability to pay money arises against a person, by reason of something done by the Board or the Military Estates Officer, in exercise of a power or the performance of a duty under the Act, that liability can be enforced by the authority concerned, either by instituting a suit or by making an application to a Magistrate. But if the word "rent" is confined to money due under some express provision of the Act or Rules, it will lead to the curious result, that, in respect of land or buildings under the management of the Board, neither remedy would be available though the claim for rent is ultimately traceable to those provisions of the Act and the Rules which empower the Board to let out the land or buildings upon the ground that it cannot be said to be claimable or recoverable under any express provision of the Act. [350 C E; 351F; 351 G H] Further, if the meaning of the word "rent" is so restricted, that word itself would be rendered otiose, because, there is no provision whatsoever in the Act which expressly makes rent claimable or recoverable by either of the two authorities specified therein. What the Board recovers under sections 256 and 257 cannot be regarded as rent, giving the word its dictionary meaning, for, the Board is not the landlord of the occupier, and what it recovers from him, is not something which was due to the Board as rent from him. [352 E G].

Appeal No. 532 of 1963. Appeal by special leave from the Award dated February 9, 1962, of the Industrial Tribunal, Delhi in I.D. No. 294 of 1961. Sukumar Ghose, for the appellant. section V. Gupte, Solicitor General, section Murthy and B. P. Maheshwari, for the respondent. The Judgment of the Court was delivered by Gajendragadkar, C. J. The short question of law which arises for our decision in this appeal is whether the order passed by the Delhi Administration referring the dispute between the appellants, the workmen of M/s Dharampal Premchand, Sau ghandhi and the respondent, the employer, M/s Dharampal Premchand Saughandhi, Delhi was valid. The order of reference has been passed by the Delhi Administration under sections 10(1)(d) and 12(5) of the (No. 14 of 1947) (hereinafter called the Act). When the Industrial Tribunal, Delhi took up this matter for hearing, the respondent raised a preliminary objection that the reference was invalid inasmuch as the dispute referred to the Tribunal by the impugned order of reference is not an industrial dispute. but is merely an individual dispute which cannot be the subject matter of a valid reference under section 10(1) of the Act. This contention has been upheld by the Tribunal, with the result that the Tribunal has held that it has no jurisdiction to adjudicate upon the merits of the dispute referred to it. It is against this order that the appellants have come to this Court by special leave. On behalf of the appellants, Mr. Sukumar Ghose contends that the view taken by the Tribunal is not sound, and that raises the question as to whether the dispute referred to the Tribunal for its adjudication in the present case can be said to be an industrial dispute within the meaning of section 2(k) of the Act. The facts which it is necessary to state for the purpose of dealing with this point are very few and they are not in dispute. The respondent is a firm which carries on business as perfumers and tobacconists in Chandni Chowk, Delhi. On the 28th July, 1961, the respondent passed the impugned order dismissing the services of its 18 employees. On that date, the respondent had in its employment 45 employees. It appears that on the 16th July, 396 1961, the 18 employees who were dismissed by the respondent had become members of the Mercantile Employees ' Association which is a registered Trade Union in Delhi. On the 29th July, 1961, the said Association took up the cause of the dismissed employees and carried the dispute before the Conciliation Officer, Delhi. The conciliation proceedings, however, failed, and at the instance of the Association the present reference was made on the 6th September, 1961. It is in the light of these facts that we have to decide whether the dispute referred to the Tribunal for its adjudi cation is an industrial dispute within the meaning of section 2(k) of the Act or not. Section 2(k) defines an "industrial dispute" as meaning any dispute or difference between employers and employees, or between employers and workmen, or between workmen and workmen, which is connected with the employment 'or non employment or the terms of employment or with the condition of labour, of any person. This definition shows that before any dispute raised by any person can be said to be an industrial dispute, it must be shown that it is connected with the employment or non employment of that person. This condition is satisfied in the present case, because the dispute is in relation to the dismissal of 18 workmen, and in that sense, it does relate either to their employment or non employment. The question, however. still remains whether it is a dispute between employers and workmen. Literally construed, this definition may take within its sweep a dispute between a single workman and his employer, because the plural, in the context, will include the singular. Besides, in the present case, the dispute is in fact between 18 workmen on the one hand, and their employer on the other, and that satisfies the requirement imposed by the fact that the word "workmen" in the context is used in the plural. But the decisions of this Court have consistently taken the view that in 'order that dispute between a single employee and his employer should be validly referred under section 10 'of the Act, it is necessary that it should have been taken up by the Union to which the employee belongs or by a number of employees. On this view, a dispute between an employer and a single employee cannot, by itself, be treated as an industrial dispute, unless it is sponsored or espoused by the Union of workmen or by a number of workmen. In other words, if a workman is dismissed by his employer and the dismissed workman 's case is that his dismissal is wrongful, he can legitimately have the said dispute referred for adjudication before an Industrial Tribunal under section 10(1) of the Act, provided a claim for such a reference is supported either by the Union to which he belongs or by a number of workmen, vide Central Provinces Transport Services vs Raghunath Gopal Patwardhan(1) and The Newspapers Ltd. vs The State Industrial Tribunal, U.P. (2). (1) ; (2) ; 397 This view is based on a consideration of the general policy underlying the provisions of the Act. As is well known, the Act has been passed for the investigation and settlement of industrial disputes, and its material provisions have been enacted, because it was thought expedient to make provision for such investigation and settlement of disputes, keeping in mind the importance of the development of Trade Union Movement on proper lines in this country. Having regard to this broad policy underlying the Act, this Court and indeed a majority of Industrial Tribunals are inclined to take the view that notwithstanding the width of the words used by the Act in defining an "industrial dispute", it would be expedient to require that a dispute raised by a dismissed employee cannot become an industrial dispute, unless it is supported either by his Union or, in the absence of a Union, by a number of workmen. Unless such a limitation was introduced, claims for reference may be made frivolously and unreasonably by dismissed employees, and that would be undesirable. Besides, in order to safeguard the interests of the working class in this country, it was thought that the development of Trade Union movement on healthy Trade Union lines was essential and that requires that disputes between employers and employees should be settled on a collective basis. A complaint against a wrongful dismissal should, therefore, be the subject matter of reference, provided the workmen acting collectively take up the case of the dismissed employee and contend that the dismissal is unjustified or wrongful. It is on these grounds that this Court has held that an individual dispute arising from an alleged wrongful dismissal of an employee can be validly referred under section 10 only if it is supported by the Union of the workmen to which the dismissed employee belongs or by a group of his co employees. There is no dispute that the Mercantile Employees ' Association has taken up the dispute on behalf of the 18 dismissed employees. In fact, as we have already indicated, the said Association took up this dispute before the Conciliation Officer and when the conciliation proceed ings failed, it successfully moved the Delhi Administration to make a reference under section 10(1) of the Act. It was, however, urged before the Tribunal that besides the 18 dismissed employees, no other employee of the respondent is a member of the said Association, and so, it was contended that the said Association was not authorised to raise the dispute, and in the absence of proof of the fact that the dispute had been sponsored or espoused by the Union of the employees of the respondent, the reference should be held to be invalid. This contention has been upheld by the Tribunal; and so, the question which we have to decide is whether the Tribunal was right in holding that the Mercantile Employees ' Association had no authority to raise and support the present dispute. 398 In support of its conclusion, the Tribunal has relied upon the decision of this Court in Bombay Union of Journalists and others vs The "Hindu", Bombay & Anr.(1). In that case, the services of one Salivateeswaran, who claimed that he was a full time employee of the "Hindu", a daily newspaper published in Madras, were terminated and an industrial dispute was raised in respect of the said termination by the Bombay Union of Journalists. The contention raised by the employer was that the reference was invalid inasmuch as the dispute referred for adjudication was an individual dispute and not an industrial dispute. This contention was accepted by the Tribunal; and that brought the dispute before this Court. In dealing with the effect of the decision pronounced by this Court in that case and particularly of certain observations made in the course of the judgment, it is necessary to bear in mind one finding of fact which had been recorded by the Tribunal and confirmed by this Court. It appears that in that case, the appellants strongly relied upon a resolution passed on April 17, 1948, by which it was alleged that the Bombay Union of Journalists had taken up the dispute of Salivateeswaran against the "Hindu" and had decided to demand reliefs for the "retrenched Journalist". Evidence was led to prove that such a resolution had been passed, but that evidence was discarded both by the Tribunal and this Court, and this Court definitely found that "the evidence tends to establish the plea raised by respondent No. 1 that the record of the alleged resolution was fabricated with a view to support the case of Salivateeswaran". In other words, in point of fact, there was no reliable evidence to show that the Bombay Union of Journalists had taken up the case of the retrenched employee Salivateeswaran. In view of this finding, it follows that the 'observations made by this Court in regard to the requirements of a valid reference under section 10(1) of the Act are in the nature of orbiter observations. It does appear that in dealing with the point of law as to the requirements of a valid reference, this Court 'observed that "the dispute, in the present case, being prima facie an individual dispute, in order that it may become an industrial dispute, it had to be established that it had been taken up by the Union of employees of the "Hindu", Bombay, or by appreciable number of employees of the "Hindu", Bombay. Similarly, it was also observed that the "principle that the persons who seek to support the cause of a workman must themselves be directly and substantially interested in the dispute, applied to the case before the Court"; and so, one of the tests which this Court applied was whether the persons who supported the cause, were employees of the same employer; if they were not, it was thought that they could not be regarded as interested in the dispute and as such, their support may not (1) ; 399 convert an individual dispute into an industrial dispute. That is why the support lent to the cause of Salivateeswaran by the Bombay Union of Journalists was found to be insufficient to convert the cause into an industrial dispute. These observations, no doubt, prima facie lend support to the view which the Tribunal has accepted. It appears that the Bombay Union of Journalists had on its roll several working Journalists in other journals; but out of the three working journalists working with the "Hindu" at its Bombay office, two had become the members of the Bombay Union of Journalists, viz., Salivateeswaran and Venkateswaran. Tiwari, the third working journalist working in the office of the "Hindu", Bombay, had not become a member of the said Union. In the Office of the "Hindu", there were seven other workmen, but they were working on the administrative side. In other words, out of the ten employees in the office of the " Hindu", seven were on the administrative side, and three on the journalism side; and out of these three, two were members of the Union. It is in the light of these facts that this Court expressed the opinion that the Bombay Union of Journalists was not competent to raise the dispute, and even if it had raised it, the dispute could not have become an industrial dispute. In our opinion, the observations on which the Tribunal has relied in support of its conclusion in the present case, should not be read as laying down any hard and fast rule in the matter. Take, for instance, the case of an employer who employs 20 workmen, and assume that these workmen have not formed any Union. If the employer illegally dismisses all the workmen employed by him, it cannot be suggested that the dispute about the dismissal of these employees would not become an industrial dispute because there is no Union to support them and the dismissed employees themselves cannot convert their individual dispute into an industrial dispute. In the present case, out of 45 employees 18 have been dismissed, and there is no evidence to show that these employees have a Union of their own. In such a case, it would be difficult to hold that though the number of employees dismissed is 18, they cannot raise a dispute by themselves in a formal manner. Considerations which would be relevant in dealing with a dispute relating to an individual employee 's dismissal, would not be material in dealing with a case where a large number of employees have been dismissed on the same day. It is not disputed that a union of workmen may validly raise a dispute as to dismissal even though it may be a union of the minority of the workmen employed in any establishment. The majority union, of course, can raise a dispute, and if a reference is made under section 10(1) of the Act at its instance, the reference, is valid. Similarly, if there is no union of workmen in any establishment, a group of employees can raise the dispute and the dispute then becomes an industrial dispute, though it may 400 relate to the dismissal of an individual employee. This position is not disputed. If that is so, it is difficult, we think, to apply or extend the observations made in the case of the Bombay Union of Journalists(1) to the present case. In the present case, we are dealing with a reference made by the Delhi Administration in relation to the appellants ' contention that the dismissal of 18 employees is invalid, and not with a case of the dismissal of a single employee. Therefore, we do not think that the Tribunal was right in relying upon the decision in the case of the Bombay Union of Journalists(1) in support of its conclusion that the present reference was invalid. It is well known that in dealing with industrial disputes, industrial adjudication is generally reluctant to lay down any hard and fast rule or adopt any test of general or universal application. The approach of industrial adjudication in dealing with industrial disputes has necessarily to be pragmatic, and the tests which it applies and the considerations on which it relies would vary from case to case and would not admit of any rigid or inflexible formula. There is no doubt that the limitations introduced by the decisions of this Court in interpreting the effect of the definition prescribed by section 2(k) of the Act were based 'on such pragmatic considerations. It may also be conceded that if the dismissal of an individual employee working in an establishment in Delhi is taken up by the union of workmen in a place away from Delhi, that would clearly not make the dispute an industrial dispute. Section 36 of the Act which deals with the representation of parties, incidently suggests that the union which can raise an individual dispute as to a dismissal validly, should be a union of the same industry. Generally, it is the union of workmen working in the same establishment which has passed the impugned order of dismissal. But in a given case, it is conceivable that the workmen of an establishment have no union of their own, and some 'or all of them join the union of another establishment belonging to the same industry. In such a case, if the said union takes up the cause of the workmen working in an establishment which has no union of its own, it would be unreasonable to hold that the dispute does not become an industrial dispute because the union which has sponsored it is not the union exclusively of the workmen working in the establishment concerned. In every case where industrial adjudication has to decide whether a reference in regard to the dismissal of an industrial employee is validly made or not, it would always be necessary to enquire whether the union which has sponsored the case can fairly claim a representative character in such a way that its support to the cause would make the dispute an industrial dispute. "Industry" has been defined by section 2(j) of the Act and it seems to us that in some cases, the union of workmen working in one industry may be competent to raise a dispute about the wrongful dismissal of an employee engaged in an establishment belonging to the same industry where workmen (1) ; , 401 in such an establishment have no union of their own, and an appreciable number of such workmen had joined such other union before their dismissal. In fact, the object of trade union movement is to encourage the formation of larger and bigger unions on healthy and proper trade union lines, and this object would be frustrated if industrial adjudication were to adopt the rigid rule that before any dispute about wrongful dismissal can be validly referred under section 10(1) of the Act, it should receive the support of the union consisting exclusively of the workmen working in the estab lishment concerned. Besides, there is another way in which this question can be considered. If 18 workmen are dismissed by an order passed on the same day, it would be unreasonable to hold that they themselves do not form a group of workmen which would be justified in supporting the cause of one another. In dealing with this question, we ought not to forget the basic theory on which limitation has been introduced by this Court on the denotation of the words "industrial dispute" as defined by section 2(k) of the Act. Therefore, we are satisfied that the Tribunal was in error in rejecting the reference on the preliminary ground that the dispute referred to it was an individual dispute and not an industrial dispute within the meaning of section 2(k). The result is, the appeal is allowed, the finding of the Tribunal on the preliminary issue is reversed, and the matter is sent back to the Tribunal for disposal in accordance with law. There would be no order as to costs. Appeal allowed.

IN-Abs

Out of 45 employees of the respondent, 18 had become members of a Trade Union. Later, these 18 employees were dismissed by an order passed on the same day. The Union took up the cause and ultimately the dispute was referred to the Tribunal, where the respondent raised the preliminary objection that the reference was invalid inasmuch is the dispute referred to the Tribunal was not an industrial dispute but was merely an individual dispute, and besides these dismissed employees no other employees of the respon dent was a member of the Union, and so the Union could not raise the dispute. This was upheld by the Tribunal. In appeal by special leave; HELD:The appeal must be allowed. The definition of "industrial dispute" in section 2(k) shows that before any dispute raised by any person can be said to be an industrial dispute, it must be shown that it is connected with the employment or non employment of that person. This condition is satisfied in the present case. [396 D] Having regard to the broad policy underlying the Act, this Court and indeed a majority of Industrial Tribunals are inclined to take the view that notwithstanding the width of the words used by the Act in defining an "industrial dispute" it would be expedient to require that a dispute raised by a dismissed employee cannot become an industrial dispute, unless it is supported either by his Union or, in the absence of a Union by a number of workmen. [397 B C] Considerations which would be relevant in dealing with a dispute relating to an individual employee 's dismissal, would not be Material in dealing with a case where a large number of employees have been dismissed on the same day. [399 G H] A Union of workmen may validly raise a dispute as to dismissal even though it may be a union of minority of the workmen employed in any establishment. Similarly if there is no union of workmen in any establishment, a group of employees can raise the dispute and the dispute then becomes an industrial dispute, though it may relate to the dismissal of an individual employee. [399 H] In a given case it is conceivable that the workmen of an establishment have no union of their own and some or all of them join the union of another establishment belonging to the same industry. In such a case if the said union take up the cause of the workmen working in an establishment which has no union of its own, it would be unreasonable to hold that the dispute does not become an industrial dispute because the Union which has sponsored it is not the union exclusively of the workmen working in the establishment concerned. In every case where industrial adjudication has to decide 395 whether a reference in regard to the dismissal of an industrial employee is validly made or not it would be necessary to inquire whether the Union which has sponsored the case can fairly claim a representative character, in such a way that its support to the case would make the dispute an industrial dispute. [400 F H] Besides, 18 workmen, dismissed by an order passed on the same day, themselves form a group of workmen which would be justified in supporting the cause of one another. [401 C] Central Provinces Transport Service vs Raghunath Gopal Patwardhan, ; and The Newspapers Ltd. vs The State Industrial Tribunal, U.P., ; , relied on. Bombay Union of Journalists vs The Hindu, Bombay, , explained and distinguished.

Appeals Nos. 48 to 53 of 1963. Appeals from the judgment and decrees dated May 3, 1960, of the Calcutta High Court in Appeals Nos. 215, 67, 82 & 216 of 1958. W. section Barlingay, section section Khanduja and Ganpat Rai, for the appellants (in all the appeals). G. section Pathak and D. N. Mukherjee, for the respondent (in all the appeals). The Judgment of the Court was delivered by Gajendragadkar, C.J. The short question which these six ap peals raise relates to the construction of section 30(c) of the Calcutta Thika Tenancy Act, 1949 (W.B. Act No. 11 of 1949) (hereinafter called 'the Act '). This question arises in this way. The respondent Sanat Kumar Ganguli is the owner of a plot of land being premises No. 12, Haldar Lane, in Central Calcutta This plot had been let out in several lots to the predecessors in title of the six appellants. 366 On July 24, 1954, the respondent filed six suits Nos. 2240 to 2245 of 1954 against the six appellants respectively on the original side of the Calcutta High Court, claiming decrees for ejectment against them and asking for arrears of ground rent and Municipal taxes. The appellants contested the respondent 's claim on the ground that the lands in suits had been taken by their predecessors in title from the owner as Thika tenants in or about the year 1900, and they alleged that they were in occupation of the said plots after having built substantial structures on them. The appellants further claimed that they had themselves let out portions of such structures to their own tenants. On these allegations, a preliminary objection to the competence of the suits was raised by the appellants on the ground that under section 5 of the Act, claim for ejectment of Thika tenants can be entertained only by the Controller, and so, the learned Judge on the original side of the Calcutta High Court had no jurisdiction to entertain it. The respondent admitted that the appellants were Thika tenants and did not dispute that normally, a claim for ejecting such Thika tenants could be tried only by the Controller; but he urged that the present suits fell within the scope of section 30(c) of the Act and in consequence, the provisions of section 5 and indeed. , all other relevant provisions of the Act did not apply to them. That is how the respondent sought to meet the preliminary objection raised by the appellants. In appreciating the nature of the controversy thus raised by the pleadings, it is necessary to mention some more facts. On February 9, 1940 a notice was issued by the Chairman of the Calcutta Improvement Trust under section 43 of the Calcutta Improvement Act, 1911 (Bengal Act V of 191 1) as amended up to 193 1. This Act will hereafter be called 'the Improvement Act '. This notice shows that a scheme bearing No. 53 had been framed for the purpose of improvement of Calcutta by a street scheme in Ward No. 10 of the Calcutta Municipality for an area the boundaries whereof were described in the said notice. This notice gave the particulars of the scheme and was accompanied by a map of the area comprised in the scheme. It also contained the statement of the land which it was proposed to acquire as well as land on which betterment fee was proposed to be levied. These plans were open for inspection at the office of the Trust at No. 5, Clive Street, Calcutta. Along with this notice, another notice was published which gave a list of properties proposed to be acquired under the scheme and contained a statement of the land in regard to which betterment fees were proposed to be levied. Premises No. 12, Haldar Lane, were included in the latter category of lands. In July 1952, proceedings were started for settling the betterment fee to be levied in respect of premises No. 12, Haldar Lane, and a letter was addressed by the Chief Valuer of the Calcutta 367 Improvement Trust to the respondent on November 19, 1952. This letter shows that the Chief Valuer had not received a reply from the respondent, though his advocate had accepted the assessment of betterment fee of Rs. 15,000 in the Land Committee meeting which had been held on August 7, 1952 and confirmed by the Board on August 30, 1952. On November 19, 1952, however, the respondent recorded in writing that he accepted the said assessment. The respondent 's case before 'he learned trial Judge was that since betterment fee had been levied by the Board in respect of the suit premises and had been accepted by him, section 30(c) of the Act applied to the present suits. Section 30(c) provides that "nothing in the Act shall apply to any land which is required for carrying out any of the provisions of the Calcutta Improvement Act, 191 1. " That is how the respondent sought to repel the application of section 5 of the Act and the exclusive jurisdiction of the Controller to deal with ejectment proceedings in respect of thika tenants ' holdings. The learned trial Judge held that the plots constituting the land in the six respective suits did not attract the provisions of section 30(c) of the Act, and so, he upheld the preliminary objection raised by the appellants and came to the conclusion that the suits filed by the respondent on the original side of the Calcutta High Court were incompetent and could not be entertained. In the result, the said suits were ordered to be dismissed with costs. The respondent challenged these decrees by preferring six appeals before a Division Bench of the High Court. The learned Judges who heard these appeals have delivered separate, but concurring, judgments and have upheld the respondent 's argument that the land in suits attracted the provisions of section 30(c) of the Act, with the result that the preliminary objection raised by the appellants has been rejected. Once the preliminary objection was rejected, it was plain that no other point survived, because the appellants had no defence to make on the merits of the respondent 's claim. That is why the appeals were allowed and decrees, for possession were passed in favour of the respondent. The claim made by the respondent in respect of arrears of round rent and municipal taxes was also allowed. It is against these decrees that the appellants have come to this Court with certificates granted by the High Court; and so, the only question which arises for our decision is whether the Division Bench was right in holding that section 30(c) of the Act applied to the present suits. The answer to this Question depends on a fair construction of the provision prescribed by section 30(c). Before dealing with this question, it is necessary to refer to the material provisions of the Act. The Act was passed in 1949 with the object of making better provision relating to the law of landlord and tenant in respect of thika tenancies in Calcutta. Section 2(5) in Chapter 1 defines a "thika tenant" as meaning any person who holds, whether under a written lease or otherwise, land under another person, and is or but for a special contract would be liable 368 to pay rent, at a monthly or at any other periodical rate, for that land to that another person and has erected or acquired by purchase or gift any structure on such land for a residential, manufacturing or business purpose and includes the successors in interest (if such person. Sub clauses (a), (b) and (c) of this definition exclude from its purview certain other categories of persons, but we are not concerned with these categories of persons in the present appeals. It is common ground that the appellants are thika tenants in respect of the plots in their possession. Chapter 11 of the Act deals with incidents of thika tenancies. Broadly stated, the object of the Act is to afford special protection to the thika tenants and several provisions have been enacted by the Act to carry out this object. Section 3 specifies the grounds on which alone a thika tenant may be evicted. Section 4 prescribes a notice before ejectment proceedings can be taken against a thika tenant; and section 5 provides for proceedings for ejectment. The important feature of the provisions contained in section 5(1) is that the application for ejectment of a thika tenant has to be made to the Controller in the prescribed manner. The "controller" is defined by section 2(2) as meaning an officer appointed as such by the State Government for an area to which the Act extends and includes officers of another category therein described. The remaining provisions of Ch. 11 deal with the procedure which has to be followed by the Controller in dealing with applications for ejectment of thika tenants and make other incidental provisions in that behalf. The policy of the Act to afford protection to the thika tenants is writ large in all these provisions. Chapter III contains provisions as to rent of thika tenancies. Chapter IV deals with appeals and certain special procedures. Section 27(1), for instance, provides for appeals to the Chief Judge of the Court of Small Causes of Calcutta and District Judge respectively under clauses (a) and (b). Section 27(6) provides that an order made under sub section (4) by the Chief Judge or the District Judge or a person appointed under sub section (2), as the case may be, or, subject to such order, if any, an order made by the Controller under this Act shall, subject to the provisions of sub section (5) be final and may be executed by the Controller in the manner provided in the Code of Civil Procedure for the execution of decrees. It is thus clear that the Act has made special provisions for the enforcement of the rights and liabilities of the thika tenants, has constituted hierarchy of special authorities to deal with claims made by landlords against their thika tenants, either in the first instance or at the appellate stage. The decisions of these special authorities which become final are assimilated to decrees passed under the Code of Civil Procedure and can be executed in the manner prescribed by 0.21 of the Code. Section 31 provides that restriction or exclusion of the Act by agreement between a landlord and a thika tenant will be invalid, 369 and will not affect the rights conferred on the thika tenants by the provisions of the Act. It is in the light of these provisions that we have to construe section 30 of the Act. Section 30 reads thus: "Nothing in this Act shall apply to (a) Government lands, (b) any land vested in or in the possession of (i) the State Government, (ii) a port authority of a major port, or (iii) a railway administration, or (iv) a local authority, or (c) any land which is required for carrying out any of the provisions of the Calcutta Improvement Act, 1911. " The perusal of section 301 clearly shows that the provisions of the Act are excluded in regard to lands specified in clauses (a), (b) and (c), so that claims made for ejectment of thika tenants from these lands will not be governed by the provisions of the Act and can be made and entertained in ordinary civil courts of competent jurisdiction. The question which we have to consider in the present appeals is whether the land which is the subject matter of the six suits is land which is required for carrying out any of the provisions of the Improvement Act. That takes us to the relevant provisions of the Improvement Act itself. The Improvement Act was passed in 1911 and has been amended from time to time. Let us consider broadly the material provisions of this Act, as they stood prior to the amendment of 1955, which would assist us in construing section 30(c) of the Act. This Act was passed, because it was thought expedient to make provision for the improvement and expansion of Calcutta by opening up congested areas, laying out or altering streets, providing open spaces for purposes of ventilation or recreation, demolishing or constructing buildings, acquiring land for the said purposes ,,]Id for the rehousing of persons of the poorer and working classes displaced by the execution of improvement schemes, and otherwise as hereinafter appearing. It was further thought expedient to constitute a Board of Trustees and invest it with special powers for carrying out the objects of this Act. Section 2(1a) of this Act defines a "betterment fee" as the fee prescribed by section 78A in respect of an increase in value of land resulting from the execution of an improvement scheme. Chapter III of this Act deals with improvement schemes and re housing schemes. Section 36 provides when general improvement schemes may be framed. It is only where the conditions specified by clauses (a) & (b) of section 36 are satisfied that general schemes can be framed. Under this section, the Board has to pass 370 a resolution to the effect that the general improvement scheme should be framed on the ground that the area comprised in the scheme is an unhealthy area and that it was necessary to frame a general improvement scheme in respect of such area. Section 40 deals with matters which have to be considered while framing improvement schemes. It provides that when framing an improvement scheme in respect of any area, regard shall be had to (a) the nature and the conditions of neighboring areas and of Calcutta as a whole , (b) the several directions in which the expansion of Calcutta appears likely to take place , and (c) the likelihood of improvement schemes being required for other parts of Calcutta. Section 41 deals with matters which must be provided for in improvement schemes; it reads thus: "Every improvement scheme shall provide for (a) the acquisition by the Board of any land, in the area comprised in the scheme, which will, in their opinion be required for the execution of the scheme, (b) the laying out or re laying out of the land in the said area; (c) such demolition, alteration or reconstruction of buildings, situated on land which it is proposed to acquire in the said area, as the Board may think necessary; (d) the construction of any buildings which the Board may consider it necessary to erect for any purpose other than sale or hire; (e) the laying out or alteration of streets (including bridges, causeways and culverts), if required; and (f) the leveling, paving, metalling, flagging, channelling, sewering and draining of the said streets, and the provision therein of water, lighting and other sanitary conveniences ordinarily provided in a Municipality. " Section 42 deals with matters which may be provided for in dealing with improvement schemes. It is necessary to read this section as well: "Any improvement scheme may provide for (a) the acquisition by the Board of any land, in the area comprised in the scheme which will, in their opinion, be affected by the execution of the scheme , (b) raising, lowering or leveling any land in the area comprised in the scheme; 371 (c) the formation or retention of open spaces . and (d) any other matters, consistent with this Act, which the Board may think fit." Under section 47, the Board is required to consider objections, representations and statements of dissent received under the relevant provisions of sections 43, 44 and 45; and it provides that as a consequence of considering the said objections, representations and statements of dissent, the Board may either abandon the scheme or apply to the State Government for sanction to the scheme, with such modifications, if any, as the Board may consider necessary. Section 47(2)(e) lays down that every application submitted under sub section (1) shall be accompanied by a list of the names of all persons, if any, who have dissented, under section 45, clause (b), from the proposed acquisition of their land or from the proposed recovery of a betterment fee, and a statement of the reasons given for such dissent. The rest of the Chapter deals with the subsequent stages of the framing of the improvement schemes to which it is unnecessary to refer. Chapter IV deals with acquisition and disposal of land. Three sections out of this Chapter are relevant for our purpose. Section 78 deals with the abandonment of acquisition in consideration of special payment. Section 78(1) is relevant; it reads thus: "In any case in which the State Government has sanctioned the acquisition of land, in any area comprised in an improvement scheme, which is not required for the execution of the scheme, the owner of the land, or any person having an interest therein, may make an application to the Board, requesting that the acquisition of the land should be abandoned in consideration of the payment by him of a sum to be fixed by the Board in that behalf. " The other sub sections of section 78 lay down a procedure for dealing with applications made under sub section With the details of these provisions we are not concerned. The only point which is relevant for our purpose is that an application for abandonment can be made in respect of land which is not required for the execution of the scheme. In other words, if it appears that the piece of land which is comprised in the scheme already sanctioned by the Government is in fact not required for the execution of the scheme, an application may be made for abandonment of acquisition in respect of such a land. The basis for making such an application is that though the land was comprised in the scheme, it is found that it is not required for the execution of the scheme,, That takes us to section 78A which has a bearing on the construction of section 30(c) of the Act. Section 78A(1) is material for our purpose; it reads thus "When by the making of any improvement scheme, any land in the area comprised in the scheme which is not B(N)3SCI 11 372 required for the execution thereof will, in the opinion of the Board, be increased in value, the Board, in framing the scheme, may in lieu of providing for the acquisition of such land, declare that a betterment fee shall be payable by the owner of the land or any person having an interest therein in respect of the increase in value of the land resulting from the execution of the scheme." Section 78A(2) provides for the determination and calculation of the betterment fee. The last section in this Chapter is section 81. It confers power on the Board to dispose of land vested in or acquired by their under this Act. Section 81(1) lays down that the Board may retain, or may let on hire, lease, sell, exchange or otherwise dispose of any land vested in or acquired by them under this Act. How this power can be exercised is specified by sub sections (2) and (3) of section 81 Before we part with the Improvement Act, it would be useful to mention that sections 120 to 126 which occur in Ch. VI of this Act deal with the accounts of the Board. Section 122 provides for credits to capital account and lays down, inter alia, that all sums, except interest, received by way of special payments for betterment fees in pursuance of sections 78, 78A or 79, shall be credited to the capital account. Section 123 deals with the question of the application of the capital account, and it proceeds on the basis that the moneys credited to the capital account shall be held by the Board in trust, and by clauses (a) to (h), it specifies the objects or purposes for which the said amount can be applied. Section 124 refers to items which have to be included in the revenue account; and section 125 requires that like the moneys credited to the capital account, those credited to the revenue account must also be held by the Board in trust, and the same shall be applied for the purposes specified in clauses (a) to (g) of section 125(1). Let us now revert to the question about the construction of section 30(c) of the Act. Before answering this question, we would like to recall the material facts which are not in dispute. The land if question has been included in the boundaries of the area comprised in the scheme. After the Board framed scheme No. 53, it has issued a notice under section 43(1) of the Improvement Act, and as required by section 43(7)(b), while mentioning the boundaries of the area com prised in the scheme, it has clearly been shown that the laid in question is comprised in the said scheme. In respect of this land, proceedings have been taken under section 78A of the Improvement Act and betterment fee has been levied and accepted. Mr. Pathak for the respondent contends that as soon as it is shown that the land in question was comprised in the scheme and in respect of it betterment fee has been levied and accepted, section 30(c) of the Act is attracted. His argument is that such a land is required for carrying out the provisions of the Improvement Act. On the 373 other hand, Dr. Barlinge contends that the land in respect of which betterment fee has been levied cannot be said to be required for carrying out any provisions of the Improvement Act, though it may be that the betterment fee would assist the Board in discharging its functions under the Improvement Act. In deciding the merits of these competing claims, it is necessary to remember that the dispute in the present proceedings is not between the Board on the one hand and the landlord or the thika tenant on the other ', the dispute is between the landlord and the thika tenants, and in the decision of this dispute, the Board is not interested. Whatever be the decision of the Court in the present dispute will not affect the Board in the discharge of its duties and functions and will have no impact on the scheme as such. The words used in section 30(c) of the Act are, in a sense, simple enough; but it must be conceded that the problem of their construction is not very easy, and so, we might attempt to resolve this problem by considering what our approach should be in construing the relevant provision. Normally, the words used in a statute have to be construed in their ordinary meaning; but in many cases, judicial approach finds that the simple device of adopting the ordinary meaning of words does not meet the ends or a fair and a reasonable construction. Exclusive reliance on the bare dictionary meaning of words may not necessarily assist a proper construction of the statutory provision in which the words occur. Often enough, in interpreting a statutory provision, it becomes necessary to have regard to the subject matter of the statute and the object which it is intended to achieve. That is why in deciding the true scope and effect of the relevant words in any statutory provision, the context in which the words occur, the object of the statute in which the provision is included, and the policy underlying the statute assume relevance and become material. As Halsbury has observed, the words "should be construed in the light of their context rather than what may be either strict etymological sense or their popular meaning apart from that context(1)". This position is not disputed before us by either party. There has, however, been a sharp controversy before us on the question as to what is the context to which recourse should be had in interpreting section 30(c). Mr. Pathak contends that in construing section 30(c) of the Act, the key words are "required for carrying out any of the provisions of the Improvement Act", and he has urged that the task of interpretation of this key clause should he attempted by having re. lard to the context, the object and the policy of the Improvement Act. In interpreting this clause, the court should ask itself: what is the purpose of the provisions of the Improvement Act which the land is required to serve, before section 30(c) of the Act can be invoked? And in finding an answer to this question, the court must bear in mind the historical evolution of the legal (1) Halabury 's Laws of England Vol. 36, p. 394, para 593. 374 principles relating to the powers and functions of Improvement Boards. In this connection Mr. Pathak has relied on the decision of the House of Lords in R. H. Galloway vs The Mayor and Commonality of London(1). In that case a contrast was drawn between the special powers conferred on persons by Parliament for effecting a particular purpose, and those conferred on the Mayor and Commonality of the City of London to make certain public improvements in the City. It was held that where a company was authorised to take compulsorily the lands of any person for a definite object, it would be restrained by injunction from any attempt to take them for any other object. On the other hand, where the Mayor and Commonalty of the City of London had been entrusted with powers to make certain public improvements in the City, and for that purpose had been authorised compulsorily to take land, to raise money on the credit of it, and to sell superfleous land to pay off the debt, the Act which gave them those powers did not expressly center on the authorities to acquire more land than was absolutely necessary to effect the desired improvements; nevertheless the material provisions of the said Act ought to be construed favorably to them, and ought to be interpreted to confer on them the power to take lands "for the purposes of the Act", even though they may not be abso lutely necessary for the improvement scheme as such. In other words, this decision shows that where the Board is entrusted with the work of improving the City and is constituted for that purpose by a statute, its power to acquire lands for the purpose of the improvement scheme would include the power to acquire a land which is comprised in the scheme, though it may not be absolutely necessary for the scheme as such; and in such a case, it would be compe tent to the Board first to acquire the land and then to dispose of it, thereby putting itself in possession of the necessary funds to discharge its functions and obligations. The same principle has been emphasised by the Privy Council in the Trustees for the Improvement of Calcutta vs Chandra Kanta Ghosh (2). We have already referred to sections 41 and 42 of the Improvement Act. Section 41 enumerates matters which must be provided for in the improvement schemes, whereas section 42 deals with matters which may be provided for in the improvement schemes. Section 42(a) lays down that any improvement scheme may provide for the acquisition by the Board of any land, in the area comprised in the scheme, which will, in their opinion, be affected by the execution of the scheme. The question which arose before the Privy Council in the case of the Trustees for the Improvement of Calcutta(1) was whether under section 42(a), it was competent to the Board to acquire, for the purpose of recoupment, land which is not required for the execution of the scheme, but the trustees are of opinion that the said land would, by virtue of the scheme, be increased in value. The (1) [1866] 1 Eng & Ir A.C. 34. (2) [1919] L.R. 47 I.A. 45. 375 decision of this question depended, inter alia, on the meaning of the word "affected" used in section 42(a). The argument which was urged before the Privy Council was that in order that land can be acquired by the Board under section 42(a), it must appear that the land falls in the area comprised in the scheme and would be affected by the execution of the scheme. If the land does not become a part of the scheme itself but remains outside the scheme, it cannot be said to be affected by the scheme; and so, the Board may have no power to acquire it avowedly for the purpose of securing recoupment money. The Privy Council rejected this contention and held that the Board was empowered to acquire land which is comprised in the scheme and would be competent to sell it and thereby raise funds if it is satisfied that the value of the land will be enhanced by virtue of the scheme. "There would appear to be nothing", said Lord Parmoor speaking for the Board, "either in the general scheme of the Act or in the special context which is inconsistent with giving the word "affected" its ordinary and normal sense; but it was suggested in the argument on behalf of the respondent that the Act did not authorise the Board to acquire land unless it was either physically affected by the execution of the scheme, or injuriously affected, whether by severance or in some other manner" (p. 54). In rejecting this argument, Lord Parmoor observed that "in the opinion of their Lordships, none of the suggested limitations to the usual and normal meaning of the word "affected" in section 42 are admissible, and that there is no reason, either in the general purpose of the Act or the special context, that the word should not be construed in its ordinary sense, and that, as so construed, section 42 authorises the acquisition of the land of the respondent, which was inserted in the scheme, because in the opinion of the Board, it would be enhanced in value by its execution". Section 78 and section 78A which has been inserted in the Improvement Act in 19 3 1, in a sense give statutory recognition to the principle evolved by the Privy Council while interpreting section 42 of the Improvement Act. Basing himself on this aspect of the matter, Mr. Pathak con tends that where a land is comprised in the improvement scheme originally notified and betterment fee is levied later in respect of it under section 78A, the Board can be deemed to have taken two steps,, it may be said that the Board acquired the land and later, sold it to the owner on the terms and conditions authorised by section 78A. In other words, the argument is that the levy of betterment fee is another way of bringing the land within the purview of the improvement scheme and it is, in fact, an alternative way of acquiring it. If that is so, section 30(c) which obviously includes lands acquired for the purposes of the scheme, cannot be said to exclude land which is not directly acquired, but is indirectly placed in the same category of lands, because recovery of the recoupment fee is one way of acquiring the land. It is on these grounds that Mr. Pathak has strenuously contended that the key clause in section 30(c) should receive a liberal 376 construction and the land in question in the present proceedings should be held to be required for carrying out the relevant provisions of the Improvement Act. On the other hand, Dr. Balinge has emphasised the fact that the section which we are construing occurs in the Thika Tenancy Act and it is the context of this Act as well as the object which it seeks to achieve that are relevant and material. There is no doubt that the provisions of the Act are intended to serve the purpose of social justice. The Legislature realised that the relations between the landlord and the tenants in respect of holdings let out to thika tenants under the Act needed to be regulated by statute and it thought that thika tenants deserved some special protection. The Act is thus a measure which can be described as social welfare measure, and so, the argument is that section 30 which provides for an exception to the material provisions of the Act, should be strictly construed, so that the beneficent purpose of the Act should not be unduly narrowed down or restricted. In construing section 30(e), it would, therefore, be relevant to remember whether it could not have been the intention of the Legislature to permit a private land holder whose land has not been acquired and does not form part of the improvement scheme, to claim immunity from the application of the relevant provisions of the Act which give protection to the thika tenants; and so, Dr. Barlinge 's contention is that it would be unreasonable to introduce a liberal approach in construing the clause "required for carrying out any of the provisions of the Improvement Act" as suggested by Mr. Pathak. In our opinion, while construing section 30(c) it would be necessary to bear in mind the context of the Act in which the section occurs. We have already noticed the broad features of the Act, and the object of the Act to help the thika tenants is writ large in all the material provisions. In the case of such a statute, if an exception is provided, the provision prescribing the exception and creating a bar to the application of the Act to certain cases must, we think, be strictly construed. Take the other clauses of section 30: they clearly indicate that it is only lands vested in Government or other special bodies or authorities that are excepted from the application of the Act. Prima facie, it is not easy to assume that a private land] ,older like the respondent would be within the protection of section 30, because there is no consideration in his case. as in the case of other authorities or bodies covered by clauses (a) and (b) of section 30, which would justify the exclusion of the Act to 'his case. That is one aspect of the matter which we cannot ignore. That takes us to the crux of the problem: can the land in question be said to be required for carrying out any of the provisions of the Improvement Act? It is significant that it is the land which must be required, and not any fee or charges that may be levied against it. What section 30(c) of the Act seems to require is direct 377 connection between the land as such and the requirements of the provisions of the Improvement Act. The other ingredient of section 30(c) is that the land must be required for carrying out the provisions of the Improvement Act. In the context, this second ingredient of the section seems to suggest that the land must be necessary for carrying out the provisions as such of the Improvement Act; in other words, we should be able to say about the land in question that it was necessary for carrying out a particular provision of the Improvement Act. The third and the last ingredient of s.30(c) is that the necessity must be established for carrying out the provisions of the Improvement Act and not the policy of the said provisions or the object which they are intended to achieve. Having regard to these ingredients of section 30(c), the question which calls for an answer is it shown that the land in question is necessary to carry out any specific provision of the Improvement Act '? It is difficult to answer this question in favour of the respondent. It is true that the betterment fee which is levied goes to constitute an important item in the capital account under section 122 of the Improvement Act. It is also true that the Board 'has the power to levy betterment fee in order that it should secure enough funds to carry out its obligations under the Improvement Act. Such a power has always vested in the Board and has now been statutorily conferred on it by section 78A. Under section 81, the Board can acquire more land than is absolutely necessary for the purpose of the scheme as such, and may later dispose of superfluous land. The existence of these powers cannot be disputed. But would it be consistent with the fair construction of section 30(c) to hold that because the land in question can be made liable to pay betterment fee and the betterment fee thus realised from the land serves the purpose of section 122 of the Improvement Act, the land itself is required for carrying, out the provisions of section 122? In order that section 30(c) should be applicable, the respondent must point out a specific provision of the Improvement Act for the carrying out of which the land as such is required. The provisions of section 122 of the Improvement Act do not he help the respondent, because it is not possible to bold that for carrying out the provisions of section 122, the land in question is directly required. There is another aspect of the question to which we ought to refer Section 78A, like section 78, deals with lands which in terms are not required for the execution of the scheme. These two sections provide for two categories of lands, both of which were originally comprised in the scheme, but are later found to be not required for the scheme. Now, when section 78A expressly says that the and in respect of which betterment fee can be levied, is not required for the scheme, it is not easy to accept the argument that such a land is nevertheless required for carrying out the provisions of section 78A. In construing section 30(c), it is necessary to distinguish between the carrying,, out the provisions of the Improvement Act, and the achieve 378 ment or the accomplishment of the objects of the said provisions. In one sense, the land in question does serve the purpose of the Improvement scheme, because the betterment fee which is levied on it swells the funds of the Board and the funds are utilised by the Board for the purposes of carrying out the scheme; but the requirement of the land for carrying out the provisions of the Improvement Act which alone can invoke section 30(c), cannot be said to be satisfied by this indirect connection between the land and the general purpose of the Improvement Act. There is one more aspect of this problem which is not irrelevant. Betterment fee is levied against a land, because its value is increased as a result of the improvement scheme, and so, section 78A authorises the Board to levy betterment fee presumably on the ground that the Board is justified in recouping itself by such levy in respect of unearned increment in the value of the land of which the land holder gets a benefit. If the land holder pays betterment fee for such unearned increment in the value of the land, he may apply under section 25 of the Act for enhancing the rent payable by the thika tenants to him. But there appears to be no reason why a landlord, the value of whose land has increased by the improvement scheme introduced in the area in which his land is situated, should get the additional benefit of exemption from the application of the provisions of the Act which give protection to the tenants. Having carefully considered the question of construing s.30(c), we have come to the conclusion that the words used in section 30(c) do not justify the conclusion that a private landholder is intended to be equated with Government or with the other special bodies or authorities whose lands are exempted from the operation of the Act by section 30. We do not think that the Legislature intended that the provisions of the Act should cease to apply to all lands which ore comprised in the scheme, because such a provision would appear to be inconsistent with the categories of cases covered by clauses (a) & (b) of section 30. Besides, if that was the intention of the Legislature in enacting section 30(c), it would have been easy for the Legislature to say that lands comprised in the improvement schemes should be exempted from the application of the Act. Section 30, as we already emphasised, provides for an exception to the application of the beneficent provisions of the Act, and it would, we think. not be unreasonable to bold that even if section 30(c) is reasonably capable of the construction for which Mr. Pathak contends, we should prefer the alternative construction which is also reasonably possible. In construing the provisions which provide for exceptions to the applicability of beneficent legislation, if two constructions are reasonably possible, the Court would be justified in preferring that construction which helps to carry out the beneficent purpose of the Act and does not unduly expand the area or the scope of the exception. Therefore, we are satisfied that the Court of Appeal was in error in 379 reversing the conclusion of the trial Judge that the present suits filed on the original side of the Calcutta High Court were incompetent. There is, however, one more point to which we ought to refer before we part with these appeals. Both the learned Judges in the Court of Appeal have observed that if section 30(c) is held not to apply to the land in question on the ground that it is not required for carrying out any of the provisions of the Improvement Act, section 30(c) would, in substance, become redundant. The argument which was thus urged before the Court of Appeal and has been accepted by it. assumes that the Board is a local authority within the meaning of 30(b)(iv) and as such, the land which has vested in the Board is already excepted from the operation of the Act by the said provision; and that means that the lands acquired by the Board under the provisions of the Improvement Act have already been provided for by section 30(b)(iv). If that is so, there would be no cases to which section 30(c) can apply. Since this point arises incidentally in construing section 30(c), we do not propose to decide in the present appeals whether the Board is a local authority within the meaning of section 30(b)(iv). In dealing with this particular argument, however, we are prepared to assume that the Board is such a local authority. Even so, it is possible to hold that section 30(c) does not become redundant, because though section 30(b)(iv) may include lands acquired by the Board, there may still be some other lands which are not acquired by the Board but which, nevertheless, may be required for carrying out some provisions of the Improvement Act. Take, for instance, section 42 of the Improvement Act. Section 42(b) lays down that any improvement scheme may provide for raising, lowering, or levelling any land in the area comprised in the scheme. Section 42(c) provides for the formation and retention of open spaces. Similar provisions are made by section 35C(1)(i) and (j) as introduced by the Amending Act 32 of 1955. It is possible to take the view that the lands required for the purposes specified in these provisions of section 42 or section 35C of the Improvement Act are required within the meaning of section 30(c) of the Act, though they may not have been acquired. But apart from this consideration, the argument that section 30(c) would become redundant cannot, we think, be treated as decisive, because it is not unknown that the Legislature sometimes makes provisions out of abundant caution. When section 30(c) was enacted in 1949, the Legislature may have thought that in order to avoid any doubt, dispute or difficulty in regard to the question as to whether the Board would be a local, authority or not, it would be better to make a specific provision in respect of lands which are acquired by the Board as well as those which would be required for the purpose of carrying out the provisions of the Improvement Act. It is true that the lands which are required within the meaning of section 30(c) would include lands which are actually acquired as well as those which might not have been acquired but are, nevertheless, required for carrying out the provisions of the Improvement Act. But having specified respective 380 authorities or bodies in clause (a) & (b) of section 30, the Legislature may have thought that it would be better to refer to the Improvement Act and lands required for carrying out its provisions, specifically and expressly. Having regard to the considerations on which our interpretation of section 30(c) is based, we are not prepared to attach undue significance to the argument based on the assumption that the Board is a local authority within the meaning of section 30(b)(iv) and that would make the provisions of section 30(c) either superfluous or would deprive the said provision of any significance or importance. The result is, the appeals are allowed, the decrees passed by the Division Bench are set aside and those of the trial Judge restored with costs throughout. Appeals allowed.

IN-Abs

The appellants were thika tenants under the respondent in respect of the suit land. Under the Calcutta Improvement Trust Act, 1911, a scheme had been framed for improvement of an area within which the suit land was situate and the suit land was shown among the properties, in regard to which betterment fees were proposed to be levied. The respondent accepted the betterment fee assessed and levied under section 78A of the Act. Thereafter, he filed suits for the ejectment of the appellants. The suits were dismissed as not maintainable because of section 5 of the Calcutta Thika Tenancy Act, 1949, under which an application for the ejectment of a thika tenant could be filed only before the Controller under that Act. On appeal, it was held, that the suits were governed by the provisions of section 30(c) of the Thika Tenancy Act, under which, nothing in the Act applied to any land which was required for carrying out any of the provisions of the Improvement Trust Act, and therefore, the appeals were allowed. In the appeal to this Court by the tenants on the question as to whether section 30(c) applied to the suits; HELD: Because the land was liable to pay betterment fee and the fee thus realised served the purpose of section 122 of the Improvement Trust Act by swelling the funds of the Improvement Trust Board and such fund could be utilised by the Board for the purposes of carrying out the scheme, it cannot be said that the land itself was required for carrying out the provisions of the improvement Trust Act. The requirement of section 30(c) of the Thika Tenancy Act could not be said to be satisfied by such an indirect connection between the land and the general purpose of the Improvement Trust Act. [378 A B] In construing the words of a statute the context in which the words occur, the object of the statute in which the provision is included and the policy underlying the statute assume relevance and become material. [373 F] In the instant case, the object of the Thika Tenancy Act to help thika tenants is writ large in all the material provisions of the Act In construing section 30, which provides for an exception to the applicability of beneficent legislation, if two constructions are reasonably possible, the Court would be justified in preferring that construction which helps to carry out the beneficent purpose of the Act and does not unduly expand the area or the scope of the exception, that is, the exception must be strictly construed. Under the section, it is the land which must be required and not any fee or charges that may be levied against it. Further, there must be a direct connection between the land as such and the requirements of the provisions of the improvement Trust Act, and not with the policy of the provisions or the object which they are intended to achieve. In order that section 30(c) should be applicable, the respondent must point 365 out a specific provision of the Improvement Trust Act for the carrying out of which the land as such was required. Section of that Act would not help the respondent, because, it would not be possible to hold that for carrying out its provisions the land was directly required. H 377 C, G; 378 H] Moreover, when section 78A of the Improvement Trust Act, expressly says that the land in respect of which betterment fee can be levied, is, not required for the scheme, the argument that such a land is, nevertheless, required for carrying out the provision of section 78A, cannot be accepted. [377 H] Betterment fee is levied against a land, because its value is increased as a result of the improvement scheme and the Board is justified in recouping itself by such levy in respect of the unearned increment in the value of the land, and, if the landholder pays the fee, he may apply under section 25 of the Improvement Trust Act for an enhancement of the rent payable by the tenants; but there is no reason why such a landlord should get the additional benefit of exemption from the application of the provisions of the Thika Tenancy Act. Clauses (a) and (b) of section 30 of that Act indicate that it is only lands vested in Government or other special bodies or authorities that are excepted from the application of the Act. The words used in cl. (c) do not justify the conclusion that a private landholder is intended to be equated with Government or with such other special bodies or authorities. [378 C, D, F] Though lands acquired by the Board may be covered by section 30(b) (iv), on the assumption that the Board is a local authority, section 30(c) would not become redundant if it was held not to apply to the suit land, because, there may still be some other lands which are not acquired by the Board but which may. nevertheless, be required for carrying out some provisions of the Improvement Trust Act, as for example under sections 35C and 42 of that Act. Or, the legislature might have made, by way of abundant caution, a specific provision in respect of lands which are acquired by the Board as well as those which would be required for the purpose of carrying out the provisions of the Improvement Trust Act. [379 D H]

Appeal No. 672 of 1964. Appeal by special leave from the judgement and decree dated October 1962 of the Madhya Pradesh High Court in First Appeal No. 8 of 1960. C. B. Agarwala, W. section Barlingay and A. G. Ratnaparkhi, for the appellant. M. Adhikari, Advocate General for the State of Madhya Pradesh, B. sen, M. section K. Sastri, M. N. Shroff, R. P. Kapur for 1. N. Shroff, for the respondent No. 1. The judgment of the Court was delivered by Raghubar Dayal, J. This appeal, by special leave, arises out of a suit instituted by the appellant for a declaration that he was not liable to pay a certain amount originally due from defendant respondent No. 2 and for the issue of a permanent injunction restraining the State Government, Madhya Pradesh, defendant respondent No. 1 from continuing the proceedings for the recovery of the amount or for starting any fresh proceedings. The suit was decreed by the Trial Court but, on appeal, the High Court reversed the decree and dismissed the appellant 's suit. The admitted facts of the case are that on December 24, 1956, respondent No. 2 purchased at the public auction sale held by the Divisional Forest Officer, Harda, the cut timber and arkat trees of coupe No. 9 Eastern, East Kalibhit Range, in Harda Forest 383 Division, for Rs. 70,200. The appellant stood surety for the purchaser, viz., respondent No. 2. The purchase price was to be paid in four instalments, according to para 4 of the deed of contract. Rs. 17,600 were to be paid at once and were so paid. The other instalments were due on March 1, May 15 and December 15, 1957. These instalments were not paid by respondent No. 2 and hence respondent No. 1 took proceedings against the appellant for the recovery of the amount. According to the terms of the contract, the contractor, res pondent No. 2, was to commence his work of collecting and removing the cut timber within 1 month after furnishing a copy of the boundary certificate. This certificate, Exhibit D 1, was furnished on February 5, 1957 and stated that the respondent No. 2 had clearly understood the boundaries of the areas covered by the lease and that he had taken possession of the standing/felled/ collected material in the aforesaid coupe as announced at the auction and described in the said lease and that he was satisfied that the quantity delivered to him agreed substantially with that announced at the auction. The appellant Badri Prasad signed this certificate as a witness. The work could continue upto June 30, 1958. Interest was to be charged at 6 1/4 per cent per annum in respect of the instalments not paid on the due dates. The removal of the forest produce purchased from the contract areas was to be according to specified routes and, after they had been examined at the depots specified in clause 5 of the contract deal. Clauses 5A and 5B of the contract made it incumbent on the forest contractor respondent No. 2 to set apart certain timber for certain purposes to the agriculturists and the residents of the villages till three months before the expiry of the contract. The Forest Contract Rules were deemed to be part of the contract entered into between respondent No. 2 and the State, by clause 6 of the contract. The formal deed of contract was signed by the Chief Conser vator of Forests on May 3, 1957 and the preamble of the deed gives the date of the making of the contract to be May 3, 1957. The First Schedule to the Contract states: "The forest produce sold and purchased consists of: All standing trees bearing hammer mark of marginally shown device at base and breast height. All felled trees marked at the butt end and stumps with the device shown in the margin". This is signed by the contractor, respondent No. 2 and by the Divisional Forest Officer, Harda Division, dated December 24, 1956. The trace of the coupe sold was signed by respondent No. 2 and the Divisional Forest Officer on November 29, 1956, prior to the actual auction sale. The Third Schedule relating to the out. 384 turn register was also signed by respondent No. 2 and, by the appellant who stood surety and the Divisional Forest Officer, on December 24, 1956. The security bond was signed by the appellant on December 29, 1956 and by the Divisional Forest Officer on March 30, 1957 and was countersigned by the Chief Conservator on May 3, 1957. The entire coupe whose cut timber was sold to the respondent was divided into four sections A, B, C and D. This was done in accordance with r. 18 of the Forest Contract Rules. This rule provides that the operations carried out in the contract area under a forest contract for the sale of standing trees are divided into two stages (a) cutting and (b) carting. Cutting operations include felling and all processes of conversion etc. without removing it further from the place where it was felled than may be necessary to carry out such processes. Carting operations include all operations for the removal of a felled tree, or its converted products from the place where the tree was felled, whether such removal be to a depot or to a saw mill or other destination. Sub r. (2) of r. 18 authorizes the Divisional Forest Officer to divide the contract area, shortly termed a coupe, into such number of sections, not exceeding,, eight, as he may think fit. The Divisional Forest Officer can regulate and confine the operations of the forest contract in accordance with the provisions mentioned in clauses (a) to (c) of that sub rule. Clause (b) provides that a forest contractor can be allowed to carry out cutting operations first in sections 1 and 2 of the coupe only and as soon as he begins cutting operations in section 3 he shall be deemed to have surrendered all his rights to the standing trees in section 1 and similar would be the result on his beginning cutting operations in section 4 and so on, till all the sections of the coupe are completed. Clause (c) authorises the forest contractor to begin carting operations from the sections whose trees he has begun to cut and provides that his rights to the forest produce in section 1 cease when he starts cutting operations in section 4, and so on. The provisions of r. 20 apply to contracts where the trees have been felled by the Forest Department and the felled trees only were sold to the forest contractor. Sub r. (3) makes rules 18 and 19 applicable to such contracts in so far as they be applicable. Sub r. (2) of r. 20 provides that a forest contractor who has purchased felled trees shall remove all the trees purchased by him under his contract. Respondent No. 2, the contractor, began his operations in section A of the coupe in the last week of February, 1957. He defaulted in the payment of the second instalment which was due on March 1, 1957 and did not pay that amount till April 25, 1957, 385 though it was demanded several times from him. On March 23, 1957 a notice. Exhibit P4, was issued to him. It stated: "You are being informed through this notice that the removal of goods from the coupe by you is already in excess of the amount deposited by you in the treasury. So please send the challan of the second instalment as soon as possible by the return load carrier, otherwise your removal of goods would be stopped and a report would be made to the higher authority within two days". This was duly served on respondent No. 2. On April 25, 1957 the appellant was told by the forest authorities that no further removal of the forest produce would be allowed in view of the default of payment of the second instalment. The licence book and the transit pass were taken back by the Government Forester, Madanlal Pagare. Fire broke out in the forest and the cut timber sold to res pondent No. 2 was burnt. The report about the loss from fire is Exhibit D2 dated April 29, 1957 and is signed by the contractor and Sheoprasad Parashar. the Forest Guard. As a result of the fire the goods purchased by respondent No. 2 and not removed by then, ceased to exist. He did not pay the amounts due for the 2nd, 3rd and 4th instalments. The appellant sought to avoid his liability as surety for the non payment of the amount inter alia on the round that the contractor respondent No. 2 had not been put in possession 'of the cut timber sold to him except of such timber which had been in section A of coupe No. 9, that therefore there had been no transfer of property in the timber sold to him and that he was therefore not liable for paying the amounts due on the 2nd, 3rd and 4th instalments. It was averred by the appellant in paragraph 5(A) of the plaint: "Thus it was clearly understood on both sides and also explained by the Forest Department officials of defendant No. 1 and which has been all along implicit in the contract as per usual practices of the forest department that the possession of the goods of each respective section will be delivered to the Contractor on payment of each instalment as stated above. It was only on due payment of each instalment that the contractor was to become entitled to remove the goods in pursuance of the licence book supplied to him by the forest department of defendant No. 1. In paragraph 5(B) it was stated: "That the contractor or his licensee had no right to remove the goods until the same was duly hammer marked by the representative of the said forest department 386 and until the licence and the transit pass were duly checked and signed by the Coupe Guard or such other representative as may be present on the spot". Para 5(C) mentioned: "That the contractor or his men were further liable to carry the forest produce for check and examination of forest Depot officers of Ziri, Rahetgaon and Timarni established for that purpose and after the cut wood was checked by the Depot Officers, the same used to be marked with a special hammer mark, and unless that was done it was not lawful for any person to remove timber brought to the depot". Respondent No. 1 admitted what was stated in paras 5(B) & (C) of the plaint. It denied the understanding as averred in para 5(A) and what was alleged in para 5(D) to the effect that it was after the processes mentioned earlier that delivery of the goods was deemed to be given to the forest contractor and was to be at his disposal. The main question urged before us is that the property in the cut timber sold and existing in sections B, C and D 'of the coupe had not passed to the contractor before the fire broke out in the last week of April 1957 and this contention is based on the facts that the goods sold were not specific goods as they had not been hammer marked, that the goods in sections B, C and D could not be delivered till the 2nd, 3rd and 4th instalments had been paid and that the deed of contract was signed after the fire had taken place. We may now consider the points urged in support of the contention that the property in the timber of sections B, C and D had not passed to respondent No. 2. The first schedule to the contract describes the property, forest produce sold and purchased, thus: " All standing trees bearing hammer mark of marginally shown device at base and breast height. All felled trees marked at the butt end and stumps with the device shown in the margin". It is the case of the plaintiff appellant that cut trees timber or cut trees were sold. Para 2(A) of the plaint describes the property purchased as 'the cut timber and arkat trees of coupe No. 9 '. Clause (1) of para 2 'of the statement of the case filed on behalf of the appellant makes this further clear as it is stated therein that the contract was for the purchase of 'the cut timber and cutarkat trees '. It appears therefore that the expression about 'all standing trees bearing hammer mark ' in the description of forest produce sold was inadvertently omitted to be struck out from the deed of contract though there was no sale of standing trees to respondent No. 2. 387 Chapter XX of Part IV of Vol. 1 of the Central Provinces & Berar Forest Manual (hereinafter shortly termed Forest Manual) gives the rules for the disposal of forest produce. Rule 5 states that before forest produce is disposed of it shall be properly marked. The standing trees are marked with hammer at two places, at the butt end and at the lower part, a little above the stem. 'the trees are to be felled so as to leave the lower hammer mark in the un cut portion. The felled tree sold is subject to further processes of cutting etc. The portions so cut have to be hammer marked, as only one such portion will have the hammer mark which was first put at the butt end of the tree. A second special hammer mark is placed on these cut portions at the time of checking at the depot. The two hammer marks necessary to be put on the cut portions of the felled tree before they could be actually taken away from the forest area were not made on the cut timber existing in sections B, C and D and sold to respondent No. 2, as the felled trees in those areas had not been cut further by the contractor. The omission to put such marks does not make the goods sold unascertained. The felled trees sold to the respondent No. 2 had a butt mark at the butt end. A similar hammer mark existed on the stem near which the felled tree must have lain, it being presumed that the rules for the felling of trees were properly complied with by the forest authorities, mentioned above. The goods sold therefore were specified goods. There is nothing in the contract that possession would not be delivered over the cut timber in sections B, C and D till the 2nd, 3rd and 4th instalments have been paid. The relevant provisions of r. 18 of the Forest Contract Rules, extracted earlier, do not contain any such restriction. It only provides that the operations necessary to be conducted by the contractor had to start with section A or the first section and that the rights of the contractor to the material purchased would be deemed to be surrendered in certain circumstances. This has nothing to do with the payment of the instalments by the contractor. He can proceed to operate on the entire property purchased, according to his inclination in accordance with the procedure, as regulated by the rules. There is therefore no force in the submission that there could have been no delivery of possession over the produce sold and existing in section B, C and D till the various instalments had been paid. The fact that the contract was signed by the Chief Conser vator of Forests on May 3, 1957, after fire had broken out has no effect on the question of delivery of possession of the produce sold and consequently on the passing of property in the goods to the contractor respondent No. 2. The Chief Conservator who was the proper authority for entering into the contract of sale of property worth over Rs. 70,000/ had necessarily to sign the deed of contract subsequent to the actual auction sale and in view of the L/B(N)3SCI 12 388 exigencies of the procedure to be followed may have to sign after a substantial period of time. The bid of respondent No. 2 at the auction sale had been provisionally accepted by the Divisional Forest Officer who is authorized under the rules to conduct the auction sale. The Divisional Forest Officer and respondent No. 2 thereafter signed the deed of contract on December 24, 1956 the date on which the auction sale took place. The appellant, as surety, also signed the third schedule on December 24, and the security bond on December 24. Practically all the formalities necessary for the execution of the deed except for the signatures of the Chief Conservator, authorised to enter into a contract of this magnitude, had been completed. His formal signature on the deed of contract relates back the contract to the date of auction when the bid of respondent No. 2 was provisionally accepted and he and the Divisional Forest Officer signed the contract. In this connection, reference may be made to certain rules and the instructions issued by Government to the various officers for complying with those rules. Executive instructions on the preparation of forest contract agreements are printed at p. 125 of Vol. 11 of the Forest Manual. Instruction No. 9 provides that if the parties have signed the deed on the same date, that date should be entered in the preamble, but if they had signed on two different dates, then the later of those two dates should be entered in the preamble. It was in accordance with this instruction that May 3, 1957, the date on which the Chief Conservator signed the contract was mentioned in the preamble of the contract deed. That date therefore had not any real effect on the actual date on which the sale of the forest produce took place in favour of respondent No. 2. Instruction 10 directs that the dates in clause 2 of the prescribed deed of contract should be very carefully entered as they have an important bearing on the deed and show the period during which the contract will remain in force. Such a period in the deed of contract Exhibit D is the period 'from the date the forest contractor furnishes the necessary coupe boundary certificate after inspection of the contract area to the 30th day of June 1958, both days inclusive '. The coupe boundary certificate was furnished on February 5, 1957. It follows that the period for the operation of the contract was from February 5, 1957 to June 30, 1958. This is a clear indication that the date in the preamble has no real effect and that the contract, after its being duly signed by the competent authority, relates back to the date of sale. Instruction 16 deals with the execution of the deed of contract. Clause (i) provides for the drawing up of the contract in triplicate. Clause (iii) requires the Divisional Forest Officer to initial the 389 contract after checking it before the lessee is asked to sign it. Clause (iv) provides that where the Divisional Forest Officer himself is empowered to execute the agreement he and the lessee should execute it together and clause (v) provides that where the Divisional Forest Officer is not empowered to execute the agreement, it should be executed by the lessee and his signature should be attested and that the agreement should then be sent as soon as possible to the Forest Officer empowered to execute it, for his signature and attestation. These instructions about the execution of the deed of contract plainly take into consideration the lapse of time between the execution by the lessee and by the competent forest authority. Instructions Nos. 38 to 48 are with regard to the auction of forest contracts. It is the Divisional Forest Officer who is directed to take certain steps. Instruction No. 45 provides that Divisional Forest Officers should ordinarily allow themselves more than one day for the conduct of the auction sales. Instruction No. 47 provides that where the agreements are to be signed by the Conservator or higher authority, the first instalments must still be paid and the duplicate agreements signed by the contractor and his surety, if any, and sent to the Conservator immediately. The Conservators should sign the duplicate agreements in token of acceptance and return them to the Divisional Forest Officers as soon as possible. The reason for this is that it is obviously only fair to a forest contractor that he should be in possession of his signed agreement before he starts work on his contract, i.e., before July 1. In case the Conservators are not competent to sign the contract deeds such deeds will have to be sent by them to the Chief Conservator who is competent in view of r. 102A of Vol. 1 of the Forest Manual (under Chapter XIX) and the relevant orders of the Government to execute contracts for the sale of forest produce upto an amount of Rs. 1,00,000 when payment is received in full at the time of delivery and upto Rs. 10,000 or upto Rs. 50,000 with the previous sanction of the Provincial Government when payment is not received in full at the time of delivery. The exercise of this power by the Chief Conservator and other officers is subject to the rules given in the Government Notification and rule 1(a) of these rules relating to contracts for forest produce reads: "No timber or other forest produce may be ordinarily sold except on cash payment in full at the time of delivery. Payment in instalments may, however, be considered as payment in full at the time of delivery provided that there is a clause in the agreement to the effect that when Divisional Forest Officer considers that the value of any forest produce removed by the purchaser equals or exceeds the amount of purchase money paid by him upto 390 that time, the Divisional Forest Officer may stop further removal until the purchaser has paid such further sum, as in the opinion of the Forest Officer, may be sufficient to cover the excess value of the forest produce removed or to be removed". In view of this rule it would be deemed that the payment of the purchase price had been made in full at the time of delivery, though the actual payment was to be made in four instalments. We are therefore of opinion that the sale of the forest pro duce to respondent No. 2 was finalised on the date of sale subject of course to the acceptance of his bid by the competent authority, the Chief Conservator of Forests and that the fact that the Chief Conservator signed the deed on May 3, 1957, does not make the sale effective from the date of his signature. His signatures do not ratify any action of the Divisional Forest Officer which he took beyond his competence, but simply completes the execution of the deed of contract and relate back its execution to the date on which the sale took place and the contractor and the Forest Officer had signed the document. We may now refer to the approach of the High Court to this question of the deed of contract operating from the date of its execution by respondent No. 2. It was of opinion that respondent No. 2, and the Divisional Forest Officer, had made the contract in December 1956 long before April 28, 1957 and even if the Divisional Forest Officer was not competent to enter into the contract, his act had been subsequently ratified by the competent authority and that therefore the ratification related back to the date of the contract and had the same effect as if the Divisional Forest Officer had performed the act by the authority of the Chief Conservator of Forests. With respect, we do not consider this approach to be correct. The Divisional Forest Officer had authority under the statutory rules for holding the auction and for provisionally accepting the bid. All that he did was within his authority. He did not actually enter into the contract with respondent No. 2. He simply signed the standard form of the contract for the satisfaction of the competent authority to the effect that its accepting the bid and entering into the contract would be correct as is the usual official procedure where subordinates have to put up or forward papers to the superior officers for approval, sanction or orders. The right view of the entire procedure adopted in the case has been already stated by us above. The other point urged by Mr. Agarwala, for the appellant, is that in view of r. 8 of the Forest Contract Rules which empowered the Divisional Forest Officer to stop the removal of forest produce sold on his finding that the value of the forest produce already removed by the contractor exceeded the amount of the instalments already paid by him, the seller in this case had reserved the right 391 of disposal of the forest produce until certain conditions were fulfilled and that therefore section 25(1) of the Indian (Act III of 1930 applies to the facts of the case and that therefore, notwithstanding, delivery of the forest produce to respondent No. 2 in February 1957, the property in it did not pass to respondent No. 2 until the conditions imposed by the seller were fulfilled. There is nothing in the deed of contract 'or in the Forest Contract Rules which reserved such a right of disposal in the State. Right given to the Government under r. 8 is the right to stop the removal of forest produce when the value of the forest produce already removed exceeded the amount of the instalments paid. This is to regulate the compliance with the conditions of the auction one of which was that ordinary forest produce was to be sold on payment in full at the time of delivery. The contractor had therefore to pay full price he had bid at the date of the sale or any day prior to the delivery of the goods to him in February 1957. The provision for allowing payment by instalments is a concession for the convenience of the contractor and it is provided in the rule that payment in instalments may however be considered as payment in full at the time of delivery provided there be a clause in the agreement in accordance with the provisions of r. 8 of the Forest Contract Rules. Reference may here be made to the provisions of section 83 of the (Act XVI of 1927). Subsection (1) provides that when any money is payable for or in respect of any forest produce, the amount thereof shall be deemed to be a first charge on such produce, and such produce may be taken possession of by a Forest Officer until such amount has been paid. Rule 8 of the Forest Contract Rules is therefore in pursuance of the statutory provisions of section 83 of the Forest Act which creates a lien on forest produce for the money payable to Government. Action which the Divisional Forest Officer can take for stopping the removal of the forest produce sold is in pursuance of the statutory authority conferred on him and not in pursuance of any terms of the contract between respondent No. 2 and the Government. When a contractor is deemed to have paid in full the price there could be no occasion for the Government to reserve a right of disposal of the property even when its delivery had been made to the purchaser. As already stated, it is section 20 of the Sale 'of Goods Act which will apply to this case. This section provides that where there is an unconditional contract for the sale of specific goods in a deliverable state, the property in the goods passes to the buyer when the contract is made and it is immaterial whether the time of payment 'of price or the time of delivery of the goods or both is postponed. The contract was unconditional, the goods sold were specific. They were in a deliverable state and therefore the property in the goods did pass at the time when the contract was made. This section would have applied even if the time of payment 392 of price hand been postponed. In the present case, as already stated, the payment allowed by instalments is to be deemed payment in full at the time of the delivery of the goods sold. The last contention raised for the appellant is that as the contract was signed by the Chief Conservator about a week after the goods lying in sections B, C and D had been burnt by fire, the contract must be deemed to have been not made at all by the Chief Conservator who could not have contracted to sell goods which did not exist. The contention really is that there could be no ratification of the act of the Divisional Forest Officer, who had no authority to enter into the contract, after the goods had ceased to exist and reliance is placed in support of this contention on what is stated at para 415 at p. 177 'of Halsbury 's Laws of England, Vol. 1, III Edn. It is stated there: "As to the time within which ratification may take place, the rule is that it must be either within a period fixed by the nature of the particular case, or within a reasonable time, after which an act cannot be ratified to the prejudice of a third person". This is the general proposition and will not be applicable to this case as no third person is being prejudiced on account of the signing of the contract by the Chief Conservator on May 3, 1957, a week after the fire had destroyed certain goods purchased. Further, it is stated in the same paragraph: "But by an anomalous rule limited to marine insurance a contract of marine insurance made by an agent on the principal 's property may be ratified by the principal after notice of loss". This proposition is well settled in England. In Williams vs North China Insurance Co.(1) this proposition was sought to be reviewed. Cockburn C.J. said at p. 764: "The existing authorities certainly show that when an insurance is effected without authority by one person on another 's behalf, the principal may ratify the insurance even after the loss is known. Mr. Benjamin asked us, as a Court of Appeal, to review those authorities. Where an agent effected an insurance subject to ratification, the loss insured against is very likely to happen before ratification, and it must be taken that the insurance so effected involves that possibility as the basis of the contract. It seems to me that, both according to authority and the principles of justice, a ratification may be made in such a case". These observations would fully apply to the facts of the present case, even if we were of the view that the Chief Conservator ratified the unauthorised act of the Divisional Forest Officer on May (1) 393 3, 1957, after the fire had taken place. The provisional acceptance of the bid and the signing of the deed by the Divisional Forest Officer must. in the circumstances, be held to be subject to ratification. It was within the realm of possibility that the forest produce might be lost on account of fire or any other risk mentioned in r. 32 of the Forest Contract Rules before the deed of contract was formally signed by the Chief Conservator. The contract entered into therefore involved the possibility of the loss of goods by fire as the basis of the Contracts Lastly, reference may be made to r. 32 of the Forest Contract Rules which provides that a forest contractor shall not be entitled to any compensation whatever for any loss that may be sustained by reason of fire etc. This is not a suit for compensation by the contractor respondent No. 2, but in essence the basis 'of the suit is that the forest contractor did not get possession of the forest produce in sections B, C and D, that such produce was lost by fire and that therefore he was not to pay the second, third and fourth instalments and cannot be said to be in default in payment of those instalments. The loss of such goods by reason of fire therefore does not in any way give support to the claim of the appellant. We are therefore of opinion that the appellant 's suit has been rightly dismissed by the High Court. We accordingly dismiss the appeal. There will be no order as to costs. Appeal dismissed.

IN-Abs

The 2nd respondent purchased on 24th December 1956, at a public auction sale held by the Divisional Forest Officer, the cut timber of a coupe and paid the first installment of the purchase price immediately. The appellant stood surety for the payment of the remaining three instalments. The coupe was divided into 4 sections according to the rules which were deemed to be part of the contract and the boundary certificates was furnished to the 2nd respondent on 5th February 1957. He began operations in the 1st section on the last week of February, but defaulted in the payment of the 2nd instalment which was due on 1st March 1957, and so, on 25th April the appellant and 2nd respondent were informed by the forest authorities, that no further removal of the timber would be allowed, as the value of timber already removed exceeded the amount paid. On 28th April a fire broke cut and the timber sold to the 2nd respondent ceased to exist. On 3rd May 1957, the formal deed of con tract, which was signed by the 2nd respondent and the Divisional Forest Officer on 24th December, was signed by the Chief Conservator of Forests, as required by the rules. Since the 2nd respondent had not paid the later instalments proceedings were commenced by the 1st respondent against the appellant, whereupon he filed a suit for restraining the 1st respondent from continuing the proceedings. The suit was decreed by the trial court, but dismissed on appeal, by the High Court. In his appeal to this Court, the appellant contended that the 2nd respondent had not been put in possession of the timber sold, except the portion in the 1st section of the coupe, that there was no transfer of property in the timber and therefore he was not liable to pay the amounts due on the other 3 instalments, the transfer of property in the timber being a condition precedent to his liability. HELD: There was an unconditional contract for the sale of specific goods in a deliverable state, the property in the timber passed to the 2nd respondent when the contract was made on 24th December 1956 under s 20 of the , and possession was also given on 5th February 1957. Therefore, the appellant 's suit was rightly dismissed by the High Court [391 H] The timber was sufficiently identifiable and was therefore specified goods and there was nothing in the contract postponing possession till the other instalments have been paid. The fact that the contract was signed by the Chief Conservator, after fire had broken out has no effect on the validity of the contract, or on the question of delivery of possession or on the passing of property in the timber. The instructions in the Forest Manual about execution of contracts plainly take into consideration the lapse of time between the execu 382 tion by the lessee and by the competent forest authority, and therefore, the date on which the Chief Conservator signed had not any real effect on the actual date on which the sale of the timber took place. It was also within the realm of possibility that the timber might be lost on account of fire or other risk, before the contract was formally signed. The sale of the timber to the 2nd respondent was therefore final on 24th December, the date of sale, subject to the acceptance of his bid by the competent authority. [387 E H; A B] Williams vs North China Insurance Co., L.R. (1876)1 C.P.D. 757, applied. Rule 8 of the Forest Contract Rules empowers the Divisional Forest Officer to stop the removal of the timber on his finding that the value of the timber already removed exceeded the amount of instalments paid. But, that would not amount to reserving a right of disposal in the State, because, the rules provide that though Ordinarily the timber should be sold for cash payment in full, payment in instalments could be considered as payment in full, if a right in accordance with r. 8 is reserved. When a contractor is deemed to have paid in full the price, there could be no occasion for the Government to reserve a right of disposal. The provision in r. 8 is only in pursuance of the statutory provision in section 83 of the Forest Act. 1927, which provides that when any money is payable for or in respect of any forest produce, the amount thereof shall be a first charge on such produce, and that such produce may be taken possession of by a Forest Officer, until such amount has been paid. [390 H 391 D]

Appeal No. 471 of 1963. Appeal by special leave from the judgment and decree dated November 9 1960 of the Punjab High. Court in Regular Second Appeal No. 1627 of 1960. 434 section V. Gupte, Solicitor General, B. K. Khanna, R. K. Garg, D. P. Singh, section C. Agarwal and M.K. Ramamurthi, for the appellant. N.C. Chatterjee and M.S. Gupta, for respondent No. 1. P.K. Chatterjee and R.H. Dhebar, for respondent No. 11. The Judgment of the Court was delivered by Mudholkar, J. The short point which falls to be considered in this appeal by special leave from a judgment of the High Court of Punjab dismissing the appellant 's appeal in limine is whether the suit for possession instituted by the plaintiff respondent No. 1 is within time. There are ten respondents to the appeal out of whom only two, the plaintiff respondent No. 1 Amardas and respondent No. 11 Union of India are represented. While the appeal is contested by the first respondent it is supported by the Union of India. The facts which are not disputed before us are briefly these: The appellant has a share of 1221/143 1/2 in the land in suit. The occupancy tenant of this land is Akhara Nirbansar of Sultanwind Gate, Amritsar. The second respondent Ram Saran Das was Mahant of this Akhara till the year 1950 when he was removed by virtue of an order made by a civil court in a suit under section 92 of the Code of Civil Procedure, confirmed in appeal on September 11, 1950. On December 29, 1953 respondent No. 1 was appointed as Mahant in place of respondent No. 2. On September 15, 1939 the appellant instituted a suit in a revenue court under sections 38 and 39 of the Punjab Tenancy Act (hereafter referred to as the Act) for possession of 141 kanals 8 marlas of land on the ground that he had granted a sub lease thereof for the manufacture of bricks to someone by utilising earth dug up from that land. This, according to the appellant, was in contravention of the provisions of section 39 of the Act and entitled him to eject respondent No. 2. The Revenue Court held that out of the land sub leased by respondent No. 2 only a certain portion was dug up by the sub lessee and, therefore, the ejectment of the second respondent was confined to that area of land which had been dug up. The date of the ejectment decree was June 3, 1940. The second respondent preferred an appeal before the Collector from that decree which was dismissed on October 19, 1940. Shortly thereafter the appellant obtained possession of the land from which the second respondent was ordered to be ejected. The lessee of the second respondent, however, continued to dig up the rest of the land and, therefore, the appellant instituted a second suit for the ejectment of the second respondent therefrom. The Assistant Collector who tried the suit granted a decree to the appellant in respect of the entire land which was left with the second respondent after he was dispossessed from a part of the land leased to him under the earlier decree. In appeal, however, the Collector modified the order of 435 ejectment by leaving out of the land 29 kanals and 14 marlas. This order was made on May 31, 1943. Shortly thereafter the appellant obtained possession of the land with respect to which the Collector had confirmed the order of ejectment in the appeal. On March, 18, 1957 the first respondent instituted a suit against the appellant and the second respondent. According to respondent No. 1 Akhara Nirbansar was not bound by the actions of Mahant Ram Saran Das, the second respondent, which were tantamount to alienation of the land which, according to him, were neither for legal necessity nor for the benefit of the estate. He contended that on the contrary the action of Ram Saran Das in alienating the land was unauthorised and illegal and because what he did was not for legal necessity nor for conferring any benefit on the estate. The appellant contested the suit on two main grounds. The first was that the land in question was never attached to the Akhara but that Mahant Ram Saran Das, the second respondent, was its occupancy tenant and that as the sub lessee of the land had dug it up and rendered it unfit for cultivation the appellant as the owner of the land was entitled to eject respondent No. 2 by forfeiting the lease. He denied that the land was wakf property and contended that the occupancy rights existing in favour of the second respondent were extinguished by the orders of the revenue courts which still hold good. The second point was that as the appellant was in continuous possession of the land in suit as owner in his own right for more than 12 years preceding the suit openly and to the exclusion of the second respondent and respondent No. 1 the suit was barred by time. In his replication respondent No. 1 reiterated that the property in suit belongs to and is owned by the Akhara Nirbansar as its occupancy tenant and that the second respondent was never its Occupancy tenant. Therefore, according to him, there was no question of extinguishment of occupancy rights in consequence of the two decrees made by the revenue courts. He contended that the action of the second respondent in leasing out the land for digging up earth was a transfer which, not being for legal necessity nor for the benefit of the estate, was unauthorised. According to him the mere fact that the appellant was in possession of the land for more than 12 years makes no difference to the suit and that the land being trust property a suit for its recovery could be brought within 12 years from the date of "death, resignation or removal" of the manager of such a property. He added that there was no question of the appellant being in possession in his own right of the land for more than 12 years. The suit was decreed by the trial court and its decision was unheld in appeal by the second Additional District Judge, Amritsar. The appellant 's second appeal was dismissed in limine by the High Court. 436 Upon the view which we take on the question of limitation it has become unnecessary to decide the other points. The learned Selicitor General who appears for the appellant relies strongly upon the averments of the appellant in his written statement that he is occupying the land in suit for a period of over 12 years from the date of the institution of the suit as owner in his own right and not as an occupancy tenant and that even if his occupation is regarded to be that of an occupancy tenant as alleged by the first respondent, he has acquired the proprietary rights in this property by operation of statute. The Solicitor General relies on the further averments to the effect that the original occupancy tenant of the land was the second respondent and not the Akhara and also contended that whether it was one or the other made no difference. For, the tenant 's occupancy rights were extinguished by the decrees passed in the ejectment suits and consequently there was no cause of action for the present suit. As pointed out by the learned Solicitor General, respondent No. 1 in his replication has not disputed the fact that the appellant was in possession for more than 12 years before the institution of the suit and that the only way in which he tried to meet it was by saying that this fact made no difference to his case. It seems to us clear that upon the eviction of respondent No. 2 from a part of the land in the year 1940 and the rest of it in the year 1943 the occupancy right with respect to the land merged in the right of ownership of the appellant. Apart from that it is clear that the actual physical possession of the land having been continuously with the appellant to the exclusion of the occupancy tenant, whether it was respondent No. 1 or the Akhara itself. for a period more than 12 years before the institution of the suit that right was extinguished. Mr. Gupta, learned counsel for respondent No. 1, however, sought to meet this position by urging that the second respondent 's act amounted to an alienation, that it was not established that it was for legal necessity and that, therefore, respondent No. 1 as the successor of respondent No. 2 to the office of Mahantship of the Akhara could institute a suit within 12 years of his succession to the office. This succession to his office must, according to him, be deemed to have occurred when upon the dismissal in the year 1950 of the appeal preferred by respondent No. 2 against the decision of the trial court removing him from Mahantship; later the respondent No. 1 was appointed a Mahant. That was on December 12, 1953. The suit having been filed within 12 years of that date, so Mr. Gupta contends, must be held to be within time. The simple answer to this contention is that what happened in this case was the forfeiture of the occupancy tenancy by the appellant as landlord. In no sense can this be regarded as, or even likened to alienation, which is a voluntary act of the alienor in favour of the alienee. The appellant is thus not an alienee from the respondent No. 2 Ram Saran Das. 437 Mr. N. C. Chatterjee who also appeared for the first respon dent raised a novel contention. According to him, adverse possession against the Akhara, which was the real occupancy tenant, could not commence till respondent No. 1 was appointed as Mahant because during the interval there was no person who was competent to institute a suit on behalf of the Akhara for the possession of the lands of which the appellant was in adverse possession. In support of the contention he has placed reliance upon the decision in Dwijendra Narain Roy vs Joges Chandra De(1). In particular learned counsel has relied upon the following observations of Mookerjee J., who delivered the judgment of the Court. They are: "The substance of the matter is that time runs when the cause of action accrues, and a cause of action accrues, when there is in existence a person who can sue and another who can be sued. . The cause of action arises when and only when the aggrieved party has the right to apply to the proper tribunals for relief. The statute (of limitation) does not attach to a claim for which there is as yet no right of action and does not run against a right for which there is no corresponding remedy or for which judgment cannot be obtained. Consequently the true test to determine when a cause of action has accrued is to ascertain the time when plaintiff could first have maintained his action to a successful result." (P. 609). He further brought to our notice that these observations have received the approval of this Court in F. Lakshmi Reddy vs L. Lakshmi Reddy(2), at p. 206. In the case which came up before this Court the facts which are set out in the head note were as follows: "V died an infant in 1927 and H, an agnatic relation filed a suit for the recovery of the properties belonging to V which were in the possession of third parties, on the ground that he was the sole nearest male magnate entitled to all the properties. During the pendency of the suit a Receiver was appointed for the properties in February, 1928. The suit having been decreed H obtained possession of the properties from the Receiver on January 20, 1930, and after his death in 1936, his nephew, the appellant, got into possession as H 's heir. On October 23, 1941 the respondent brought the present suit for the recovery of a onethird share of the properties from the appellant on the footing that he and his brother were agnatic relations of V of the same degree as H, that all the three were equal co heirs of V and that H obtained the decree and got into possession on behalf of all the co heirs. The appellant resisted the suit and contended that the respondent lost his right by the adverse possession of H and his successor and that for this purpose not only the period from (1) A.I.R. 1924 Cal. (2) ; 438 January 20, 1930 to October 23, 1941 was to be counted but also the prior period when the Receiver was in possession of the properties during the pendency of H 's suit. It was found that the respondent 's case that H obtained the decree and got possession from the Receiver on behalf of the other co heirs was not true. " The facts of that case were different and it was on these facts that this Court held that the respondent did not lose his right by adverse possession. It is in the context of these facts that the learned Judges cited with approval the observations of Mookerjee J., which we have set out. Assuming these observations are sound, it cannot be said in the case before us that at any point of time there was no person who was competent to institute a suit on behalf of the Akhara. Respondent No. 2 was still the Mahant and could well have instituted a suit on behalf of the Akhara if in fact there was any cause of action for such a suit. Further, in the course of the suit the possession was with a Receiver who had been appointed by the court and was thus competent in law to institute a suit. We may point out that a Mahant of an Akhara represents the Akhara and has both the right to institute a suit on its behalf as also the duty to defend one brought against it. The law on the subject has been stated very clearly at pp. 274 and 275 in Mukherjea 's Hindu Law of Religious and Charitable Trust, 2nd, ed. It is pointed out that in the case of an execution sale of debutter property it is not the date of death of the incumbent of the Mutt but the date of effective possession as a result of the sale from which the commencement of the adverse possession of the purchaser is to be computed for the purposes of article 144 of the Limitation Act. This is in fact what the Privy Council has laid down in Sudarsan Das vs Ram Kirpal (1). A similar view has been taken by the Privy Council in Subbaiya vs Mustapha(2). What has been said in this case would also apply to a case such as the present. Thus if respondent No. 2 could be said to have represented the Akhara in the two earlier suits, decrees made in them would bind the respondent No. 1 as he is successor in office of respondent No. 2. On the other hand if respondent No. 2 did not represent the Akhara, the possession of the appellant under the decree passed in these suits would clearly be adverse to the Akhara upon the view taken in the two decisions of the Privy Council just referred to. The first respondent 's suit having been instituted after the appellant has completed more than 12 years of adverse possession must, therefore be held to be barred by time. For these reasons disagreeing with the courts below we set aside the decrees of the courts below and instead dismiss the suit of respondent No. 1 with costs in all the courts. Appeal allowed. (1) L. R. 77 I.A. 42. (2) L.R. 50 I.A. 295.

IN-Abs

The appellant was the owner of the suit land. Alleging that the 2nd respondent, who was the Mahant of an Akhara, was the occupancy tenant and that he had allowed his lessee to dig it up and rendered it unfit for cultivation, the appellant evicted the 2nd respondent from a part of the land in 1940, and from the rest of it in 1943. In 1950, the 2nd respondent was removed from the office of Mahant, in proceedings under section 92, C.P.C., and in 1953, the 1st respondent was appointed in his place. In 1957 the 1st respondent filed a suit for possession of the land, alleging that the Akhara itself was the occupancy tenant. The trial court decreed the suit and the High court confirmed the decree. In the appeal to this Court, the appellant contended that the suit was barred by limitation. HELD: Upon the eviction of the 2nd respondent the occupancy right in the land merged in the right of ownership of the appellant. Apart from it, the actual physical possession of the land having been continuously with the appellant to the exclusion of the occupancy tenant, whether it was the 1st respondent or the Akhara itself, for a period of more than 12 years before the institution of the suit, the occupancy right was extinguished. If the 2nd respondent represented the Akhara in the eviction proceeding the decrees therein would bind the 1st respondent as his successor. If the 2nd respondent did not represent the Akhara, the possession of the appellant under those decrees would be adverse to the Akhara. The 2nd respondent as the Mahant, or the Receiver appointed by the Court In the section 92 proceedings, could have filed a suit on behalf of the Akhara, and so, the 1st respondent 's suit after 12 years of adverse possession by the appellant was barred. (436D E; 438F H] Sudaram Das vs Ram Kirpal, L.R. 77 T.A. 42 and Subbaiya V. Mustapha, L.R. 50 I.A. 295, applied Dwijendra Narain Roy vs Joges Chandra De, A.I.R. 1924 Cal. 600, referred to.

Appeal No. 730 of 1962. Appeal from the judgment and decree dated February 19, 1959, of the Mysore High Court in Regular Appeal No. 208 of 1961 62. S.K. Venkatarangaiengar and A.G. Ratnaparkhi, for the appellants S.T. Desai and Naunit Lal, for respondent No. 1. K.K. Jain, for respondent No. 2. The Judgment of the Court was delivered by Mudholkar, J. This is an appeal by defendants Nos. 3 to 8 from a decision of the High Court of Mysore passing a decree in favour of respondent No. 1 who was defendant No. 1 in the trial court, for possession of half the property which was the subject matter of the suit and also allowing future mesne profits. The relevant facts are briefly these: The plaintiff who is the eider sister of the first defendant instituted a suit in the court of the District Judge, Bangalore for a declaration that she.is the owner of half share in the properties described in the schedule to the plaint and for partition and separate possession of half share and for mesne 285 profits. According to her the suit property was the absolute property of her mother Puttananjamma and upon her death this property devolved on her and the first defendant as her mother 's heirs. Since,according to her, the first defendant did not want to join her as coplaintiff in the suit, she was joined as a defendant. It is common ground that the property was in the possession of the second defendant R.S. Maddanappa, the father of the plaintiff and the first defendant and Gargavva, the second wife of Maddanappa and her children. Maddanappa died during the pendency of the appeal before this Court and his legal representatives are the other defendants to the suit. Briefly stated his defence, which is also the defence of defendants other than defendant No. 1 is that though the suit properties belonged to Gowramma, the mother of Puttananjamma, she had settled them orally on the latter as well as on himself and that after the death of Puttananjamma he has been in possession of those properties and enjoying them as full owner. He further pleaded that it was the last wish of Puttananjamma that he should enjoy these properties as absolute owner. The plaintiff and the first defendant had, according to him, expressly and impliedly abandoned their right in these properties, that his possession over the properties was adverse to them and as he was in adverse possession for over the statutory period, the suit was barred. Finally he contended that he had spent more than Rs. 46,000 towards improvements of the properties which met partly from the income of his joint ancestral property and partly from the assets of the third defendant. These improvements, he alleged, were made by him bona fide in the belief that he had a right to the suit properties and consequently he was entitled to the benefit of the provisions of Section 51 of the Transfer of .Property Act. The first defendant admitted the claim of the plaintiff and also claimed a decree against the other defendants in respect of her half share in the suit properties. The other defendants, however, resisted her claim and in addition to what the second defendant has alleged in his written statement contended that she was estopped by her conduct from claiming any share in the properties. The trial court decreed the claim of the plaintiff but held that the first defendant was estopped from claiming possession of her half share in the properties left by her mother. The first defendant preferred an appeal before the High Court challenging the correctness of the decision of the trial court. The other defendants also flied an appeal before the High Court challenging the decision of the trial court in favour of the plaintiff. It would appear that the plaintiff had also preferred some cross objections. All the matters were heard together in the High Court, which dismissed the appeal preferred by defendants Nos. 2 to 8 as well as the crossobjections lodged by the plaintiff but decreed the appeal preferred by the first defendant and passed a decree in her favour for possession of her half share in the suit properties, and future mesne profits 286 against the remaining defendants. Defendants Nos. 2 to 8 applied for a certificate from the High Court under Articles 133(1)(a) and 133(1)(c) in respect of the decree of the High Court in the two appeals. The High Court granted the certificate to defendants Nos. 2 to 8 in so far as defendant No. 1 was concerned but refused certificate in so far as the plaintiff was concerned. We are therefore, concerned with a limited question and that is whether the High Court was right in awarding a decree to the first defendant for possession of her half share and mesne profits. Mr. Venkatarangaiengar, who appears for the appellants accepts the position that as the certificate was refused to defendants Nos. 2 to 8 in so far as the plaintiff is concerned, the only points which they are entitled to urge are those which concern the first defendant alone and no other. The points which the learned counsel formulated are as follows: (1) It is not open to a court to award future mesne profits to a party who did not claim them in the suit; (2) No decree can be passed in favour of a defendant who has not asked for transposition as plaintiff in the suit. (3) That the first defendant was estopped by her conduct from claiming possession of her alleged half share of the properties. We will consider the question of estoppel first. The conduct of the first defendant from which the learned counsel wants us to draw the inference of estoppel consists of her attitude when she was served with a notice by the plaintiff, her general attitude respecting Bangalore properties as expressed in the letter dated 17th January, 1941 written by her to her step mother and the attestation by her and her husband on 3 10 1944 of the will executed on 25th January, 1941 by Maddanappa. In the notice dated 26th January, 1948 by the plaintiff 's lawyer to the first defendant it was stated that the plaintiff and the first defendant were joint owners of the suit properties which were in the possession of their father and requested for the co operation of the first defendant in order to effect the division of the properties. A copy of this notice was sent to Maddanappa and he sent a reply to it to the plaintiff 's lawyers. The first defendant, however, sent no reply at all. We find it difficult to construe the conduct of the first defendant in not replying to the notice and in not co operating with the plaintiff in instituting a suit, for obtaining possession of the properties as justifying the inference of estoppel. It does not mean that she impliedly admitted that she had no interest in the properties. It is true that in exhibit 15, which is a letter sent by her on 17 1 1941 to her step mother she has observed thus: "I have no desire whatsoever in respect of the properties which are at Bangalore. Everything belongs to my father. He has the sole authority to do anything . We give our 787 consent to anything done by our father. We will not do anything." But even these statements cannot assist the appellants because admittedly the father knew the true legal position. That is to say, the father knew that these properties belonged to Puttananjamma, and that he had no authority to deal with these properties. NO doubt, in his written statement Maddanappa had set up a case that the properties belonged to him by virtue of the declaration made by Puttananjamma at the time of her death, but that case has been negatived by the courts below. The father 's possession must, therefore, be deemed to have been, to his knowledge, on behalf of the plaintiff and the first defendant. There was thus no possibility of an erroneous belief about his title being created in the mind of Maddanappa because of what the first defendant had said in her letter to her step mother. In so far as the attestation of the will is concerned, the appellants ' position is no better. This 'will ' purports to make a disposition of the suit properties along with other properties by Maddanappa in favour of defendants Nos. 3 to 8. The attestation of the will by the first defendant and her husband, would no doubt affix them with the knowledge of what Maddanappa was doing, but it cannot operate as estoppel against them and in favour of defendants Nos. 3 to 8 or even in favour of Maddanappa. The will couId take effect only upon the death of Maddanappa and, therefore, no interest in the property had at all accrued to the defendants Nos. 3 re, 8 even on the date of the suit. So far as Maddanappa is concerned, he, as already stated, knew the true position and therefore, could not say that an erroneous belief about his title to the properties was created in his mind by reason of the conduct of the. first defendant and her husband in attesting the document. Apart from that there is nothing on the record to show that by reason of the conduct of the first defendant Maddanappa altered his position to his disadvantage. Mr. Venkatarangaiengar, however, says that subsequent to the execution of the will he had effected further improvements in the properties and for this purpose spent his own moneys. According to him, he would not have done so in the absence of an assurance like the one given by the first defendant and her husband to the effect that they had no objection to the disposition of the suit properties by him in any way he chose to make it. The short answer to this is that Maddanappa on his own allegations was not only in possession and enjoyment of these properties ever since the death of Puttananjamma but had made improvements in the properties even before the execution of the will. In these circumstances, it is clear that the provisions of Section 115 of the Indian Evidence Act, which contain the law of estoppel by representation do not help him. Mr. Venkatarangaiengar, however, wanted us to hold that the law of estoppel by representation is not confined to the provisions 288 of section 115 of the Evidence Act, that apart from the provisions of this section there is what is called "equitable estoppel" evolved by the English Judges and that the present case would come within such "equitable estoppel". In some decisions of the High Courts reference has been made to "equitable estoppel" but we doubt whether the court while determining whether the conduct of a particular party amounts to an estoppel, could travel beyond the provisions of Section 115 of the Evidence Act. As was pointed out by Garth C.J. in Ganges Manufacturing Co. vs Saurjmull(1) the provision of s 115 of the Evidence Act are in one sense a rule of evidence and are rounded upon the well known doctrine laid down in Pickard vs Sears(2) in which the rule was stated thus: "Where one by his word or conduct wilfully causes another to believe for the existence of a certain state of thing and, induced him to act on that belief so as to alter his own previous position, the former is concluded from averring against the latter a different state of things as existing at the first, time. " The object of estoppel is to prevent fraud and secure justice between the parties by promotion of honesty and good faith. Therefore, where one person makes a misrepresentation to the other about a fact he would not be shut out by the rule of estoppel, if that other person know the true state of facts and must consequently not have been misled by the misrepresentation. The general principle of estoppel is stated thus by the Lord Chancellor in Cairncross vs Lorimer(3): "The doctrine will apply, which is to be found, I believe, in the laws of all civilized nations that if a man either by words or by conduct has intimated that he consents to an act which has been done, and that he will offer no opposition to it, although it could not have been lawfully done without his consent, and he thereby induces others to do that from which they otherwise might have abstained, he cannot question the legality of the act he had so sanctioned, to the prejudice of those who have so given faith to his words or to the fair inference to be drawn from his conduct. I am of opinion that, generally speaking, if a party having an interest to prevent an act being done has full notice of its being done, and acquiesces in it, so as to induce a reasonable belief that he consents to it, and the position of others is altered by their giving credit to his sincerity, he has no more right to ' challenge the act to their prejudice than he would have had if it had been done by his previous license. " It may further be mentioned that in Carr vs London & N.W. Ry. Co.(4)four propositions concerning an estoppel by conduct (1) I.L.R. 5 cal., 669. (2) ; (3) (4) ; 289 were laid down by Brett, j. (afterwards Lord Reher) the third which runs thus: "If a man either in express terms or by conduct makes a representation to another of the existence of a certain state of facts which he intends to be acted upon in a certain way, and it be acted upon in the belief of the existence of such a state of facts, to the damage of him who so believes and acts, the first is estoppel from denying the existence of such a state of facts. " This also shows that the person claiming benefit of the doctrine must show that he has acted to his detriment on the faith of the representation made to him. This was quoted with approval in Sarad vs Gopal(1). It will thus be seen that here also the person who sets up an estoppel against the other must show that his position was altered by reason of the representation or conduct of the latter and unless he does that even the general principle of estoppel cannot be invoked by him. As already stated no detriment resulted to any of the defendants as a result of what the defendant No. 1 had stated in her letter to her step mother or as a result of the attestation by her and her husband of the will of Maddanappa. Mr. Venkatarangaiengar then tried to urge before us that it was a case of family settlement by the father with a view to avoid disputes amongst his heirs and legal representatives after his death and, therefore, the actions of defendant No. 1 can be looked at as acquiescence in the family settlement effected by the father. A case of family settlement was never set up by the defendants either in the trial court or in the High Court and we cannot allow a new case to be set up before us for the first time. Finally on this aspect of the case the learned counsel referred to the observations of Lord Cranworth in Ramsden vs Dyson(2) which are as follows: "If a stranger begins to build on my land supposing it to be his own and I (the real owner) perceiving his mistake, abstain from setting him right, and leave him to persevere in his error, a court of equity will not allow me afterwards to. assert my title to the land, on which he has expended money on the supposition, that the land was his own. It considers that when I saw the mistake in which he had fallen, it was my duty to be active and to state his adverse title; and that it would be dishonest in me to remain wilfully passive on such an occasion in order afterwards to profit by the mistake which I might have prevented. The doctrine of acquiescence cannot afford any help to the appellants for the simple reason that Maddanappa who knew the true state of affairs could not say that any mistaken belief was caused (1) L.R. 19 I.A. 203. (2) L.R.I. H. L. App. 129, 140. 290 in his mind by reason of what the first defendant said or did. According to the learned counsel, even if the first defendant 's claim to the half share in the suit property cannot be denied to her she must at least be made to pay for the improvements effected by Maddanappa, according to her proportionate share in the suit property. As already stated the appellant was in enjoyment of these proportion after his wife 's death and though fully aware of the fact that they belonged to the daughters he dealt with them as he chose. When he spent moneys on those properties he knew what he was doing and it is not .open to him or to those who claim under him to say that the real owners of the properties or either of them should be made to pay for those improvements. No man who, knowing fully well that he has no title to property spends money on improving it can be permited to deprive the original owner of his right to possession of the property except upon the payment for the improvements which were not effected with the consent of that person. In our view, therefore, neither was defendant No. 1 estopped from claiming possession of half share of the properties nor can she be made liable to pay half the costs of improvements alleged to have been made by the second defendant. Now regarding the second point, this objection is purely technical. The plaintiff sued for partition of the suit properties upon the ground that they were inherited jointly by her and by the first defendant and claimed possession of her share from the other defendants who were wrongfully in possession of the properties. She, also alleged that the first defendant did not co operate in the matter and so she had to institute the suit. The first defendant admitted the plaintiff 's title to half share in the properties and claimed a decree also in her own favour to the extent of the remaining half share in the properties. She could also have prayed for the transposition as a co plaintiff and under Order I, rule 10(2) C.P.C. the Court could have transposed her as a co plaintiff. The power under this provision is exercisable by the Court even suo motu. As pointed out by the Privy Council in Bhupender vs Rajeshwar(1) the power ought to be exercised by a court for doing complete justice between the parties. Here both the plaintiff and the first defendant claim under the same title and though defendants 2 to 8 had urged special defences against the first defendant, they have been fully considered and adjusted upon by the High Court while allowing her appeal. Since the trial court upheld the special defences urged by defendants 3 to 8 and negatived the claim of the first defendant it may have thought it unnecessary to order her transposition as plaintiff. But the High Court could, while upholding her claim, well have done so. Apparently it either over looked the technical defect or felt that under O. XLI, rule 33 it had ample power to decree her claim. However that may be, the provisions of section 99 would be a bar to interfere here with the High Court 's decree upon a ground such as this. (1) L.R. 58 I.A. 228. 291 The only other question for consideration is whether the High Court was justified in awarding mesne profits to the first defendant even though she was not transposed as a plaintiff. According to the learned counsel mesne profits cannot be awarded to a successful party to a suit for possession unless a claim was made in respect of them. The learned counsel is right in so far as mesne profits prior to the suit are concerned but in so far as mesne profits subsequent to the date of the institution of the suit, that is future mesne profits are concerned, the position is governed by Order XX, rule 2, C.P.C. which is as follows: "(1) Where a suit is for the recovery of possession of immovable property and for rent or mesne profits, the Court may pass a decree (a) for the possession of the property; (b) for the rent or mesne profits which have accrued on the property during a period prior to the institution of the suit or directing an inquiry as to such rent or mesne profits; (c) directing an inquiry as to rent or mesne profits from the institution of the suit until: (i) the delivery of possession to the decreeholder, (ii) the relinquishment of possession by the judgment debtor with notice to the decree holder through the Court, or (iii) the expiration of three years from the date of the decree, whichever event first occurs. (2) Where an inquiry is directed under clause (b) or clause (c) a final decree in respect of the rent or mesne profits shall be passed in accordance with the result of such inquiry. " The learned counsel, however, relied upon the decision of this Court in Mohd. Amin and others vs Vakil Ahmed and others(1). That was a suit for a declaration that a deed of settlement was void and for possession of the property which was the subject matter of the settlement under that deed. The plaintiffs had not claimed mesne profits at all in their plaint but the High Court had passed a decree in the plaintiff 's favour not only for possession but also for mesne profits. In the appeal before this Court against the decision of the High Court one of the points taken was that in a case of this kind, the court has no power to award mesne profits. While upholding this contention Bhagwati J. who delivered the judgment of the Court has observed thus: "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 (1) ; ,1144 B(N)3SCI 6 292 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. " In order to satisfy ourselves whether these observations related to the award of past mesne profits or to the award of future mesne profits we sent for the original record of this Court and we found that the High Court had awarded past as well as future mesne profits. Mr. S.T. Desai, appearing for the respondent No. 1 stated. that a Full Bench in Babburu Basavayya and four others vs Babburu Garavayya and another (1) following the decision of the Judicial Committee in Fakharuddin Mohomed Ahsan vs The Official Trustee(2) has held that even after the passing of the preliminary decree, it is open to the court to give appropriate directions, amongst other matters regarding future mesne profits either suo motu or on the application of the parties in order to prevent multiplicity of litigation and to do complete justice between the parties. This decision has been followed in a large number of cases. In Bachepalli Atchamma vs Yerragupta Rami Reddy(3) Simma Krishnamma vs Nakka Latchumanaidu and others(4) Kasibhatla Satyanarayana Sastrulu and others vs Kasibhatla Mallikarjuna Sastrulu(5) and Ponnuswami Udayar and another vs Santhappa(6) the decision of this Court was cited at the Bar and has been considered. The learned Judges have said that the authority of the decision in Babburu Basavayya and four others vs Babburu Guravayya(1) is not shaken by what this Court has said. One of the grounds given is that the former relates to a suit for partition while the latter to a suit for possession simpliciter. It is not necessary for us to consider whether the decision of this Court can be distinguished upon this ground, but we feel that when a suitable occasion arises it may become necessary to reconsider the decision of this Court as to future mesne profits. In the present case the plaintiff did claim not only partition and separate possession of her half share of the properties but also past mesne profits. The defendant No. 1 admitted the plaintiff 's claim and in substance prayed for a similar decree in her favour. The decision of this Court would, therefore, not apply to a case like the one before us. In the result therefore we uphold the decree of the High Court and dismiss the appeal with costs. Appeal dismissed. (1) I.L.R. 1952 Madras 173. (2) 8 cal 178 (P. C.). (3) A.I.R. 1957 A.P. 52. (4) A.I.R. 1958 A.P. 520. (5) A.I.R. 1960 A.P. 45. (6) A.I.R. 1963 Mad. 171.

IN-Abs

The plaintiff instituted the suit for possession of her half share in the suit properties and for mesne profits. The first defendant, who was the plaintiff 's sister, admitted the plaintiff 's claim and herself claimed a decree against the other defendants in respect of her half share in the suit properties. The second defendant was their father and the suit properties were in his possession. He and the other defendants, who were his second wife and children by her, contested the suit. The trial court decreed the plaintiff 's claim, but held that the first defendant was estopped from claiming possession of her share. On appeal by the first defendant, the High Court passed a decree in her favour also for possession of her half share in the suit properties, and for past and future mesne profits. On appeal to this Court against the decree in favour of the first defendant, it was contended on behalf of the other defendants: (i) that the first defendant was estopped by her conduct from claiming possession of her half share of the properties because (a) she had not replied to a notice from the plaintiff to join with her in the suit for obtaining possession and division of the suit properties; (b) 'she had written a letter to her step mother stating that she wished to have no interest in the suit properties then in her father 's possession; (c) she and her husband had attested a will executed by the father 25 1 1941 which covered the disposition of the suit properties; and (d) ' that the first defendant 's conduct was either covered by section 115 Evidence Act or fell within the principle of "equitable estoppel" ' (ii)even if the first defendant 's claim to the half share in the suit properties could not be denied, she must be made to pay for half the cost of various improvements of those properties effected by the second. defendant in the bona fide belief that the properties belonged to him as she had acquiesced in the expenditure being incurred; (iii) that no, decree can be passed in favour of a defendant who has not asked for transposition as plaintiff in the suit; and (iv) that it is not open to a court to award future mesne profits to a party who did not claim them in the suit. HELD: (i) The first defendant was neither estopped from claiming possession of her half share of the properties nor could she be made liable to pay half the costs of improvements alleged to have been made by the second defendant; (a) It cannot be implied from the conduct of the first defendant in not replying to the notice given b the plaintiff that she had admitted that she had no interest in the properties; (b) The second defendant 's case that the properties belonged to him having been negatived, there was no possibility of an erroneous belief being created in the mind of the second defendant that he had title to the property because of what the first defendant, had said in her letter to her step mother; (c) The attestation of the will by the first defendant and her husband, by which the second defendant purported to make a disposition of the suit properties in favour of the other defendants could not operate as an estoppel, as 284 no interest had accrued in favour of those defendants on the date of the suit. As far as the second defendant was concerned, he knew, the true legal position and could not say that an erroneous belief was created in his mind by reason of the first defendant and her husband attesting the will. [286 G H; 287 C; 287 F] Quaere: Whether the Court, while determining whether the conduct of a particular party amounts to an "equitable estoppel" could travel beyond the provisions of section 115 of the Evidence Act. [288 B] Case law reviewed. (ii) No man who knowing fully well. that he has no title to property, spends money on improving it, can be permitted to claim payment for improvements which were not effected with the consent of the true owner. [290C] Ramsden vs Dyson, L R.I.H.L.App. 129, 140 distinguished. (iii) Both the plaintiff and the first defendant claimed under the same title and though the other defendants had urged special defences against the first defendant, they had been fully considered and adjudicated upon by the High Court while allowing her appeal. The High Court could, while upholding her claim, have transposed her as a plaintiff. It either over looked the technical defect or felt that under Order XLI rule 33, it had ample power to decree her claim. However that may be, the provisions of section 99 C.P.C., would be a bar to interference by the Supreme Court with the High Court 's decree upon such a ground. [290 G H] Bhupendra vs Rajeshwar, 58 I.A. 228, referred to. (iv) Though mesne profits prior to the suit cannot be awarded to a successful party unless a claim is made in respect of them, the position regarding future mesne profits is governed by O. XX, r. 2, C.P.C. The decree awarding mesne profits to the first defendant must be upheld because the first defendant admitted the plaintiff 's claim and in substance prayed for a similar decree in her favour. [291 B; 292 G H] Mohd. Amin and Ors. vs Vakil Ahmed and Ors. ; , distinguished.

ivil Appeal No. 125 of 1963. Appeal by special leave from the judgment and decree dated June 2, 1959 of the Calcutta High Court in Appeal from Appellate Decree No. 536 of 1964. section Murthy and B.P. Maheshwari, for the appellant. M.C. Chakraborthy and R. Gopalakrishnan, for respondent No. 1. The Judgment of the Court was delivered by Ramaswami, J. The sole question for determination in this appeal is whether respondent No. 2 Atul Chandra Patitundi is protected from being evicted by the landlord from the premises No. 90A, Harish Mukerjee Road situated in Bhawanipur, District 24 Parganas in view of the provisions enacted in section 13(2) of the West Bengal Premises Rent Control (Temporary Provisions) Act, 1950 (West Bengal Act XVII of 1950), hereinafter called the 1950 Act. Some time before 1948, respondent No. 2 was inducted as a monthly tenant under Rai Sahib Chartdan Mal Inder Kumar, the predecessor in interest of the appellant. One of the conditions of the lease was that the tenant will not sub let the premises or any portion thereof. As respondent No. 2 defaulted in the payment of rent the appellant made an application under section 14 of the Calcutta Rent Ordinance, 1946 for permission to sue him for eviction. The application was granted by the Second Additional Rent Controller on September 10, 1948. On December 1, 1948, the West Bengal Premises Rent Control (Temporary Provisions) Act, 1948 (West Bengal Act XXXVIII of 1948). hereinafter called the 1948 Act, came into force. On September 15, 1949 the appellant flied a Title Suit No. 171 of 1949 in the Court of the 1 st Subordinate Judge, Alipore, 24 Parganas against respondent No.2 for his eviction on the ground that the tenancy had been determined on account of default in payment of rent. While the suit was pending, the 1950 Act came into force on March 31, 950. The suit was eventually decreed in favour of the appellant on February 25, 1951. The appellant took out execution proceedings being Title Execution Case No. 39 of 1951 of the Court of the First Sub Judge. Alipore. The suit was resisted by respondent No. 1 who alleged that he had taken sub tenancy from respondent No. 2. Respondent No. 1 also filed Title Suit No. 578 of 1951 in the Court of 4th Munsif at Alipore impleading the appellant and respondent No. 1 and praying for a declaration that on the termination of the tenancy of respondent No. 2, respondent No. 1 became a direct tenant of the appellant under section 13(2) of the 1950 Act and that he was not liable to be evicted in the execution case. The suit was decreed in the Court of the Subordinate Judge and the decree was affirmed by the District Judge of 24 Parganas in Title Appeal No. 157 of 1953. A Second Appeal was also dismissed by the Calcutta High Court on June 2, 1959. 331 On behalf of the appellant the argument put forward was that the sub lease granted by respondent No. 1 in favour of respondent No. 2 was contrary to the agreement of lease and not binding upon the appellant. It was, therefore, submitted that the sub lessee did not acquire the status of a tenant under section 13(2) of the 1950 Act and the sub lessee could not be deemed to be holding directly under the appellant within the meaning of that sub section. The question at issue depends upon the proper interpretation of section 13(2) of the 1950 Act which states: "13. (2) Where any premises or any part thereof have been or has been sub let by 'a tenant of the first degree ' or by 'a tenant inferior to a tenant of the first degree ', as defined in explanation to sub section (1), and the sublease is binding on the landlord of such last mentioned tenant, if the tenancy of such tenant in either case is lawfully determined otherwise than by virtue of a decree in a suit obtained by the landlord by reason of any of the grounds specified in clause (h) of the proviso to subsection (1) of section 12, the sub lessee shall be deemed to be a tenant in respect of such premises or part, as the ease may be, holding directly under the landlord of the tenant whose tenancy has been determined, on terms and conditions on which the sub lessee would have held under the tenant if the tenancy of the latter had not been so determined: Provided that it shall be competent for the landlord, or any person deemed under this section to be a tenant holding directly under the landlord, to make an application to the Controller for fixing rent of the premises or part thereof in respect of which such person is so deemed to be a tenant and until the rent is fixed by the Controller on such application such person shall be liable to pay to the landlord the same rent as was payable by him in respect of the premises or part thereof, as the ease may be, to the tenant before the tenancy of the tenant therein had been determined. The Controller in fixing the rent shall not determine such rent at the rate which is beyond the limit fixed by paragraph (4) of Schedule A. The rent so fixed shall be deemed to be the standard rent fixed under section 9". Section 13(1)is also relevant in this connection and it states: "13. (1) Notwithstanding anything contained in this Act, or in any other law for the time being in force, if a tenant inferior to the tenant of the 1st degree sub lets in whole or in part the premises let to him except with the consent of the landlord and of the tenant of a superior degree above him, such sub lease shall not be binding on such non consenting landlord, or on such non consenting tenant. 332 Explanation In this subsection (a) 'a tenant of the first degree ' means a tenant who does not hold under any other tenant; (b) 'a tenant inferior to the tenant of the first degree ' means a tenant holding immediately or mediately under a tenant of the first degree; (c) 'landlord ' means the landlord of a tenant of the first degree". It is manifest that section 13(1) makes a distinction between the two classes of sub tenancies, namely, (1) sub tenancy created by a tenant of the first degree, and (2) sub tenancy created by "a tenant inferior to the tenant of the first degree" by which is meant a tenant holding immediately or mediately under a tenant of the first degree. So far as the second class of sub tenancy is concerned, the sub section enacts that the sub letting will not be binding upon the landlord or on the tenant of the superior degree unless each of them has consented to the transaction of sub lease. There is no express provision in section 13(1) that a sub lease of the 1st class requires previous consent of the landlord or that in the absence of such consent the sub lease shall not be binding upon the nonconsenting landlord. Section 13(2) refers to both the classes of sub leases and states that if the sub lease has been made by a tenant of the first degree, the sub lessee shall be deemed to be a tenant in respect of the premises demised to him if the tenancy of such tenant is lawfully determined under the provisions of the Act otherwise than by virtue of a decree in a suit obtained by the landlord by reason of any of the grounds specified in el. (h) of the proviso to sub section (1) of section 12. In the case of second class of sub leases, i.e., sub leases created by a tenant inferior to the, tenant of the 1st degree also the sub lessee will acquire the status of a tenant as mentioned in the statute but in this class of sub leases the rights of the tenant are conferred on the sub lessee only if the sub lease is binding upon the landlord. In enacting section 13(1) and (2) of the 1950 Act the legislature has deliberately made a distinction between the two classes of sub tenancies and provided that in the case of sub lease of the first class, namely, sub leases created by a tenant of the first degree, the sub lessee will acquire the status of the tenant in respect of the premises demised, though the sub lease is not binding upon the landlord according to the agreement of lease. The legislature has further provided that in the case of sub lease of the second class the sub lessee will acquire the status of a tenant of the premises only if the sub lease is binding upon the "landlord" as defined in section 13(1). It follows that in the case of sub letting by a tenant of the first degree no consent of the landlord to sub letting is required as a condition precedent for acquisition by the sub lessee of the tenant 's right but in the case of sub letting by a tenant inferior to the tenant of the first degree the consent of the landlord and 333 also of the tenant of the superior degree above him to the subletting is necessary if the sub lessee is to acquire the rights of the tenant contemplated by section 13(2). It was argued on behalf of the appellant that the clause "and the sub lease is binding on the landlord of such last mentioned tenant" in section 13(2)governs both classes of tenancies, namely, sub tenancies created by "tenant of the first degree" and also by "a tenant inferior to the tenant of the first degree" as defined in section 13(1). We do not consider that there is any justification for this argument. Having regard to the grammatical structure and Context of the clause it is obvious that it imposes a qualification only upon sub tenancies of the second class. It was also submitted on behalf of the appellant that if a sub lease is granted by the tenant of the first degree against the terms of the contract of lease the landlord is entitled under section 12(1)(c) of the 1950 Act to bring a suit for eviction of the tenant and that in such a suit the tenant and the sub lessees are both liable to be evicted from the premises in question. It was submitted, therefore, that the rights mentioned in section 13(2) are conferred upon the sub lessee only in a case where sub letting is not in violation of the agreement for lease. In our opinion, there is no substance in this argument. Section 12(1)(c) states: "12. (1) Notwithstanding anything to the contrary in any other Act or law, no order or decree for the recovery of possession of any premises shall be made by any court in favour of the landlord against a tenant, including a tenant whose lease has expired: Provided that nothing in the sub section shall apply to any suit for decree for such recovery of possession, (c) against a tenant who has sub let the whole or a major portion of the premises for more than seven consecutive months: Provided that if a tenant who has sub let major portion of the premises agree to possess as a tenant the portion of the premises not sub let on payment of rent fixed by the Court, the Court shall pass a decree for ejectment from only a portion of the premises sub let and fix proportionately fair rent for the portion kept in possession of such tenant, which portion shall thenceforth constitute premises under clause (8) of section 2 and the rent so fixed shall be deemed standard rent fixed under section 9, and the rights and ' obligations of the sub tenants of the portion from which the tenant is ejected shall be the same as of sub tenants under the provision of section 13;". It is manifest that section 12(1)(c) saves the right of sub tenants even in a case in which the landlord has brought a suit for eviction against 334 the tenant under section 12(1)(c) and the rights and obligations of subtenants would be governed by the provisions of section 13. Counsel on behalf of the appellant also referred to the provisions of section 11(3) of the 1948 Act which states: "11.(3) Any person to whom any premises or any part thereof have been or has been lawfully sublet by a tenant shall, where the interest of the tenant in such premises or part is lawfully determined otherwise than by virtue of a decree or order obtained ' by the landlord on any of the grounds specified in clause (f) of the proviso to sub section (1), be deemed to be a tenant in respect of such premises or part, as the case may be, holding directly under the landlord on the terms and conditions on which such person would have held under the tenant if the interest of the tenant had not been so determined: It was pointed out that rights are conferred by the statute only upon sub lessees to whom the premises have been "lawfully" sublet by a tenant. It was contended that though the 1948 Act was repealed and substituted by the 1950 Act, the provisions of section 13(2) of the latter Act have to be construed in the context of the language of section 11(31) of the 1948 Act. We are unable to accept this argument as correct. It is manifest that in enacting section 13 of 1950 Act the legislature has deliberately enlarged the class of sub tenants to be protected from eviction by the landlords and the language of the section dealing with the sub lessees has been deliberately changed and proper effect and interpretation must be given to the language of the new section. For the reasons expressed, we hold that the suit of respondent No. 1 has been rightly decreed and this appeal must be dismissed with costs. Appeal dismissed.

IN-Abs

Respondent No. 2 was a monthly tenant of 'the appellant on a condition that he would not sublet the premises of any portion thereof Under the West Bengal Premises Rent Control (Temporary Provisions) Act, 1948 the appellant filed a suit against respondent No. 2 for his eviction on the ground that the tenancy had been determined on account of default in payment of rent. While the suit was pending, the West Bengal Premises Rent Control (Temporary Provisions) Act, 1950 came into force. The suit was decreed and the appellant took out execution proceedings. The suit was resisted by respondent No. 1 who alleged that he had taken subtenancy from respondent No. 2. Respondent No. 1 also filed a suit impleading the appellant and respondent No. 2 and prayed for a declaration that on the termination of the tenancy of respondent No. 2, respondent No. 1 became a direct tenant of the appellant under section 13(2) of the 1950 Act and he was not liable to be evicted in the execution case. The suit was decreed bY the trial court, which was affirmed by the appellate courts. In appeal by special leave: HELD: The appeal must be dismissed. [334F] In the case of sub letting by a tenant of the first degree no consent of the landlord to sub letting is required as a condition precedent for acquisition by the sub lessee of the tenant 's rights, but in the case of sub letting by a tenant inferior to the tenant of the first degree the ,consent of the landlord and also of the tenant of the superior degree above him to the sub letting is necessary if the sub lessee is to acquire the rights of the tenant contemplated by section 13(2). [332 H] The clause "and the sub lease is binding on the landlord of such last mentioned tenant" in section 13(2) does not govern both classes of tenancies, namelY, sub tenancies created by "tenant of first degree" and also by "a tenant inferior to the tenant of the first degree" as defined in section 13(1). [333 B] Is not correct to say that the rights mentioned in s, 13(2) are conferred u.on the sub lessee only in a case where sub letting is not in violation of the agreement of lease. The right of sub tenant even in a case in which the landlord has brought a suit for eviction against the tenant under section 12(1)(c) are saved and the rights and obligations of sub tenants, would be governed by the provisions of.s. [334A] In enacting section 13 of the Act the legislature has deliberately enlarged the class of sub tenants to be protected from eviction by the landlords and the language of the section dealing with the sublessees has been deliberately changed and proper effect and interpretation must be given to the language of the new section. [334 E] 330

Appeals Nos. 392 and 393 of 1954. Appeals by special leave from the judgment and order dated March 26, 1962, of the Calcutta High Court in Civil Revision Nos. 3176 of 1958. G.S. Chatterjee and S.C. Mazumdar, for the appellant (in C.A. No. 392/64). N.C. Chatterjee and section (7. Mazumdar, for the appellant (in C.A. No. 393/64). C.K. Daphtary, Attorney General, B. Sen, S.C. Bose and P.K. Bose, for the respondents (in C.A. 392/64). B. Sen, S.C. Bose and P.K. Bose, for the respondent (in C.A. No. 393/64). The Judgment of the Court was delivered by Hidaytullah, J. these two appeals the appellants seek to displace a common judgment and order of the High Court of Calcutta dated March 26, 1962 by which a Full Bench of the Court, specially constituted to hear and determine certain petitions under article 226 of the Constitution involving a common point of law, discharged the Rule issued earIier in them. These cases were concerned with Muslim wakfs in which either the ultimate benefit to charity is postponed till after the exhaustion of the wakif 's family and descendants or the income from the wakf estate is applied for the maintenance of the family side by side with expenditure for charitable or religious purposes. The common question which arose and still arises is whether these wakfs are affected by the passing of the West Bengal Estates Acquisition Act, 1953 (West Bengal Act I of 1954). ?hat Act, in common with similar Acts of other States in india abolished from a date notified by the State Government all intermediaries such as proprietors, tenure holders etc. between the raiyat and the State and vested the estates and the rights of the intermediaries in the State free from all incumberances. Section 3 of the Act provided that the Act was to have effect notwithstanding anything to the contrary contained in any other law or in any contract express or implied or in any instrument and notwithstanding any usage or custom to the contrary. There were, however, some exceptions and one such exception was that an intermediary was entitled to retain, with effect from the date of vesting, land held in khas under a trust or endowment or other legal obligation exclusively for a purpose which was charitable or religious or both. Notices under section 10(2) of the Act were issued by the Collectors in charge, Estate Acquisitions, to the respective Mutwallis informing them that after the notification issued on November II, 1954 under section 4 of the Act there was extinction and cesser of the estate 309 and rights of these intermediaries and their divested estates and rights vested in the State. The Mutawallis were called upon by said notice or order to give up possession of these estates and interests within 60 days of the service of the order, to the officer empowered by the Collector in this behalf. The orders also specified in schedules appended thereto, the details of such properties, interests and rights. Notices of this kind were issued to Fazlul Rabbi radhan, Mutawalli of Abdul Karim Wakf Estate, who is appellant a Civil Appeal No. 392 of 1964 and to Kawsar Alam, Mutawalli of Penda Mohammad Wakf Estate, appellant in Civil Appeal No.393 of 1964. Similar notices were issued to other mutawallis in respect of other wakfs. The mutawallis appeared in answer to the notices and objected to them. They claimed that they were protected by section 6(1)(i) of the Act (to which detailed reference will be made (resently) as they were holding the properties exclusively for purposes which were charitable or religious or both. This claim was not accepted by the Collector, Estate Acquisitions, and appeals to the commissioner also failed. The orders of the Collector and the Commissioner are dated February 24, 1956 and January 18, 1958 respectively. The appellants after serving notices of demand for justice filed petitions in the High Court under article 226 of the Constitution. The petitions came up for hearing before D.N. Sinha J. and were refered, on his recommendation, to a Full Bench consisting of Bachaat, D.N. Sinha and P.N. Mookerjee JJ. These learned Judges by separate but concurring judgments held that the wakfs in question were not protected by section 6(1)(i) as they were not exclusively for purposes which were charitable or religious or both and discharged the Rule. The cases were, however, certified under article 133(1)(a) and (c) of the Constitution and these two appeals were filed. It is not necessary to state how the Act is constructed for the ' only question is whether the wakfs can be said to be exclusively for purposes which are religious or charitable or both and thus exempted from the operation of the Act by virtue of section 6(1)(i) which reads "6. Rights of intermediary to retain certain lands. (1) Notwithstanding anything contained in section 4 and 5, an intermediary shall, except in the cases mentioned in the proviso to sub section (2) but subject to the other provisions of that sub section, be entitled to retain with effect from the date of vesting (i) where the intermediary is a corporation or an institution established exclusively for a religious or a charitable purpose or both, or 310 is a person holding under a trust or an endowment or other legal obligation exclusivey for a purpose which is charitable or religious or both land held in khas by such corporation or institution, or person, for such purposes. " Section 2(c) defines "charitable purpose" and section 2(n) "religious purpose". These definitions are: "2(c) "charitable purpose" includes the relief of poor, medical relief or the advancement of education or of any other object of general public utility;" "2(n) "religious purpose" means a purpose connected with religious worship, teaching or service or any performance of religious rites;" If this concession is not available then the estate must vest in the State Government under sections 4 and 5 of the Act. The former section invests power in the State Government to notify the date from which the estates and rights of every intermediary are to vest in the State free of all incumberances and the latter says that upon due publication of the notification the vesting takes place from the date notified. This has been done. The wakfs in these two appeals are dissimilar in their terms but both provide for application or income for the support of the wakifs and their families. In the Abdul Karim Wakf (Civil Appeal 392 of 1964) the value of the property is shown as Rs. 1,00,000 and a ceiling of Rs. 4,500 is placed by the wakif on expenditure per year (el. 12). The mutawalliship and the Naib mutawalliship run in the family from generation to generation first in the male line and after exhaustion of the male line in the female line. The charities mentioned specifically or generally require a stated expenditure of Rs. 904 per year. The wakif has. in addition, provided for an expenditure of Rs. 2,000 at a time, for the solace of his own soul and for his burial ceremonies etc. Rs. 25 have been ordered to be spent on Milad every year. As regards secular expenses the deed directs that 10 per cent of the income is to be kept as d reserve fund and from savings from the income other properties are to be purchased (cl. 19). The mutawalli and the Naib mutawalli are tO receive 8 per cent of the income in proportion of 5:3. Then follow numerous dispositions for the benefit of the family. They are: "15. My wife Bibi Jainulnessa wilt get as long as she is alive, Rs. 1,200 annually at the rate of Rs. 100 per month and Bibi Taherankhatun, the widow of my eldest son, will get as long as she is alive, Rs. 480 annually (Rupees four hundred eighty only) at the rate of Rs. 40 per month. Such monthly allowances 311 will be stopped after their death. After their death their heirs will not get any portion of the aforesaid monthly allowances. Each of my three sons Shriman Tojammal Hossain Prodhan, Shriman Ahmad Yasin Prodhan and Shriman Azizul Huq Prodhan, will get Rs. 24 per cent out of the net income of the wakf estates (after payment of revenue, cess etc. which are current at present or will be levied in future and after meeting the costs of administration). Shriman Abu Alam Prodhan, the only son born of the loins of my deceased second son will similarly get at the rate of Rs. 7 per cent out of the net income. A fund will be created with a deposit at the rate of Rs. 3 (Rupees three only) per cent, out of the annual net income for the purpose of education of the sons of my sons, sons of my daughters, sons of the daughters of my sons and my great grandsons (in the male line). The Mutawalli and the Naib Mutawalli in consultation with each other will render help as far as possible to the boy amongst them who will be meritorious and has zeal for education according to his standard of education. If there be any surplus the same will be kept in deposit in the wakf estate for meeting the expenses of education of the future heirs. If after graduation he goes to England, France, Germany, America, Japan, Australia and other progressive countries for higher education, then the Mutawalli and the Naib Mutawalli will, in consultation with each other, help him as far as possible. , "20. The provision made for allowances for my aforesaid three sons and my grandson Shriman Abu AIam Prodhan in Schedule (Kha) will vest, after their death in the respective sons and grandsons in the male line equally. If any of them has no son or grandson, in that case after his death if his wife lives and continues to follow her own religion, she will get one eighth share of the aforesaid allowance as long as she is alive. The remaining seveneighth share and in the absence of his wife, sixteen annas share will vest in the wakf estate. Daughters born of them will not get the said allowance (in the female line). " In the Penda Mohammad Wakf Estate (Civil Appeal 393 of 1964) the value of the property is shown as Rs. 40,000. The expenditure on charities and religious purposes is about Rs. 3,700 per year. 312 These are specified in Schedule Kha. The pay of the Naib Mutawalli is fixed at Rs. 300 per year. The Mutawalliship and the Naib Mutawalliship run in the family and Mutawalli holding office can appoint his successor. The other important clauses of the wakf namah dealing with the application of the funds are: "(9) The Mutawalli shall from the income of the wakf property pay at first revenue and other legitimate government and zamindary dues. "(10) The Mutawalli shall pay all expenses required for the maintenance of the wakf property and the Mutawalli shall get ten per cent of such expenses. The Mutawalli shall pay Rs. 25 (Rupees twenty five only) per month to the Naib Mutawalli as his remuneration. "(12) The Mutawalli will be entitled to take as his own remuneration the balance remaining after deducting expenses under items Nos. (9) and (10) as well expenses under Schedule (ka) and (kha) below from the income of the Wakf property and he will be entitled to spend the sum for his own work. In Schedule Ka dispositions are made for the family and the various clauses run as follows: "(1) My grandson Jaman Ajimuddin Ahmed shall get a sum of Rs. 200 (Rupees two hundred) per month as his tankha (allowance) that is the cost of his maintenance and on his demise his heirs shall get the said tankha generation after generation and by way of succession for ever. (2) My daughter Sreemati Hiramannessa Bibi shall get Rs. 25 (Rupees twenty five) per month for her maintenance and on her demise her heirs shall continue to get the said tankha generation after generation for ever by way of succession. (3) My second wife Srimati Bibijannessa Bibi shall get Rs. 30 (Rupees thirty) per month during her life time as tankha that is as costs of her maintenance and on her demise none of her heirs shall get the same and it will be included in the Wakf Estate". It was not claimed before us in these cases that the provisions about the family have become inoperative by the exhaustion of the beneficiaries and we proceed on the assumption that the families the wakifs do still enjoy the benefits. In these circumstances, the question is whether these trusts can be described as those exclusively for religious or charitable purposes or both. If they can be 313 so described section 6(1)(i) would exempt them from the operation of the Act; otherwise, in view of the provisions of sections 3, 4 and 5 the estates of the intermediaries vested in the State on the appointed date. As already stated the provisions of the Act apply notwithstanding anything to the contrary contained in any other law or in any instrument and notwithstanding any usage or custom to the contrary. The Act must, therefore, be construed on its actual words and the exemption cannot be enlarged beyond what is granted there. The exemption is given to Corporations and institutions established exclusively for a religious or a charitable purpose or both but to this kind of eleemosynary foundations no mutawalli in either deed can lay claim. The matter can thus only come in, if at all, within the words of the exempting clause which read: " . a person holding under a trust or endowment or other legal obligation exclusively for a purpose which is charitable or religious or both? ' The word "exclusively" limits the exemption to trusts, endowments or other legal obligations which come solely within charitable or religious purposes. These purposes are defined by section 2(c) and (n) and the definitions have already been reproduced. It is quite dear (and indeed the contrary was not suggested at the Bar) that the expression "religious purpose" cannot cover these two cases. The definition is an exhaustive one and to satisfy the requirement the purpose must be connected with religious worship, teaching or service or performance of religious rites. No religious worship, teaching or service or performance of religious rites is involved when the wakif provides for his family or himself even though a person giving maintenance to his family or himself is regarded in Mahomedan Law as giving a sadaqah. But even if regarded as a pious act a sadaqah of this kind is not a religious worship or rite. In our opinion, neither of the deed makes a disposition coming within the description "exclusively for religious purposes". This leaves over for consideration whether they come within the expression "charitable purposes". The definition of "charitable purposes" in the Act follows, though not quite, the well known definition of charity given by Lord Macnaghten in Commissioners for Special Purposes of Income Tax vs PemseI(1), where four principal divisions were said to be comprised trusts for the relief of poverty; trusts for the advancement of education; trusts for the advancement of religion; and trusts for other purposes beneficial to the community not falling under any of the preceding heads. The definition in this Act makes one significant change when it speaks of "public utility" and this gives a guidance to the whole meaning and purpose of the exemption. No doubt the definition is not an exhaustive one like the definition of 'religious purposes '. It only speaks of what may be included in it besides the natural meaning of the words. It ; 583. 314 is quite clear that the provision for the family of the wakif or for himself cannot be regarded as 'relief of poor ', 'medical relief ' or the `advancement of education '. It cannot also be regarded as an ex penditure on an object of general public utility. The definition as it stands cannot obviously comprehend such dispositions. But it is contended by Mr. N.C. Chatterjee that in giving a meaning to the expression "charitable purposes" we must be guided by the notions of Mahomedan Law and he relies upon the observation of Sir George Rankin in Tribune Press Trustees, Lahore vs I.T. Commissioner(1). Mr. Chatterjee claims that provision for the wakif and the wakif 's family is a charitable purpose according to Mahomedan Law. In the Tribune case the Judicial Committee was required to interpret section 4(3)(i) of the Indian Income tax Act 1922 (XI off 1922). That section provided: "(3) This Act shall not apply to the following classes of income: (i) Any income derived from property held under trust or other legal obligation wholly for religious or charitable purposes, and in case of property so held in part only for such purpose, the income applied, or finally set apart for application, thereto. In this sub section 'charitable purpose ' includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility. " In dealing with the will of Sardar Dayal Singh who had constituted a trust to maintain the Press and the Newspaper, "keeping up the liberal policy of the said newspaper and devoting the surplus income . in improving the said newspaper . ", the question had arisen whether the running of a newspaper was an object of general public utility or whether it was to be treated as a business concern. The High Court at Lahore was divided in its opinion. Learned Judges in favour of granting the prayer for exemption were of the opinion that the true test was not what the Court considered to be an object of public utility, but what the testator thought to be. The Judicial Committee pointed out that in reaching this view those learned Judges were following what Chitty J. said in In re Foveaux, etc.(2) and further that that case was dissented from in later cases. In these latter cases it was held that though the private opinion of the Judge was immaterial, nevertheless for a charitable gift to be valid, it must be shown (1) that the gift was for public benefit, and (2) that the trust was one of which the Court could, if (1)L.R. 66 I.A. 241 at P. 252. [1895] 2 ch. 501, 315 necessary undertake and control otherwise trusts to promote all kinds of "fantastic" objects in perpetuity would be established. The Judicial Committee acceded to this view but pointed out further: . "It is to be observed, moreover, that under the Incometax Act the test of general public utility is applicable not only to trusts in the English sense, but is to be applied to property held under trust "or other legal obligation" a phrase which would include Moslem wakfs and Hindu endowments. The true approach to such questions, in cases which arise in countries to which English ideas let alone English technicalities may be inapplicable, was considered by the Board in Yeap Cheah Neo vs Ong Cheng Neo(1), and it was well said by Sir Raymond West in Fatima Bibi vs Advocate General of Bombay(2); "But useful and beneficial in what sense? The Courts have to pronounce whether any particular object of a bounty falls within the definition; but they must, in general, apply the standard of customary law and common opinion amongst the community to which the parties interested belong. " Relying on this passage Mr. Chatterjee contends that if the Mahomedan Law regards gifts for the benefit of the wakif and his family as "charity" it is not for the Courts to say that they are not and he claims exemption for the wakfs. He relies upon the precept of the Prophet "A pious offering to one 's family, to provide against their getting into want, is more pious than giving alms to beggars. The most excellent of sadkah is that which a man bestows upon his family '. Now it is a matter of legal history that wakfs in which the benefits to charity or religion were either illusory or postponed indefinitely, while the property so dedicated was being enjoyed from generation to generation by the family of the wakif, were regarded as opposed to the rule against perpetuities as contained in the Indian Succession and the Transfer of Property Acts. This was so declared in a succession of cases by the Judicial Committee and the opinion of Amir Ali expressed in his Tagore Lectures as well ' as in Meer Mahomed Israeli Khan vs Shasti Churn Ghore(3) and Bikani Mia vs Shukul Poddar(4) was not accepted. These cases are referred to in the three opinions in the High Court and most important of them is Abul Fata Mahomed Ishak and Others vs Bussomoy Dhur Chowdry, and others(5). In that case Lord Hobhouse, while emphasising that (1) (2) Bom. 42, 50 (3) (4) (5) 22 I.A. 76. 316 Mahomedan Law ought to govern a purely Mahomedan disposition, declined to hold that disposition in which the benefit was really intended to go to the wakif and his family could be described as charity even under that law. Speaking of the precept above quoted by us Lord Hobhouse observed: " . it would be doing wrong to the great lawgiver to suppose that he is thereby commending gifts for which the donor exercises no self denial; in which he takes back with one hand what he appears to put away with the other; which are to form the centre of attraction for accumulations of income and further accessions of family property; which carefully protected so called managers from being called to account; which seek to give to the donors and their family the enjoyment of property free from all liability to creditors; and which do not seek the benefit of others beyond the use of empty words." Similar observations were made by Lord Hobhouse in L.R. 17 I.A. 25 and by Lord Natson in L.R. 19 I.A. 170 in earlier cases. These cases led to agitation in India and the (VI of 1913) was passed. It declared the rights of Mussalmans to make settlements of property by way of wakf in favour of their families, children and descendants. For the purposes of the Validating Act the term 'wakf ' was defined to mean "the permanent dedication by a person professing the Mussalman faith of any property for any purpose recognized by the Mussalman law as religious, pious or charitable". This gave a wider meaning to the word wakf but only for the purpose of taking them out of the validity which would have otherwise existed and which was already authoritatively stated to have so existed. After the passage of these two Acts wakfs in which the object was the aggrandisement of families of wakifs without a pretence of charity in the ordinary sense became valid and operative. But the intention of the Validating Act was not to give a new meaning to the word "charity" which in common parlance is a word denoting a giving to some one in necessitous circumstances and in law a giving for public good. A private gift to one 's own self or kith and kin may be meritorious and pious but is not a charity in the legal sense and the Courts in India have never regarded such gifts as for religious, or charitable purposes even under the Mahomedan Law. It was ruled in Syed Mohiuddin Ahmed and Ant. vs Sofia Khatun(1) that neither the Wakf Validating Act 1913 nor the Shariat Act 1937 had the effect of aborgating the Privy Council decisions on the meaning of "charitable purpose" as such. We do not say that the English authorities should be taken as the guide as was suggested in soms of these cases at one time. For (1) 44 C.W.N.974. 317 one thing, the law was developed in the Chancery Courts without the assistance of any statutory definition. The earliest statute on the subject is one of 1601 in the forty third year of the reign of Queen Elizabeth I and in its preamble it gave a list of charitable objects which came within the purview of that Act, and for another, Courts in England extended these instances to others by analogy and the subject is often rendered vague and difficult to comprehend. A clear guide is available to us in India in the interpretation of the almost similar provisions of the Indian Income tax Act 1922 already quoted. The observations of Sir George Rankin in the Tribune, case, on which much reliance is placed by the appellants were intended to convey the same caution about English cases which we have sounded here. The Judicial Committee did not intend to lay down that the words of a statute so precise in its definition should be rendered nugatory by leaving room for inclusion in "charitable purposes", objects which by no means could be charity in the generally accepted legal sense. No doubt the definition which is common is not exhaustive and leaves scope for addition but it does not make for enlargement in directions which cannot be described as "charitable". This view of the definition was taken in respect of the analogous provision of the Indian Income tax Act. In D.V. Arur vs Commissioner 'of Income tax(1) and in re Mercantile Bank of India (Agency) Ltd.(2)it was laid down that for satisfying the test of charitable purpose there must always be some element of public benefit. Indeed it must be so, if family endowments which are in effect private trusts are not to pass as charities which, as was observed in Mujibunnissa and Ors. vs Abdul Rahim and Abdul Aziz(3), it is superfluous in the present day to say, is not the law. When the two deeds are examined and their provisions considered in the light of these principles, it is easily seen that they are not exclusively for charitable purposes. They do provide in part for objects which are religious or charitable or both but mingled with those purposes are some which are secular and some which are family endowments very substantial in character. If the latter benefits had ceased or the families had become extinct leaving only the charities or if the provisions were for poor and needy though belonging to the wakif 's family, other considerations might conceivably have arisen, as was stated by Bachawat J. in his opinion. The deeds as they stand cannot, however, be said to come within the exemption claimed. The appeals must, therefore, fail. They are dismissed but in the circumstances we direct parties to bear their own costs. Appeals dismissed. (1) I,A.R. (2) (3) 21 I.A. 15 at p, 26.

IN-Abs

The appellants were the respective mutawallis of two wakfs, in which either the ultimate benefit to the charity was postponed till after the exhaustion of the wakif 's family and descendents, or the income from the wakf estate was applied for the maintenance of the family side by side with expenditure for charitable or religious purposes. Notices were issued by the Collector under the West Bengal Estates Acquisition Act, 1953, to the appellants, calling upon them to hand over possession of the wakf estates, on the ground that under section 4 of the Act, there was an extinction and cesser of the estate and the rights of the appellants, and that their divested estates and rights vested in the State. The appellants claimed that they were protected by section 6(1)(i)of the Act, because, they were holding the properties exclusively for purposes which were charitable or religious or both. The claim was rejected by the Collector, by the Commissioner on appeal, and by the High Court under article 226 of the Constitution. In the appeal to the Supreme Court, HELD: The purposes described in the deeds were not covered by the expression "religious purpose", and they were not exclusively for charitable purposes. Mingled with those purposes were some which were secular and some, which were family endowments, of a very substantial character. As the provisions about the family had not become inoperative by the exhaustion of the beneficiaries, the deeds. as they stood, could not be said to come within exemption claimed. [317 F H]. The provisions of the Act apply notwithstanding anything to the contrary contained in any other law or in any instrument and notwithstanding any usage or custom to the contrary. The Act must, therefore, be construed on its actual words and the exemption cannot be enlarged beyond what is granted there. No doubt, the definition of "Charitable purpose" is not exhaustive like that of "religious purpose" but the expression "public utility" in the definition of "charitable purpose" gives a guidance to the meaning and purpose of the exemption. It leaves scope for addition but it does not make for enlargement in directions which cannot be described as "charitable". A provision for the family of the wakif or for himself cannot be regarded as "relief of poor", "medical relief" or "the advancement of education" under the definition. It cannot also be regarded as an expenditure on an object of general public utility. It is true that after the passing of the Mussalman waqf validating Act, 1937, wakfs, in which the object was the aggrandisement of the families of wakifs without any pretence of charity in the ordinary sense, became valid and operative. But, the intention was not to give a new meaning to the word "Charity" which in common parlance is a word denoting a giving to someone in necessitous circumstances and in law, a giving for public good. A private gift to one 's own self or kith and kin may be meritorious and pious, but is not a charity in the legal sense and Courts in India have never regarded such gifts as for religious or charitable purposes, even under the Mahomedan Law. A; 316 F H; 317 D].

Appeal No. 423 of 1964. Appeal by special leave from the order dated October 5, 1962 of the Central Government Industrial Tribunal at Dhanbad in Application No. 53 of 1961 in Reference Nos. 45, 56, 63 and 65 of 196.1. section V. Gupte, Solicitor General and I. N. Shroff, for the appellant. Jitendra Sharma and Janardan Sharma, for the respondent. The Judgment of the Court was delivered by Gajendragadkar, C. J. This appeal raises a very short point for our decision. The appellant, the Tata Iron & Steel Co. Ltd., (N)4SCI 430 Jamadoba, filed an application under section 33(2)(b) of the (No. 14 of 1947) (hereinafter called "the Act"), before the Central Government Industrial Tribunal, Dhanbad (hereinafter called "the Tribunal"), asking for its approval of the action which it proposed to take against its employee, the respondent D. R. Singh. This application was made by the appellant, because certain industrial disputes were pending at the relevant time between the appellant and its employees under References Nos. 45, 56, 63 and 65 of 1961. This application was opposed by the respondent who filed his written statement. At the hearing of the application, the appellant urged before the Tribunal that though it had made the present application as a matter of abundant caution, its case was that it was not necessary to apply under section 32(2), because the respondent was not concerned with the industrial disputes which were pending between the appellant and its employees in the different References to which we have already referred. In other words, the appellant wanted the Tribunal to consider the question as to whether the respondent was a workman concerned in the relevant industrial disputes at all, before dealing with the merits of its application. The appellant 's case was that one of the conditions precedent for the applicability of section 33 is that the workman against whom the employer seeks to take action falling under section 33(2), must be a workman concerned in the main industrial disputes; if he is not so concerned, section 33(2) will not apply. In order to avoid any complica tions and with a view to save itself from the charge that it had contravened section 33 of the Act, the appellant had no doubt made an application as a precautionary measure; that is why it wanted the Tribunal to consider its contention that section 33 did not apply as a preliminary point. The Tribunal took the view that the appellant could not raise such a contention. It held that if the appellant thought that section 33 did not apply, it should withdraw the application and take the consequences. On that view, it refused to entertain the plea raised by the appellant and proceeded to deal with the merits of the application. In the result, the Tribunal was not satisfied that a prima facie case had been made out for the dismissal of the respondent, and so, approval was not accorded to the action which the appellant wanted to take against the respondent and its application was accordingly dismissed. It is against this order that the appellant has come to this Court by special leave. The learned Solicitor General for the appellant contends, and we think rightly, that the Tribunal was in error in not dealing with the preliminary point as to whether section 33 applied to the facts of this case. It is plain that in a situation like the present, even if the appellant took the view that the workman against whom it was taking action was not a workman concerned with the main industrial disputes, it would be justified in refusing to take the risk of deciding the said point for itself. It would be legitimate for an employer like the appellant to make an application under section 33 without prejudice to his case that section 33 did not apply. The question 431 about the construction of the words "a workman concerned in such dispute" which occur in section 33(1) and (2) has been the subject matter of judicial decisions and somewhat inconsistent views had been taken by different High Courts on this point. Some High Courts construed the said words in a narrow way, vide New Jehangir Vakil Mills Ltd., Bhavnagar vs N. L. Vyas & Ors.,(1) while others put a broader construction on them, vide Eastern Plywood Manufacturing Company Ltd vs Eastern Plywood Manufacturing Workers ' Union(2). Newton Studios Ltd. vs Ethirajulu (T. R.) & Others(3), and Andhra Scientific Company Ltd. vs Seshagiri Rao (A).(4). This problem was ultimately resolved by this Court in its two recent decisions, viz., New India Motors (Private) Ltd. vs Morris (K.T.)(5) and Digwadih Colliery vs Ramji Singh(6). In this latter case this Court considered the conflicting judicial decisions rendered by the different High Courts and has approved of the broader construction of the words "workmen concerned in such dispute". Where judicial decisions differed on the construction of the words "workmen concerned in such dispute", it would be idle and unreasonable to suggest that the employer should make up his mind whether section 33 applies or not, and, if he thinks that section 33 does not apply, he need not make the application; on the other hand, if he thinks that section 33 applies, he should make an application, but then he cannot be permitted to urge that the application is unnecessary. Such a view is, in our opinion, wholly illogical and unsatisfactory. Therefore, we must hold that the Tribunal was in error in not considering the preliminary point raised by the appellant that the respondent was not a workman concerned with the main industrial disputes and as such, the application made by it was unnecessary. That raises the question as to the course that we should adopt in dealing with the merits of the present appeal. Logically, it would be necessary to make a finding on the preliminary point raised by the appellant before the merits are considered, because if the appellant is right in contending that the respondent is not a "workman concerned with such disputes" within the meaning of section 32(2), the application would be unnecessary and there would be no jurisdiction in the Tribunal either to accord or to refuse approval to the action proposed to be taken by the appellant against the respondent. In the present case, however, we do not propose to adopt such a course. The order terminating the services of the respondent was passed on December 4, 1961 and it was to take effect from December 9, 1961. The Award was pronounced by the Tribunal on October 5, 1962, and when the appeal has come for final disposal before us, more than three years have elapsed since the date of dismissal of the respondent. The learned Solicitor General fairly con ceded that the appellant has come to this Court not so much to enforce its order of dismissal against the respondent, as to have a (1) [1958] II LLJ 575. (4) [1959] II LLJ 717. (2) [1952] I LLJ 628. (5) [1960] I LLJ 551. (3) [1958] I LLJ 63. (6) [19641 II LLJ 143. 432 decision from this Court on the point of law raised by it before the Tribunal. Accordingly, we have decided that point in favour of the appellant, but having regard to the long passage of time between the date of the impugned order and the date when we are pronouncing our judgment in the present appeal, we think it would be inexpedient and unjust to send the matter back to the Tribunal with a direction that it should decide the preliminary point raised by the appellant as to whether the respondent is a "workman concerned in such disputes" within the meaning of section 33(2) of the Act. That is why though we have reversed the finding of the Tribunal on the preliminary point, we do not propose to give this litigation any further lease of life. In the result, without examining the merits of the findings recorded by the Tribunal for not according approval to the dismissal of the respondent, we direct that the appeal fails and is dismissed. There would be no order as to costs. Appeal dismissed.

IN-Abs

Because certain industrial disputes were pending before the Industrial Tribunal at the relevant time between the appellant and its employees, the appellant filed an application under section 33(2), (b) asking for approval of action which it proposed to take against its employee the respondent. The appellant urged that this application was made as a matter of abundant caution and it wanted the Tribunal to consider the question as to whether the respondent was a workman concerned in the relevant industrial dispute at all before dealing with the merits of the application. The Tribunal, being of the view that if the appellant thought that s, 33 did not apply, it should withdraw the application and take the consequences, dealt with the merits of the application. In appeal by special leave: HELD: The Tribunal was in error in not considering the preliminary point raised by the appellant that the respondent was not a workman concerned with the main industrial dispute and as such the application made by it was unnecessary. [431E] It is plain that in a situation like the present, where judicial decisions differed on the construction of the words "workman concerned in such dispute", even if the appellant took the view that the workman against whom it was taking action was not a workman concerned with the main industrial disputes, it would be justified in refusing to take the risk of deciding the said point for itself. It would he legiti mate for an employer to make an application under section 33 without prejudice to his case that section 33 did not apply. [431D E] Case law referred to.

iminal Appeal No. 34 of 1953. Appeal from the Judgment and Order dated the 5th January, 1953, of the High Court of Judicature at Allahabad (Lucknow Bench), Lucknow (Kidwai and Bhargava JJ.) in Criminal Appeal Register No. 24 of 1952 and Capital Sentence Register No. 4 of 1952 arising out of the Judgment and Order dated the 19th January 1952, of the Court of the Sessions Judge, Sitapur, in Sessions Case No. 97 of 1951. Jai Gopal Sethi (K. P. Gupta, with him) for the appellant. G.C. Mathur and Onkar Nath Srivastava for the respondent. November 16. The Judgment of the Court was delivered by BOSE J. We have three appellants before us. All were prosecuted for the murder of one Babu Singh. Of these, Surendra Singh alone was convicted of the murder and was sentenced to death. The other two were convicted under section 225, Indian Penal Code. Each was sentenced 331 to three years ' rigorous imprisonment and to a fine of Rs. 200. All three appealed to the High Court at Allahabad (Lucknow Bench) and the appeal was heard on Filth December, 1952, by Kidwai and Bhargava JJ. Judgment was reserved. Before it could be delivered Bhargava J. was transferred to Allahabad. While there he dictated a, "judgment" purporting to do so on behalf of himself and his brother Judge, that is to say it purported to be a joint judgment : he used the pronoun "we" and not "I". He signed every page of the "judgment" as well as at the end but did not date it. He then sent this to Kidwai J. at Lucknow. He died on 24th December, 1962, before the "judgment" was delivered. After his death, on 5th January, 1953, his brother Judge Kidwai J. purported to deliver the "judgment" of the court. He signed it and dated it. The date he placed on it was 5th January, 1953, Bhargava J. 's signature was still there and anyone reading the judgment and not knowing the facts would conclude that Bhargava J. was a party to the delivery on 5th January, 1953. The appeal was dismissed and the sentence of death was confirmed. The question is whether this "judgment" could be validly delivered after the death of one of the two Judges who heard the appeal. The arguments covered a wide range but we intend to confine ourselves to the facts of this case and only deal with the narrower issues which arise here. Delivery of judgment is a solemn act which carries with it serious consequences for the person or persons involved. In a criminal case it often means the difference between freedom and jail, and when there is a conviction with a sentence of imprisonment, it alters the status of a prisoner from an under trial to that of a convict; also the term of his sentence starts from the moment judgment is delivered. It is therefore necessary to know with certainty exactly when these consequences start to take effect. For that reason rules have been drawn up to determine the manner in which and the time from when the decision is to take effect and crystal 332 lise into an act which is thereafter final so far as the court delivering the judgment is concerned. Now these rules are not all the same though, they are designed to achieve the same result. The Criminal Procedure Code takes care of courts subordinate to the High Court. Section 366 and 424 deal with them. The High Courts have power to make their own rules. The power is now conferred, or rather continued, under article 225 of the Constitution. The Allahabad High Court framed its present set of Rules in 1952. They came into force on the 15th of September in that year. We are concerned with the following in Chapter VII dealing with the judgment and decree, namely rules 1.4. These rules provide for four different situations: (1) for judgments which are pronounced at once as soon as the case has been heard; (2) for those which are pronounced on some future date, (3) for judgments which are oral, and (4) for those which are written. These rules use the word "pro nounced" in some places and "delivered" in others. Counsel tried to make capital out of this and said that a judgment had to be both "pronounced" and "delivered" and that they were two different things. We do not intend to construe these rules too technically because they are designed, as indeed are all rules, to fur ther the ends of justice and must not be viewed too narrow ly; nor do we desire to curtail the jurisdiction which the Privy Council point out is inherent in courts to make good inherent defects caused by accidents such as death. As this decision of the Judicial Committee was relied on in the arguments we will quote the passage which is relevant here. It is at page 295 of Firm Gokal Chand vs Firm Nand Ram(1). The facts are not the same as here because the judgment was actually delivered in open court and both the judges who constituted the Bench were present and concurred in it. But before it could be signed, one Judge went on leave. (1) A.I.R. 1938 P.C. 292. 333 The rules required the judgment to be signed and dated at the time that it was pronounced. Their Lordships said: "The rule does not say that if its requirements are not complied with the judgment shall be a nullity. So startling a result would need clear and precise words. Indeed the rule does not even state any definite time in which it is to be fulfilled. The time is left to be defined by what is reasonable. The rule from its very nature is not intended to affect the rights of parties to a judgment. It is intended to secure certainty in the ascertainment of what the judgment was. It is a rule which Judges are required to comply with for that object. No doubt in practice Judges do so comply, as it is their duty to do. But accidents may happen. A Judge may die after giving judgment but before he has had a reasonable opportunity to sign it. The court must have inherent jurisdiction to supply such a defect. The case of a Judge who has gone on leave before signing the judgment may call for more comment, but even so the convenience of the court and the interest of litigants must prevail. The defect is merely an irregularity. But in truth the difficulty is disposed of by sections 99 and 108, Civil Procedure Code. " That was a civil case. This is a criminal one. But section 537 of the Criminal Procedure Code does much the same thing on the criminal side as sections 99 and 108 do on the civil. The principle underlying them is the same. But even after every allowance is made and every effort taken to avoid undue technicality the question still remains what is a judgment, for it is the "judgment" which decides the case and affects the rights and liberties of the parties; that is the core of the matter and, as the Privy Council say, the whole purpose of these rules is to secure certainty in the ascertainment of what the judgment was. The question as sumes more importance than ever in a criminal case because of section 369 of the Criminal Procedure Code which provides that 334 "Save as otherwise provided by this Code or by any other law for the time being in force or, in the case of a High Court, by the Letters Patent or other instrument constituting such High Court, no court, when it has signed its judgment, shall alter or review the same except to correct a clerical error. " In our opinion, a judgment within the meaning of these sections is the final decision of the court intimated to the parties and to the world at large by formal "pronouncement" or "delivery" in open court. It is a judicial act which must be performed in a judicial way. Small irregularities in the manner of pronouncement or the mode of delivery do not matter but the substance of the thing must be there : that can neither be bluffed nor left to inference and con jecture nor can it be vague. All the rest the manner in which it is to be recorded, the way in which it is to be authenticated the signing and the sealing, all the rules de signed to secure certainty about its content and matter@an be cured; but not the hard core, namely the formal intima tion of the decision and its contents formally declared in a judicial way in open court. The exact way in which this is clone does not matter. In some courts the judgment is delivered orally or read out, in some only the operative portion is pronounced, in some the judgment is merely signed after giving notice to the parties and laying the draft on the table for a given number of days for inspection. An important point therefore arises. It is evident that the decision which is so pronounced or intimated must be a declaration of the mind of the court as it is at the time of pronouncement. We lay no stress on the mode or manner of delivery, as that is not of the essence, except to say that it must be done in a judicial way in open court. But, however, it is done it must be an expression of the mind of the court at the time of delivery. We say this because that is the first judicial act touching the judgment which the court performs after the hearing. Everything else up till then is done out of court and is not intended to be the operative act which sets all the consequences which follow 335 on the judgment in motion. Judges may, and often do, dis cuss the matter among themselves and reach a tentative conclusion. That is not their judgment. They may write and exchange drafts. Those are not the judgments either, how ever heavily and often they may have been signed. The final operative act is that which is formally declared in open court with the intention of making it the operative decision of the court. That is what constitutes the "judgment". Now up to the moment the judgment is delivered Judges have the right to change their mind. There is a sort of locus paniteniea, and indeed last minute alterations sometimes do occur. Therefore, however, much a draft judgment may have been signed beforehand, it is nothing but a draft till formally delivered as the judgment of the court. Only then does it crystallise into a full fledged judgment and become operative. It follows that the Judge who "delivers" the judgment, or causes it to be delivered by a brother Judge, must be in existence as a member of the court at the moment of delivery so that he can, if necessary, stop delivery and say that he has changed his mind. There is no need for him to be physically present in court but he must be in existence as a member of the court and be in a position to stop delivery and effect an alteration should there be any last minute change of mind on his part. If he hands in a draft and signs it and indicates that he intends that to be the final expository of his views it can be assumed that those are still his views at the moment of delivery if he is alive and in a position to change his mind but takes no steps to arrest delivery. But one cannot assume that he would not have changed his mind if he is no longer in a position to do so. A Judge 's responsibility is heavy and when a man 's life and liberty hang upon his decision nothing can be left to chance or doubt or conjecture; also, a question of public. policy is involved. As we have indicated, it is frequently the practice to send a draft, sometimes a signed draft, to a brother Judge who also heard the case. This may be merely for his information, or for consideration and criticism. The mere signing of the 336 draft does not necessarily indicate a closed mind. We feel it would be against public policy to leave the door open for an investigation whether a draft sent by a Judge was indend ed to embody his final and unalterable opinion or was only intended to be a tentative draft sent with an unwritten understanding that he is free to change his mind should fresh light dawn upon him before the delivery of judgment. Views similar to this were expressed by a Full Bench of the Calcutta High Court consisting of nine Judges in the year 1867 in Mahomed Akil vs Asadunnissa Bibee(1). In that case, three of the seven Judges who constituted the Bench handed in signed judgments to the Registrar of the court. Before the judgment could be delivered, two of them retired and one died. A Full Bench of nine Judges was convened to consider whether the drafts of those three Judges could be accepted as judgments of the court. Seton Kerr J., who had heard the case along with them, said "Certainly as far as I can recollect, they appeared to have fully made up their minds on a subject which they had very seriously considered, and on which they had abundant opportunities of forming a final determination. I am, however. not prepared to say that they might not on further consideration have changed their opinions. " (p. 13). Despite this, all nine Judges were unanimous in holding that those three opinions could not be regarded as judgments in the formal sense of the term. In our opinion, Jackson J. expressed the law aright in these words: "I have however always understood that it was necessary in strict practice that judgments should be delivered and pronounced in open court. Clearly, we are met today for the first and only time to give judgment in these appeals; and it appears to me, beyond question, that Judges who have died or have retired from the court cannot join in the (1) 9 W.R.I. (F.B.) 337 judgment which is to be delivered today, and express their dissent from it." (p. 5). Peacock C.J. pointed out at page 30: "The mere arguments and expressions of opinion of individual Judges, who compose a court, are not judgments. A judgment in the eye of the law is the final decision of the whole court. It is not because there are nine Judges that there are nine judgments. When each of the several Judges of whom a simple court is composed separately expresses his opinion when they are all assembled, there is still but one judgment, which is the foundation for one decree. If it were otherwise, and if each of the memoranda sent in on the present occasion were a judgment, there would be nine judgments in one case, some deciding one thing and some another, and each Judge would have to review his own judgment separately, if a review should be applied for. " We do not agree with everything which fell from the learned Chief Justice and the other Judges in that case but, in our opinion, the passages given above embody the true rule and succinctly explain the reasons for it. As soon as the judgment is delivered, that becomes the operative pronouncement of the court. The law then provides for the manner in which it is to be authenticated and made certain. The rules regarding this differ but they do not form the essence of the matter and if there is irregularity in carrying them out it is curable. Thus, if a judgment happens not to be signed and is inadvertently acted on and executed, the proceedings consequent on it would be valid because the judgment, if it can be shown to have been validly delivered, would stand good despite defects in the mode of its subsequent authentication. After the judgment has been delivered provision is made for review. One provision is that it can be freely altered or amended or even changed completely without further formality, except notice to the parties and a rehearing on the point of change should that be necessary, provided it has not been signed. Another is that after signature L/B(D)2SCI 8 338 a review properly so called would lie in civil cases but none in criminal; but the review, when it lies, is only permitted on very narrow grounds. But in this case the mere fact that a Judge is dead and so cannot review his judgment does not affect the validity of the judgment which has already been delivered and has become effective. For this reason there is a distinction between judgments which have not been delivered and so have not become operative and those which have. In the former case, the alteration is out of court. It is not a judicial act. It is only part of a process of reaching a final conclusion; also there is no formal public declaration of the Judges ' mind in open court and consequently there is no "judgment ' which can be acted upon. But after delivery the alteration cannot be made without notice to the parties and the proceeding must take place in open court, and if there is no alteration there is something which is final and conclusive and which can at once be acted upon. The difference is this. In the one case, one cannot know, and it would be against public policy to enquire, whether the draft of a judgment is the final conclusion of the Judge or is only a tentative opinion subject to alteration and change. In the second case, the Judge has publicly declared his mind and cannot therefore change it without notice to the parties and without hearing them afresh when that is necessary; and if there is no change the judgment continues in force. By change we mean an alteration of the decision and not merely the addition or subtraction of part of the reasoning. Our conclusion is that the judgment which Kidwa,i J. purported to deliver on 5th January, 1953, was not a valid judgment because the other member of the Bench died before it could be delivered. The appeal is allowed and the order of the High Court which purports to be its judgment is set aside. As it is no longer possible for the Bench which heard the appeal and the confirmation proceedings to deliver a valid judgment 339 we send the case back to the High Court for re hearing and delivery of a proper judgment. November 23. BOSE J.The order for stay dated the 25th May, 1953, has now expended itself. The death sentence cannot be carried out as there is no valid decision of the appeal and no valid confirmation. The position regarding that is as it was when the appeal was, made to the High Court. The second and the third appellants will surrender to their bail as they are now relegated to the position which they occupied when the appeal was filed in the High Court. Appeal allowed. Agent for the appellant : Naunit Lal.

IN-Abs

Where a case was heard by a Bench of two Judges and the judgment was signed by both of them but it was delivered in court by one of them after the death of the other: Held, that there was no valid judgment and the case should be re heard. A judgment is the final decision of the court intimated to the parties and the world at large by formal "pronouncement or "delivery" in open court and until a judgment is delivered the judges have a right to change their mind. Firm Gokal Chand vs Firm Nand Ram (A.I.R. and Mahomed Akil vs Asadunnissa Bibee F.B.) referred to.

Appeal No. 43 of 1964, Appeal by special leave from the award, dated August 3, 1962 of the Central Government Industrial Tribunal, Dhanbad in Reference No. 56 of 1961. B. Sen and I.N. Shroff, for the appellants. The respondent did not appear. The Judgment of the Court was delivered by Hidayatullah, J. This is an appeal by special leave against the Award dated August 3, 1962, of the Central Government Industrial Tribunal Dhanbad, under the 448 449 The appellants are the Employers in relation to Digwadih Colliery and the respondents their workmen. The workmen did not appear in this Court. The dispute was whether the management of the colliery was justified in terminating the services of Jaldhar Singh with back wages. Jaldhar Singh was a 'badli ' workman which means (as defined by the Standing Orders of the colliery) a person appointed in the post of a permanent employee or probationer who is temporarily absent. He worked as badli in the calendar years 1959 and 1960 in different capacities. His employment was, of course, not continuous and there were six breaks of one day to a week in 1959 and eight breaks of one day to a week in 1960. However, he worked for more than 240 days in each calendar year though with these interruptions. In January 1961 the colliery terminated Jaldhar Singh 's service without notice to him or payment of wages in lieu of notice or compensation. A dispute arising, conciliation was attempted but failed and the reference followed. Before the Tribunal the workmen claimed that Jaldhar Singh was a permanent workman while the Employers contended that he was temporary. The Employers stated that as some of the permanent staff had become surplus, there was no need of badli workmen and the termination of Jaldhar Singh 's service was justified. The workmen attempted to prove that Jaldhar Singh was permanent from 1960 and produced some documents from which they asked that this inference be drawn but the Tribunal did not agree. The workmen relied in the alternative upon section 25F of the Act because Jaldhar Singh had put in service of 240 days in each of the years and contended that as the Employers had failed to comply with the provisions of section 25F the termination of service was illegal and unjustified. The Employers submitted that section 25F could apply only if Jaldhar Singh had put in 240 days ' continuous service in any of the years 1959 or 1960. The service of Jaldhar Singh was admittedly terminated as there was no work for him and not on account of disciplinary action or voluntary retirement, superannuation or ill health. This was thus a case of retrenchment as defined in section 2(00) of the Act. Section 25F, which was inserted as part of Chapter VA, with effect from October 24, 1953 by the Industrial Disputes (Amendment) Act 1953 (43 of 1953) provides: "25F. Conditions precedent to retrenchment of workmen. No workman employed in any industry who has been in continuous service for not less than one year under an employer shall be retrenched by that employer until (a) the workman has been given one month 's notice in writing indicating the reasons for retrenchment and the period of notice has expired, or the workman has 450 been paid in lieu of such notice, wages for the period of the notice: Provided that no such notice shall be necessary if the retrenchment is under an agreement which specifies a date for the termination of service; (b) the workman has been paid, at the time of retrenchment, compensation which shall be equivalent to fifteen days ' average pay for every completed year of service or any part thereof in excess of six months; and, (c) notice in the prescribed manner is served on the appropriate Government," The section, if it applied, had plainly not been complied with I in respect of any of the conditions precedents Jaldhar Singh, as seen already, had not been given any notice or wages in lieu of notice or paid compensation and no notice had been served on the appropriate Government. The termination of service would, in these circumstances, be illegal. But the Employers pointed, out that section 25F required two conditions: (a) continuous service and (b) service for not less than one year, and contended that these conditions were not fulfilled as the service was not continuous but broken. They relied on the definition of "continuous service" in section 2(eee) which was introduced by the same amending Act: "2(eee) continuous service means uninterrupted service, and includes service which may be interrupted merely on account of sickness or authorised leave or an accident or a strike which is not illegal, or a lock out or a cessation of work which is not due to any fault on the part of the workman;" The workmen, on the other hand, relied upon the provisions of section 25B which read: "25B. Definition of one year of continuous service. For the purposes of sections 25C and 25F, a workman who, during a period of 12 calendar months, has actually worked in an industry for not less than two hundred and forty days shall be deemed to have completed one year of continuous service in the industry. Explanation. In computing the number of days on which a workman has actually worked in any industry, the days on which (a) he has been laid off under an agreement or as permitted by standing orders made under the , or under this Act or under any other law applicable to the industrial establishment, the largest number of days during 451 which he has been so laid off being taken into account for the purposes of this clause, (b) he has been on leave with full wages, earned in the, previous year, and (c) in the case of a female, she has been on maternity leave; so however that the total period of such maternity leave shall not exceed twelve weeks, shall be included. " The definitions in section 2 of the Act do not apply if there is anything repugnant in the subject or context and the question is whether the definition of "continuous service" can at all apply in considering section 25F when what is meant by the expression "one year of continuous service" in section 25F is, by section 25B specially stated. If section 25B had not been enacted the contention of the Employers would have been unanswerable for the words of section 25F would then have plainly meant that the service should be for a period of 12 months without interruptions other than those stated in section 2(eee) itself. But section 25B says that for the purpose of section 25F a workman who, in a period of twelve calendar months has actually worked for not less than 240 days shall be deemed to have completed one year of continuous service. Service for 240 days in a period of twelve calendar months is equal not only to service for a year but is to be deemed continuous service even if interrupted. Therefore, though section 25F speaks of continuous service for not less than one year under the employer, both conditions are fulfilled if the workman has actually worked for 240 days during a period of twelve calendar months. It is not necessary to read the definition of continuous service into section 25B because the fiction converts service of 240 days in a period of twelve calendar months into continuous service for one complete year. Mr. B. Sen drew our attention to the Industrial Disputes (Amendment) Act 1964 which was passed last December. By section 2(iii) of the amending Act of 1964 clause (eee) of the second section of the principal Act was omitted and by section 13, for section 25B in the principal Act the following was substituted: "25B. For the purposes of this Chapter, (1) a workman shall be said to be in continuous service for a period if he is. for that period, in uninterrupted service, including service which may be interrupted on account of sickness or authorized leave or an accident or a strike which is not illegal, or a lock out or a cessation of work which is not due to any fault on the part of the workman; (2) where a workman is not in continuous service within the meaning of clause (1) for a period of one year 452 he shall be deemed to be in continuous service under an employer (a) for a period of one year, if the workman, during a period of twelve calendar months preceding the date with reference to which calculation is to be made, has actually worked under the employer for not less than (i) one hundred and ninety days in the case of a workman employed below ground in a mine; and (ii) two hundred and forty days, in any other case; The Explanation to section 25B is the same, mutatis mutandis as before. Mr. Sen contended that the change in the law brought out his contention. We do not agree. The amended section 25B only consolidates the previous sections 25B and 2(eee) in one place, adding some other matters which are not relevant to the present purpose, but the purport of the new provisions is not different. In fact the amendment of section 25F of the principal Act by substituting in cl. (b) the words "for every completed year of continuous service" for the words "for every completed year of service" now removes a discordance between the unamended section 25B and the unamended cl. (b) of section 25B. Neither before these several changes nor after is uninterrupted service necessary if the total service is 240 days in a period of twelve calendar months. The only change in the new Act is that this service must be during a period of twelve calendar months preceding the date with reference to which calculation is to be made. The last amendment now removes a vagueness which existed in the unamended section 25B. We accordingly hold that the decision under appeal is correct. The appeal fails and is dismissed. Appeal dismissed.

IN-Abs

A badli workman worked as the appellant 's employee for more than 240 days, with interruptions in each of the calendar years 1959 and 1960. He was retrenched in 1961. An industrial dispute having arisen, it was referred to the Tribunal, which held, that the appellant was not justified in terminating the services of the workman as the provisions of section 25F of the were not com plied with. In its appeal to this Court, the appellant contended that the section could apply only if the workman had put in 240 days ' continuous service in any of the years 1959 and 1960. HELD: Section 25B says that, for the purpose of section 25F a workman who, in a period of 12 calendar months has actually worked for not less than 240 days shall be deemed to have completed one year of continuous service. Service for 240 days in a period of 12 calendar months is equal not only to service for a year but is to be deemed continuous service even if interrupted. Therefore, though section 25F speaks of continuous service for not less than one year under the employer, both the conditions are fulfilled if the workman has actually worked for 240 days during a period of 12 calendar months. It is not necessary to read the definition of continuous service in section 2(fee) into section 25B, because, the fiction converts service of 240 days in a period of the twelve calendar months into continuous service for one complete year. [451C E] The amendments introduced by the Industrial Disputes (Amend ment) Act, 1964 into sections 25B and 25F only removed the discordance between the unmended sections 25B and 25F (b) and vagueness which existed previously. But neither before the amendments nor after, is uninterrupted service necessary, if the total service is 240 days in a period of 12 calendar months. [452D E]

Appeal No. 130 of 1964. Appeal from the judgment and order dated November 21, 1958 of the Bombay High Court in Appeal No. 31 of 1958. D. N. Mukherjee, for the appellants. G. section Pathak, section N. Andley and Rameshwar Nath, for respon dent No. 1 The Judgment of the Court was delivered by Bachawat, J. Maharaja Sir Rajendra Prakash Bahadur Maharaja of Sirmur, Maharani Mandalsa Kumari Debi Rajmata of Sirmur, Maharani Premlata Debi of Chhota Udaipur, Maiyan Sahiba Sheba Kumari Debi of Jharipani, Major Rao Raja Sirendra Singh, Jagat Pershad, Shib Chander Kumar, Praduman Kumar and Dayawati Rani carried on business in co partnership under the firm name and style of Messrs. Jagatsons International Corporation (hereinafter referred to as the firm) at New Delhi. Respondent No. 1, Ramnarain (Private) Ltd. instituted Summary Suit No. 162 of 1957 against Messrs. Jagatsons International Corporation on the Orginal Side of the Bombay High Court claiming a money decree for Rs. 1,96,831 58 N.P. The suit was instituted on the allegation that respondent No. 1 and the firm had entered into an agreement in writing dated September 26, 1956, whereby respondent No. 1 agreed to provide finance to the firm, as a result of the dealings under the agreement a sum of Rs. 1,96,831.58 N.P. was due to respondent No. 1 from the firm, and in view of the breaches of the agreement by the firm, the agreement has stood terminated. The consent of the Central Government to the institution of the suit was not obtained, though the Maharaja of Sirmur is a Ruler of the former Indian State within the meaning of section 87B of the Code of Civil Procedure. The summons of the suit was served oil Shib Chander Kumar as a partner of the firm and as a person having the control or management of the partnership business. On July 15, 1957, at the hearing of the summons for judgment taken out by respondent No. 1, the firm admitted its liability as claimed in the plaint and applied for installments, and the Court passed a decree for Rs. 1.89,643.98 N.P. and further interest, and directed that the decretal amount would be payable in certain instalments. The firm committed defaults in payment of the instalments payable under the decree. On December 13, 1957. respondent No. 1 filed an application under 0. 21 r. 50(2) of the Code of Civil Procedure for leave to execute the decree against (1) Maharani Mandalsa Kumari Debi, (2) Maharani Premlata Debi, (3) Maiyan Sahiba Sheba Kumari Debi, (4) Major Rao Raja Sirendra Singh, (5) Jagat Pershad. (6) Praduman Kumar and (7) Dayawati Rani claiming that respondent No. 1 was entitled to cause the decree to be executed against them 423 as being partners in the firm. The opposite parties to the application filed an affidavit alleging (1) that the suit and all proceedings therein were incompetent in the absence of the requisite consent of the Central Government under section 86 of the Code of Civil Procedure; (2) Jagat Pershad and Shib Chander Kumar entered into the agreement dated September 26, 1956 and utilised the moneys received under it in fraud of the other partners and without their authority, Shib Chander Kumar dishonestly and fraudulently concealed from the other partners the fact of the institution of the suit and without the authority and knowledge of the other partners submitted to a consent decree in the suit. , By an order dated March 18, 1958, a learned single Judge of the High Court rejected all the contentions in the affidavit, and allowed the application under 0. 21, r. 50(2) of the Code of Civil Procedure. The learned single Judge held that (1) the defect of the absence of the requisite consent under section 86 read with section 87 B did not render the decree a nullity, and the objection could not be taken in execution proceedings; (2) the other defences to the merits of the claim in the suit could not be agitated in a proceeding under 0. 21, r. 50(2) of the Code of Civil Procedure. An appeal preferred by appellants, Maharani Mandalsa Kumari Debi, Maharani Premlata Debi, Major Rao Raja Sirendra Singh and Maiyan Sahiba Sheba Kumari Debi was dismissed by a Bench,of the High Court on November 21, 1958. The appellate Court held that (1) though the decree against the firm was a decree against all its partners including the Maharaja of Sirmur, and though the decree against the Maharaja of Sirmur might be a nullity, the decree against the other partners of the firm was valid, and (2) the appellants were not entitled to raise other defences to the merits of the claim on an application under 0. 21, r. 50(2) of the Code of Civil Procedure. The appellants now appeal to this Court under a certificate granted by the High Court. On behalf of the appellants Mr. D. N. Mukherjee contended that (1) the suit against the firm of Jagatsons International Corporation was a suit against all its partners and in the absence of the requisite consent under section 86 read with section 87 B of the Code of Civil Procedure, the suit was not competent against the Maharaja of Sirmur, and the decree against him was null and void; (2) consequently, the suit against the firm under the provisions of 0. 30 of the Code of Civil Procedure was not competent and the decree passed in the suit was wholly void, the decree not being a decree against the firm could not be executed by recourse to the machinery of 0. 21, r. 50, Code of Civil Procedure, and the application against the appellants under 0. 21, r. 50(2), Code of Civil Procedure was not maintainable; and (3) the appellants were entitled to dispute their liability in an application under 0. 21, r. 50(2) of the Code of Civil Procedure on all the grounds raised in the affidavit field 424 on their behalf and the court ought to have tried and decided all those questions. In answer to the first contention of Mr. D. N. Mukherjee, Mr. Andley argued that for the purposes of a suit under 0. 30, Code of Civil Procedure, the firm of Jagatsons International Corporation is a legal entity separate and distinct from its partners, and no question of obtaining the consent of the Central Government to sue one of its partners under section 86 read with section 87 B of the Code of Civil Procedure to the institution of such a suit arises. Mr. Andley relied upon the observations of Das, J. in Dulichand Lakshminarayan vs The Commissioner of Income tax, Nagpur(1) that for the sake of convenience, 0. 30 of the Code of Civil Proce(lure permits a firm to sue or be sued in the firm name "as if it were a corporate body". Consistently with this legal fiction, R. 3 permits service of the summons on a partner or a person having control or management of the partnership business, R. 4 permits the institution and continuance of the suit in the firm name in spite of the death of a partner before the institution or during the pendency of the suit without joining the legal representatives of the deceased partner as a party to the suit, and R. 9 permits a suit between a firm and one or more of its partners and between firms having one or more common partners. But the legal fiction must Pot be carried too far. For some purposes the law has extended a limited personality to a firm, see Bhagangi Morarji Goculdas vs Alembic Chemicals Works Co.(2 ), but the firm is not a legal entity, see Purushottam Umedbhai &, Co. vs M/s. Manilal & Sons(3), Lindley on Partnership, 12th Edn., pp. 27 28. The persons who arc individually called partners arc collectively called a firm, and the name under which their business is carried on is called the firm name: see section 4 of ' the Indian partnership Act, 1932. Order 30, R. 1 of the Code of Civil Procedure enables two or more persons claiming or being liable as partners and carrying on business in India to sue or be sued in the name of the firm of which they were partners at the time of the accrual of the cause of action. Rule 1 shows that the individual partners sue or are sued in their collective firm name. Rule 2 provides that on disclosure of the names of the partners of the plaintiff firm, the suit proceeds as if they are named as plaintiffs in the plaint. Rule 6 provides that the persons sued in the firm name must appear individually in their own names. A suit by or in the name of a firm is thus really a suit by or in the name of all its partners, see Rodriguez vs Speyer Brothers (4), Purushottam Umedbai & Co. V. M/s Manilal &Sons (3) at pp. 991, 993, 995. So also a suit against the firm is really (1) ,162. (2) [1948] L.R. 75 I.A. 147. (3) ; ,994. (4) 425 a suit against all the partners of the firm. In Western National Bank of City of New York vs Perez, Triana & Co. (1), Lindley, L.J. said: "When a firm 's name is used, it is only a convenient method of denoting those persons who compose the, firm at the time when that name is used, and a plaintiff who sues partners in the name of their firm in truth sues them individually, just is much as if he had set out all their names". The decree passed in the suit. though in form against the firm, is in effect a decree against all the partners. In Lovell & Christmas vs Beauchamp(2) Lord Herschell, L. C. said: "Although the judgment may be pronounced against the firm in the firm 's name, it is in reality a judgment against all the persons who are in fact members of the firm; and it is because such a judgment exists that the right of execution follows". The firm name of Jagatsons International Corporation applies as much to the Maharaja of Sirmur as to the other partners. When respondent No. 1 sued the firm of Jagatsons International Corporation, it sued the Maharaja of Sirmnur and all the other partners as if the plaint had set out their names, and the decree passed in the suit is in reality a decree against all the partners of the firm including the Maharaja of Sirmur. Now, the Maharaja of Sirmur is the Ruler of a former Indian State, and section 86 read with section 87 B of the Code of Civil Procedure barred the institution of a suit against him except with the consent of the Central Government. No such consent was given for the institution of the suit against the Mabaraja of Sirmur. In the absence of the requisite consent of the Central Government, a suit, which is in reality, though not in form, a suit against the Maharaja of Sirmur, is barred by section 86 read with section 87 B. See Gaekwar Baroda State Railway vs Hafiz Habib Ul_Haq(3). Consequently, the suit so far as it was one against the Maharaja of Sirmur was incompetent and the decree against the firm so far as it is a decree against him personally was a nullity. The first contention of Mr. Mukherjee is. therefore, sound and should be accepted. But we think that the second contention of Mr. Mukherjee should be rejected. Beyond doubt, in a normal case where all the partners of a firm are capable of being sued and of being adjudged judgment debtors. a suit may be filed and a decree may be obtained against a firm under 0. 30 of the Code of Civil Procedure. and such a decree may be executed against the property of the partnership and. against all the partners by following the procedure of 0. 21, r., 50. of the Code of Civil Procedure, (1) (2) (3) [1938] L.R. 65 T. A. 182, 196. 426 But there may be abnormal cases where a suit is filed against a firm under the provisions of 0. 30, of the Code of Civil Procedure, and it is found that one of its partners cannot be sued or cannot be adjudged a judgment debtor. Thus, take the case of an infant who under the English law, can be a partner in a firm, but, though a partner, cannot contract debts by trading and cannot be adjudged to be a debtor in respect of such debts. In Lovell & Christmas vs Beauchamp(1), the House of Lords held that a creditor of a firm of which an infant was a partner could issue a writ against the firm in the firm 's name, and in such a suit judgment could be recovered against the defendant firm other than the infant partner, and if a judgment had been improperly signed against the firm simply, such a judgment could be suitably amended so as to make it a judgment against the firm other than the infant partner. The precise point decided in this case cannot arise in this country, because under our law, a minor may not be a partner in a firm, though he may be admitted to the benefits of the partnership. But the case shows that a creditor of a firm of which one of the partner 's cannot be adjudged to be a debtor, may institute a suit against a firm in the firm name under 0. 30 of the Code of Civil Procedure, and may in such a suit obtain a decree against the firm other than the partner who cannot be adjudged a debtor. Again, take a case where the creditor of a firm institutes a suit against a firm and one of its partners at the time of the accrual of the cause of action is dead at the time of the institution of the suit. The suit against the firm is really a suit against all the partners who were its partners at the time of the accrual of the cause of action. including the dead partner. Order 30, R. 4 of a Code of Civil Procedure enables the creditor to institute the suit against the firm in the firm name without joining the legal representative of the deceased partner. The suit is, therefore, competent, but no suit can be instituted nor can a decree be obtained against a dead person. The decree passed in such a suit will, therefore, bind the partnership and all the surviving partner s, but will not affect the separate property of the deceased partner. In Ellis vs Wadeson(2), Romer, L. J. observed: "Now consider the question of death. Suppose a partner dies before action brought, and an action is brought against the firm in the firm 's name. The dead man is not a party to the action, so, far as his private estate is concerned, for a dead man cannot be sued, though the legal personal representative of a dead man can be sued in a proper case. In that case the action would be an action solely against the. surviving partners. If the legal personal representatives of a deceased partner are not added expressly as defendants. (1) (2) [1899]1 Q.B. 714 at 718. 427 and the action is brought against the firm in the firm 's name, then judgment can only be obtained as against the surviving partners and be enforced against them and against the partnership assets". The above illustrations show that a suit may be brought under the provisions of 0. 30 of the Code of Civil Procedure against a firm of which a partner is not capable of being sued or being adjudged a debtor, and in such a suit a decree enforceable against the other partners and the partnership assets may be passed. Now, in the instant case, respondent No. 1 sued the firm of Jagatsons International Corporation under the provisions of 0. 30 of the Code of Civil Procedure. The assets of the firm as also all its partners jointly and severally are liable to satisfy the debts of the firm. Even the Maharaja of Sirmur is jointly and severally liable for the debts of the firm; only the institution of a suit against him without the consent of the Central Government is barred by section 86 read with section 87 B of the Code of Civil Procedure. As the suit was instituted without the requisite consent of the Central Government, no decree could be passed in the suit against the Maharaja of Sirmur. But the suit against the firm other than the Maharaja of Sirmur was competent, and a decree could be passed against the firm other than the Maharaja of Sirmur, and such a decree could be executed against the partnership property and against the other partners by following the procedure of 0. 21, r. 50 of the Code of Civil Procedure. It is true that respondent No. 1 obtained a decree against the firm of Jagatsons International Corporation simply, but the decree should be suitably amended so as to make it a decree against the firm of Jagatsons International Corporation other than the Maharaja of Sirmur, and the decree so read is a valid decree which may be executed against the partnership property and the other partners of the firm by recourse to the machinery of 0. 21, r. 50 of the Code of Civil Procedure. The application of respondent No. 1 under 0. 21, r. 50(2) for leave to execute the decree against the other partners is, therefore maintainable. The second contention of Mr. Mukherjee must, therefore, be rejected. The third contention of Mr. Mukherjee raises the question as to what defences may be raised by a respondent to an appli cation under 0. 21, r. 50(2) of the Code of Civil Procedure. The law on this point is now well settled. In Gambhir Mal Pandiya vs J. K. Jute Mills Co. Ltd., Kanpur(1), Hidayatullah, J. speaking on behalf of the Court observed: ". primarily the question to try would be whether the person against whom the decree is sought to be executed was a partner of the firm, when the cause of action accrued. but he may question the decree on the (1) ; 428 ground of collusion, fraud or the like but so as not to have the suit tried over again or to raise issues between himself and his other partners". The respondent to an application under 0. 21, r. 50(2) of the Code of Civil Procedure is also entitled to raise a plea of special protection under the law, and on this ground, the learned judge at pp. 205 206 of the Report distinguished the case of Chhattoo Lal Misser & Co. vs Naraindas Baijnath Prasad(1). We may add that the respondent may also defend the application on the ground that the decree sought to be executed against him is a nullity. Now, in the instant case, none of the appellant is entitled to any special protection from the institution of the suit under section 86 read with section 87 B, Code of Civil Procedure. The Maharaja of Sirmur was entitled to this special protection, but he was not a party to the application under 0. 21, r. 50(2) of the Code of Civil Procedure. Nor is the decree against the firm other than the Maharaja of Sirmur a nullity. The affidavit filed on behalf of the appellants does not sufficiently raise a plea that the decree was the result of any collusion, fraud or the like. The affidavit incorrectly assumes that the decree passed on admission of the appearing partner, was a consent decree. Allegations of dishonesty and fraudulent concealment of the fact of the institution of the suit are made against Shib Chander Kumar, one of the partners of the firm, but no allegation of fraud or collusion is made against respondent No. 1. It was not alleged that respondent No. 1 was a party to any fraud or collusion or that it obtained the decree by fraud or collusion. The appellants alleged that their partners, Jagat Pershad and Shib Chander Kumar, had entered into the agreement dated September 26, 1956, and had utilised the moneys received under it in fraud of the appellants and without their authority, but the appellants are not entitled to raise these pleas in the application under 0. 21 r. 50(2) of the Code of Civil Procedure. The appellants were admittedly partners of the firm of Jagatsons International Corporation at the time when the cause of action accrued. In the absence of any plea questioning the decree on the ground of collusion, fraud or the like, respondent No. 1 is entitled to an order under 0. 21, r. 50(2) of the Code of Civil Procedure giving it leave to execute the decree against the appellants as partners in the firm. The third contention of Mr. Mukherjee must, therefore, be rejected. In the result, the appeal is dismissed with costs. Appeal dismissed. (1) Cal, 704.

IN-Abs

Under Order 30 of the Code of Civil Procedure the respondent No. 1 a firm sued another firm of which the appellants and a Ruler of a former Indian State were partners. The consent of the Central Government to the institution of the suit under section 87 B of the Code of Civil Procedure was not obtained. The firm admitted the liability and the Court passed a decree and directed that the decretal amount would be payable in certain instalments. On the firm 's default in paying the instalments an application was filed under Order 21 Rule 50(2) of the Code of Civil Procedure for leave to execute the decree against the appellants, excepting the Ruler as partners of the firm. The Court allowed the application. The appellants ' appeal was dismissed by the High Court. On appeal by certificate; HELD: (i) The suit so far as it was one against the Ruler was incompetent and the decree against the firm so far as it was a decree against him personally was a nullity. In the absence of the requisite consent of the Central Government a suit against the Ruler was barred by section 87 read with section 87 B. [425 F, G]. (ii) The application of respondent No. 1 under Order 21 Rule 50(2) for leave to execute the decree against the other partners was maintainable. [427 G]. A suit may be brought under the provisions of 0. 30 of the Code against a firm of which a partner is not capable of being sued or being adjudged a debtor, and in such a suit a decree enforceable against the other partner and the partnership assets may be passed. [427 B]. Case law referred to. (iii) In an application under 0. 21 Rule 50(2) the judgmentdebtor could question the decree on the ground of collusion, fraud or the like but so as not to have the suit tried over again or to raise issues between himself and his other partners. [428 A]. The Judgment debtor was also entitled to raise a plea of special protection under the law; and might also defend the application on the ground that the decree sought to be executed against him is a nullity. But in the instant case none of the appellants was entitled to any special protection; nor was it alleged that respondent No. 1 was a party to any fraud or collusion or that it obtained the decree by fraud or collusion. [428 B, C]. Gambhir Mal Pandiya vs J. K, Jute Mills Co. Ltd., Kanpur relied upon. 422

Appeal No. 807 of 1963. Appeal from the judgment and order dated September 4, 1961 of the Calcutta High Court Income tax Reference No. 85 of 1956. C.K. Daphtary, Attorney General, R. Ganapathy Iyer and R. N. Sachthey, for the appellant. A. V. Viswanatha Sastri and section C. Muzumdar, for the respondent. The Judgment of the Court was delivered by Subba Rao, J. This appeal by certificate raises the question of the construction of the provisions of section 23A of the Indian Incometax Act, 1922, hereinafter called the Act, before it was amended by the Finance Act, 1955. The relevant and undisputed facts may be briefly stated. Messrs. Gungadhar Banerjee & Co. (Private) Ltd., the respondent herein, is a private limited company. At the General Body Meeting of the Company held on December 6, 1948, the Directors declared a dividend at the rate of 5 1/2 per cent. per share. The said distribution of dividends related to the accounting year 1947 48 which ended on April 13, 1948. According to the balance sheet of the Company for that year the net profit for the said year was Rs. 1,28,112/7/5. The taxation reserve was Rs. 56,000. The profit 441 left was Rs. 72,000. The Directors declared a dividend at the rate of 51 per cent. per share thus making a total distribution of Rs. 44,000. On that basis the profit that was available for further distribution was Rs. 28,000. Though under the balance sheet the estimated tax was Rs. 66,000, the tax assessed for the year was Rs. 79,400. If the difference between the tax assessed and the estimated tax was also deducted from the profits, there would only be a sum of Rs. 4,000 that would remain as undistributed profits. The Income tax Officer assessed the total income of the assessee for the year 1948 49 at Rs. 2,66,766. After deducting the tax payable under the two heads, namely, I.T. of Rs. 81,517/13/0 and C.T. of Rs. 33,345/12/0, he held that a sum of Rs. 1,51,902/7/0 was available for distribution to the shareholders as dividends. As the amount distributed by the Company was below 60 per cent. of the profits available for distribution, the Income tax Officer, with the previous approval of the Inspecting Assistant Commissioner of Income tax, passed an order under section 23 A of the Act directing that the amount of Rs 1,07,902 (i.e., Rs. 1,51,902 minus Rs. 44,000= Rs. 1,07,902) shall be deemed to have been distributed as dividends as on the date of the annual general meeting of the Company. He found that, having regard to the profits earned in the earlier years and the capital and taxation reserves, payment of larger dividends would not be unreasonable. The assessee preferred an appeal to the Appellate Assistant Commissioner against the order made by the Income tax Officer under section 23A of the Act. By the time the appeal came to be disposed of, in an appeal against the order of assessment the assessed income was reduced by a sum of Rs. 80,926. Notwithstanding the said deduction, as the amount of Rs. 44,000 distributed by the Company was less than 60 per cent. of the balance of Rs. 1,64,440 arrived at on the basis of the revised calculation, the Appellate Assistant Commissioner held that an action under section 23A of the Act was justified. He further held that the assesee incurred no losses in the previous years, that in almost all the past assessments the assessee showed substantial profits, that the profits disclosed in the year of account were not small and that, therefore, the direction to pay a higher dividend was not unreasonable. On a further appeal, the Income tax Appellate Tribunal held that the amount of profits should be judged only from the balancesheet and that judged by the figures given thereunder a dividend to the extent of Rs. 64,000 being 60 per cent. of the assessed profits less income tax. could be distributed and that such distribution was not unreasonable. The Tribunal referred the following question under section 66(1) of the Act for the decision of the High Court of Calcutta: "Whether on the facts and in the circumstances of the case any larger dividend than that declared by the company could reasonably be distributed within the meaning 442 of Section 23A of the Indian Income tax Act and the application of Section 23A of the Indian Income tax Act was in accordance with law." The High Court held that the Tribunal went wrong in taking into consideration the past profits instead of the past losses, the taxation reserves without considering the past liabilities for taxation, and the profits for the year in question disclosed in the balance sheet, ignoring the actual tax assessed for that year. It came to the conclusion that, having regard to the smallness of the profits, the order of the Income tax Officer was not justified. In the result, it answered both parts of the question referred to it in the negative. Hence the appeal. Learned Attorney General, appearing for the Revenue, con tended that the balance sheet of a company on the basis of which dividends were declared was final and the profits disclosed thereunder would be the correct basis for the Income tax Officer acting under section 23A of the Act; and, as the balance sheet of the company for the relevant year showed a sum of Rs. 1,05,950 as "capital reserve brought forward", a sum of Rs. 5,73,161 as taxation reserve, and a sum of Rs. 56,000 as estimated tax, the Income tax Officer rightly held that the financial condition of the Company was sufficiently sound to warrant an order under section 23A of the Act. Alternatively he contended that if the respondent could be permitted to go behind the balance sheet to ascertain the real profit, the Department should also be likewise allowed to go behind the balance sheet to show that the commercial profit was larger and the reserves were in excess of the past liabilities and that in that event to remand the case for ascertaining the true state of facts. Mr. A.V. Viswanatha Sastri, appearing for the assessee Com pany, contended that the burden lies on the Revenue to establish that the dividend declared was not a reasonable one and that in the present case it had not discharged that burden. Idle further argued that for the purpose of "testing the smallness of the profit" the Income tax Officer had to take into consideration not the assessable Income but the commercial profit of the Company and that in the present case, having regard to the commercial profit, a declaration of a higher dividend would be unreasonable. He pleaded that, should this Court hold that the Income tax Officer could establish that the reserves were more than the liabilities, the assessee should also be permitted to prove what were its real, commercial profits and that the reserves were far less than the demands. The contentions of learned counsel turn upon the provisions of section 23A of the Act, before it was amended by the Finance Act of 1955. The material part of that section reads: "(1) 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 443 sixth month after its accounts for that 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 incometax 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 dividend 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 un distributed 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. " The section is in three parts: the first part defines the scope of the jurisdiction of the Income tax Officer to act under section 23A of the Act; the second part provides for the exercise of the jurisdiction in the manner prescribed thereunder , and the third part provides for the assessment of the statutory dividends in the hands of the share. holders. This section was introduced to prevent exploitation of juristic personality of a private company by the members thereof for the purpose of evading higher taxation. To act under this, section the Income tax Officer has to be satisfied that the dividends distributed by the Company during the prescribed period are loss than the statutory percentage, i.e., 60 per cent., of the assessable income of the Company of the previous year less the amount of Income tax and super tax payable by the Company in respect thereof. Unless there is a deficiency in the statutory percentage, the Income tax Officer has no jurisdiction to take further action thereunder. If that condition is complied with, he shall make an order declaring that the undistributed portion of the assessable income less the said taxes shall be deemed to have been distributed as dividends amongst the shareholders. But before doing so, a duty is cast on him to satisfy himself that, having regard to the losses incurred by the company in earlier years or "the smallness of the profit made," the payment of a dividend or a larger dividend than that declared would be reasonable. The argument mainly centered on this part of the section. Would the satisfaction of the Income tax Officer depend only on the two circumstances, namely, losses and smallness of profit? Can he take into consideration other relevant circumstances? What does the expression "profit" mean? Does it mean only the assessable income or does it mean commercial or 444 accounting profits? If the scope of the section is properly appreciated the answer to the said questions would be apparent. The Incometax Officer, acting under this section, is not assessing any income to tax: that will be assessed in the hands of the shareholders. He only does what the directors should have done. He puts himself in the place of the directors. Though the object of the section is to pre vent evasion of tax, the provision must be worked not from the standpoint of the tax collector but from that of a businessman. The yardstick is that of a prudent businessman. The reasonableness or the unreasonableness of the amount distributed as dividends is judged by business considerations, such as the previous losses, the present profits, the availability of surplus money and the reasonable requirements of the future and similar others. He must take an overall picture of the financial position of the business. It is neither possible nor advisable to lay down any decisive tests for the guidance of the Income tax Officer. It depends upon the facts of each case. The only guidance is his capacity to put himself in the position of a prudent businessman or the director of a company and his sympathetic and objective approach to the difficult problem that arises in each case. We find it difficult to accept the argument that the Income tax Officer cannot take into consideration any circumstances other than losses and smallness of profits. This argument ignores the expression "having regard to" that precedes the said words. On the interpretation of the words "having regard to" in section 23A of the Act, the decision of a Division Bench of the Bombay High Court, consisting of Chagla C. J., and Tendolkar J., in Sir Kasturchand Ltd. vs Commissioner of Income tax, Bombay City(1) was relied upon by the appellant. Chagla C.J., speaking for the Court, held in that case that "the reasonableness or unreasonableness of the payment of a dividend or a larger dividend has to be judged only with reference to the two facts mentioned in the section, viz., losses incurred by the company in earlier years and the smallness of the profit." To put the contrary construction, the learned Chief Justice said, "would be to import into it words which the Legislature did not think fit to insert in that section and to expand the ambit of the discretion exercised by the Income tax Officer." But the learned Chief of Justice did not expressly consider the scope of the expression "having regard to" found in the section. The Judicial Committee in Commissioner of Income tax vs Williamson Diamond Ltd.(2) had to consider the scope of section 21(1) of the Tanganyika Income tax (Consolidation) Ordinance, 27 of 1950, which was pari materia with section 23A of the Act. Adverting to the argument based upon the words "having regard to", their Lordships observed: "The form of words used no doubt lends itself to the suggestion that regard should, be paid only to the two matters mentioned, but it appears to their Lordships that it is (1) (2) 445 impossible to arrive at a conclusion as to reasonableness by considering the two matters mentioned isolated from other relevant factors. Moreover, the statute does not say "having regard only" to losses previously incurred by the company and to the smallness of the profits made. No answer, which can be said to be in any measure adequate, can be given to the question of "unreasonableness" by considering these two matters alone. Their Lordships are of the opinion that the statute by the words used, while making sure that "losses and smallness of profits" are never lost sight of, requires all matters relevant to the question of unreasonableness to be considered. Capital losses, if established, would be one of them. " With great respect, we entirely agree with this view. The contrary view unduly restricts the discretion of the Income tax Officer and compels him to hold a particular dividend reasonable though in fact it may be unreasonable. The expression "smallness of profit" came under the judicial scrutiny of this Court in Commissioner of Income tax, Bombay City vs Bipinchandra Maganlal & Co. Ltd.(1) Therein, Shah, J., speaking for the Court observed thus: "Smallness of the profit in section 23A has to be adjudged in the light of commercial principles and not in the light of total receipts, actual or fictional. This view appears to have been taken by the High Courts in India without any dissentient opinion. " The learned, Judge laid down the following test: "Whether it would be unreasonable to distribute a larger dividend is to be judged in the light of the profits of the year in question. " If the assessable income was the test and if the commercial profits are small, the learned Judge pointed out, the company would have to fall back either upon its reserves or upon its capital which in law it could not do. This decision is binding on us and no further citation in this regard is called for. These two concepts, "accounting profits" and "assessable profits", are distinct. In arriving at the assessable profits the Income tax Officer may disallow many expenses actually incurred by the assessee; and in computing his income, he may include many items on notional basis. But the commercial or accounting profits are the actual profits earned by an assessee calculated on commercial principles. Therefore, the words "smallness of profit" in the section refer to actual accounting profits in comparison with the assessable profits of the year. Another incidental question is whether for the purpose of ascertaining the net commercial profits the tax estimated or the tax actually assessed shall be deducted. In a case where an Income tax Officer takes action under section 23A of the Act before the tax for the relevant period is assessed, only the estimated tax can be deduct (1) , 296, p(N)4SCI 446 ed but, there is no reason why, when the tax had already been assessed before he takes action under this section, the estimated tax and not the real tax shall be deducted therefrom. In this view, in the present case to ascertain the commercial profits what should be deducted is not the tax shown in the balance sheet but the actual tax assessed, on the income of the Company. Another question raised is whether the balance sheet is final and both the parties are precluded from questioning its correctness in any respect. There is no provision in the Income tax Act which makes the balance sheet final for the purpose of section 23A of the Act or even for the assessment. It no doubt affords a prima facie proof of the financial position of the company on the date when the dividend was declared. But nothing prevents the parties in a suitable case to establish by cogent evidence that certain items were, either by mistake or by design, inflated or deflated or that there were some omissions. It does not also preclude the assessee from proving that the estimate in regard to certain items has turned out to be wrong and placing the actual figures before the Income tax Officer. But in this case no attempt was made before the Tribunal to canvass the correctness of the figures either on the debit side or on the credit side and we do not think we are justified to give another opportunity to either of the parties in this regard. Before the Tribunal there was no dispute that the actual tax assessed for the relevant year was much higher than the estimated tax shown in the balance sheet. Section 23A of the Act is in the nature of a penal provision. In the circumstances mentioned therein the entire undistributed portion of the assessable income of the Company is deemed to be distributed as dividends. Therefore, the Revenue has strictly to comply with the conditions laid down thereunder. The burden, therefore, lies upon the Revenue to prove that the conditions laid down thereunder were satisfied before the order was made: see Thomas Fattorini (Lancashire) Ltd. vs Inland Revenue Commissioners(1). In the present case the Revenue failed to discharge the said burden: indeed, the facts established stamp the order of the Income tax Officer as unreasonable. The assessment orders passed by the Income tax Officer are not before the Court. The balance sheet shows a net profit of Rs. 1,28,112/7/5 whereas the Income tax Officer has computed the assessable income at Rs. 2,66,766, which was later reduced in appeal by Rs. 80,925. There is no evidence on the record that the real commercial profits were artificially reduced in the balance. sheet. Nor is there evidence to show what part of the income assessed represents commercial profits, and what part the notional income. In the circumstances it must be assumed that the amount mentioned in the balance sheet correctly represented the commercial profits. (1) L.R. [1942] A.C.643. 447 From the figures already extracted at an earlier stage it is manifest that the net commercial profit was barely Rs. 4,000 and it is not possible to hold that it was not unreasonable for the Income tax Officer to make an order to the effect that the additional sum of Rs. 64,000 should be deemed, to have been distributed as dividends amongst the shareholders. In the result we hold that the order of the High Court is correct and dismiss the appeal with costs. Appeal dismissed.

IN-Abs

As the dividend declared to be distributed by the respondentcompany at its General Body Meeting was below 60 per cent of the profits available for distribution, the Income Tax Officer, with the previous approval of the Inspecting Assistant Commissioner, passed an order under section 23 A of the Income Tax Act directing that a certain higher amount shall be deemed to have been distributed as dividends as on the date of the annual general meeting of the Company. He found that, having regard to the profits earned in the earlier years and the capital and taxation reserves, payment of larger dividend would not be unreasonable. This was affirmed, on assessees appeals by the Appellate Assistant Commissioner, and the Income tax Appellate Tribunal. The Tribunal referred the question to the High Court under sec. 66(1) of the Act, which concluded that having regard to the smallness of the profits, the order of the Income tax Officer was not justified and answered the question in the assessee 's favour. In appeal by certificate. HELD: Section 23A of the Income tax Act is in the nature of a penal provision. In the circumstances mentioned therein, the entire undistributed portion of the assessable income of the company is deemed to be distributed as dividends. Therefore, the Revenue has strictly to comply with the conditions laid down thereunder. The burden therefore, was upon the Revenue to prove that the conditions laid down thereunder were satisfied, before the order was made. Thomas Fattorini (Lancashire) Ltd. vs Inland Revenue Commis sion applied. In the present case the Revenue failed to discharge the said burden: indeed, the facts established stamp the order of the Income tax Officer as unreasonable. [446F, G] Though the object of the section is to prevent evasion of tax, the provision must be worked not from the stand Point of the tax collector but from that of a businessman. The reasonableness or the unreasonableness of the amount distributed as dividends is judged by business considerations, such as the previous losses, the present profits, the availability of surplus money and the reasonable requirements of the future and similar others. It is neither possible nor advisable to lay down any decisive tests for the guidance of the Income tax Officer. It depends upon the facts of each case. The only guidance is his capacity to put himself in the position of a prudent businessman. It is difficult to say that the Income tax Officer cannot take into consideration any circumstances other than losses and smallness of profits. This argument ignores the expression "having regard to" that precedes the said words in section 23A of the Act. [444B E] 440 Commissioner of Income tax vs Williamson Diamond Ltd. L.R. , applied. Sir Kasturchand Ltd. vs Commissioner of Income tax, Bombay City, , referred to. The words "smallness of profit" in section 23A of the Act refer to actual accounting profits in comparison with the assessable profits of the year. The two concepts "accounting profits" and "assessable profits" are distinct. In arriving at the assessable profits the Income tax Officer may disallow many expenses actually incurred by the assessee; and in computing his income he may include many items on notional basis. But the commercial or accounting profits are the actual profits earned by an assessee calculated on commercial principles. [445F H.] Commissioner of Income tax, Bombay City vs Bipinchandra Maganlal and Co. Ltd. (1961)41 I.T.R. 296, followed. In a case where an Income tax Officer takes action under section 23A of the Act before the tax for the relevant period is assessed, only the estimated tax can be deducted; but, there is no reason why, when the tax had already been assessed before he takes action under this section. the estimated tax and not the real tax shall be deducted therefrom. [445H 446B] There is no provision in the Income tax Act which makes the Balance Sheet final for the purpose of section 23A of the Act or even for the assessment. It no doubt affords a prima facie proof of the financial position of the company on the date when the dividend was declared. But nothing prevents the parties in a suitable case to establish by cogent evidence that certain items were, either by mistake or by design, inflated or deflated or that there were some omissions. [446B D]

iminal Appeals Nos. 198 and 199 of 1963. Appeals from the judgment and order dated February 4, 1963, of the Bombay High Court in Criminal Appeals Nos. 779 & 780 of 1962. section C. Patwardhan, B. R. G. K. Achar for R. H. Dheber, for the appellant. Avadh Behari, for respondent. The Judgment of the Court was delivered by Sikri, J. These are two appeals by certificate granted by the High Court of Judicature at Bombay against its judgment dated February 4, 1963, in Criminal Appeals Nos. 779 and 780 of 1962. By this judgment the High Court affirmed the order of (N)4SCI 3 462 acquittal passed against the respondent by the Judicial Magistrate, A First Class, Vadagaon (Mawal). The relevant facts are as follows: The Labour Inspector (Central), Bombay 1, appointed under the (XI of 1948) (hereinafter called the Act) by the Central Government filed two complaints in the Court of the Judicial Magistrate alleging that the respondent had contravened certain provisions of the Minimum Wages (Central) Rules, 1950. It was alleged that the respondent was doing quarrying operation work in quarry survey Nos. 23(1) Kusegaon village near Lonavala, and while carrying on this quarrying operation work he, failed to observe certain provisions in the Rules. The respondent submitted a written statement admitting the facts but he contended, inter alia, that the Inspector was not authorised to file the complaint and it was only an inspector appointed by the Maharashtra State who was competent to file a complaint. The Judicial Magistrate, treating this as a preliminary objection, came to the conclusion that the Inspector was not entitled to file the complaint. According to him, the word "mine" in sub cl. (i) of section 2(b) of the Act does not include a stone quarry and, therefore, the appropriate Government was the State Government and not the Central Government. There upon he acquitted the accused of the offence under section 22A, read with section 18, of the Act and for contravening certain rules of the Minimum Wages (Central) Rules, 1950. The State then filed two appeals before the High Court. The High Court also came to the conclusion that the Inspector was not competent to file the complaints but the reasoning of the High Court was different. It was of the opinion that "a stone quarry can fall within the category of a mine as defined in the Mines Act of 1952 or the Mines and Minerals (Regulation and Development) ,Act of 1957. " But even so, according to it, "the Schedule does not mention either a mine or a stone quarry and item No. 8, viz., Employment in stone breaking and stone crushing, cannot, therefore, be said to be an employment in respect of a mine whether in its broadest sense so as to include a stone quarry or in narrow sense as given in the Oxford English Dictionary." The High Court further held that 'unless, therefore, the Parliament amends item No. 8 of the Schedule so to include the operation of stone breaking and stone crushing in a stone quarry or in all mines including a stone quarry, it is not possible to hold that the appropriate Government would be the Central Government, merely on the basis that, in its widest connotation, the words 'stone quarry ' may fall within the ambit of the word 'mine '. " Section 2(b) of the Act defines "appropriate government" as follows: "2(b) "appropriate government" means (i) in relation to any scheduled employment carried on 463 by or under the authority of the Central Government or a railway administration or in relation to a mine, oilfield or major port, or any corporation established by a Central Act, the Central Government, and (ii) in relation to any other scheduled employment, the State Government. " Sub clause (g) defines 'scheduled employment" to mean in em ployment specified in the Schedule, or any process or branch of work forming part of such employment. The Schedule is divided into two parts, and Part 1 contains entry 8 Employment in stone breaking or stone crushing. Section 22 prescribes the penalties for certain offenses and section 22A provides that "any employer who contravenes any. provisions of this Act or of any rule or order made thereunder shall, if no other penalty is provided for such contravention by this Act, be punishable with fine which may extend to five hundred rupees. " Section 22B deals with the cognizance of offences and provides that "no Court shall take cognizance of a complaint against any person for an offence. under clause (b) of section 22 or under section 22A except on a complaint made by, or with the sanction of, an Inspector. " The first question which arises is whether the quarry which the respondent is alleged to be working and in which the employees are alleged to be carrying on the operation of stone breaking or stone crushing is a mine, within section 2(b). Learned counsel for the appellant has drawn our attention to the definition of the word mine" in the (XXXV of 1952), and the (LXVII of 1957). Section 2(j) of the Mine Act defines 'mine ', and the relevant part of the definition is as under: "Mine" means any excavation where any operation for the purpose of searching for or obtaining minerals has been or is being carried on, and includes (iv) all open cast workings. " The word 'minerals ' is defined to mean all substances which can be obtained from the earth by mining, digging, drilling dredging, hydraulicing, quarrying or by any other operation and includes mineral oils (which in turn include natural gas and petroleum). he learned counsel says that a quarry is a mine within this definition. In the , the expressions 'mine ' and 'owner ' have the meanings assigned to them in the . The learned counsel contends that this meaning should be read into the . 464 The learned counsel for the respondents relies on the observations of this Court in Pandit Ram Narain vs The State of Uttar Pradesh(1) that "it is no sound principle of construction to interpret expressions used in one Act with reference to their use in another Act. The meanings of words and expressions used in an Act must take their colour from the context in which they appear. " The learned counsel further contends, relying on a number of English decisions, that in its primary signification the word 'mine ' means underground excavations or underground workings. He relies in particular on the speech of Lord Macnaughten in Lord Provost and Magistrates of Glasgow vs Farie (2) . The House of Lords was concerned in that case with the interpretation of section 18 of the Waterworks Clauses Act, 1847, which was in the following terms: "The undertakers shall not be entitled to any mines of coal, ironstone, state, or other minerals under any land purchased by them, except only such parts thereof as shall be necessary to be dug or carried away or used in the construction of the water works unless the same shall have been expressly purchased, and all such mines, excepting as aforesaid, shall be deemed to be excepted out of the conveyance of such lands, unless they shall have been expressly named therein and conveyed thereby. " The appellants in that case had purchased from the respondent a parcel of land for the purpose of erecting waterworks and the conveyance contained a reservation of the "whole coal and other minerals in the land in terms of the Waterworks Clauses Act, 1847. " Under the land was a seam of valuable brick clay. The respondent worked this clay in the adjoining land, and having reached the appellants ' boundary, claimed the right to work out the clay under the land purchased by the appellants. The House of Lords held that common clay, forming the surface or subsoil of land, was not included in the reservation in the Act, and that the appellants were entitled to an interdict restraining the respondent from working the clay under the land purchased by them. It is true Lord Macnaughten first construed the word 'mine ' in this enactment to mean under ground excavations or underground workings, and then proceeded to construe the section. But Lord Watson was of the opinion that the word 'mine ' did not necessarily mean underground excavations. He said that "it does not occur to me that an open excavation of auriferous quartz would be generally described as a gold quarry; I think most people would call it a cold mine. " Later he observed that "the word 'quarry ' is, no doubt, inapplicable to underground excavations but the word 'milling ' may without impropriety be used to denote some quarries. Dr. Johnson defines a quarry to be a stone mine". He arrived at the conclusion that "the word 'mine ' must be taken to signify all (1) ; at 673. (2) 13 A.C. 657. 465 excavations by which the excepted minerals may be legitimately worked and got. " In our opinion, as stated in Halsbury 's Laws of England, Third Edition, volume 26, p. 317, the word 'mine ' is not a definite term, but is one susceptible of limitation or expansion according to the intention with which it is used. In section 2(b) of the Act, we have to see the context in which the word has been used. What the legislature is purporting to do is to demarcate the jurisdiction of the State Governments and the Central Government in respect of minimum wages to be paid to persons employed in the employments enumerated in the Schedule. Entry 35 in List 1 of Schedule VII of the Government of India Act, 1935, was "regulation of tabour and safety in mines and oilfields. " Entry 36 read "regulation of mines and oilfields and mineral development to the extent to which such regulation and development under Dominion control is declared by Dominion law to be expedient in the public interest. " It is not seriously contested that in Entries 35 and 36 the word ,mines ' would include quarries. The Mines Act, 1923 (IV of 1923) which was the existing law when the Government of India Act came into force, made provisions regarding health and safety in mines and regulated hours and limitations of employment in the mines. The word 'mine ' had been defined to mean any excava tion where any operation for the purpose of searching for or obtaining minerals has been or is being carried on, and includes all works, machinery, tramways and sidings, whether above or below ground, in or adjacent to or belonging to a mine, provided that it shall not include any part of such premises on which a manufacturing process is being carried on unless such process is a process for coke making or the dressing of minerals. Therefore, if we examine the definition of 'appropriate government ' in section 2(b) in the context and in the background of the Government of India Act and the existing law, it seems to us that the Central Legislature must have intended to include quarries in the word 'mine ', otherwise it would be rather incongruous that some matters such as health and saftey, hours and employment in quarries should be regulated by the Central Government and minimum wages by the State Governments. Further. there is no indication whatsoever in the Act that the word 'mine ' has the narrower meaning suggested by the learned counsel for the respondent. If the word 'mine ' is held to include a quarry, the next question that arises is whether stone breaking or stone crushing in a quarry is within the Schedule. While interpreting Entry 8 in the Schedule, this Court observed in Madliva Pradesh Mineral Industry Association vs The Regional Labour Commissioner, Jabalpur(1) as follows: "When we speak of stone breaking or stone crushing normally we refer to stone in the sense of "piece of rock" (1) [1960] 3S.C.R. 476. 466 and that would exclude maganese. Employment in stone breaking or stone crushing in this sense would refer to quarry operations. " This Court thus read Entry 8 to refer to quarry operations, and we hold that stone breaking or stone crushing in a quarry is within the Schedule. Thus reading item 8 of the Schedule and section 2(b) of the Act together, it seems to us that the definition demarcates the jurisdiction of the Central Government and the State Governments in this way: If the employment in stone breaking or stone crushing is in a quarry then it is within the jurisdiction of the Central Government; if the employment in stone breaking or stone crushing is not in a quarry, it is the State Government that will have jurisdiction. We are unable to appreciate the observations of the High Court that the operation of stone breaking and stone crushing in a stone quarry does not fall within item 8 of the Schedule and that it is necessary that Parliament should amend item 8 of the Schedule. In the result, we hold that the Inspector was competent to file the complaints and the Magistrate and the High Court should not have acquitted the respondent on the ground of his being incompetent to file the complaints. The appeals are allowed and the judgment of the High Court and the order of the Magistrate are reversed and the cases remitted to the Magistrate to proceed with the complaints in accordance with law. Appeals allowed.

IN-Abs

The Labour Inspector, appointed under the filed two complaints before the Judicial Magistrate alleging that the respondent, doing quarrying operation work, had contravened certain provisions of the Minimum Wages (Control) Rules, 1950. The respondent, inter alia, submitted that the Inspector was not authorised to file the complaint, and only an Inspector appointed by the State Government was competent to file the complaint. The Judicial Magistrate held that the word "mine" in sub cl. (1) of section 2(b) of the Act, does not include a stone quarry and therefore, the appropriate government was the State Government and not the Central Government. The appellants ' appeals were dismissed by the High Court. In appeal to this Court. HELD: An examination of the definition of "appropriate Government" in section 2(b) of the in the context and background of Government of India Act, 1935, and the Mines Act, 1923, shows that the word "mine" in section 2(b)(i) includes quarries. Also stone breaking or stone crushing in a quarry is within Entry 8 in Part 1 of the Schedule of the Act. Since the employment in stone breaking or stone crushing is in a quarry, it is within the jurisdiction of the Central Government, because it is a scheduled employment in a mine Within the meaning of section 2(b)(i). Therefore, the Inspector appointed under the Act was competent to file the complaints. [465F; 466A B, D] Madhya Pradesh Mineral Industry Association vs The Regional Labour Commissioner, Jabalpur, [19601 3 S.C.R. 476, applied.

Appeals Nos. 600 and 679 of 1964. Appeals from the judgment and decree dated February 20, 1962 of the Bombay High Court (Nagpur Bench) at Nagpur in Appeals Nos. 196 and 195 of 1956 from original decree. S.G. Patwardhan, section Murthy and B. P. Maheshwari, for the appellant (in C.A. No. 600/64). S.N. Kherdekar and A. G. Ratnaparkhi, for the appellant (in, C.A. No. 679/64). A.V. Viswanatha Sastri and M. section Gupta, for the respondent (in C.A. No. 600/64). A.V. Viswanatha Sastri and M. section Gupta for U. P. Singh, for the respondent (in C.A. No. 679/64). 502 The Judgment of Subba Rao, Mudholkar and Ramaswami, JJ. was delivered by Mudholkar J. The dissenting Opinion of Raghubar Dayal and Bachawat, JJ. was delivered by Dayal, J. Mudholkar, J. This judgment will also govern Civil Appeal No. 679 of 1964 since common questions of law arise in both the 'appeals. For illustrating the points which arise for consideration in ,these appeals we will set out briefly the facts pertaining to C.A. 600 of 1964. The appellant (hereinafter referred to as the Company) is a private limited company having its registered office at Calcutta and a branch office at Dhamangaon which was formerly in the Province ,of Central Provinces & Berar but is now in the State of Maharashtra. The company owns a ginning factory at Dhamangaon. The Notified Area Committee of that place imposed, under section 66(1)(b) of the Central Provinces Municipalities Act, 1922 (hereinafter referred to as the Act) as applied to Berar, a tax at the rate of one anna per bojha of ginned cotton and one anna per bale of pressed cotton as from Dec. 22, 1936 on which date a notification sanctioning the imposition under section 241(1) of the Act was published in the official Gazette by order of the Government of the Province. The Notification in question runs as follows: "No. 7911 3242 M VII: In exercise of the powers conferred by clause (a) of sub sec. (1) of sec. 241 of the Central Provinces Municipalities Act, 1922 (C.P. Act 11 of 1922) as applied to Berar, the Local Government is pleased to confirm the following rule made by the Notified Area Committee, Dhamangaon, in the Amravati district, under clause (b) of sub section (1) of sec. 6(1) of the said Act, for imposing a tax on persons carrying on the trade of ginning and pressing cotton by means of steam or mechanical process within its limits: Rule The committee shall levy from all persons carrying on within its limits the trade of ginning or pressing cotton into bales by means of steam or mechanical process a tax at the following rates from the date of the publication of this notifiCation in the Central Provinces Gazette: (a) For each bojha of 392 lbs. ginned 1 anna. (b) For each bale of 392 lbs. pressed 1 anna. By order of the Government, (Ministry of Local Self Government), Sd/ R. N. Bannerjee, Secretary to Government, Central Provinces. 503 The Notified Area Committee of Dhamangaon decided to raise the rate from 1 anna per bojha and 1 anna per bale to four annas per bojha and four annas per bale. Soon after this decision it caused the following notification to be published in the official Gazette on April 10, 1941. The Notification runs thus: "The following amendment to the rule for imposition of the tax ' by the o Municipal Committee, Dhamangaon, in the Amraoti district, under cl. (b) of sub sec. (1) of sec. 66 of the Central Provinces Municipalities Act, 1922 (11 of 1922) as ap plied to Berar, on persons carrying on the trade of ginning and pressing cotton by means of steam or mechanical process within its limits, published in the Central Provinces and Berar Gazette Notification No. 7911 3242 M/Vlll, dated the 22nd Dec. 1936, is published for the information of the public, the same having been previously published as required by subsection (3) of sec. 68 of that Act, and in exercise of the powers conferred by sub sec. (7) of sec. 68 of that Act, the municipal committee directs that the said amendments shall come into operation on the 1st August, 1941: Amendment For the figure and the word 'anna ' occurring in clauses (a) and (b) of the rule, the figure and word '4 annas ' shall be substituted. Sd/ B. section Mundhada, President, Municipal Committee No. 2418 M XIII" Certain rules were framed by the Government for the assess ment and collection of tax which were also published on Dec. 22, 1936. These rules were, however, amended by the Local Government and the amended rules were published in the Gazette on July 30, 1941. It is these latter rules which are now in force. Consequent upon the amendment of the rules the appellants in the two appeals and the proprietors of the ginning factory in Dhamangaon have been paying these taxes at the new rate of 4 annas per bojha and 4 annas per bale. It may be mentioned that in Dec. 1951 the Municipal Com mittee. Dhamangaon, which by then had replaced the Notified Area Committee proposed to raise the tax from four annas to one rupee per bojha and per bale but eventually dropped the proposal. Apparently being alarmed at the abortive attempt of the Municipal committee to raise the tax further, the appellant and other factory owners in Dhamangaon instituted suits for recovery from the Municipal Committee of excess tax paid by them within 3 years of the dates of the respective suits. The Company claimed refund of Rs. 12,511 6 6 on the ground that it was recovered from it illegally 504 by the Municipal Committee and paid by it under a mistake. The amount has been computed by them thus: Rs. 6,905 14 6 recovered from them in respect of ginned cotton between 29 3 49 and some date in the year 1952 plus Rs. 8,048 8 0 in respect of pressed cotton recovered from them during the same period less Rs. 3,738 9 6 which was legally due from them thus totaling to Rs. 11,215 13 0. To this they added Rs. 1,295 9 6 as interest by way of damages on the aforesaid said amount at the rate of 9 per cent. In the plaint it was contended by the Company that after the coming into force of section 142A of the Government of India Act, 1935 (which came into effect from 1 4 1939) till January 25, 1950 a tax on trade, profession or calling in excess of Rs. 501 per annum could not be imposed either by a Provincial Government or by a Local Body. Nor again, could an existing tax on trade, profession or calling be raised further so as to exceed Rs. 501 per annum. The Company further pointed out that after the coming into force of the Constitution the upper limit of the tax was raised to Rs. 250/per annum and that as the Company was already paying more than this amount per year even at the rate of one anna per bojha and one anna per bale recovery from them at the enhanced rate of 4 annas was illegal with effect from April 1, 1939. The Municipal Committee contended in its written statement that the provi sion of section 142A of the Government of India Act and article 276 of the Constitution which limit the tax on professions, trades or callings or employments to Rs. 50 and Rs. 250 per annum respectively do not apply to a case such as the present where there is no imposition of a new tax but only an enhancement of the rate of an existing tax. It further contended that the tax in question at the rate of 4 annas per bojha and 4 annas per bale was in existence when article 276 came into force and is saved by that Article. According to the Committee, the Company is not entitled to claim back the amount paid by it under section 72 of the Indian Contract Act or the general law. This contention, however, was negatived by the trial court and does not appear to have been reiterated before the High Court. Nor again was it pressed before us by Mr. Viswanatha Sastri who appears for the Municipal Committee. The principal contention which was pressed before the trial court and raised before the High Court was that the Company 's suit was bad for non compliance with the requirements of section 48 of the Act and that is the point which we have to consider in this appeal. 48 of the Act reads thus: "(1) No suit shall be instituted against any Committee or any member, officer or servant thereof or any person acting under the direction of any such committee, member, officer or servant for anything done or purporting to be done under this Act, until the expiration of two months next after notice in writing stating the cause of action, the name and place of abode of the intending plaintiff and the relief which he claims, 505 has been, in the case of a committee, delivered or left at its office, and, in the case of any such member, officer or servant or person as aforesaid, delivered to him or left at his office or usual place of abode, and the plaint shall contain a statement that such notice has been so delivered or left. (2)Every such suit shall be dismissed unless it is instituted within six months from the date of the accrual of the alleged cause of action." Mr. Patwardhan for the appellant contends that this was a case of recovery of an Illegal tax and, therefore a claim for its refund fell outside the provisions of section 48 of the Act. In support of his contention he relied upon a number of decisions and we will proceed to examine them. The first of these cases is Municipal Committee, Karania vs New, East India Press Co. Ltd., Bombay(1). That was also a case where enhancement of a tax was made by the Municipal Committee of Karanja after March 31, 1939 in excess of Rs. 50 per year payable by one person. There, a Division Bench of the High Court held, that the enhancement was in contravention of section 142A of the Government of India Act, 1935 and was illegal, that a ' suit for refund of the tax is maintainable by the person who has paid the tax and that such a suit is not barred by the provisions of sections 48, 83 or 84 of the Act. The relevant 'observations of Bose A.C.J. (as he then was) who delivered the judgment are as follows: "It was then argued that the Civil Courts have no jurisdiction because of sections 83 and 84 of the Central Provinces Municipalities Act as applied to Berar. It was said that Act provides for remedies in cases of wrongful recovery of taxes. Therefore, the jurisdiction of the civil courts is barred. A large number of cases have dealt with this question but we need consider only two of the latest decisions. In District Council, Bhandara vs Kishorilal (Civil Revision No. 220 of 1946 decided on the 25th June, 1948) one of us (Bose, J.) held that provisions corresponding to sections 83 and 84 come into play only when the Municipal Committee acts within the scope of its authority, that is to say, when it is acting or purporting to act under the Municipalities Act. It is pointed out there in respect of this very section of the Government of India Act, sec. 142 A, that when a Municipality is prohibited by law from imposing a tax in excess of a certain amount then it cannot be said to be acting either under the Act or purporting to act under the Act if it exceeds that amount, and in such a case the jurisdiction of the Civil Courts is not barred. Here again we may refer to the fact that in the Privy Council case Radha Kishan Jaikishan (Firm) vs Municipal Committee, Khandwa(2), this objection does not appear to have (1) I.L.R. (2) [1939] 30 Nag. T.R. 121 (P.C.) 506 been taken. It is hardly likely that it would have been omitted had there been any force in the contention. In the present case, as in District Council, Bhandara vs Kishorilal the Municipality is seeking to recover sums which the: law has prohibited it from taking, in the shape of taxes. Accordingly, as it is acting wholly without jurisdiction, the claims lie and are not barred by reason of sections 83 and 84. Then it was stated that the claims are barred by sec. 48 of the Municipalities Act. There again the same considerations apply. 48 comes into play only when the act is done or is purported to be done under the Municipalities Act. As we have said, that is not the case here because its action is something which is prohibited by law, and so wholly beyond its jurisdiction, and therefore section 48 does not apply. The distinction between a case where section 48 applies and a case where it does not is clearly shown in The Amraoti Town Municipal Committee vs Shaikh Bhikan(1)". Kishorilal 's case to which reference is made in the above quotation is a decision of a Division Bench upon a reference made by Bose J. and which, though rendered earlier, has been reported in I.L R. In that case a tax imposed by the District Council, Bhandara under a similar provision of the Local Self Government Act, 1920 at the rate of three pies per khandi on persons carrying on trade of husking, milling or grinding of grains was raised by it to one anna as from April 1, 1942 with the sanction of the Provincial Government. It was contended on behalf of the respondent that the recovery was illegal. Since the matter involved the interpretation of section 142A of the Government of India Act 1935 Bose J, acting under one of the rules of the High Court referred it to a Division Bench. This is what the Division Bench held: " We are clear that the tax in question is a tax which can be so termed. This was in fact conceded in the Court below and the contention raised before us that the persons who gave grain to Kishorilal for grinding and not he were the traders concerned was plainly devoid of force. He had a mill and with it carried on the trade of milling grain. The tax in question was recovered from him because of this and it was one of the taxes hit by section 142 A of the Government of India Act, 1935, and the Professions Tax Limitation Act, 1941 (XX of 1941). " When the matter went back before Bose J., it was contended on behalf of the District Council that the suit was barred altogether by the provisions of section 71 and that the provisions of section 73 make the issue of a notice by the Distt. Council a precondition for the institution of a suit of the kind before him. Reliance was placed on a (1)I.L.R. , 219, 220. 507 certain rule framed under section 79(1) (xxix) of the Central Provinces local Self Government Act, 1920 After quoting section 71 and the rule relied on the learned Judge observed: "It will be observed that both section 79 and the rule Fire confined to orders and decisions given under the Act. It is impossible to say that an order which contravenes the law or is made in the face of an express statutory prohibition can be said to be under the Act. The words "purporting to be given" or "made under the Act" are not present in this section and so the difficulty which arises regarding the other point is not present here. I hold that the suit is not incompetent on this score." Pointing out that the other question urged before him was more difficult the learned Judge said that his conclusion was that what was done in the case was not "under the Act" and, therefore, what remained for consideration was whether it was "purported to be done" Under the Act. He came to the conclusion that what was done was not "purported to be done under the Act" and expressed himself thus: "Now this expression has recently been interpreted by their Lordships of the Privy Council in H.H.B. Gill vs The King(2) also in Hori Ram Singh vs The Crown(2) of which their Lordships approved. The question is a difficult one and as Varadachariar J. observed in the Federal Court decision at p. 187, it is neither possible nor desirable to lay down any hard and fast rule. The question is substantially one of fact and "must be determined with reference to the act complained of and the attendant circumstances. " I think, however, that the following test which their Lordships of the Privy Council laid down concludes the matter so far as this Act is concerned. Their Lord ships say: "A public servant can only be said to act or to purport to act in the discharge of his official duty, if his act is such as to lie within the scope of his official duty. " Now I can understand it being said that an act which is within the scope of an official duty cannot be taken out of that category simply because it is carelessly or negligently performed, but I cannot see how an act which is expressly prohibited by law can be said to lie there. If a magistrate directed to supervise a sentence of whipping duly imposed by a competent Court has the wrong man whipped by mistake or imposes more lashes than war ranted, I can understand him being protected. He is there acting within the scope of his duty. But if, instead of having the man whipped. he has him branded with a hot iron he would not, in my opinion, be able to claim the protection. In the same way I cannot see bow a Municipal Committee can (1)A.I.R. (2)[1939] F.C.R. 159. 508 be said to be acting 'under the Act ' when it does that which is expressly prohibited by the Legislature. Say it purported to tax salt. Its action would not be covered by sec. 73 because the Constitution Act makes that an exclusively Central subject. Say also a municipality attempted to tax marriages or births, that would be completely beyond its province and it could not be heard to say that because it has been given certain limited powers of taxation, therefore it 'purports to act ' under the Act whatever the nature of the tax it attempts to impose. In the same way, if the Legislature limits the authority of the Committee to a maximum of Rs. 50 1 do not think it can be said to purport to act within the scope of the Act if it travels beyond its limited provisions." A reference may be made to the decision in The Amraoti Town Municipal Committee vs Shaikh Bhikan(1) which apparently takes a contrary view. There Niyogi J., sitting singly has held that a suit against a municipal committee for the recovery of a tax illegally collected is governed by section 48 of the Central Provinces Municipalities Act, and, is, therefore, barred by limitation if not filed within six months of the. date of the collection of the tax. That case is, however, distinguishable in that there was no prohibition to the levy of the tax and all that had happened was that proper procedure had not been followed in imposing the tax. This was thus a case of something purporting to be done under the Act but not done strictly in accordance with the provisions. That such a case would squarely fall within the ambit of section 48 cannot be questioned. But the point is whether what was done by a local body under the colour of an Act can be regarded as something purported to be done under the Act even though neither the local body nor even the State Legislature has the power to do what was in fact done. The next case referred to was Gajadhar Hiratal vs Municipal Committee, Washim(2). That was also a case in which a tax on bojhas and bales of ginned cotton was raised from Re. 0 2 3 per bale to Re. 0 4 0 per bale and the learned Judges held, following the decision in the New East India Press Co. 's case(1) that the enhancement was ultra vires of article 276 of the Constitution. The other question did not arise for consideration in this case. This decision is, therefore, of little assistance to us, because it is not contended before us that the enhancement of the tax is valid. There is, however, another decision in the same volume at p. 483 (The Municipality of Chopda vs Motilal Manekchand) which is relevant for consideration in this appeal. In that case a Division Bench, while pointing out that the particular tax which was levied by the Municipality was in substance a tax on trade within the meaning of article 276 of the Constitution and being in (1) I.L.R. (3) T.L.R. [1948) 971. (2) I.L.R. 509 excess of Rs. 250 p.a. was beyond the competence of the Municipality, held that a suit for its refund beyond the time prescribed by rules was barred by limitation. According to the learned Judges the levy of the tax though beyond the authority of a Municipality was " an act done in pursuance or execution or intended execution of the Bombay District Municipal Act" and was merely a wrongful act as distinguished from an ultra vires or illegal act. In coming to this conclusion they followed a previous decision of the High Court in Jalgaon Borough Municipality vs The Khandesh Spinning and Weaving Mills Co. Ltd.(1). Incidentally we may mention that an appeal was brought before this Court from that part of the decision in The Municipality of Chonda, East Khandesh vs Motilal Manekchand Press Factory, Chonda(2) which held that the levy was unconstitutional. Ayyangar J. who spoke for the Court has stated towards the end of the Judgment as follows: "In the circumstances the correctness of the decision of the High Court in holding the impugned levy to be a tax on " callings or employments ' and therefore subject to a pecuniary limit of Rs. 250 per year does not really arise for consideration. The respondent , had in their plaint, no doubt, challenged the entirety of the levy and sought relief on that basis, but they had however pleaded in the alternative that the tax might be held to be one on 'a trade etc. ' and therefore within article 276(2) and claimed relief on this footing in the alternative. The learned Civil Judge had accepted this alternative contention and had granted them a decree on that basis and the respondents had not challenged the correctness of that decision by preferring an appeal and the learned Judges of the High Court had accepted this view of the nature of the levy. We however consider it proper to add that there is considerable force in the opinion expressed by the High Court that the tax in question, at the date when the same was challenged, being a levy imposed on persons carrying on the business of pressing cotton, was a tax on 'professions, trades, callings, or employments ' and that the learned Judges of the High Court came to a correct conclusion that the respondents were entitled to the declaration which was granted as regards the maximum amount of the tax that could be levied from the respondents," In Jalgaon Borough Municipality 's case(3) on which the High Court relied in Motilal Manekchand 's case, what had happened was this: The Municipality acting under section 73(iv) of the Bombay Municipal Boroughs Act, 1925 levied octroi duty on fuel oil or furnace oil under certain rules and by laws framed by it with the sanction of the Government which provided for the levy 'of an octroi duty on various articles including 'oils used for machinery '. (1) (2) C.A. No. 168 of 1961 decided on March 11, 1962, (3) 55 Rom. L.R. 65. (N) 4SCI 5 510 it was found that the Municipality was not entitled to levy any octroi duty on fuel oil or furnace oil which was not comprised within the items enumerated in the octroi rules and by laws. The respondent who had paid the tax instituted a suit for its recovery. One 'of the questions which arose for consideration was whether the provisions of section 206 of the Bombay Municipal Boroughs Act, 1925 corresponding to those of section 48 of the Central Provinces and Berar Municipalities Act, 1922 applied to the case. The learned Judges of the High Court held that what the municipality (lid was not an act done in pursuance of the Act, but it was an act which it purported to do in pursuance of the Act and that therefore its action was well within the terms of section 206. In the course of the judgment Bhagwati J., observed that the acts which fell within the category of those "done or purporting to have been done in pursuance of this Act" could only be those which were done under a vestige or semblance of authority or of a shadow of right. If an act was outrageous and extraordinary or could not be supported at all, not having been done with a vestige or semblance 'of authority, or a shadow of right invested in the party doing that act, it would not be an act which is done or purported to have been done in pursuance of the Act. The distinction is really between ultra vires and illegal acts, on the one hand, and wrongful acts, on the other wrongful in the sense that they purport to have been done in pursuance of the Act; they are intended to have been done in pursuance of the Act if they are done with a vestige or semblance of authority, or a sort of a right invested in the party doing those acts. The learned Judge then referred to certain decisions and said that under section 73(iv) of the Act power was given to the Municipality to impose octroi duty on articles and goods imported within its jurisdiction. What had happened there was that the defendants, on the interpretation which they gave to the words "oils used for machinery", did something which ultimately, on an adjudication in that behalf, the court found to be wrong. By acting in that way what the Municipality purported to do could not be said to be illegal or outrageous and extraordinary or done without having any vestige or semblance of authority or without even a shadow of a right. Apart from the fact that much of what was said in this case is opposed to a recent decision of this Court to which we will presently make a reference certain observations made by Bhagwati J., in fact lend support to the argument advanced before us by Mr. Patwardhan. The observations we have in mind are to the effect that where ,a municipality, not having the power to levy a particular tax at all, either wholly or in regard to some classes of goods, had purported to levy the same it would certainly be an act which was "outrageous and extraordinary, or done without having any vestige or semblance of authority or without even a shadow of a right". Here, the over stopping of its authority by the Municipality consists not in the matter of the selection of a class of goods but of that of the rate at 511 which it has levied and collected a tax. It has levied and collected a tax beyond constitutional limits. Therefore, to the extent it has done so the tax could properly be said to have been levied without a vestige or semblance of authority or even of a shadow of right. We may now refer to the recent decision of this Court in The Poona City Municipal Corporation vs Dattatraya Naresh Deo dhar(1). That was a case in which the Municipal Corporation had imposed a tax on the refund of octroi duty collected by it on goods imported within the Municipal limits of the city. Its practice was to deduct the tax from the amount which it was required to refund and pay the person entitled to the refund only the balance. A suit was instituted by the respondents for refund of the amount illegally deducted by the Corporation from the octroi refund made by the Corporation to the respondents. It was contended on behalf of the Corporation that the deduction made by it was valid and that the suit was barred by limitation. This Court upheld the contention of the respondents that the Corporation had no power to impose the tax and that in fact there was a prohibition against the imposition of such a tax by the Corporation. On the plea of limitation, which was founded upon the provisions of section 487 of the Bombay Act which are almost the same as those of section 48 of the Act with which we are concerned, this Court observed: "The benefit of this section would be available to the Corporation only if it was held that this deduction of ten per cent was 'an act done or purported to be done in pursuance or execution or intended execution of this Act. ' We have already held that this levy was not in pursuance or execution of the Act. It is equally clear that in view of the provisions of section 127 (4) (to which we have already referred) the levy could not be said to be 'purported to be done in pursuance or execution or intended execution of the Act. ' For, what is plainly prohibited by the Act cannot be claimed to be purported to be done in pursuance or intended execution of the Act. " Sub sec. (4) of section 127 of the Act to which this Court has referred is in the following terms: "Nothing in the section shall authorise the imposition of any tax which the State Legislature has no power to impose in the State under the Constitution. " It is pertinent to bear in mind that the conclusion of this Court on the question whether the act was "done or purported to be done" under the Act was not based solely on this provision and reliance wag placed upon it as affording additional support to the conclusion already arrived at. It seems to us that this provision was enacted by way of abundant caution. For, the Constitution is the (1)[1964] 8 S.C.R. 178. 512 fundamental law of the land and it is wholly unnecessary to provide in any law made by the Legislature that anything done in disregard of the Constitution is prohibited. Such a prohibition has to be read in every enactment. This decision does appear to conclude the matter. During the pendency of the suit before the trial court the appellant had preferred a writ petition before the High Court at Nagpur in which it contended that the notification of April 10, 1941 enhancing the tax from one anna per bojha and one anna per bale to four annas per bojha and four annas per bale was illegal and ultra vires and should therefore be quashed. This petition was granted by the High Court on April 12, 1955. There was, therefore, a direct decision before the trial court and the appellate court which though it could not be treated as res judicata was binding on those courts and was treated as such by them and it is perhaps because of this that it was not sought to be urged on behalf of the Municipal Committee when the second appeal was argued before the High Court that the notification is valid and, therefore, the Municipal Committee could recover the tax at the enhanced rate. Though Mr. Viswanatha Sastri did say that the decision of the High Court is not res judicata he did not directly challenge its correctness. What he argued was as follows: The levy of a tax on professions, trades, callings etc. was within the power of the Provincial Legislature and is now within the power of the State Legislature. It could in the past and can even now levy such a tax at the rate of 4 annas per no ha and 4 annas per bale, that both under section 142 A of the Government of India Act and article 276 of the Constitution the Municipal Committee could collect such a tax to the constitutional limit (which was formerly Rs. 50 p.a. and is after the coming into force of the Constitution Rs. 250 p.a.). The mischief, according to him, is not in the levy but in the realisation of an excess over the limit. To put it differently, the ban is not upon the rate of tax but upon excess collection thereof. Therefore, the collection of a tax above the constitutional limit was not without jurisdiction but only illegal or irregular. A suit by an assessee to recover the amount paid by him in excess of the constitutional limit would therefore be in respect of a matter "purported to be done" under the Act and the provisions of section 48 of the Act would apply to it. Further according to him every suit against a Committee for anything done or purported to be done under the Act must comply with the conditions laid down in the section. He points out that the assessment of the tax was made by an authority competent to make an assessment, that in making it the authority proceeded in accordance with the provisions of the Act and assessed the tax as authorised by Rules which had been sanctioned by the former Government of Central Provinces and Berar. So, even it is assumed that any of 513 the Rules were ultra vires and therefore the assessment and recovery of the tax was illegal, what the authority had done was something purported to be done under the Act. Some of these arguments were advanced in cases discussed earlier and rejected. In support of his contention he placed reliance on the decisions in Richard Spooner and Bomanjee Nowrojee vs Juddow(1) and Dhondu Dagdu Patil vs The Secretary of State for India(2). These cases were not pressed in aid in the decisions so far considered and we would deal with them now. Before we deal with these cases it is necessary to point out the rationale upon which section 142 A of the Government of India Act, 1935 was enacted and on which article 276 of the Constitution now rests. It is that the legislative spheres of the Provinces and the Centre came to be clearly demarcated in regard to items falling within Lists 1 and 11 of Schedule VII of the Government of India Act and now to those falling within the same lists of Schedule VII of the Constitution. Taxes on professions, trades, callings and employments are taxes on income and are thus outside the provincial/and now State list and belong exclusively to Parliament and before that to the Central Legislature. Yet under a large number of laws enacted before the Government 'of India Act, 1935 came into force, power was conferred on local governments and local authorities to impose taxes on such activities. This was obviously in conflict with section 100 of the Government of India Act. When this was realised section 142 A was enacted by the British Parliament which saved the power conferred by pre existing laws but limited the amount payable to Rs. 50 after 31st March, 1939. A saving was made, however, of pre existing laws subject to certain conditions with which we are not concerned. The provisions of this section have been substantially reproduced in article 276 of the Constitution with the modification that the upper limit of such tax payable per annum would be Rs. 250 instead of Rs. 50. A tax can be recovered only if it is 'payable ' and it would be, payable only after it is assessed. it is, therefore, futile to contend that the ban placed by the aforesaid provisions extends only to recoveries and not to an earlier stage. Now coming to the cases, the first was one in which the question considered by the Privy Council was whether the Supreme Court at Bombay was competent to entertain a suit for recovery of damages brought by one Harkissondas Hurgovindass against the Collector of Bombay and others in respect of trespass and nuisance committed by certain officers of the Collectorate while purporting to execute a distress warrant issued against one Narrondass for non payment of arrears of land revenue. Under the Letters Patent dated Dec. 8, 1823 the jurisdiction of the Supreme Court was barred "in any matter concerning the revenue under the management of the (1) 4 MI.A. 353, 379. (2) I.L.R. , 106. 514 said Governor and Council of Bombay respectively. or concerning any act done according to the usage and practice of the country, or the regulations of the Governor and Council of Bombay aforesaid. " Similar provisions were contained in section 8 of Statute 21 Geo. 111, c. 70. The Supreme Court over ruled the defendant 's contention on the ground that what was due from the plaintiff was not revenue but a perpetual ground rent which was incapable of being enhanced and could not be regarded as revenue at all. After holding so Lord Campbell who delivered the opinion of the Judicial Committee observed: "The point, therefore, is, whether the exception of jurisdiction only arises where the Defendants have acted strictly, according to the usage and practice of the contrary, and the Regulations of the Governor and Council. But upon this supposition the proviso is wholly nugatory; for if the Supreme Court is to inquire whether the Defendants in this matter concerning the public revenue were right in the demand made, and to decide in their favour only if they acted in entire con formity to the Regulations of the Governor and Council of Bombay, they would equally be entitled to succeed, if the Statutes and the Charters contained no exception or proviso for their protection. Our books actually swarm with decisions putting a contrary construction upon such enactments, and there can be no rule more firmly established, than that if parties bona fide and not absurdly believe that they are acting in pursuance of Statutes, and according to law, they are entitled to the special protection which the Legislature intended for them, although they have done an illegal act. In this case it may well be that the warrant against the goods of Tookaydass did not authorise the taking of the goods of Hurgovindass, or even that Hurgovindass might not be liable for the arrears of 'quit rent ' which accrued before he became owner of the house. Still the Collector was evidently of opinion, that a distress might be made for the whole of the arrears due, and that it was sufficient to introduce into the warrant the name of Tookaydass, in whose name the house continued to be registered. The other Defendant never could have doubted the sufficiency of the warrant. If Indian revenue officers have fallen into a mistake, or without bad faith have been guilty of an excess in executing the duties of their office, the object of the Legislature has been, that they should not be liable to be sued in a civil action before the Supreme Courts. " Later in his opinion Lord Campbell said: "If it concerned the revenue, or was a matter concerning an act bona fide believed to be done according to the Regulations of the Governor and Council of Bombay, his (i.e., of the Judge of the Supreme Court) jurisdiction was gone, although prima 515 facie it appeared to be a trespass over which his jurisdiction might be properly exercised." This case would have assisted Mr. Sastri only if what was done was something which could legally have been done by the Municipality but was wrongly done by it as, for instance, the collection of a lawful tax from a person other than the one from whom it was due. But this decision is no authority for the proposition that if the Collector recovered or tried to recover from a person a sum of money as arrears of land revenue even though it did not fall within the definition of revenue or tried to collect a sum of money which he was expressly prohibited by law from collecting, he would still be said to have purported to act under the revenue law which empowered him to collect land revenue. If an act of trespass was committed in execution of a distress warrant for recovery of such monies. a suit for damages would not. have been barred. in the next case what the High Court was dealing with was the claim of the plaintiff against the Government for damages occasioned by the wrongful cancellation of his licence to sell liquor. The suit had been dismissed by the trial judge as barred by the provisions of section 67 of the Bombay Abkari Act, 1878, firstly because the Collector had acted bona fide in pursuance of the Act and secondly because it was not instituted within four months from the date of the act complained of. The High Court upheld the dismissal of the suit and in the course of its judgment observed: "It is quite true that the Collector 's action is not strictly in conformity with the section which authorises the revocation only on the actual conviction of the licensee. But the circumstances under which the Collector acted are so near the circumstances legally entitling him to act as he did that we feel bound to say the act was done in pursuance of the Statute. The law upon this point may be found stated in many cases, of which we may notice Hermann vs Saneschal(1). In strictness, anything not authorized by a Statute cannot be said to be in pursuance of it, while if it is authorized by the Statute clearly it would need no other protection. But if effect were given to such a construction it would altogether do away with the protection intended to be given; accordingly the general principle is that if any public or private body charged with the execution of a Statute honestly intends to put the law in motion and really and not unreasonably believes in the existence of facts. which, if existent, would justify his acting and acts accordingly. his conduct will be in pursuance of the Statute and will be protected." The learned Judges then referred to Spooner 's case(2) also. Mr. Sastri laid particular emphasis on the concluding portion (1) ; (2) 4 M.I.A. 353, 379. 516 of the observations quoted above. This again, it may be said, is not a decision which is quite in point. There was no want of jurisdiction in the Collector to do what he did but there was only the absence of facts which, had they existed would have given him power to do what he did. Cases of this type must be distinguished from those like the present in which we must imply a constitutional or statutory prohibition against the act done. Where such prohibition exists or can be implied, anything done or purported to be done by an authority must be regarded as wholly without jurisdiction and is not entitled to a protection of the law under colour of which that act was done. It is true, as urged by Mr. Sastri, that it was within the competence of the respondent committee to raise the rate of tax from one anna to four annas per bojha and bale even after the coming into force of section 142 A of the Government of India Act, 1935. The levy of tax at that rate cannot, therefore, be regarded to be beyond the jurisdiction of the respondent so long as the constitutional limit was not exceeded. What is, however, contended on behalf of the appellant is that the action of the Committee in compelling it to pay the tax in excess of the amount which was constitutionally recoverable from it in respect of any one year was ultra vires, that thereby the provisions of section 142 A have been transgressed and, therefore, this was a case of utilization by the Committee of the provisions of the Act and the rules made thereunder for doing something which was prohibited by the Government of India Act, 1935 and is now, by the Constitution. It is true that the Committee had jurisdiction to recover an amount up to the constitutional limit. But it cannot fairly be contended on its behalf that merely because of this, that the recovery by it of an amount in excess of the constitutional limit was only irregular or at the worst illegal. Where power exists to assess and recover a tax up to a particular limit and the assessment or recovery of anything above that amount is prohibited the assessment or recovery of an amount in excess is wholly without jurisdiction and nothing else. To such a case the Statute under which action was purported to be taken can afford no protection. Indeed, to the extent that it affords protection, it would be bad. But where, as here, the validity of a provision of a statute can be upheld upon a possible construction of that provision it would be the duty of the court to so construe it as to avoid rendering the provision unconstitutional and reject a construction which will invalidate the provision. The final contention urged by Mr. Sastri is based upon the decision of the Privy Council in Raleigh Investment Company Ltd. vs Governor General in Council(1). His argument is that the Municipalities Act contains adequate provisions dealing with refund of taxes and that the provisions of section 85(2) bar a suit for recovery of a (1)74 I.A. 50. 517 tax wrongfully recovered by the Municipal Committee. It may be mentioned that the contention was not raised in the suit or in the grounds of appeal before the High Court and has not therefore been considered by it. It has been raised for the first time in the statement of case. But the scope of an appeal cannot, even at the instance of the respondent who is entitled to support a decree in his favour even upon a ground found against him by the High Court. be permitted to be enlarged beyond that of the appeal before the High Court or the courts below. But as it is a question of consider able importance and might be raised in other similar suits which are said to be pending, we propose to deal with it. Before dealing with Raleigh Investment Co. 's case(1) we may refer to the provisions of the Act which Mr. Sastri placed before us. 83(1) provides for an appeal against the assessment or levy of or refusal to refund any tax under the Act before the Deputy Commissioner and sub section (1 A) for a revision before the State Government. Sub sec. (2) provides that if the authority hearing the appeal or revision entertains a reasonable doubt on any question as to the liability to or the principles of assessment of a tax it shall draw up a statement of the facts of the case and the point on which the doubt is entertained and refer the statement with his own opinion on the point for the decision of the High Court. There is, however, no express provision like that of section 31(1) or section 33(4) of the Indian Income tax Act entitling the assessee to a hearing either in the appeal or revision petition. Section 85 empowers the State Govern ment to make rules for regulating the refund of taxes, and such rules may impose limitations on such refunds. Sub section (2) thereof provides that no refund of any tax shall be claimable by any person otherwise than in accordance with the provisions 'of this Act and the rules made thereunder. This sub section can be availed only if the Act or the rules provide for making a claim for refund. The rules relating to refunds, if there are any, were, however, not placed before us. Nor was our attention drawn to any provision of the Act or to any rule which makes it obligatory upon a person to apply to the Municipal Committee for a refund of a tax. Even assuming that the Act contemplates obtaining a refund only upon compliance with rules made thereunder, does it contemplate cases where refund or repayment on the ground of the unconstitutionality of the levy? It will be noticed that sub section (1) of this section empowers the State Government to impose by rules limitations on the refunds presumably including limitation on the amount of refunds and sub section (2) bars a claim for refund otherwise than in accordance with the rules made under sub section These provisions cannot possibly apply to case where the right to obtain a refund or repayment is based upon the ground that the action of the Committee was in violation of a constitutional provision. To hold otherwise would lead to the startling result (1)74 I.A. 50. 518 that what was incompetent to the State Legislature to do or authorise a committee to do directly can be permitted to be done indirectly by empowering the State Government to make rules for refund where under the amount 'of refunds could be so limited as to permit retention by the committee of the tax recovered by it in excess of the constitutional limit. In our view, therefore, section 85 of the Act cannot, in any event, be said to provide a machinery for obtaining refunds in cases of this kind. Since section 85 is inapplicable, a fortiori section 83 cannot apply either. We must therefore proceed on the footing that the Act does not provide a machinery for making a claim for refund or repayment in such cases. It would be pertinent to advert also to the provisions of section 84, sub section (3) of which deals with "Bar of other proceedings". Sub section (1) provides for the period of limitation for an appeal under section 83(1). Sub sec. (2) empowers the appellate authority to require the assessee to deposit the tax before the hearing or the decision of the appeal. Sub sec. (3) is in the following terms: "No objection shall be taken to any valuation, assessment, or levy, nor shall the liability of any person to be assessed or taxed be questioned, in any other manner or by any other authority than is provided in this Act. " It will be seen that there is no express mention of a civil court in this sub section as there was in section 67 of the Indian Income tax Act, 1922. In fact section 48 of the Municipalities Act contemplates the institution of a suit subject to fulfillment of certain conditions and thus indicates that it was not the intention of the legislature to make the machinery provided by the Act exclusive. But even if a bar to the Jurisdiction of a civil court be assumed or implied, there is an absence of a reference to "refund" in sub section (3) of section 83, In other words, no finality seems to have been given to a decision rendered by an authority under section 83 refusing to refund a tax improperly or 'File ally assessed or recovered. In the light of these circumstances we have to consider the applicability of the decision in Raleigh Investment Co. 's case(1). In that case the Privy Council considered the effect of certain provisions of the Indian Income tax Act, 1922 which prescribed remedies to an assessee who sought to challenge the assessment made against him and also the provisions of section 67. The relevant portion of section 67 was that "no suit shall be brought in any civil court to set aside or modify any assessment made under this Act. . After examining all these provisions the Privy Council said that an effective and appropriate machinery was provided by the Act itself for the review of any assessment on grounds of law, including the question whether a provision of the Act was ultra vires and it was in that setting that section 67 had to be construed. Then it went on to say that the phrase "assessment made under this Act" in section 67 meant an assessment finding its origin in an activity of the assessing officer acting as such and that the circumstance that (1)74 I.A. 50. 519 he had taken into account an ultra vires provision of the Act was in that view immaterial in determining whether the assessment was " made under this Act. " But, with respect, we find it difficult to appreciate how taking into account an ultra vires provision which in law must be regarded as not being a part of the Act at all, will make the assessment as one 'under the Act '. No doubt the power to make an assessment is conferred by the Act and, therefore, making an assessment would be within the jurisdiction of the assessing authority. But the jurisdiction can be exercised only according, as well as with reference, to the valid provisions of the Act. When, however, the authority travels beyond the valid provisions it must be regarded as acting in excess of its jurisdiction. To give too wide a construction to the expression "under the Act" may lead to the serious consequence of attributing to the legislature, which owes its existence itself to the Constitution, the intention of affording protection to unconstitutional activities by limiting challenge to them only by resort to the special machinery provided by it in place of the normal remedies available under the Code of Civil Procedure, that is, to a machinery which cannot be as efficacious as the one provided by the general law. Such a construction might necessitate the consideration of the very constitutionality of the provision which contains this expression. This aspect of the matter does not appear to have been considered in Raleigh Investment Co. 's case(1). This decision has been briefly referred to by this Court in Firm and Iliuri Subbayya Chetty & Sons vs The State of Andhra Pradesh(2) and what this Court has observed is this: "In determining the effect of section 67, the Privy Council considered the scheme of the Act by particular reference to the machinery provided by the Act which enables an assessee affectively to raise in courts the question whether a particular provision of the Income tax Act bearing on the assessment made is or is not ultra vires. The presence of such machinery observed the judgment, though by no means conclusive, marches with a construction of the section which denies an alternative jurisdiction to enquire into the same subject matter. It is true that the judgment shows that the Privy Council took the view that even the constitutional validity of the taxing pro vision can be challenged by adopting the procedure prescribed by the Income tax Act; and this assumption presumably proceeded on the basis that if an assessee wants to challenge the vires of the taxing provision on which an assessment is purported to be made against him, it would be open to him to raise that point before the taxing authority and take it for a decision before the Court under section 66(1) of the Act. It is not necessary for us to consider whether this assumption is well founded or not. But the presence of the alternative machinery by way of (1) 74 I.A. 50. (2) ; at 764, 520 appeals which a particular statute provides to a party aggrieved by the assessment order on the merits, is a relevant consideration and that consideration is satisfied by the Act with which we are concerned in the present appeal. " We have already adverted to the provisions of sections 83 and 85 of the Act which are the only provisions brought to our notice as providing a machinery under the Act for challenging an assessment and we have pointed out that they do not cover a case like the present. Again the provision for an appeal before a Deputy Commissioner who is an authority who performs numerous functions under different laws, functions which are executive, as well as administra tive and judicial, cannot be regarded as on par with one which provides for an appeal before an Appellate Assistant Commissioner under the Income tax Act, an authority whose duties are confined to matters arising under that Act. Further, the latter Act contains a safeguard in the shape of an appeal to the Income tax Appellate Tribunal which deals exclusively with matters arising under that Act and is an independent tribunal. In the circumstances it must be held that even in the class of cases to which the provisions of sections 83 and 85 of the Municipalities Act apply they cannot be said to provide a sufficiently effective remedy to an assessee to challenge the assessment made against him or to a person who is aggrieved by the action of the Committee levying or refusing to refund a tax. It is true that Sub sec. (2) of section 83 provides for a reference to the High Court but even that provision cannot be said to be a sufficiently efficacious remedy for challenging the assessment made on an assessee. For whether to make a reference or not is at the discretion of the appellate or revisional authority and the Act does not confer upon the person aggrieved a right to move the High Court, as does the Income tax Act, to require a reference to be made in an appropriate case. We may again point out that there is a complete absence of a provision corresponding to section 67 of the Indian Income Tax Act barring the institution of a suit in so far as refusal of refund of a tax is concerned. In Secretary of State vs Mask & Co.(1) the Privy Council has observed that it is settled law that the exclusion of the jurisdiction of the civil courts is not to be readily inferred, but that such exclusion must either be explicitly expressed or clearly implied. As earlier pointed out, this decision has been approved by this Court in the case of Firm and Illuri Subbayya Chetty & Sons(2). Further, one of the corollaries flowing from the principle that the Constitution is the fundamental law of the land is that the normal remedy of a suit will be available for obtaining redress against the violation of a constitutional provision. The Court must, therefore, lean in favour of construing a law in such a way as not to take away this right and render illusory the protection afforded by the Constitution. So, whatever be the position with respect to section 67 of the Indian (1) [1940] 67 T.A. 222,226. (2) ; at 764. 521 Income tax Act, so far as section 83(3) of the Act is concerned, we find it reasonably possible to construe it as not depriving a person of his right to obtain redress from a civil court in respect of an amount recovered from him as a tax in violation of article 276 of the Constitution. We have already pointed out that no machinery is provided by the Act for obtaining a refund of tax assessed and recovered in excess of the Constitutional limit and that the machinery actually provided by the Act is not adequate for enabling an assessee to challenge effectively the constitutionality or legality of assessment or levy of a tax by a municipality or to recover from it what was realised under an invalid law. It is, therefore, not possible to infer that the jurisdiction of the civil court is barred. The decision in the Raleigh Investment Co. 's case(1) does not, therefore, help the respondent. Moreover, we must bear in mind the provisions of article 265 of the Constitution which preclude the levy or collection of a tax except by authority of law, which means only a valid law. There was no corresponding provision in the various Acts for the governance of India which preceded the Constitution. Under article 226 the Constitution has provided a remedy to a citizen to obtain redress in respect of a tax levied or collected under an invalid law. This remedy will not be affected by any provision like section 67 of the Indian Income tax Act or like section 84(3) of the Municipalities Act. We must not lose sight of the fact that what the appellant has claimed in the suit is the repayment by the Municipal Committee of an amount recovered by it in excess of that which under the Constitution it was competent to recover from the appellant. The appellant has not sought to modify or set aside any order made by an authority acting or purporting to act under the Act. No doubt, the relief of repayment is claimed on the ground that the enhancement of the rate is unconstitutional. No doubt also that the appel lant had sought a further relief of injunction. As regards the first, the position is that the High Court of Nagpur has held, in the petition under article 226 preferred by the appellant, the enhancement to be unlawful. This decision was rendered by the Court during the pendency of the suit and was binding on the civil court in which the suit was pending and has been in fact followed by it. As regards the relief of injunction, that relief became unnecessary because of the order made by the High Court in the Writ petition. It is apparently for this reason that the civil court did not award that relief to the appellant. In view of the High Court 's decision it was not at all necessary for the trial court to consider in the suit before it the question of the validity of the assessment by or collection of the tax but only to ascertain the amount which was payable to the appel lant and whether the suit was barred under section 48 or section 85(2) as contended by the respondent. In these circumstances, we are of opinion that the appellant 's suit cannot be said to be barred even if we interpret section 84(3) of the Municipalities Act in the same way as the Privy Council interpreted section 67 of the Indian Income tax Act. (2)74 1.A. 50. 522 We may further observe that where there is an express prohibition in a statute against a local authority from imposing a tax, as for instance the recovery in the Statute construed by this Court in the Poona City Municipal Corporation case(1) or where prohibition can be implied whether it be with regard to an item of taxation or with regard to the rate of tax or the quantum of tax payable by an individual assessee the action of a local authority or of any of its instrumentalities in transgressing that prohibition must be regarded as being in excess of its jurisdiction. Here there is a prohibition in section 142 A of the Government of India Act and now in article 276 of the Constitution, which preclude a State Legislature from making a law enabling a local authority to impose a tax on "profes sions, trades, callings and employments" in excess of Rs. 250 per annum. These provisions have to be read in the Act or to be deemed by implication to be there as the Constitution is the paramount law to which all other laws are subject as was the Government of India Act, 1935 before January 26, 1950. If therefore, after the date specified in section 142 A of the Government of India Act or after the commencement of the Constitution a local authority or any of its instrumentalities imposed or imposes a tax which is in excess of the permissible amount, it would be exceeding its jurisdiction and a provision like section 84(3) of the Act will not bar the jurisdiction of a civil court to entertain a suit instituted by a person from whom it is collected for the repayment of the money recovered from him in excess of the permissible amount. There is a real distinction between those cases where a suit was held to be incompetent and the kind of cases which we have before us. Thus where the question merely is, whether the assessment had been made according to law, the Assessing Officer of the Municipality having jurisdiction on the subject matter and over the assessee the provisions of section 84(3) may be a bar to a suit. Where, however, the question raised is as to the jurisdiction of the Assessing Officer to proceed against the assessee and levy on or collect from him an amount in excess of that permitted by the Constitution, the matter would be entirely out of the bar of that provision. Here since the Assessing Officer had no authority to levy a tax beyond what section 142 A of the Government of India Act, 1935 permitted or what article 276 permits his proceedings are void in so far as they purport to levy a tax in excess of the permissible amount and authorise its collection and the assessment order is no answer to the suit for the recovery of the excess amount. To this extent, even the order of assessment cannot obtain the protection of section 84(3) of the Act and, therefore, the appearances ' suit is maintainable. For all these reasons we hold that the High Court was in error in dismissing the appellant 's suit. We hold the same in the connected appeal and accordingly allow both the appeals with costs throughout. (1)[1964] 8 S.C.R. 178. 523 Raghubar Dayal J. We have given careful thought to the ques tions of law arising in this appeal, but regret we have not been able to agree with the view expressed by brother Mudholkar J. in the majority judgment. We need not recapitulate the facts which have been fully set out in the judgment of Mudholkar J. The questions of law which arise for determination are: (i) whether the respondent 's collecting the amount in excess of the amount which it could have collected on account of the tax on trade, in view of the provisions of article 276 of the Constitution, was 'an act done or purported to be done under the Act ' within the meaning of section 48(1) of the Central Provinces & Berar Municipalities Act, 1922 (Act 11 of 1922), hereinafter called the Act , and (ii) whether the suit is barred by section 84(3) of that Act. The question in short boils down to this: whether the expression 'anything done or purporting to be done ' under the Act will cover only those acts which would be in strict conformity with the provisions of the Act or will also cover such acts which the Municipal Committee is competent to do under the Act, but in doing which the Committee has, in some manner, acted beyond the provisions of the Act or beyond any other legal provision. Section 48 of the Act refers to suits against the Committee or any of the other specified persons acting under the directions of the Committee, for anything done or purported to be done under the Act. If a suit is for anything done or purported to be done under the Act, the necessary conditions laid down in the section are to be satisfied before the institution of the suit. One condition is that the suit is to be instituted after the expiration of two months after the service of a notice, in writing, to the persons mentioned in sub section Another is that suit be instituted within six months from the date of accrual of the alleged cause of action. If a suit is not instituted after giving notice or within this period, it has to be dismissed. The question then is: what is the present suit for? And it is only on the determination of the nature of the act to which the present suit relates that it can be said whether the suit is covered by section 48 for not i.e., whether the act can be said to be done or purported to be done under the Act. The plaintiff claims a decree for the amount alleged to have been illegally collected from him as tax and for a permanent injunction. The illegality of the collection is said to be on account of there being an upper limit for a person , s liability to tax on trade and calling, in view of section 142A of the Govern of India Act, 1935 (shortly referred to as the 1935 Act) and article 276 of the Constitution. The limit under the Constitution is Rs. 250. It was Rs. 50 under the 1935 Act. What was collected from the appellant was the tax assessed on him. According to the appellant, the amount assessed exceeded the legal limit and therefore what had been collected in excess of that limit was collected illegally. 524 We may now consider the procedure laid down for the collection of tax under the Act before we determine the nature of the alleged excessive collection of tax from the appellant. Section 66 empowers the Committee to impose the taxes enumerated in sub section (1), clause (b) of subs. (1) mentions a tax on persons exercising any profession or art, or carrying on any trade or calling, within the limits of the municipality. Sub section (2) empowers the State Government, by rules made under the Act, to regulate the imposition of taxes mentioned in the section and to impose maximum amounts of rates for any tax. The rate of tax fixed by Government Notification dated December 22, 1936 was enhanced by another Notification dated April 10, 1941. The former rate of one annual was enhanced to four annas. These notifications did not lay down any upper limit for the amount of tax payable by one person to the Municipality. The legality of the imposition is not questioned. The legality of the enhancement was questioned by the appellant through Miscellaneous Petition No. 389 of 1954 decided by the High Court on April 12. 1955. The appellant prayed, by that petition, for the issue of a writ prohibiting the Committee from collecting taxes tinder the notification of 1941. The High Court did not hold the notification to be bad in law. What it held was that the tax was invalid to the extent it offended against section 142A of the 1935 Act and that it was also invalid to the extent it offended against article 276 of the Constitution. The writ issued by the High Court was a writ of mandamus prohibiting the Municipality from resorting to the 1941 Notification for the purpose of collecting tax in excess of Rs. 250 per annum. The Municipality therefore was empowered to impose tax in accordance with the notification of 1941 and, in view of section 142A of the 1935 Act and article 276 of the Constitution, the total tax claimable on account of this tax from the appellant could not exceed Rs. 50 or Rs. 250 respectively during the period when section 142A was in force and later when article 276 came into force. The next step, after the imposition of a valid tax, according to the Act, relates to the assessment of tax on the person 's liability to pay it. Section 71 empowers the State Government to make rules under the Act regulating assessment of tax and for preventing the evasion of assessment and section 76 empowers the State Government to make rules regulating the collection of taxes. The rules for assessment and collection of taxes framed in 1936 were notified on December 22, 1936. Rule 1 required a person carrying on the trade of ginning or pressing cotton into bales by means of steam or mechanical process to furnish to the Committee, annually, a return in the prescribed form which required the furnishing of the number of bojhas ginned and the number of bales pressed, with the total weight in maunds during the financial year in each case. This information was necessary as the rate of tax related to a bojha of 392 lbs. ginned cotton and a bale of 392 lbs. pressed cotton. 525 Rule 4 provided that the tax would be assessed by a sub committee on the basis of the information received under certain rules including r. 1. Rule 5 required the communication of the amount of assessment to the assessee. Rule 6 provided that objections to the assessment would be received and considered by the sub committee if presented within a month from the date of communication of the amount of assessment to the assessee and that the decision of the sub committee would be final subject to the confirmation by the general committee. Rule 7 provided that the tax would be payable in one instalment on August 1, each year. Fresh rules were notified in 1941 and these were practically identical with the 1936 rules. It is not alleged that the tax assessed on the appellant during the periods in suit had not been assessed by following the procedure laid down in the rules. It follows from the statutory rules that once the tax is assessed according to The rules, the assessee becomes liable statutorily, to pay the assessed tax. Section 77 provides how any arrears of tax claimable by the Committee under the Act can be recovered. They can be recovered on an application to a Magistrate, by distress and sale of movable property of the defaulter within the limits of his jurisdiction. Sections 77A and 80 provide other procedure for arrears of certain taxes to be realised. Section 83 provides for an appeal, against the assessment or levy of or refusal to refund any tax under the Act, to the Deputy Commissioner or some other officer empowered by the State Government in that behalf. Sub section (1A) allows a person aggrieved by the decision of the appellate authority to apply to the State Government for revision of the decision on the grounds that the decision is contrary to law or is repugnant to any principle of assessment of tax or that the appellate authority has exercised jurisdiction not vested in it by law or has failed to exercise a jurisdiction vested in it by law. Sub section (2) provides for a reference to the High Court by the appellate authority or the revisional authority on its own motion or on the application of any person interested, for the opinion of the High Court on any question as to the liability or the principle of assessment of tax if such a question arises on the hearing of the appeal or revision. sub section (3) of section 84 Provides "No objection shall be taken to any valuation, assessment, or levy, nor shall the liability of any person to be assessed or taxed be questioned, in any other manner or by any other authority than is provided in this Act," p(N)4SCI 7 526 Section 85 reads: "(1) The State Government may make rules under this Act regulating the refund of taxes, and such rules may impose limitations on such refunds. (2)No refund of any tax shall be claimable by any person otherwise than in accordance with the provisions of this Act and the rules made thereunder. " It follows from the above provisions that an assessee has to pay the tax assessed and that if aggrieved with the assessment of tax he has to appeal against the assessment order. He can raise questions of law and fact in the appeal. The appellant, in the present case, could have appealed against the assessment on the ground that the amount assessed exceeded the limits laid down for the tax under section 142A of the 1935 Act if that applied at the time of assessment or under article 276 of the Constitution if the latter applied at the relevant time. His claim for the refund of any amount, if paid, would arise only after the amount assessed and paid is modified by the appellate or revisional authority. If that amount is not so modified, no question for the refund or repayment of any amount paid as tax under the Act arises. The statute provided for the assessment of tax and for its collection in case the assessee did not himself pay the assessed amount according to the rules. The present suit for the repayment of the amount alleged to have been realised illegally is in essence a, suit for firstly modifying the amount assessed and then to decree the payment of the amount held to have been paid in excess of the tax as modified by the Court. It follows therefore, to our mind, that the suit relates to the act of the Committee in assessing the appellant wrongly by ignoring the constitutional provision that the amount payable by a single person to the municipality for such tax was not to exceed a certain limit and that it is not merely with respect to the act of collecting the excess amount. In fact, the assessment of the entire tax was one act and so was the collection of the amount assessed. The act of assessing the tax or the consequential act of collecting the amount cannot be broken up into two acts (i) of assessing the tax upto the legal limit and (ii) of assessing the tax with respect to the amount in excess of the legal limit. Neither can the act of collection be broken up into two acts (i) of collecting the amount which can be legally assessed; and (ii) of collecting the amount in excess of the legally realisable amount of tax. The act of assessment or of collection therefore was an act done by the Committee Linder the provisions of the Act, though it may be, as appears to be the case, that it acted wrongly in assessing the tax at an excessive figure and consequently in collecting an amount in excess which could have been legally collected. The suit is therefore fully covered by the provisions of sub s, (1) of section 48 of the Act. 527 Sub section (2) of section 48, as already stated, provides that every such suit, i.e. a suit falling within Sub section (1) of that section, shall be dismissed unless it is instituted within six months from the date of the accrual of the alleged cause of action. The suit was instituted in the instant case on December 6, 1952, more than 8 months after the date of recovery of most of the amounts alleged to have been illegally recovered from the appellant and, clearly, the suit for the recovery of such amounts bad to be dismissed. The taxes for the years 1951 52 were recovered in small amounts on January 17, 1952, March 13, 1952, March 31, 1952 and August 27, 1952. The suit for the amount recovered on January 17 was also instituted after the period of limitations No notice with respect to the alleged illegal collection of taxes in March and August 1952 had been given to the Municipal Committee as notice was given on January 10, 1952, prior to these collections and could not have possibly referred to them. The suit for these amounts also has to be dismissed as the condition precedent for the institution of the suit under sub section (1) of section 48 has not been satisfied. There is another reason which justifies the dismissal of the appellant 's suit, though the view of the High Court on that point is in favour of the appellant. In view of section 84(3) the assessment of the tax or the liability of the person assessed or taxed cannot be objected to in any manner or before any authority other than what is provided in the Act. Section 83 provides the procedure by which the assessment of tax can be questioned both on law and facts. The correctness of the assessment cannot be questioned by any other manner and questioning by instituting the suit in a Civil Court would be one such other manner. We have already indicated that in essence the present suit is a suit for the modification of the taxes assessed and for consequential order decreeing the repayment of the amount held to have been collected in excess of the amount so modified. In view of sub section (3) of section 84. exclusive jurisdiction to determine the correctness of the amount assessed is given to the authorities mentioned in section 83. The result is that no other authority can enter into the question of the correctness of the assessment on grounds of law or fact. The present suit is barred from the cognizance of the Civil Court. The views we have expressed find support from what has been decided by the Privy Council and this Court. We would first refer to those cases before dealing, with the cases relied on for the appellant in support of the contention that the Committee had no jurisdiction to assess the tax beyond the limit allowed by section 142A or article 276 and that therefore the act of the Committee was an act which could not be said to have been done or purported to have been done under the Act and that it was not necessary for the appellant to take recourse to the procedure laid down in ss, 48 and 83 of the Act. 528 In Raleigh Investment Co. Ltd. vs Governor General in Council(1) the Privy Council had to construe section 67 of the Income tax Act which provided: 'no suit shall be brought in any civil court to set aside or modify any assessment made under this Act. . The, suit giving rise to the appeal before the Privy Council was for a declaration that certain provision of the Act was ultra vires the; legislative powers of the Federal Legislature, that therefore the appellant before the Privy Council was not liable to be assessed or, charged to tax in respect of certain dividends and the assessment was illegal and wrongful, for an injunction restraining the department from making assessment in future years in respect of such dividends and for the repayment of the amount said to have been illegally realised on account of the illegal assessment. The Privy Council said at p. 62: "In form the relief claimed does not profess to modify or set aside the assessment. In substance it does, for repayment of part of the sum due by virtue of the notice of demand could not be ordered so long as the assessment stood. " The same can be said with respect to the claim for repayment of the alleged illegal collection of the excess amount from the appellant. The Privy Council further said: "An assessment made under the machinery provided by the Act, if based on a provision subsequently held to be ultra vires, is not a nullity like an order of a court lacking jurisdiction. Reliance on such a provision is not an excess of jurisdiction but a mistake of law made in the course of its exercise. " In view of what the Privy Council has said, the Committee 's overlooking the constitutional provisions in the exercise of its jurisdiction to assess the tax will not make its assessment of the tax an assessment without jurisdiction but would only show that the Committee mad . a mistake of law in the course of the exercise of its jurisdiction. The Privy Council took into consideration the machinery pro vided in the Income tax Act for the assessee raising objections to the assessment made against him and held that effective and proper machinery was provided by the Act itself for the review on grounds of law. This was however not the reason for their construing section 67 in the way they did. In fact, they considered the construction of 67 clear and said: "Under the Act the income tax officer is charged with the duty of assessing the total income of the assessee. The obvious meaning, and in their Lordships ' opinion, the correct meaning, of the phrase 'assessment made under this Act ' is an assessment (1) LR. 74 I.A. 50. 529 finding its origin in an activity of the assessing officer acting as such. the circumstance that the assessing officer has taken into account an ultra vires provision of the Act is in this view immaterial in determining whether the assessment is 'made under this Act '. The phrase describes the provenance of the assessment: it does not relate to its accuracy in point of law. The use of the machinery provided by the Act, not the result of that use, is the test. " These observations fully apply to the expression 'the assessment of any tax under the Act ' in sub section (1) of section 83. It follows that when the Committee made the assessment of the tax on the appellant the assessment was founded on the activity of the Committee acting as the assessing authority and the fact that it overlooked the constitutional requirement is immaterial in determining whether the assess ment is made under the Act. The expression 'made under the Act ' has no relation to the accuracy of the assessment in point of law. The expression 'assessment of any tax under the Act ' in section 83 is equivalent in its content to the expression 'assessment made under the Act '. Lastly, the final observations of the Privy Council in this case indicate that when an exclusive machinery for the determination of the tax is provided by the Act and the tax is assessed by that machinery, there arises a duty to pay the amount of tax demanded on the basis of that assessment and that the jurisdiction to question the assessment otherwise than by the use of the machinery expressly provided by the Act would be inconsistent with the statutory obligation to pay arising by virtue of the assessment. The very fact that the appellant let the assessment become final without taking recourse to the procedure of appeal and revision laid down in section 83 of the Act and thus became liable under the statute to pay the amount assessed, makes his questioning the correctness of the amount through the Court inconsistent with that obligation. It appears that the Privy Council considered a special provision barring the taking of objection to assessment of tax by any authority to be unnecessary. It said at p. 65 : "The only doubt, indeed, in their Lordships ' mind, is whether an express provision was necessary in order to exclude jurisdiction in a civil court to set aside or modify an assessment. " This would meet the contention for the appellant that sub section, (3) of section 84 does not specifically refer to the Civil Court and therefore does not specifically bar jurisdiction of the Civil Court from taking cognizance of a suit relating to the assessment of tax. It may also be mentioned that section 84(3) of the Act, by its terms, refers to an objection to assessment and not to 'assessment under the Act or assessment made under the Act '. This makes the provisions of section 84(3) much wider in scope than those of section 67 of the Indian Income tax Act were. 630 The other case we would refer to is Firm & Illuri Subbayya Chetty & Sons vs The State of Andhra Pradesh(1). The appellant before this Court, in that case, sued the State of Andhra Pradesh for a decree for a certain amount on the ground that amount had been illegally recovered from it under the Madras General Sales Tax Act, 1939. Section 18A of that Act provides that no suit or other proceeding shall, except as expressly provided in the Act, be instituted in any Court to set aside or modify any assessment made under the Act. This provision is practically identical in terms with that of section 67 of the Income tax Act which had been considered by the Privy Council in Raleigh 's Case(2). The contention raised before the Court was that if an order of assessment had been made illegally by the proper authority purporting to exercise its powers under the Act, such an assessment could not be said to be an assessment made under the Act. It was also contended that the use of the words 'any assessment made under this Act ' did not cover cases of assessment which purported to have been made under the Act. This Court said at p. 759: "The expression 'any assessment made under this Act ' is, in our opinion, wide enough to cover all assessments made by the appropriate authorities under this Act whether the said assessments are correct or not. It is the activity of the assessing officer acting as such officer which is intended to be protected and as soon as it is shown that exercising his jurisdiction and authority under this Act, an assessing officer has made an order of assessment that clearly falls within the scope of s, 18A." The view expressed by this Court is practically the same as had been expressed in Raleigh 's Case (2). In fact, the only difference between the two cases appears to be that in the Privy Council case the illegality of the assessment was said to lie in basing the assessment on a provision which was said to be ultra vires the legislature while the illegality of the assessment made in the case before this Court lay in the alleged mistake of the assessing officer in construing certain transactions to be transactions of purchases though they were really transactions of sale, the tax being leviathan on purchases and not on sales. This Court referred to Raleigh 's Case(1) at p. 764 and did not express an opinion, on the view of the Privy Council that even the constitutional validity of the taxing provision could be challenged by adopting the procedure prescribed by the Income tax Act, a question which does not arise for consideration in the present case. We are therefore of opinion that the construction put on the expression 'assessment made under the Act ' in these two cases justifies the conclusion that the assessment of tax made on the appellant in this case is covered by sub section (1) of section 83 of the Act and (1) ; (2) 74 I.A. 50 531 amounts to 'an act done, under the Act ' for the purposes of sub section (1) of section 48 of the Act. It is therefore unnecessary to determine the scope of the expression 'an act purported to be done under the Act ' in sub section (1) of section 48. We may now briefly deal with the cases relied on for the ap pellant. Before, however, doing so, we may first deal with the case of Poona City Municipal Corporation vs Dattatraya Naresh Deodhar(1) decided by this Court. In this case the Poona Municipality had imposed a tax on the amount of octroi duty which had been levied on the goods imported within the Municipal limits but had been subsequently exported out of such limits within the specified periods. The Poona Municipality used to deduct 10 per cent of the amount to be refunded. This deduction was held to amount to a tax on the octroi refund. Such a deduction was imposed as a tax under section 59(b)(xi) of Act III of 1901. The tax continued after the 1901 Act was repealed by the Bombay Municipal Boroughs Act, 1925. The Boroughs Act was, in its turn, repealed by the Bombay Provincial Municipal Corporation Act, 1949. That Act was applied to Poona on February 15, 1950 and thereafter the powers of taxation of the Municipality were governed by section 127 of that Act which authorised the Corporation to impose the various taxes mentioned in that section. A tax on octroi refund was not one of such taxes. It could not come under cl. (f) which described: 'any other tax which the State Legislature has power under the Constitution to impose in the States '. The State Legislature had no power under the Constitution to impose a tax on octroi refund. It was therefore held by this Court that the amount of tax on octroi refund could not be imposed by the Poona City Municipal Corporation. It was, after holding so, that reference was made to sub section (4) of section 127 which provided that nothing in that section would authorize the imposition of any tax which the State Legislature had no power to impose in the State under the Constitution, and it was said: "Apart from his absence of power to impose such a tax, which is clear from the earlier parts of section 127, we have the categorical prohibition in sub section 4 against the imposition of any such tax by the Corporation. " This reference was to emphasize that the impugned tax could not possibly be imposed under the Act. Sub section (4) appears to have been enacted as a matter of caution. There could be no necessity for sub section (4) as section 127 itself had provided for the taxes which could be imposed. Any tax which was not specified in the section could not possible be imposed by the Corporation. The legislature might have considered the possibility of any of the specified taxes not remaining in future within the legislative list of the State and (1)[1964] 8 S.C.R. 178. 532 therefore provided that in such a contingency a tax though specified in the section will not be imposed. The provision of sub section (4) did not in any way affect the decision of this Court in holding that the Poona Municipal Corporation could not impose a tax on octroi refund. The other contention for the Poona Municipal Corporation was that the suit was instituted beyond the period of limitation prescribed under section 487 of the 1949 Act. The suit would have been time barred if the act of the Corporation imposing the tax on octroi refund could be held to be 'an act done or purported to be done in pursuance or in execution or intended execution ' of the 1949 Act. This Court held that the tax was not levied in pursuance or in, execution of the Act and therefore the benefit of section 487 could not be available to the Corporation. The expression used in section 487 is different from the one used in section 48 of the Act. Apart from this consideration, the act of imposing the tax could not be said to have originated from any provision of the 1949 Act and therefore could not possibly be held to be an act done under the 1949 Act. We do not think this case can be taken to support the appellant 's contention that the assessment of the tax on it and the consequential collection of the amount in excess of the limit laid down by article 276 of the Constitution was not an act done under the Act. The appellant has mainly relied on the cases decided by the Nagpur High Court and a brief reference may now be made to them. We may refer to the case reported as The Amraoti Town Municipal Committee vs Shaikh Bhikan(1) first. The plaintiffs had sued to recover the tax which had been collected from them in excess of the lawful rate. The suit was instituted after the plaintiffs had obtained a declaration that the enhancement of the tax over that rate was illegal. The Municipal Committee had power to impose and enhance the tax. It however had enhanced the tax without following the entire procedure laid down for such enhancement and had omitted to consider the objections filed against the proposed enhancement. The question before the 'High Court was whether the collection of the tax at the enhanced rate was an act which fell within the ambit of the expression 'anything done or purported to be done under the Act ' which Act, it may be mentioned, was the C.P. & Berar Municipalities Act, 1929, the very Act with which we are concerned in the present appeal. Niyogi J. expressed at p. 219 his agreement with the principle that if the Municipal Committee exercised a power which it did not possess, it should not be regarded as acting in pursuance of the statute governing its affairs and its acts should not be regarded as being done under the statute, and further stated that principle however did not help the Municipal Committee, the appellant before him. (3) I.L.R. 533 Niyogi J. then said, after noticing the failure of the Municipal Committee to consider the objections to the proposed taxes: "Now there can be no question that the municipal committee, in imposing and collecting tax at four annas per animal, was acting exactly in accordance with section 68. It must be observed that there is a difference between a case when a corporate body exercises a power which is wholly absent and a case where it has power but it exercises it illegally or with material irregularity. In the former case the municipal committee 's act from beginning to end is illegal; whereas in the latter case the act is quite legal in the beginning but becomes illegal in the end.". Again he said: "In enhancing the tax and collecting it the municipal committee was certainly exercising although irregularly, the power conferred on it by section 68 and to that extent it appears to me that the contention that they were not acting under the statute is untenable. " The views expressed by Niyogi J., we may say with respect, find full support from Raleigh s Case(1) and Subbayya Chetty 's Case(2). Amraoti Municipal Committee 's Case(3) was in a way on all fours with the present case. In that case the Municipal Committee overlooked the provision of law about considering the objections to the proposed enhancement in tax. In the present case the Committee overlooked the constitutional requirement that the maximum limit of the tax payable by a single individual is Rs. 250. The next case is District Council, Bhandara vs Kishorilal(4). In this case the question before Bose J. was whether a suit for the recovery of an amount recovered in excess of what could be legally taxed came within the mischief of section 71 and section 73(1) of the Central Provinces Local Self Government Act, 1920 (C.P. IV of 1920). Bose J. said at p. 92: "It will be observed that both section 79 and the rule are confined to orders and decisions given under the Act. It is impossible to say that an order which contravenes the law or is made in the face of an express statutory prohibition can be said to be under the Act. The words 'purporting to be given ' or 'made under the Act ' are not present in this section and so the difficulty which arises retarding the other point is not present here. " We do not see why an ordinary decision given under the Act be not considered to be an order made under the Act. Neither of the expressions refer to the order or decision being correct or not. (1)74 I.A. 50. (2)[1964] 1 S.C.R. 752. (3) I.L.R. (4)I.L.R. 534 Section 73 of the Central Provinces Local Self Government Act prescribed that no suit shall be instituted etc. . for anything done or purporting to be done under that Act, unless the prescribed notice be first given. Bose J. presumably in view of what he had said earlier in connection with orders and decisions given under the Act, said: "I am clear that what was done here was not done 'under the Act ', so the only question is whether it 'purported to be done ' under the Act." In these observationshe seems to have equated the expression ,given under the Act 'with 'done under the Act '. His view, as we have already pointed out with reference to something done under the Act, does not find support from Raleigh 's Case(1) and Subbayya Chetty 's Case(2). BoseJ. then considered the content of the expression 'purported to bedone '. We need not discuss what he says on this point as we haveheld that the assessment made on the appellant was an assessment made under the Act and that the act of, illegal collection with respect to the amount in excess was an act done under the Act. The appellant mainly relied on the Nagpur case reported as Municipal Committee, Karanja vs New East India Press Co. Ltd., Bombay. It was held in that case that a suit for refund of a tax, illegally imposed by the Municipal Committee was not barred by reason of sections 48, 83 and 84 of the Central Provinces Municipalities Act as the Municipal Committee did not act or purport to act under the Act in imposing the illegal tax. Bose, Acting C.J., delivering the judgment, relied on his earlier decision in District Council, Bliandara Case(1) and held that the claim for the recovery of the tax illegally reallised in excess of the permissible limit were not barred by reason of sections 83 and 84. He then referred to section 48 and, after stating that the act of the Municipality when prohibited by law was wholly beyond its jurisdiction and therefore section 48 did not apply, said: "The distinction between a case where section 48 applies and a case where it does not is clearly shown in The Amraoti Town Municipal Committee vs Shaikh Bhikan(4). " We have referred to this case and expressed full agreement with the views expressed by Niyogi J. there. It appears to us that the full significance of that judgment has been overlooked in Municipal Committee, Karanja Case(3). We bold that the appellant 's suit for the recovery of the tax realised in excess of Rs. 250 a year has been rightly dismissed as (1) 74 I.A. 50. (2) ; (3) I.L.R. (4) I.L.R. 535 the correctness of the assessment of the tax could not be challenged by a suit in a Civil Court in view of section 84(3) and as the provisions of section 48 requiring the giving of notice to the Municipality and the institution of the suit within a certain period had not been complied with. We would therefore dismiss the appeal with costs. ORDER In view of the majority judgment, the appeal is allowed with costs throughout.

IN-Abs

The appellant was paying a tax at the rate of one anna per unit weight of cotton, under section 66(1)(b) of the Central Provinces Municipalities Act. 1922, from 1936. In all 1941 the rate of tax was increased to 4 as. In 1952, the appellant filed a suit for recovery of the excess,tax paid within 3 years of the date of suit. It was contended that after the coming into force of section 142A of the Government of India Act, 1935, on 1st April 1939, till 25th January 1950, a tax in excess of Rs. 50 per annum could not be imposed by the respondent, and, after the coming into force of the Constitution the upper limit of the tax was raised to Rs. 250 per annum under article 276 of the Constitution; and that as the appellant was already paying more than this amount per year even at the rate of one anna, the enhanced rate of 4 annas was illegal. The trial court decreed the suit for recovery from the Municipal Committee of excess tax paid by the appellant within 3 years of the date of suit but on appeal, the High Court held that the suit was bad for non compliance with the requirements of section 48 of the Act, according to which a suit for anything done or purported to be done under the Act shill be instituted only after the expiration of 2 months after serving a written notice and within six months from the date of the accrual of the alleged cause of action. In its appeal to this Court, the appellant contended that it was a case of recovery of an illegal tax and therefore, a, claim for its refund fell outside the provisions of section 48. The respondent contended that (i) since the ban was not upon the rate of tax but upon the excess collection thereof, the collection of a tax above the constitutional limit was not without jurisdiction but only illegal or irregular and therefore, the suit would be in respect of a matter "Purported to be done under the Act" and the provision of section 48 would apply, and (ii) on the basis of Raleigh Investment Company Ltd. vs Governor. General in Council, (74 I.A. 50) the suit was barred by section 84(3) of the Act, which enacts that no objection shall be taken to any assessment in any other manner than is provided in the Act. HELD (Per K. Subba Rao, J. R. Mudholkar and V. Ramaswami JJ.): (i) Since the respondent had no authority to levy a tax beyond what section 142A of the Government of India Act, 1935, or what article 276 permitted, the assessment proceedings were void in so far as they purported to levy a tax in excess of the permissible limit and authorise. Its collection, and the assessment order would be no answer to the suit for the recovery of the excess amount, and therefore, the suit was maintainable. [522G H] The Constitution is the fundamental law of the land and it is unnecessary to provide in any law that anything done in disregard of the Constitution is prohibited, Such a prohibition has to be read into 500 every enactment, and where such prohibition exists or can be implied, anything done or purported to be done by an authority must be regarded as wholly without jurisdiction, and is not entitled to a protection of the law under colour of which that act was done. [512A B; 516B C] Poona City Municipal Corporation vs Dattatraya Nagesh Deodhar.[1964] 8 S.C.R. 178, followed. (ii)A tax can be recovered only if it is "payable" and it would be payable only after it is assessed. It is therefore futile to contend that the ban placed by section 142A of the Government of India Act and article 276 of the Constitution, extends only to recoveries and not to an earlier stage. [513G] It is true that the respondent had jurisdiction to recover an amount up to the constitutional limit. But it cannot be contended that merely because of this, the recovery by the respondent of an amount in excess of the constitutional limit was only irregular or at the worst illegal. Where power exists to assess and recover a tax up to a particular limit and the assessment or recovery of anything above that amount is prohibited, the assessment or recovery of an amount in excess is wholly without jurisdiction. To such a case, the statute under which action was purported to be taken can afford no protection. Indeed, to the extent that it affords protection it would be bad. But it is the duty of the court to so construe it as to avoid rendering the provision unconstitutional, that is, to construe section 48 as affording protection only if what was done was something which could legally have been done by the respondent but was wrongly done by it, and reject a construction which will invalidate the provision. [515B; 516B H] (iii)The appellant 's suit could not be barred even if section 84(3) of the Act is interpreted in the same way as the Privy Council interpreted section 67 of the Income tax Act, in the Raleigh Investment Co. 's case. Unlike the Income tax Act the Act does not provide a machinery for making a claim for refund or repayment on the ground of the un constitutionality of the levy, and the jurisdiction of the civil court in cases of refund is not taken away. Even in the class of cases to which the provisions of sections 83 and 85 of the Act, which are the only provisions providing a machinery under the Act for challenging an assessment, apply, they cannot be said to provide a sufficiently effective remedy to an assessee. A reference to the High Court is only at the discretion of the appellate or revisional authority and the person aggrieved has no right to move the High Court. Besides, in the Raleigh Investment Co. 's case, the expression "assessment made under this Act was given too wide a construction, because, it is difficult to appreciate how taking into account an ultra vires provi sion, which in law must be regarded as not being a part of the Act at all, will make the assessment as one under the Act. [517G; 518B, F, H; 519A B; 520D F; 521H] The exclusion of the jurisdiction of the civil court is not to be readily inferred but such exclusion must either be explicitly expressed or clearly implied. One of the corollaries flowing from the principle that the Constitution is the fundamental law is that the normal remedy of a suit will be available for obtaining redress against the violation of a constitutional provision. Moreover the provisions of article 265 of the Constitution preclude the levy or collection of a tax except by authority of law, which means only a valid law. There was no corresponding provision in the various Acts for the governance of India which preceded the Constitution and the decision in the Raleigh Investment Co. 's case was given in that context. Further under article 501 226, the Constitution has provided a remedy to a citizen to obtain redress in respect of a tax levied or collected under an invalid law, and this remedy will not be affected by any provision like section 67 of the Income tax Act, or section 84(3) of the Act. [520G H; 521C E] Thus, when the question merely is whether the assessment had been made according to law, the respondent having jurisdiction over the subject matter and the assessee, the provisions of section 84(3) may be a bar to a suit. But, where the question raised is as to the jurisdiction of the respondent to proceed against the assessee, and levy on or collect from him an amount in excess of that permitted by the Constitution, the matter would be entirely out of the bar of that provision. [522E G] Per Raghubar Dayal and Bachawat, JJ. (dissenting): The appellant 's suit for the recovery of the tax realized in excess of Rs. 250 a year was rightly dismissed, as the correctness of the assessment of the tax could not be challenged by a suit in a civil court in view of section 84(3) and as the provisions of section 48, requiring the giving of notice to the respondent and the institution of the suit within a certain period, had not been complied with. [534H; 535A B] The suit was in essence a suit for, first, modifying the amount assessed and then to decree the payment of the amount held to have been paid in excess of the tax as modified by the court. But the act of assessing the tax or the consequential act of collecting the amount cannot be broken up into two acts, one, upto the legal limit and the other in excess of it. The act of assessment or of collection therefore was an act done by the respondent under the provisions of the Act, though it acted wrongly in assessing the tax at an excessive figure, and consequently in collecting an amount in excess of that which could have been legally collected. The suit was therefore fully covered by section 48 and had to be dismissed. [526E H] In view of section 84(3), exclusive jurisdiction to determine the correctness of the amount assessed is given to the authorities mentioned in section 83. The result is that no other authority can enter into the question of the correctness of the assessment on grounds of law or fact, and therefore the appellant 's suit was barred from the cognizance of the civil court. [527G] Raleigh Investment Co. Ltd. vs Governor General in Council, L.R. 74 I.A. 50 and Firm of Illuri Subbayya Chetty & Sons vs State of Andhra Pradesh; , , followed. Poona City MuniciPal Corporation vs Dattatraya Nagesh Deodhar, ; , distinguished.

Appeal Nos. 38 and 39 of 1964. Appeals from the judgment and order dated April 10, 1961 of the Madhya Pradesh High Court in Miscellaneous Civil Case No. 63 of 1961. C. K. Daphtary, Attorney General, R. Ganapathy Iyer and R. N. Sachthey, for the appellant (for both the appeals). N. D. Karkhanis, Rameshwar Nath, section N. Andley and P. L. Vohra, for the respondent (in both the appeals). The Judgment of the Court was delivered by Subba Rao, J. These two appeals by certificate arise out of the judgment of the High Court of Madhya Pradesh, Jabalpur, in Miscellaneous Case No. 63 of 1961 from a reference under section 66(2) of the Indian Income tax Act, 1922, made by the Income tax Appellate Tribunal, Bombay. To appreciate the contention of the parties the following genealogy will be useful: Kalooram Todi : : : : Govindram Gangaprasad (d. in January 1943) (d. in 1933) : : : : : Bachhulal : : : : : : Madanlal (predeceased his Nandlal Babulal father) (d. 9 12 1945) (b. 25 1 1935) : : Jankibai Banarsibai : : : : Radheyshyam (predeceased Venkatlal his father) (b. 13 12 1931) : : Shantibai : : Vishwanath (adopted) (b. 13 4 1941) 490 After the death of Kalooram Todi, his two sons by name Govindram and Gangaprasad constituted a joint Hindu family which owned extensive property in Jaora State and a sugar mill called "Seth Govindram Sugar Mills" at Mahidpur Road in Holkar State. In the year 1942 Bachhulal filed a suit for partition against Govindram and obtained a decree therein. In due course the property was divided and a final decree was made. We are concerned in these appeals only with the Sugar Mills at Mahidpur Road. After the partition Govindram and Bachhulal jointly worked the Sugar Mills at Mahidpur Road. After the death of Govindram in 1943, Nandlal, the son of Govindram, and Bachhulal, as kartas of their respective joint families, entered into a partnership on September 28, 1943 to carry on the business of the said Sugar Mills. Nandlal died on December 9, 1945, leaving behind him the members of his branch of the joint family, namely, the three widows and the two minor sons shown in the genealogy. After the death of Nandlal, Bachhulal carried on the business of the Sugar Mills in the name of "Seth Govindram Sugar Mills". For the assessment year 1950 51, the said firm applied for registration on the basis of the agreement of partnership dated September 28, 1943. The Income tax Officer refused to register the partnership on the ground that after the death of Nandlal the partnership was dissolved and thereafter Bachhulal and the minors could be treated only as an association of persons. On that footing he made another order assessing the income of the business of the firm as that of an association of persons. Against the said orders, two appeals one being Appeal No. 21 of 1955 56 against the order refusing registration and the other being Appeal No. 24 of 1955 56 against the order of assessment were filed to the Appellate Assistant Commissioner. The Appellate Assistant Commissioner dismissed both the appeals. In the appeal against the order of assessment, the Appellate Assistant Commissioner exhaustively considered the question whether there was any partnership between the members of the two families after the death of Nandlal and came to the conclusion that in fact as well as in law such partnership did not exist. Two separate appeals, being Income tax Appeal No. 8328 of 1957 58 and Income tax Appeal No. 8329 of 1957 58, preferred to the Income tax Appellate Tribunal against the orders of the Appellate Assistant Commissioner were dismissed. The assessee made two applications to the Tribunal for referring certain questions of law to the High Court, but they were dismissed. Thereafter, at the instance of the assessee the High Court directed the Tribunal to submit the following two questions for its decision and it accordingly did so: "(1) Whether on the facts and in the circumstances of the case, the status of the assessee, "Seth Govindram Sugar Mills, Mahidpur Road, Proprietor Nandlal Bachhulal, Jaora", is an Association of Persons or a firm within the meaning of Section 16(1)(b) of the Income tax Act. " 491 "(2) Whether the order of the Appellate Tribunal is illegal on account of the Tribunal having committed an error of record and having omitted to consider the relevant material in the case. " The High Court, for reasons given in its judgment, held on the first question that in the assessment year 1949 50 the status of the assessee was that of a firm within the meaning of section 16(1),(b) of the Income tax Act and on the second question it held that the Tribunal misdirected itself in law in reaching the conclusion that the parties could not be regarded as partners. The present two appeals are preferred against the said order. At the outset we must make it clear that the question of registration could not be agitated in these appeals, as that question was not referred to the High Court. We shall, therefore, only consider the points raised by the questions referred to the High Court and held by the High Court against the appellant. Indeed, the only effective question is whether during the assessment year 1950 51 the assesee was a firm or an association of persons. The first question raised by the learned Attorney General is that on the death of Nandlal the firm of Seth Govindram Sugar Mills was dissolved and thereafter the income of the said business could only be assessed as that of an association of persons. To appreciate this contention some more necessary facts may be stated. The deed of partnership dated September 28, 1943, was executed between Nandlal and Bachhulal. It is not disputed that each of the said two partners entered into that partnership as representing their respect;, joint families. Under cl. (3) of the partnership deed, "The death of any of the parties shall not dissolve the partnership and either the legal heir or the nominee of the deceased partner shall take his place in the provisions of the partnership" The question is whether on the death of Nandlal his heirs, i.e., the members of his branch of the family, automatically became to partners of the said firm. The answer to the question turns upon section 42 of the (Act 9 of 1932). the material,part of which reads: "Subject to contract between the partners a firm is dissolv ed by the death of a partner. " While for the appellant the leaned Attorney General contended that section 42 applied only to a partnership consisting of more than two partners, for the respondent Mr. Karkhanis argued that the section did not impose any such limitation and that on its terms it equally applied to a partnership comprising only two partners. It was argued that the contract mentioned in the over riding clause was a contract between the partners and that, if the parties to the contract agreed that in the event of death of either of them his successor would be inducted in his place, the said contract would be binding 492 on the surviving member. On the death of one of the partners, it was said, his heir would be automatically inducted into the partnership, though after such entry he might opt to get out of it. This conclusion the argument proceeded was also supported by section 31 of the Partnership Act. Section 31 of the Partnership Act reads: "(1) Subject to contract between the partners and to the provisions of section 30, no person shall be introduced as a partner into a firm without the consent of all the existing partners." Converting the negative into positive, under section 31 of the Partnership Act if there as a contract between the partners, a person other than the partners could be introduced as a partner of the firm without the consent of all the existing partners. A combined reading of sections 42 and 31 of the Partnership Act, according to the learned counsel, would lead to the only conclusion that two partners of a firm could by agreement induct a third person into the partnership after the death of one of them. There is a fallacy in this argument. Partnership, under section 4 of the Partnership Act, is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. Section 5 of the said Act says that the relation of partnership arises from contract and not from status. The fundamental principle of partnership, therefore, is that the relation of partnership arises out of contract and not out of status. To accept the argument of the learned counsel is to, negative the basic principle of law of partnership. Section 42 can be interpreted without doing violence either to the language used or to the said basic principle. Section 42(c) of the Partnership Act can appropriately be applied to a ' partnership where there are more than two partners. If one of them dies, the firm is dissolved; but if there is a contract to the contrary, the surviving partners will continue the firm. On the other hand, if one of the two partners of a firm dies, the firm automatically comes to an end and, thereafter, there is no partnership for a third party to be introduced therein and, therefore, there is no scope for applying cl. (c) of section 42 to such a situation. It may be that pursuant to the wishes of the directions of the deceased partner the surviving partner may enter into a new partnership with the heir of the deceased partner, but that would constitute a new partnership. In this light section 31 of the Partnership Act falls in line with section 42 thereof. That section only recognizes the validity of a contract between the partners to introduce a third party without the consent of all the existing partners: it presupposes the subsistence of a partnership; it does not apply to a partnership of two partners which is dissolved by the death of one of them, for in that event there is no partnership at all for any new partner to be inducted into it without the consent of others. There is a conflict of judicial decisions on this question. The decision of the Allahabad High Court in Lal Ram Kumar vs 493 Kishori Lal(1) is not of any practical help to decide the present case,. There. from the conduct of the surviving partner and the heirs of the deceased partner after the death of the said partner, the contract between the original partners that the partnership should not be dissolved on the death of any of them was inferred. Though the partnership there was only between two partners, the question of the inapplicability of section 42(c) of the Partnership Act to such a partnership was neither raised nor decided therein. The same criticism applies to the decision of the Nagpur High Court in Chainkarcin Sidhakaran Oswal v Radhakisan Vishwnath Dixit(2). This question was directly raised and clearly answered by a Division Bench of the Allahabad High Court in Mt. Sughra vs Babu(3) against the legality of such a term of a contract of partnership consisting of only two partners. Agarwala, J., neatly stated the principle thus: "In the case of a partnership consisting of only two partners, no partnership remains on the death of one of them and, therefore, it is a contradiction in terms to say that there can be a contract between two partners to the effect that on the death of one of them the partnership will not be dissolved but will continue . . Partnership is not a matter of status, it is a matter of contract. No heir can be said to become a partner with another person without his own consent, express or implied. " This view accords with that expressed by us earlier. In Narayanan vs Umayal(4). Ramachandra lyer J., as he then was, said much to the same effect when he observed thus: ". . . if one of the partners died, there will not be any partnership existing to which the legal representatives of the deceased partner could be taken in. In such a case the partnership would come to an end by the death of one of the two partners, and if the legal representatives of the deceased partner joins in the business later, it should be referable to a new partnership between therein." But Chatterjee J., in Hansraj Manot vs Messrs. Gorak Nath Pandey(5) struck a different note. His reasons for the contrary view are expressed thus: "Here the contract that has been referred to s the contract between the two partners Gorak Nath and Champalal Therefore, it cannot be said that the contract ceased to have effect because a partner died. The contract was there. There was no new contract (1) A.T.R. 1946 All. 259. (2) A.T.R.1956 nag. 46 (3) A.I.R. 1952 All. 506, 507. (4) A.I.R, 1959 Mad. 283,284. (5) , 264. (N)4SCI 5 494 with the heirs and there was no question of a new contract with the heirs because of the original contract, and by virtue of the original contract the heirs become partners as soon as one of the partners died. . . As soon as there is the death, the heirs become the partners auto matically without any agreement between the original Partners by virtue of the original agreement between the Partners while they were surviving. there is no question of interregnums. As soon as the death occurs the right of somebody else occurs. The question of interregnums does not arise. The heirs become partners not because of a contract between the heirs on the one hand and the other partners on the other but because of the contract between the original partners of the firm. " With great respect to the learned Judge, we find it difficult to appreciate the said reasons. The learned Judge seems to suggest that by reason of the contract between the original partners, the heirs of the deceased partner enter the field simultaneously with the removal by death of the other partner from the partnership. This implies that the personality of the deceased partner projects into that of his heirs, with the result that there is a continuity of the partnership without any interregnums. There is no support either on authority or on principle for such a legal position. In law and in fact there is an interregnums between the death of one and the succession to him. We accept the view of the Allahabad and Madras High Courts and reject the view expressed by Nagpur and Calcutta High Courts, The result of the discussion is that the partnership between Nandlal and Bachhulal came to an end on the death of Nandlal on December 9, 1945. The next question is whether after the death of Nandlal a new partnership was entered into between the representatives of the two branches of the families, i.e., Nandlal 's and Bachhulal 'section Before we consider this question it is as well that we advert to incidental questions of law that were raised. One is whether the widow of Nandlal could under Hindu law be a karta of the joint Hindu family consisting of three widows and two minors. There is conflict of view on this question. The Nagpur High Court held that a widow could be a karta: see Commissioner of Income tax, C. P. & Berar vs Seth Laxmi Narayan Raghunathdas(1); Pandurang Dahke vs Pandurang Gorle(2), The Calcutta High Court expressed the view that where the male members are minors and their natural guardian is the mother, the mother can represent the Hindu undivided family for the purpose of assessment and recovery of taxes under the Income tax Act: see Sushila Devi Rampurla vs Income tax Officer(2); and (3) 495 Sm. Champa Kumari Singhi vs Additional Member, Board of Revenue, West Bengal(1) The said two decisions did not recognize the widow as a karta of the family, but treated her as the guardian of the minors for the purpose of income tax assessment. The said. decisions, therefore, do not touch the question now raised. The Madras and Orissa High Courts held that coparcenership is a necessary qualification for the managership of a joint Hindu family and as a widow is not admittedly a copartner, she has no legal qualifi cations to become the manager of a joint Hindu family. The decision of the Orissa High Court in Budhi Jena vs Dhobai Naik(2) followed the decision of the Madras High Court in V.M.N. Radha Ammal vs Commissioner of Income tax, Madras(2) wherein Satyanarayana Rao J., observed: "The right to become a manager depends upon the fundamental fact that the person on whom the right devolved was a copartner of the joint family Further, the right is confined to the male members of the family as the female members were not treated as copartner though they may be members of the joint family. " Viswanatha Sastri J., said: "The managership of a joint Hindu family is a creature of law and in certain circumstances, could be created by an agreement among the copartner of the joint family. Coparcenership is a necessary qualification for managership of a joint Hindu family. " Thereafter, the learned Judge proceeded to state: "It will be revolutionary of all accepted principles of Hindu law to suppose that the senior most female member of a joint Hindu family, even though she has adult sons who are entitled as copartner to the absolute ownership of the property, could be the manager of the family . . . . She would be the guardian of her minor sons till the eldest of them attains majority but she would not be the manager of the joint family for she is not a copartner. " The view expressed by the Madras High Court is in accordance with well settled principles of Hindu law, while that expressed by the Nagpur High Court is in direct conflict with them. We are clearly of the opinion that the Madras view is correct. Another principle which is also equally well settled may be noticed. A joint Hindu family as such cannot be a partner in a firm, but it may, through its karta enter into a valid partnership with a stranger or with the karta of another family. This Court in Kshetra (1) (2) A.I.R. 1956 Orissa 6. (3) , 230, 232, 233. 496 Mohan Sanyasi Charan Sadhukhan vs C.E.P.T.(1) pointed out that when two kartas of different families constituted a partnership the other members of the families did not become partners, though the karta might be accountable to them. The question, therefore, is whether after the death of Nandlal the representatives of the two families constituted a new partnership and carried on the business of the Sugar Mills. Admittedly no fresh partnership deed was executed between Banarsibai, acting as the guardian of the minors in Nandlal 's branch of the family and Bachhulal. It is not disputed that partnership between the representatives of two families can be inferred from conduct. Doubtless the accounts produced before the income tax authorities disclosed that Bachhulal was carrying on the business of "Seth Govindram Sugar Mills Ltd." in the same manner as it was conducted before the death of Nandlal. Therein Kalooram Govindram and Gangaprasad Bachhulal were shown as partners, Govindram having 10 annas share and Bachhulal having 6 annas share. There were separate current accounts for the two parties. The Appellate Assistant Commissioner, who examined the accounts with care, gave the following details from the accounts ason November 1, 1948: Joint capital account of Kalooram Govindram and Gangaprasad Bachhulal in the ratio of 10 : 6 Rs. Credit balance 10,78,660 Current Accounts: Gangaprasad Bachhulal Do. 10,46,797 Kalooram Govindram Do. 8,30,348 Profit & Loss Account Debit balance 14,01,669 No profit or loss was adjusted to the current account of the parties. Thereafter the accounts were closed as on 31 3 1950, when the capital account was squared up by transferring that much loss from the profit and loss account and balance in the profit and loss account was transferred in the ratio of 10:6 to the current accounts of the two parties. Thus the profit and loss account showed: Net debit balance including current Rs. year 's loss 17,51,992 Loss set off against capital account 10,78,666 . . . . Rs. 6,73,326 Transferred to partners ' accounts: Messrs. Kalooram Govindram 4,20,829 Messrs. Gangaprasad Bachhulal 2,52,497 6,73,326 . . . . Balance Nil (1)[1954] S.C.R. 497 The accounts only establish that Bachhulal was doing the business of Govindram Sugar Mills Ltd. But Banarsibai 's name was not found in the accounts. If she was a partner, her name should have found a place in the accounts. Not a single document has been produced on behalf of the assessee which supports the assertion that Banarsibai acted as a partner or was treated by the customers of the firm as a partner. There is not a little of evidence of conduct of Bachhulal, Banarsibai or even of third parties who had dealings with the firm to sustain the plea that Banarsibai was a partner of the firm. Indeed, the conduct of the parties was inconsistent with any such partnership between Banarsibai and Bachhulal. After the death of Nandlal, Banarsibai and Shantibai applied to Jaora District Court for the appointment of guardians to look after the properties and the persons of the two minors; and on January 21, 1946, four persons other than these two widows were appointed as guardians of the minors. If Banarsibai was acting as a guardian of the minors representing the family in the business, she would not have applied for the appointment of others as guardians. On October 4, 1952, a partnership deed was drawn up between Bachhulal on the one hand and the minors represented by the said four guardians on the other. If Banarsibai was the representative of the family in the business, this document would not have come into being Banarsibai also had no place in another partnership deed which was executed on March 27, 1953, between Venkatlal represented by the aforesaid guardians and Bachhulal. The evidence, therefore, demonstrates beyond any reasonable doubt that Banarsibai was nowhere in the picture and that Bachhulal carried on the business of the Sugar mills on behalf of the two families. Nor is there any evidence to show that from 1943 till the assessment year the guardians of the minors appointed by the District and Sessions Judge, Jaora, in 1946 representing the minors entered into a partnership with Bachhulal. The partnership deeds of 1952 and 1953 were subsequent to the order of assessment and they contain only self serving statements and they cannot, in the absence of any evidence, sustain the plea of earlier partnership. Indeed, the guardians were only appointed for the properties situated within the jurisdiction of the District Judge, Jaora, and they could not act as guardians in respect of the properties outside the said jurisdiction. If they were acting as partners with Bachhulal, their names would have been mentioned either in the accounts or in the relevant documents pertaining to the business. The conflicting version given by the assessee in regard to person or persons who actually represented the family in the partnership in itself indicates the falsity of the present version. It must, therefore, be held that the Court guardians did not enter into a partnership with Bachhulal. But, Venkatlal became a major on December 13, 1949, i.e., during the accounting year 1949 50. On October 17, 1951, an application for registration was received by the Income tax Officer 498 signed by Venkatlal and Bachulal who are shown as partners representing their respective joint families. The return of income submitted along with the application for registration was signed by Venkatlal on August 29, 1951. After Venkatlal became a major, there was no obstacle in his representing his branch of the family, in the partnership. Indeed, it was conceded in the High Court that there was a partnership from December 13, 1949, when Venkatlal, attained majority. Having regard to the said circumstances and the concession, we must hold that from December 13, 1949, the business was carried on in partnership between Venkatlal, representing his branch of the family, and Bachhulal, representing his branch of the family. In the result we set aside that part of the finding of the High Court holding that the partnership business was carried on by the representatives of the two families after the death of Nandlal, but confirm the finding to the extent that such a partnership came into existence only after December 13, 1949. In this view, we answer the two questions referred to the High Court as under: (1)For the assessment year 1950 51 the status of the, assessee was that of a firm within the meaning of section 16 (1)(b) of the Income tax Act, 1922. (2)The Tribunal misdirected itself in law in reaching the conclusion that the parties could not be regarded as partners. In the result the appeals are dismissed. But as the respondent failed in its main contentions, the parties will bear their own costs in this Court. Appeals dismissed.

IN-Abs

A joint Hindu family consisting of two branches owned a sugar mill. After partition, the two kartas entered into a partnership in 1943, to carry on the business of the sugar mill. The two partners represented the respective joint families, and the partnership deed provided that the death of any of the parties shall not dissolve the partnership and either the legal heir or the nominee of the deceased partner should take his place. One of the kartas died in 1945 leaving as members of his branch of the family, three widows and two minor sons. The other partner continued the business of the sugar mill in the firm name. For the assessment year 1950 51, the assessee (respondent firm) applied for registration on the basis of the partnership agreement of 1943. The Income tax Officer, Appellate Assistant Commissioner and the Tribunal held that there was no partnership between the members of the two families after the death of one of the kartas. On a reference to the High Court, it was held that the partner ship business was carried on by the representatives of the two families after the dent), of one of the kartas. In the appeal to this Court, on the question as , to whether during the assessment year 19 50 51, the assessee, was a firm within the meaning of section 16(1) of the Income tax Act, 1922, or an association of persons. HELD: The High Court was wrong in its finding. But, as a result ,of the concession by the appellant, that there was a partnership from 13th December 1949, when one of the minor sons had become a major, the status of the assessee was that of a firm for the assessment year 1950 51. [498B] A joint Hindu family as such cannot be a partner of a firm, but it may through its karta enter into a partnership with the karta of another family. [495H] Kshetra Mohan Sanyasi Charan Sadhukhan v, Commissioner of Excess Profits Tax, [19541 S.C.R. 268. followed. A widow, though a member of a joint family, cannot become its manager. [495B] Commissioner of Income tax, C.P. & Berar vs Seth Lakshmi Narayan Raghunathdas, and Pandurang Dakhe vs Pandurang Gorle. I.L.R. overruled. Therefore, in the instant case, when one of the kartas died, the partnership had come to an end. There was no scope for applying section 42(c) of the Partnership Act, 1932, because, the section is applicable only to a partnership with more than two partners. In such a case. if one of them dies, the firm is dissolved, but if there is a contract to 488 489 the contrary, the surviving partners will continue the firm. On the other hand, if there are only two partners and one of them dies, the firm automatically comes to an end and, thereafter, there is no partnership for a third party to be introduced. Section 31, which deals with the validity of a contract between the partners to introduce a third party into the partnership without the consent of all the existing partners, presupposes the subsistence of a partnership and does not apply to a partnership of two partners, which is dissolved by the death of one of them. [492E H] Hansraj Manot vs Messrs, Gorak Nath Pandey, , disapproved. Further, there was no evidence that the representatives of the two families constituted a new partnership and carried on the business of the sugar mill before 13th December 1949, when, it was conceded a new partnership had come into existence.

Appeal No. 21 of 1963. Appeal from the judgment and order dated August 1, 1961 of the Rajasthan High Court in Civil Writ No. 86 of 1960. C. C. Kasliwal Advocate General for the State of Rajasthan and M. M. Tiwari, for the appellants. Rameshwar Nath section N. Andley, and P. L. Vohra, for the respondent. The Judgment of the Court was delivered by Raghubar Dayal, J. This appeal, on certificate granted by the Rajasthan High Court, raises the question of the applicability of the provisions of Chapter IV and thereby of r. 30 of the Rajasthan Minor Mineral Concession Rules, 1955, hereinafter called the rules, to the grants of mining leases under the provisions of Chapter V of the rules. The facts leading to this appeal are briefly these. The respondent obtained the mining lease for extracting sand stone from the mines in certain area from the Government of Rajasthan in 1956. The lease was granted as a result of auction. The period of the lease was from April 1, 1956 to July 31, 1959. The respondent applied for extension of the period upto two years in view of the mandatory nature of the main provision of r. 30 and Simultaneously also applied for the renewal of the lease for a further period in accordance with the provisions of the proviso to r. 30. The first prayer was refused and the State Government extended the period of the lease at first by six months and later by another two months. The respondent thereafter filed a writ petition under article 226 of the Constitution in the High Court and prayed for issue of a writ of mandamus directing the striking down of the order of the Government renewing the lease for 8 months and directing the State of Rajasthan further to extend the lease in the first instance for two years from July 30. 1959 to bring, it unconformity with the period of lease specified in r. 30 and to renew. after the expiry of such extended period, for a further period of 5 years under r. 30 of the rules. The State of Rajasthan, appellant, contested the petition on the ground that the provisions of Chapter IV of the rules did not apply to the grant of mining leases by auction or tender provided for by Chapter V of the rules and that in any case the initial period short of 5 years must be deemed to have been at the desire of the respondent and that any further extension of the period of the lease under the proviso was in the discretion of the Government and consequently, the respondent could not claim to have the period of the lease extended for a period of 5 years. The High Court held that the provisions of Chapter IV of the rules were applicable as far as possible to the grant of mining M/B(N) 3SCI 13 404 leases by auction under Chapter V. that though the State Government had to give a lease for 5 years in view of r. 30, yet the shorter period of the lease in favour of the respondent must, in the circumstances, be deemed to have been at his request and that the respondent was entitled to an extension of the lease by a further period of 5 years in accordance with the provisions of the proviso. It therefore directed the State Government to renew the lease for a period of 5 years from the expiry of the original lease with option of further renewal, if so desired, by another period of 5 years subject to the conditions mentioned in r. 30. It is against this order that this appeal has been filed. Two questions are raised for the appellant in this Court. The first is that the provisions of Chapter IV of the rules do not govern the grant of mining leases by auction under the provisions of Chapter V of the rules. The other is that the proviso to r. 30 gives discretion to the State Government to extend the period of the lease for any period not exceeding 5 years that it is not mandatory that the State Government must extend the lease by a period of 5 years as held by the High Court. We are of opinion that the High Court has come to a right conclusion on these two points. Section 5 of the Mines and Minerals (Regulation and Develop ment) Act, 1948 (Act LIII of 1948) empowered the Central Government to make rules, by notification in the official Gazette, for regulating the grant of mining leases or for prohibiting the grant of such leases in respect of any mineral in any area. In the exercise of its power the Central Government framed the Mineral Concession Rules, 1949, hereinafter referred to as the Central rules. Clause (ii) of r. 3 of the Central rules defined 'minor mineral ' to mean 'building stone ' etc., which admittedly included sand stone Rule 4 stated that the rules would not apply to minor minerals the extraction of which would be regulated by such rules as the State Government might prescribe. The State of Rajasthan made the rules in 1955 in the exercise of the powers conferred by r. 4 of the Central rules. Chapter IV of the rules deals with grant of mining leases and consists of rr. 19 to 32. Chapter V deals with grant of mining leases and royalty collection contracts by auction or by inviting tenders or by other methods and consists of rr. 33 to 42. Apart from the heading of Chapter IV being in general terms and so applicable to the grant of all mining leases by whatever process, a comparison of the provisions of rules in Chapter IV and those in Chapter V shows that all the incidents of a grant of a mining refuse contemplated and provided for in Chapter IV ire not provided for by Chapter V. This leads to the irresistible conclusion that matters not provided for by rules in Chapter V with regard to mining leases will be covered by provisions relating to those matters in chapter IV, as these provisions deal with the essential incidents affecting grant of mining lease. 405 We may therefore go through the provisions of Chapter IV to have a comprehensive view of what the rules provide and to see whether all of them are such that the Legislature could have intended their not applying to leases granted under Chapter V or whether they, by their nature, can apply to leases granted under Chapter IV only. Rule 19 deals with restrictions on grant of mining leases. There is no corresponding rule in Chapter V. It is inconceivable that the restrictions mentioned in r. 19 be not applicable to the grant of mining leases by auction or tender or any other method. The matters of substance are the contents of the lease, the persons to whom the minerals about which leases can be granted and not the procedure to be followed in granting the lease. Chapter IV deals with the grant of mining leases on applications for such a grant. Chapter V mainly deals with grant of mining leases by auction or by inviting tenders or by other methods. It is clear that the procedure to be followed for the grant of leases is left to the discretion of the Government though, ordinarily, in the absence if general or special orders, the procedure laid down in Chapter IV is to be followed. Sub r. (3) of r. 33 provides that leases by public auction or tender under sub r. (1) shall be given only in such a case as the Government may, by general or special order, direct and r. 42 gives discretion to Government to adopt any other method for leasing out minor mineral deposits in the interest of industry and development of the deposit. The restrictions laid down by r. 19 are that no mining lease is to be granted in respect of any minor mineral notified by Government in that behalf, that no mining lease for the notified mineral will be granted to a person unless he holds a valid certificate of approval and that no mining lease shall be granted to an individual person unless he be a citizen of India except with the prior approval of Government. These restrictions are of a general nature and salutary in effect and the Legislature, in our view, could not have made them inapplicable to the grant of mining leases under the rules in Chapter V. Rules 20 to 23 are applicable to applications for grant of mining leases. They mention the person to whom an application is to be made, the fee which is to accompany such application, what the application should contain and how priority is to be given if there be more than one application in respect of the same land. These rules cannot, by their nature, apply to the grant of mining leases by auction or tender or by any other method. Rule 24 provides for the Register of Mining Leases. Most of the particulars to be noted in this Register relate to the grant of mining leases on application but some of the particulars could be entered with respect to the mining leases granted by following the other procedure and therefore its provisions can partially apply to the mining leases granted under Chapter V. Rule 25 will also usually apply to applications only, as in the case of granting a mining lease otherwise, the Government would have ordinarily already decided 406 the area for which the lease is to be given. Rule 26 lays down a restriction on the length and breadth of an area to be leased, but gives discretion to the Government to relax the provisions of the rule. This rule is of general application, subject to the discretion in the Government to relax its provisions and there is no reason why it would have been made inapplicable to mining leases granted under Chapter V. Rule 27 provides that the boundaries of the area covered by a mining lease shall run vertically down below the surface towards the centre of the earth. Such a specification of the boundaries of the area is very essential in connection with mining leases and the rule about it must apply to all mining leases granted under Chapter V. Rule 28 deals with deposit of security and applies to applicants for mining leases and not to those who are to get leases under Chapter V. There is a specific provision for security under r. 37 (iv), in Chapter V. Rule 29 deals with transfer of mining leases and provides that a lessee with the previous sanction of the Government and subject to certain conditions could transfer his lease or any right or interest therein. There is no corresponding rule in Chapter V. This indicates that r. 29 will apply to the transfer of mining leases granted under Chapter V. There is no good reason why such a lessee be deprived of his right to transfer or be free from any restriction laid down in r 29. Rule 30 deals with the period of lease and is the rule which is to be considered by us. Rule 31 lays down the conditions subject to which the mining lease is granted. This rule has 24 clauses dealing with various matters. It is clear from r. 41 in Chapter V dealing with the execution of lease that the terms and conditions mentioned in r. 31 would be included in the lease executed by the lessee to whom a mining lease is ranted under Chapter V. of course, r. 41 provides that Such terms and conditions would be so modified as might be necessary by reason of the provisions of rr. 33 and 34. Sub.r, (2) of r. 23 provides that in cases of grant of mining leases by auction or by inviting tenders the annual dead rent of the lease would be determined in the auction or by tend as the case may be and may exceed the rate give in the Second Schedule to the rules. Rule 34 deals with payment of royalty through the contractor for royalty collection. These provisions of rr. 33(2) and 34 would re quire modification in conditions (3) and (4) of r. 31. It has been urged that the specific mention of r. 31 in r. 41 indicates that the other rules in Chapter IV are not applicable to the grant of mining leases under Chapter V. We do not agree and 407 are of opinion that the specific mention of r. 31 is made in r. 41 In view of the fact that it was to apply with suitable modifications. Rules in Chapter IV which apply as they stand do require no specific mention for their applicability to the rant of mining leases under Chapter V. Rule 32 deals with the currency of the lease and provides that the currency of the lease shall be from the date of communication to the party unless otherwise stated, that the lessee shall have no right to continue work or to accumulate stock on or after the date of termination of the lease however unless otherwise sanctioned by Government and that all accumulated stock and immovable property left in the leased out area after the date of expiry of the lease shall be deemed to be Government property. The provisions of this rule are essential to define the currency of the mining lease granted under Chapter V and to the rights of the lessee and the State in regard to continuing the work after the date of termination of the lease or to the matter lying in the leased out area after the expiry of the lease. There is no corresponding rule in Chapter V. Rule 32 must be deemed to apply to the leases granted under Chapter V. It would thus appear that the provisions of rr. 19, 26, 27 29 and 32, by their nature, must apply to the leases granted under Chapter V as they are expressed in general terms and can apply to all mining leases. If they were not intended to apply to mining leases granted under Chapter V, the legislature would have made an express provision about it and would have also made some suitable corresponding provisions for the leases granted under Chapter V. We are therefore of opinion that the contention that the rules under Chapter IV do not apply to mining leases granted under Chapter V is not sound and that the High Court rightly held that they do apply so far as applicable to mining leases granted tinder Chapter V. Rule 30 deals with the period of lease. This rule will apply to leases granted under Chapter V both because the rules under Chapter IV apply to such leases and because there is no corresponding rule in Chapter V. Reference has been made to rr. 38 and 39 in Chapter V which deal with certain payments if the period of lease is not more than 1 year or is more than one year respectively. The fixing of the period of the lease is an essential term of the lease, Rule 32 in Chapter IV provides when the lease is to commence. The lease should also provide the time when it should terminate. That can be done either by setting down the actual date or by expressing the period of the lease. Rules 38 and 39 provide for different matters. They apply when the period of the lease is already fixed tinder the terms of the lease and in accordance with the rules. 408 The next matter to be considered is the construction of r.30 which reads: Period of lease A mining lease may be granted for a period of 5 years unless the applicant himself desires it shorter period; Provided that the period may be extended by the Government for another period not exceeding 5 years with option to the lessee for renewal for another equivalent period in case the lessee guarantees investments in machinery equipments and the like, it least to the tune of 20 times the value of annual dead rent within 3 years from the of such extension. The value of the machinery, equivalent and the like shall be determined by the Government. Were the lease is so renewed, the dead rent and the surface rent shall be fixed by the Government within the limits given in the Second Schedule to these rules, and shall in no case exceed twice the original dead rent and surface rent respectively, and the royalty shall be charged at the rates in force at the time of renewal". It is urged for the appellant that the State Government has discretion to fix the initial period of the lease as well as to fix the of the extension of the lease after the expiry of the initial period. The High Court did not agree with this submission of the and, we think, rightly. The word 'may ' in the main provision of the rule must mean shall ' and make the provision mandatory. This is obvious from the last portion of the provision. If the State Government had discretion to fix any period of the lease, the last portion of the provision would be redundant. The Government could fix the period of the lease at any period shorter than live yea AS. But the provision requires the fixing of the period shorter than 5 years only when the applicant desires a shorter period. The period of the lease therefore can be shorter than five years only when the applicant desires and not when the Government desires. Government must fix the period of the lease at 5 years in the absence of any expression of desire by the applicant for taking the lease for a shorter period. The word 'may ' in the proviso in regard to the extension of the period by Government should also be construed as 'shall so as to make it incumbent on Government to extend the period of the lease if the lessee desires extension. Of course no question for the extension of the lease can arise if the lessee himself does not wish to have the lease for a further period. It is on account of this option existing in the lessee that the word 'may ' has been used in this context. The lessee has been given a further option to have the lease extended by another five years but such an option is to be respected only if he gives the guarantee referred to in the proviso. If he is not prepared to give such a guarantee, he cannot exercise the option for 409 the extension of the lease and the lease must automatically expire at the end of the first extended period. The first extension has to be for five years. Government has no option in that regard as well. This appears from what is provided in connection with the option of the lessee for a second extension. The second extension, at his option, is to be for a period equivalent to the period of the first extension. The guarantee to be given is to the effect that the lessee would invest in machinery etc. , at least to the tune of 20 times the value of the annual dead rent within 3 years from the grant of such extension. There is no point in, taking a gurantee to make certain investments within three years if the second extended period of the lease is of a shorter duration as it can be if Government has a discretion in granting extension for a period shorter than 5 years. If the first extension be for less than three years the second extension cannot be for a longer period. If that expression 'such extension ' refers to the extension on the exercise of the option of the lessee at the end of the first extension, it would be a preferable construction of the proviso to hold that the Government is bound to extend the period of the lease for five years at the expiry of the initial period of the lease and that the lessee will have the option for renewal of the lease for another five years in case be guarantees the requisite investment as mentioned in the proviso. Another way of looking at the provision and a better way is that the expression 'such extension ' refers to the first extension which the Government grants at the expiry of the initial term of the lease. This means that at the time of granting the first extension the lessee has to choose whether he should also ask for the option for a second extension. The option would then be an integral part of the agreement about the first extension. This is also indicated from the language of the proviso linking the period of extension with the option for renewal of the lease for an equivalent period If no option as such is given at the time and is not a term of the lease, the lessee may not be able to ask for a second extension at the end of the first extended period of the lease. When he secures the exercise of such an option as a term of the lease, he has to guarantee that within the first three years of the extended period of the lease he will make the heavy investment mentioned in the proviso with the resultant confidence that he will have undisturbed lessee rights for a period of 10 years from the expiry of the initial term of the lease: Whichever construction be put, with respect to the time when the term about option is to be settled between the parties, it must follow that the period of the first extension must be five years and not less. We are further of opinion that the High Court is right in holding that the respondent 's taking the lease for a period upto July 31, 1959 must amount to his expressing a desire for having a lease for that period. If he did not so desire, he need not have bid and taken the lease for the period for which it was to be given by auction. 410 it has been argued for the State that the High Court granted relief to the respondent in excess of what he had prayed, inasmuch as the High Court had directed the Government to renew the respondent 's first lease for a period of 5 years with option to further renewal if so desired for another period of 5 years subject to the condition mentioned in r. 30 when the respondent had not prayed for any direction with respect to the option for a second extension of the lease. The contention is not sound. The relief claimed after the expiry of the period of the first lease, which, according to the respondent, was also to be extended by two years, reads: " and then, after the expiry of the period of five years the lease be renewed for a period of five years under Rule 30 ,of Rajasthan Minor Mineral Concession Rules, 1955". The renewal was to be under r. 30. Rule 30 itself requires extension of the lease with option in the lessee for obtaining another extension for an equivalent period. This option must be a term of the lease and therefore must be incorporated in the lease at the time when the first extension is granted. The prayer therefore should be deemed to include a prayer for an extension of 5 years with the necessary option. Even if the prayer was not so made, the High Court was competent to make the direction in accordance with the requirements of the proviso to r. 30. The direction for renewal is, in our view. in full accordance with what the proviso requires. The result is that the appeal fails and is dismissed with costs. Appeal dismissed.

IN-Abs

The respondent who had as a result of auction obtained a mining lease from the appellant State, applied for extension of the lease period in view of the mandatory nature of the main provision of rule 30 and simultaneously also applied for renewal of the lease in accordance with the provisions of the proviso to rule 30. The appellant refused the first prayer but extended the period by a few months. The respondent thereafter, filed a writ petition in the High Court for striking down the order of the Government renewing the lease by a few months and for directing the appellant to extend the lease in the first instance for two years to bring it in conformity with the period of lease specified in rule 30 and to renew after the expiry of such extended period, for a further period of 5 years under rule 30. The appellant contended that the provisions of Chapter IV of the rules did not apply to the grant of mining leases by auction or tender provided for by Chapter V of the rules and that in any case the initial period short of 5 years must be deemed to have been at the desire of the respondent and that any further extension of the period of lease under the proviso was in the discretion of the appellant and consequently, the respondent could not claim to have the period of the lease extended for a period of 5 years. The High Court disagreed with the appellant 's contentions and allowed the petition. In appeal by certificate; HELD: Matters not provided for by rules in Chapter V with regard to mining leases will be covered by provisions relating to those matters in Chapter IV, as these provisions deal with the essential Incidents affecting grant of mining leases. [404 H] Rule 30 applies to leases granted under Chapter V both because the rules under Chapter IV apply to such leases and because there is no corresponding rule in Chapter V. [407 G H] The word "may" in the proviso in rule 30 in regard to the extension of the period by, Government should also be construed as 'shall ', so as to mike it incumbent on Government to extend the period of the lease if the lessee desires extension. Of course no question for the extension of the lease can arise if the lessee himself does not wish to have the lease for a further period. It is on account of this option existing in the lessees that the word 'may ' has been used in this context. But the option given to the lessee to have the lease extended by period of another five years is to be respected only if the lessee gives the guarantee referred to in the proviso. [408 H] The first extension must be five years and not less. The period of lease can be shorter than five years only when the applicant desires and not when the Government desires. [409 B] 403

Appeal No. 5 of 1964. Appeal by special leave from the judgment and order dated December 1, 1961 of the Andhra Pradesh High Court in Case Referred No. 21 of 1960. A.V. Viswanatha Sastri, K. Jayaram and R. Vasudeva Pillai for the appellant. K.N. Rajagopal Sastri and R.N. Sachthey, for the respondent. The Judgment of the Court was delivered by Sikri, J. This appeal by special leave is directed against the judgment of the High Court of Andhra Pradesh answering the question referred to it under section 66 of the Income Tax Act, 1922, against the appellant. The question referred to was "whether on the facts and in the circumstances of the case a sum of Rs. 79,494/ is assessable as capital gains in the assessment year 1948 49. " The facts relevant to the question are as follows. The assessment year in question is 1948 49 and the accounting year is the official year 1947 48. The appellant, hereinafter referred to as the assessee, Alapati Venkataramaiah, was the proprietor of Mohan Tile Works, engaged in the manufacture of tiles and bricks and owned the factory buildings, plant and machinery. The assessee entered into an agreement dated March 17, 1948. with one Shri Manthena Venkata Raju agreeing to sell to the Mohan Industries Limited, hereinafter called the Company, the aforesaid factory, plant, machinery, furniture, stocks and goodwill for a sum of Rs. 2,00,000/ . The agreement recited that the assessee had been carrying on business under the name and style of Mohan Tile Works at Tenali and that the company to be called the Mohan Industries Limited is to be formed under the indian Companies Act, having for its object among other things the acquisition and the working of the said business. It appears that this agreement was drafted before the Company was incorporated and the recital clause was not modified when the agreement was actually executed. It is common ground that the Company was incorporated on July 5, 1947, before the date of the agreement. Since the answer to the question turns in part on the construction of the agreement it would be convenient to set out the relevant clauses, which are as follows: "1. The vendor shall sell and ' the company shall purchase: First the Goodwill of the said business (with the exclusive right to represent the company as carrying on such business in continuation of the Vendor or in succession thereto). 569 Secondly all the immovable properties specified in Schedule hereto; Thirdly all the plant, machinery, offices furniture, licences, livestocks, carts, implements and utensils to which the vendor is entitled in connection with the said business specified in the Second Schedule hereto; Fourthly all materials and semi processed materials in stock described in the third schedule. The consideration for the said sale shall be the sum of Rs. 2,00,000.00 which shall be paid and satisfied by payment in cash soon after the capital Rs. 3,00,000.00 has been raised or in any other manner agreed upon between the Directors of the Company and Vendor. The purchase shall be completed by Seventeenth day of March, 1948 at Tenali when possession of the premises shall as far as practicable be given to the company and ' the consideration aforesaid shall be paid and satisfied subject to the provisions of the agreement and thereupon the Vendor and all other necessary parties, if any, shall at the expense of the company execute and do all the assurances and things for vesting the said premises in the company and giving to it the full benefit of this Agreement as shall be reasonably required. If from any cause whatever other than the wilful default of the vendor the purchase shah not be completed by the said 17th day of March 1948 the company shall pay interest on the said sum of Rs. 2,00,000.00 (Two lakhs) cash at the rate of . . p.c. per annum. Upon the adoption of this agreement by the company in such manners as to render the same binding on the company the said Manthena shall be discharged from all liability in respect thereof. Unless before the day the company shall have become entitled to commence business either of the parties hereto may by notice in writing to the other, determine this agreement and after adopting this agreement the company shall stand in the place of the said vendor for the purpose of this clause. If this agreement shall not be adopted by the company in the manner aforesaid before and day next, either of the parties may by notice in writing to the other determine the same. " The assessee was appointed managing agents of the company on July 15, 1947, and on March 11, 1948, he wrote a letter on behalf of the company to the Director of Industries and Commerce. Madras, furnishing a detailed list of land, building and machinery comprising the assets of the company together with their value, in 570 connection with the grant of loan by Government. On March 20, 1948, the assessee was credited with the price of Rs.200000/ in the books of the company. On November 22, 1948, sale deed in respect of land was executed in favour of the company. On December 9, 1948, the company mortgaged the land with all its buildings and structures thereon and the machinery. plant and other property for Rs. 1,00,000/ to the State of Madras. On March 16. the Board of Directors, by resolution No. 22 approved the agreement dated March 17, 1948, and on April 10, 1949, the agreement was approved at the annual general meeting of the company. In the first annual report dated March 22, 1949, it was stated as follows: "The company was registered on 5th July 1947. The Memorandum of Association and Articles alongwith the prospectus of the company were published and the shareholders and the public are well aware of the objects and the prospectus of this industry in Andhra. To achieve their objects the directors entered into an agreement called vendor 's agreement, with Sri Alapati Venkatramiah, Proprietor of Mobart Tile Works on 17 3 1948. " It appears that the assessee had returned this income as capital gains in his return and the Income Tax Officer, without any discussion, held that the assessee realised an excess of Rs.79,494/over and above the original cost and this was capital gains assessable under section 12B of the Act. The assessee appealed to the Appellate Assistant Commissioner and in the grounds of appeal stated that "the Income Tax Officer erred in determining the excess over the original cost in respect of the building at Rs. 79,494/ as attracting tax to capital gains. As a matter of fact the building was sold at Rs. 1,69,950, but a sum of one lakh alone was received and ' the balance is yet to be received. The transaction therefore cannot be said to be complete nor can it be said that the profits had been realised. Therefore, the sum of Rs. 79,494/ as attracting capital gains is absolutely justified. " The Appellate Assistant Commissioner observed that the fact that a part of the sale amount had not been realised was irrelevant. Then he said that "at one stage it was contended that there was no legal transfer of the buildings. machinery, etc. to the limited company. There is no substance in this contention also. The limited company is said to have obtained a loan of more than a lakh of rupees from the Madras Government on the basis that they were the owners of the buildings. machinery, etc. which they had purchased from the appellant. The statement therefore that there was no legal transfer cannot be true. I am satisfied that the sum of Rs. 79,494/ as returned by the appellant under the head capital gains was rightly included in the assessment. " The assessee then appealed to the Appellate Tribunal. The Tribunal, by its order dated ' November 24, 1955, held that "there 571 was in fact no sale, much less legal transfer of lands, buil dings, machinery etc., to the limited liability company which was promot ed to take over the tiles business. There was only an agreement to sell . In fact, the assessee did not receive a single pie during the ye ar of account or even during the period when the capital gains was in force. He received in all Rs. 1 lakh in several instalments beginning from 25 3 1949, which is beyond the year of account. The point tha t the assessee himself returned the sum of Rs. 79,494/under the capital gains leads us nowhere. He might have done it under the advice of some "income tax expert". The assessee cannot be tied down to an inadv isably made wrong statement. In the circumstances, we delete the additio n." It appears that the Commissioner of Income Tax filed an appli cation under section 35 of the Act for the correction of the Tribunal 's Order on the ground that the Tribunal had not mentioned in the order c ertain documents which, if they had been considered, would perhaps supp ort a conclusion different from the one arrived at by the Tribunal. The Tribunal thereupon came to the conclusion that its earlier de cision deleting the amount from taxation was based on non considerati on of various materials on record and it proceeded to rectify this order as a mistake apparent from the record. Accordingly it deleted para 4 i n its order dated November 24, 1955, and substituted its order dated Mar ch 8, 1957. The Tribunal held that in pursuance of cl. 6 of the agr eement dated March 17, 1948, the possession of the entire factor y was immediately handed over to Mohan Industries and that the sale deed dated November 22, 1948 was executed for consideration of Rs. 4,500/ on ly and refers only to the land on which the factory is situated, and di d not refer to the factory, machinery and plant, etc. which had been taken possession of by Mohan Industries on March 17, 1948. Further it held that the entries in the account books of Mohan Industries under date March 20, 1948, showed that a sum of Rs. 2,00,000/ was credit ed in favour of the assessee and the asset accounts were debited as foll ows: Plant & Machinery a/L.P.27Rs. 15,989 0 0 Furniture account 2918,80500 Electric goods 31 1,289100 Site & Construction amount331,26,47O00 Stock amount 34 30,05000 Goodwill account 407,39660 Total 'Us.2,00,00000 572 Further it noticed that the assessee also made corresponding entries in the books on March 20, 1948, by debiting Rs. 2,00,000/ to Mohan Industries and crediting the various accounts in the same way. The Tribunal also relied on the letter dated March 11, 1948, from Mohan Industries to the Director of Industries, and the first annual report dated March 22, 1949. As stated above, the Tribunal referred the question set out above. The High Court came to the conclusion (1) that in the circumstances of the case it is immaterial as to when the money was actually paid because the transfer had already been made by putting the company in possession; (2) that the words used in section 12B are sale, exchange, relinquishment or transfer. If transfer is equivalent to sale, in that it should only be by a registered instrument, the Legislature would not have used two different words for that purpose. All that is required for the purpose of this section is that the assessee should have a right to receive the profits and not that he should have in fact received it. The assessee, in their view, had a right to receive the two lakh of rupees under the agreement immediately and in fact he treated it as having been received; (3) the entire movable and immovable property was transferred by giving possession to the company in the year of account and in order to perfect the title the only thing that is required was a registered conveyance in respect of land which was done subsequently; and (4) that it is apparent from the entire transaction and the method of accounting adopted both by the assessee and the company that the income had ,risen to the assessee in the year of account and there is no justification even for the contention that atleast immovable assets should be deemed to have been transferred only in the year in which the actual sale deed was executed. Accordingly, it answered the question in the affirmative. Mr. A.V. Vishwanatha Sastri, the learned counsel for the assessee contends that under section 12B of the Income Tax Act, as it stood at the relevant time, profits and gains are deemed to be the income of the previous year in which the sale, exchange or transfer took place. He says that the sale took place when on March 16, 1,949, the Board of Directors ratified the agreement dated March 17, 1948; till then there was only an agreement to sell and that an agreement to sell is neither a sale nor a transfer of a capital asset. The relevant part of section 12B was in the following terms: "12B. Capital gains (1) The tax shall be payable by an assessee under the head "Capital gains" in respect of any profits or gains arising from the sale, exchange or transfer of a capital asset effected after the 31st day of March 1946 and before the 1st day of April 1948, and such profits and gains shall be deemed to be income of the previous year in which the sale, exchange or transfer took place. . " 573 The word "capital asset" was defined to mean "property of any kind held by the assessee whether or not connected with his business, profession or vocation but does not include (i) any stock in trade, consumable stores or raw materials held for the purpose of his business, profession or vocation. " The question which arises is whether any sale or transfer took place before the first day of April, 1948. Upto that date, apart from the agreement to sell, three events had taken place. First, the assessee as managing agents had written on March 11, 1948, i.e., before the agreement was signed, to the Government regarding loan. Secondly, on March 17, 1948, the possession of the land and the buildings and machinery had ' been given to the company. Thirdly, on March 20, 1948, the assessee had been credited with the price of Rs. 2,00,000/ in the books of the company and he had also made appropriate entries in his own account books Turning now to the agreement dated March 17, 1948, it is urged that this is an agreement to sell and not a sale deed '. This is evident from clause 1 of the agreement. Further it is contended that it is a conditional agreement to sell. Reliance is placed on clauses 8 and 9 of the agreement. Clause 8 expressly contemplates adoption of the agreement by the company in such manner as to render the same binding on the company, and clause 9 contemplates that it is only after the adoption of the agreement that the company shall stand in the place of the said Mantuna Venkata Raju. It seems to us that it was a conditional agreement to sell and before it could ripen into a contract between the company and the assessee, it had to be adopted by the company. We may mention that Mr. Rajagopala Sastri urged that we should discard clauses 8 and 9 because they were meant to operate if the agreement had been executed before the incorporation of the company. But we are unable to rewrite the agreement. Clauses 8 and 9 are appropriate in an agreement which is made by an agent subject to confirmation by a principal and must be given effect to. When was the agreement adopted by the company '? We are relieved from addressing ourselves to this question because in the statement of the case, which was agreed to by the assessee and the Revenue, it is stated that "the said agreement was approved and accepted by a resolution of the Board of Directors of the Company on 26.3.1949 and in and by the said resolution the company agreed to pay purchase price in instalments commencing from 31.3.1949. The agreement was subsequently approved by the general body of share holders at a meeting held on 10 4 1949 and on such approval, acceptance and adoption, the agreement became binding on the assessee and the company. " Even if the agreement was accepted by the company in 1949, the question still remains whether any sale or transfer of assets took place before April 1948. Sale or transfer of an asset could take place, as it did in respect of the site, even before the agreement was L/P(N)4SCI 10 574 accepted. The assets comprised of two items of immovable property, viz., Plant and machinery valued at Rs. 15,989/ and site and buildings valued at Rs. 1,26,470/ . It is clear that title to these assets could not pass to the company till the conveyance was executed and registered. (See Commissioner of Income Tax vs Bhurangva Coal Co.(1) No such conveyance was executed before April 1, 1948. It is only on November 22, 1948, that a sale deed was executed and registered in respect of the site. Therefore, it is clear that the title to these assets did not pass to the company till after April 1, 1948, and consequently nO sale took place of these assets before April 1, 1948. Mr. Rajagopala Sastri however urges in the alternative that even if no sale took place before April 1, 1948, the assets had been transferred to the company before that date. He says that 'transfer ' is a wide word ' and had been used in section 12B to cover those cases where rights in assets have been transferred in such a manner as to give rise to capital gains. He further urges that in this case possession of the assets was transferred ' to the company on March 17, 1948, and the assessee could never get back possession of the immovable assets in view of section 53A of the Transfer of Property Act. In none of the cases cited before us has this point been considered. We are unable to sustain this contention. Before section 12B can be attracted, title must pass to the company by any of the modes mentioned in section 12B, i.e. sale, exchange or transfer. It is true that the word 'transfer ' is used in addition to the word 'sale ' but even so, in the context transfer must mean effective conveyance of the capital asset to the transferee. Delivery of possession of immovable property cannot by itself be treated as equivalent to conveyance of the immovable property. The High Court has relied on the entries made in the account books of the assessee and the company on March 20, 1948, but the date of sale or transfer according to section 12B is the date when the sale or transfer takes place, and it seems to us that the entries in the account books are irrelevant for the purpose of determining such a date. Mr. Rajagopala Sastri contends that the assessee should not be allowed at this stage to draw a distinction between movable and immovable assets, but in the statement of the case, which was agreed to by the assessee and ' the Revenue, a distinction is drawn thus: "The building and site was valued at Rs. 1,26,470/ .The machinery and electrical fitting which were permanently embedded in the earth were respectively valued at Rs. 15,989/ and Rs. 1,298 10 0. The stocks were valued at Rs. 30,050/ and goodwill at Rs. 7396 6 0. " We are, therefore, unable to prevent the assessee from relying upon the distinction between movable and immovable assets. In the (1) 575 result, we hold that the following assets were not sold ' or transferred before April 1, 1948. (i) Machinery valued at Rs. 15,989 0 0. (ii) Electrical fittings valued at Rs. 1,289 10 0. (iii) Buildings and site valued at Rs. 1,26,470 0 0. Therefore, no capital gains in respect of these items arose in the previous year ending March 31, 1948. This brings us to the movable assets. Stocks valued at Rs. 30,050/ are expressly exempt from the definition of capital asset, and therefore we hold that no capital gain accrued in respect of their sale or transfer. This leaves furniture valued at Rs. 18,805/ , and goodwill valued at Rs. 7,396/6/ . There is no doubt that possession of furniture was delivered on March 17, 1948, and as title to furniture can pass by delivery, capital gains, if any, accrued on that date. In the circumstances of the case, delivery must have been made with the intention of passing title. The position regarding goodwill is however different. It is an intangible asset and it ordinarily passes alongwith the transference of the whole business. It cannot be said in the circumstances of this case that the goodwill was transferred before April 1, 1948. Accordingly, we hold that only one asset, namely, furniture was transferred before April 1, 1948. In the result, we answer the question referred to the High Court as follows: "In the facts and circumstances of the case the sum of Rs. 79,494/ is not assessable as capital gains in the assessment year 1948 49, but only such part of it, if any, as is attributable to the capital gain made by the transfer of furniture valued at Rs. 18,805/ is assessable. " The appeal is accordingly accepted and as the assessee has succeeded substantially he will have his costs here and in the High Court. Appeal allowed.

IN-Abs

On 17th March 1948, the assessee entered into an agreement to sell his factory to a company, and on the very same day possession of all the assets of the factory was handed over to the company. A few days later an entry was made in the company 's account showing that a sum of Rs. 2,00,000/ had been paid to the assessee and there were corresponding entries in the assessee 's accounts also. In fact only a lakh and odd was paid to the assessee and even that amount was paid only in March 1949. In November 1948 a sale deed was executed and registered and in March 1949 the Board of Directors of the Company ratified the sale. For the assessment year 1948 49, the assessee had included in his return the sum of Rs. 2 lakhs as capital gains. The Income tax Officer held that the assessee realised an excess of Rs. 79,494/ over and above the original cost, as capital gains assessable under section 12B of the Income tax Act. The Appellate Assistant Commissioner, and the Tribunal confirmed the order. In reference, the High Court held that it was immaterial as to when the money was actually paid because the transfer had already been made to the company by possession, that for the purpose of the section the assessee should have the right to receive the profits and not that he should have in fact received it, that entire property was transferred by giving possession to the company in the year of account, and that the income had arisen to the assessee in the year of account. In appeal to this Court, it was contended that as the sale took place only in March 1949, when the Directors ratified the agreement of sale, no sale or transfer took place before 1st April 1948, as required by section 12B, and hence the amount was not liable to tax. HELD: Title to the assets could not pass to the company till the conveyance was executed and registered and consequently no sale, in the instant case, took place of the assets before 1st April 1948 as required by section 12B. [574B] Commissioner of Income tax vs Bhurangya Coal Co. 34 I.T.R. 802, referred to. Before section 12B can be attracted, title must pass to the company by any of the modes mentioned in section 12B i.e., sales exchange or transfer It is true that the word 'transfer ' is used in addition to the word 'sale ' but even so, in the context, transfer must mean effective conveyance. of the capital asset to the transferee. Delivery of possession of immovable property cannot by itself be treated as equivalent to conveyance of the immovable property. [574E] The date of sale or transfer according to section 12B is the date when the sale or transfer takes place, and the entries in the account books are irrelevant for the purpose of determining such a date. [574F G] In the present case, machinery, electrical fittings, buildings and site were not sold or transferred in the relevant year of account; only 568 one asset, namely, furniture was transferred on 17th March 1948 as title to furniture can pass by delivery. Capital gains, if any, made by the transfer of furniture accrued on that date. The position of goodwill is however different. It is an intangible asset and it ordinarily passes along with the transference of the whole business and so it was not transferred before 1st April 1948. [575A E]

Appeals Nos. 966 958 of 1964. Appeals from the judgment and decree dated September 23. 1959, of the Calcutta High Court in Appeals from Original Decrees Nos. 268 to 270 of 1957. S.V. Gupte, Solicitor General, A.K. Sen, and D.N. Mukherji, for the appellants (in all the appeals). A.V. Viswanatha Sastri and S.C. Majumdar, for respondent No. 1. The Judgment of SUBBA RAO and SHAH JJ. was delivered by SHAH, J. BACHAWAT, J. partially dissented. Shah, J. This group of appeals arises out of suits Nos. 79 and 80 of 1954 and 67 of 1955 filed by the first respondent Balai Chand Ghose (who will hereinafter be called "Balai") in the Court of the Eighth Subordinate Judge, Alipore, District 24 Parganas, West Bengal. In Suits Nos. 79 and 80 of 1954 Balai prayed that he be declared owner of the properties described in the schedules annexed to the respective plaints. In suit No. 67 of 1955 he claimed that it be declared that his wife Nirmala, is a benamidar for him and that the deed of dedication dated September 15, 1944 did not amount to an absolute dedication of the properties in suit to the deities Sri Satyanarayan Jiu & Sri Lakshminarayan Jiu and that the plaintiff is the sole Shebait of the two deities. The Trial 552 Court decreed suits Nos. 79 & 80 of 1954 holding that the plaintiff was the owner of the disputed properties and the deed of endowment Ext. 11 (a) executed on March 8, 1939 by Nirmala was "sham and colourable". In suit No. 67 of 1955 the Subordinate Judge declared that Nirmala was a benamidar of Balai of the properties in suit and the deed of endowment dated September 15, 1944, Ext. 11, did not amount to absolute dedication of the properties to the deities Sri Satyanarayan Jiu and Sri Lakshminarayan Jiu. The High Court of Judicature at Calcutta, in exercise of its appellate jurisdiction, modified the decrees passed by the Trial Court. The High Court held that the deed Ext. 11(a) was not sham, but it amounted to a partial dedication in favour of the deity Sri Gopal Jiu i.e. it created a charge on the properties endowed for the purposes of the deity mentioned in the deed. The decree passed in suit No. 67 of 1955 from which appeal No. 269 of 1957 arose was dismissed subject to the "clarification or clarifications" that it created only a charge in favour of the city or deities for the purposes recited therein and that subject to the charge, the properties belonged to Balai. With certificates of fitness granted by the High Court, these three appeals have been preferred. [After stating the facts which gave rise to the appeals His Lordship proceeded] We may briefly set out the terms of the deed Ext. II(a). It is described as a deed of dedication in respect of immovable properties valued at Rs. 20,000 for the Seba of the deity. After describing the properties it is recited that the settlor was in possession and enjoyment of the properties and that she dedicated the properties for Deb Seba. The deed then recites that the settlor had been carrying on the Seba of Sri Gopal Jiu installed by her husband, and that the properties dedicated by her husband were not sufficient for satisfactorily carrying on the Seba of Sri GopaI Jiu for ever and for perpetuating the names of her father in law and mother in law and for carrying on the work of worship of the deity of Sri Gopal Jiu regularly for ever, the provisions then set out were made. The deed proceeds ,to state: "I dedicate the above mentioned two properties more fully described in the schedule below in order that the daily and periodical Seba etc. of the said Sri Sri Gopal Thakur installed by my husband may go on regularly. From this day the said two properties become the Debuttar properties of the said 'deity Sri Sri Gopal Jiu Thakur and they vest in it in a state absolutely free from encumbrances and defects. The said deity Sri Sri Gopal Jiu becomes the full owner of the said two properties. As to this neither I nor any of my heirs and legal representatives in ' succession shall raise or be 553 entitled to lay any claim or demand at any time and even if it be done it shall be wholly void and rejected". Then the deed directs that "one good temple and ornaments worth approximately Rs. 500/ for Sri Gopal Jiu Thakur will be made out of the income of the Debuttar properties of Sri Gopal Jiu Thakur and on the temple being constructed, the deity will be installed and established therein and the expenses for worship etc. and entertaining Brahmins and other expenses in connection with the ceremony shall be met out of the income of the Debuttar properties of Sri Gopal Jiu Thakur". To meet the expenses for the worship of the deity the properties described in the schedule, it was directed, will be let out on rent and all the expenses of the deity will be derrayed out of the rents, that the Shebait shall maintain proper accounts of the income and expenditure and deposit in the deity 's fund any surplus, repair the houses yearly, pay municipal taxes etc., and out of the accumulations from the surplus income purchase immovable properties in the name of the deity and with the income erect a house at 153, Beliaghata Main Road and deposit the rent from that house in the Debuttar fund. The deed gives detailed directions with regard to succession to the Shebaitship. By the deed Nirmala and her husband Balai were constituted joint Shebaits and it was directed that after Nirmala 's death Balai shall be the Shebait, and after his death his two sons Paresh and Naresh will become Shebaits of the deity. The settlor expressed the hope that the two Shebaits and their lineal descendants will live in the same mess as members of the family and directed that any one who separated in mess will not be entitled to be a Shebait of the deity but if they separated in mess for want of accommodation "out of their own accord and being unanimous", and all the properties remain joint, they shall be entitled to remain Shebaits. On the death of the two sons, Paresh and, Naresh, their sons will become Shebaits in accordance with the shares of their respective fathers in the Shebaitship, and if any of the sons have more than one son then all such sons will together get their father 's turn of worship and will act in accordance with the terms of the deed and carry on the worship of the deity and that in the absence of sons, the settlor 's great grandsons will be appointed Shebaits, and they will protect the Debuttar property. The deed then directs that the daily Seba will be carried on in the same manner prescribed in the deed of dedication relating to the Debuttar created by Balai and the daily and periodical expenses for the worship of the deity will be met out of the Debuttar properties dedicated by Balai. Provision was then made that on the occasion of each of the festivals of Janmastami. Rasjatra and of Sri Gopal Jiu Thakur a sum of Rs. 101/ will be spent by the Shebaits for entertaining Brahmins and the poor. A monthly remuneration of Rs. 25/ is provided for the person who acts as a Shebart and it is directed that so long as the sons shall remain Shebaits in joint mess, they will get, for the 554 expenses of their common family expenses four maunds of rice, two maunds of flour per month and Rs. 2/ per day "for daily expenses". An additional amount of Rs. 10/ per month is directed to be spent on the Sankranti day i.e. on the last day of each month and Rs. 51/~ on the occasion of Sivaratri out of the Debuttar estate. All these expenses, it is directed, are to be met out of the house rents and the monthly Ticca rent of the lands of the Bustee of the Debuttar properties, but the Shebaits are not entitled to let out the house or land in permanent rights to any one nor are they entitled to mortgage, make a gift of, sell, encumber or transfer the same in any other manner, and if there be no tenant in the house or the rent of the Bustee be not realised, the expenses of the deities will be reduced and the Shebaits will get reduced remuneration proportionately. Provision is made for the devolution of the office of Shebait. Descendants in the female line are excluded from Shebaitship, until the entire male line is extinct. Provision is also made for application of the compensation received for Debuttar property: it is directed that out of the amount of compensation immovable properties will be purchased by the Shebaits in the name of the deity or the amount will be invested in Government paper in the name of the deity, and out of the interest thereof disbursements directed in the deed will be made. The deed then directs that the surplus amount remaining after meeting the cost of worship will be accumulated. The Shebaits are prohibited from residing in or otherwise using the houses appertaining to the Debuttar estate and it is directed that if any one resides or uses it, he will remain bound to pay proper rent. Paragraph 12 of the deed then provides: "If in future the Shebaits be in want of rooms for their residence then each of them will take three Cottahs of land within the Bustee No. 153, Beliaghata Main Road beginning from the southern extremity and after erecting houses thereon at his own expense will continue to enjoy and possess the same down to his sons, sons and other heirs in succession on payment of a rent of Rs. 2/ per Cottah per month to the Debuttar estate and will pay for taxes, rents and repairs etc. of the said house from their respective funds". In the event of any Shebait dying sonless after constructing a house, his widow will be entitled during her lifetime to reside in the house and will also be entitled to get food and Rs. 5/ per month as expenses. The deed then again states: "Be it stated that no one will at any time be entitled to make gift, sale or transfer in respect of the house built in the said Bustee. The said house will form a part of the Debuttar estate and the Shebait will only remain in possession of the same". 555 Finally, the deed states that to the effect stated in the deed the settlor gives to Sri Iswar Gopal Jiu Thakur installed by her husband "the properties etc. mentioned in the schedule below". In the preamble as well as in the operative part of the deed, it is stated that the settlor has dedicated the properties described in the schedule to the deed for the purpose of carrying on the worship of Sri Gopal Jiu Thakur. The deed expressly recites that the properties have, by the deed of dedication, become the properties of the deity and they vest in the deity absolutely free from all encumbrances, and that no other person has any right therein. The deed undoubtedly contains some inconsistent directions, but the predominant theme of the dedication is that the estate belongs to the deity Sri Gopal Jiu and that no one else has any beneficial interest therein. The plea raised by Balai in the two suits was that the deed of dedication Ext. 11 (a) was "a mere colourable one and was never acted upon" and that by the deed a cloud was "cast on" his title. The Trial Court accepted the plea. The High Court held that the deed was valid, but thereby only a partial dedication was intended. That there is a genuine endowment in favour of the deity Sri Gopal Jiu is now no longer in dispute. The only question canvassed at the Bar is whether the dedication is partial or complete. Balai contends that it is partial: the deity represented by Nirmala contends that it is absolute. Where there is a deed of dedication, the question whether it creates an absolute or partial dedication must be settled by a conspectus of all the provisions of the deed. If the property is wholly dedicated to the worship of the idol and no beneficial interest is reserved to the settlor, his descendants or other persons, the dedication is complete: if by the deed what is intended to create is a charge in favour of the deity and the residue vests in the settlor, the dedication is partial. Counsel for Balai contends that notwithstanding the repeated assertions in the deed of dedication that the property was endowed in favour of Sri Gopal Jiu and that it was of the ownership of the idol, the deed contained diverse directions which indicated that the dedication was intended to be partial. Counsel relied upon the following indications in the deed in support of the contention: (1) A hereditary right was granted to the lineal descendants of the settlor in the male line to act as Shebaits, and provision was made for their residence, maintenance and expenses. This was not restricted to the Shebaits only, but enured for the benefit of the members of the Shebaits ' families. (2) The income of the endowed property was in excess of the amounts required for the expenses of the deity. Expenses of the deity were, it was contended, static, whereas the income was expanding, leaving a large 556 surplus undisposed of. Provision was made for reducing the expenses of the deity in the event of the income of the property contracting. (3) The deed was supplementary to another deed executed by Balai for the benefit of the deity, and the expenses of the deity were primarily to come out of the property endowed under that deed. (4) Direction for accumulation of income of the property endowed, and other properties which may be acquired, without any provision for disposal of the accumulation disclosed an intention on the part of the settlor to tie up the property in perpetuity for the benefit of the male descendants subject to a fixed charge in favour of the deity. We do not propose to express any opinion on the validity or otherwise of the directions, under which provision for accumulation of income is made or benefit is given to persons other than the Shebaits are concerned. This enquiry is only directed to the question whether on the assumption that the directional are valid, they indicate an intention on the part of the settlor to create merely a charge on the estate endowed, reserving the beneficial interest in the settlor or her heirs. A reasonable provision for remuneration, maintenance and residence of the Shebaits does not make an endowment bad, for even when property is dedicated absolutely to an idol, and no beneficial interest is reserved to the settlor, the property is held by the deity in an ideal sense. The possession and management of the property must, in the very nature of things, be entrusted to a Shebait or manager and nomination of the settlor himself and his heirs with reasonable remuneration out of the endowed property with right of residence in the property will not invalidate the endowment. A provision for the benefit of persons other than the Shebait may not be valid, if it infringes the rule against perpetuities or accumulations, or rules against impermeable restrictions, but that does not affect the validity of the endowment. The beneficial interest in the provision found invalid reverts to the deity or the settlor according as the endowment is absolute or partial. If the endowment is absolute, and a charge created in favour of other persons is invalid the benefit will enure to the deity, and not revert to the settlor or his heirs. Evidence about the income of the endowment in favour of Sri GopaI Jiu is somewhat vague and indefinite. The deed of endowment executed by Balai for the deity to which the present deed Ext. 11 (a) is supplementary is not before the Court, and there is on the record no evidence about the income from that endowment and the directions made thereunder. The defect in the record is directly traceable to the nature of the plea raised by Balai in the 557 Court of First Instance. He had pleaded that the endowment Ext. 11 (a) made by his wife Nirmala was a "sham transaction" and was not intended to create any interest in the deity: it was not the case of Balai that the endowment though valid was partial and created a mere charge upon the property in favour of the deity. Suits Nos. 79 & 80 of 1954 were tried with suit No. 67 of 1955 and the question whether the endowment in favour of Sri GopaI Liu was partial or absolute appears to have been raised without any pleading in the former suits. There is, however, some evidence on this part of the case, to which our attention has been invited, and on which the argument to support the decree passed by the High Court is rounded by counsel for Balai. Under the deed of dedication Ext. 11(a) "one good temple and ornaments worth apapproximately Rs. 500" are to be provided for out of the property endowed. Janamashtami, Rasjatra and other festivals are to be annually celebrated and in respect of each of these festivals Rs. 101/ are to be expended. The Shebait 's remuneration is fixed at Rs. 25/ per month and for the benefit of the family of the Shebait four maunds of rice, two maunds of Atta and a sum of Rs. 2/per day for the daily expenses are provided. For performing the Seba of Sri Satyanarayan Jiu on Sankranti day every month Rs. 10/ have to be spent, and Rs. 51/ have to be spent on the Sivaratri day. Provision has been made for paying Rs. 2/ per month to a pious widow of the family for helping in the Puja and to a widow of a Shebait expenses at the rate of Rs. 5/ per month have to be paid. In the aggregate, these would amount to Rs. 2,400/per annum at the rates prevailing in 1939. Income at the date of the endowment from the Bustee land 153/1 was estimated by Nirmala to be Rs. 50/ per month, and income from the house Nos. 155 & 154/2 was estimated at Rs. 200/ . There is no clear evidence about the Municipal or other taxes, rent collection expenses and repairs. But on the materials found on the record, the plea that the income of the properties was largely in excess of the total expenses to be incurred cannot be accepted. The settlor had provided that if a Shebait is unable to reside in the house, he will be entitled to get a plot of land out of premises No. 153 at the rate of Rs. 2/ per month: whether this rent was nominal or real, need not be investigated. If provision for residence of the Shebait can be made under a deed of endowment without affecting its validity, a provision whereby the Shebait will be entitled to use the land belonging to the deity at specially low rates may not by itself amount to an impermissible reservation by the settlor. The plea that this was a simulate endowment has been abandoned by Balai. Assuming therefore that the charge for rent to be levied from the Shebaits as monthly rental was nominal, the validity of the deed of dedication will not on that ground be affected. Use of land in future by the Shebaits for erecting houses will undoubtedly reduce the land available for letting out at market P(N4SCI 9 558 rates. If the annual income of the deity was Rs. 3,000/ per annum, and some income under the deed of endowment executed by Balai, and the outgoing were Rs. 2,400/ beside taxes, collection charges for rents and the expenses for repairs, it would be reasonable to hold that there was not much disparity between the total income which the deity received in 1939 and the estimated outgoing. The fact that on account of the pressure on land increasing in the town of Calcutta, the rentals of immovable property may have gone up later, will be irrelevant in deciding whether a substantial residue was not disposed of by the deed. The direction in paragraph 6 of the deed that in the event of the rent not being realised, the expenses of the deity will be proportionately reduced and there will be proportionate reduction in the remuneration to be paid to the Shebaits also acquires significance. Whether the provision for accumulation of income of the endowment is valid, does not call for determination in this case. If there is an absolute dedication, but the direction for accumulation is invalid, the benefit of the income will enure for the benefit of the deity without restriction: the income will not revert to the settlor. The High Court observed that the deed commenced with what purported to be an absolute dedication to the deity, but it was clear that the expenses for the Seba Puja and other expenses of the deities under the deed were not of an expanding character, there being specific recitals in the deed which indicated that the dedication was merely supplementary to the earlier deed of endowment by Balai for the Seba Puja etc. of the deity. The High Court observed: "As a matter of fact there was specific recital in the deed itself, which indicated that it was merely to be supplementary to the earlier Debuttar deed of the husband Balai Chand Ghose, for the purpose of enabling the said Sheba Puja etc. to be carried on regularly and in a satisfactory manner. The expenses are practically all mentioned in the deed itself and however elaborate they may be, having regard to the nature of the properties and the estimate of the income, as appearing in the evidence before us, it is difficult to hold that any large part of said income would be spent on those expenses. This, undoubtedly, is a strong test in favour of holding that what was merely the creation of a charge for those expenses out of the properties, mentioned in the Schedule to the deed. Moreover under this deed (Ext. II(a)) (Vide clause 3) so far as the daily and periodical Shebas were concerned their expenses, or at least, the daily Sheba expenses, both fixed and occasional, were to be met out of the husband 's (Balai Chand 's) ' earlier Debuttar 559 thus leaving practically not much pressure upon the properties covered by this deed, Ext. 11 (a). It is true that in several places of this deed (Ext. 11 (a), reference has been made to the income of the Debuttar estate or advantages to the Debuttar estate or investment, in the Debuttar estate, but they all, in the context, can be read as referring to the Debuttar estate, which was created by the dedication in question, namely, the partial Debuttar or the charge which was created in favour of the particular deity. Where a charge is created and a dedication is made, it will not be inappropriate to refer to the dedicated properties as Debuttar, though only for the limited purpose of providing for that charge. That, indeed, is the meaning of partial dedication, as understood in H indu Law. The mere use of the word 'Debuttar ' would not necessarily constitute a particular endowment an absolute Debuttar. On the same principle and in same context, the payment of rent by the Shebaits, occupying particular portion of the dedicated properties for purposes of their residence, may also be explained. As a matter of fact on a reading of the entire deed, in the light of the circumstances of this case and upon a full consideration of the same, we are inclined to hold this deed, Ext. 11(a). upon its true construction, did not create an absolute Debuttar, but created only a charge in favour of the deity Sri Sri Gopal Jiu, named therein, for the various services and other necessities, referred to in several paragraphs of the said deed, Ext. 11(a)". The High Court opined that because the income of the endowed properties was large and was capable of continuous expansion, and the expenses for the purposes of the deity were fixed, it may be inferred that the settlor intended to create a mere charge and not an absolute dedication in favour of the deity. In support of this proposition, the High Court placed strong reliance upon the judgment of the Judicial Committee in Surendrakeshav Roy vs Doorgasundan Dassee and Another(1). In that case Rajah Bijoykeshav Roy bequeathed by his will property to a Thakur, to secure proper performance of the Sheba and other ceremonies and directed his two widows each to adopt a son, both of such sons being appointed Shebaits, subject to the control of the widows during their minority, with monthly allowance from the surplus income. The residue was not disposed of. Before the Judicial Committee it was urged that all the property had been devised under the will of the Raja to the deity and the heirs of the settlor had become Shebaits and were merely entitled to manage the property in the usual way. In dealing with that contention the Judicial Committee observed at p. 127: (1) L.R. 19 I.A. 108, 560 "It is true that by the first sentence of the will all is given to the Thakoor; and though in the plaint the question is mooted whether the gift is made bona fide (and of course such gifts may be a mere scheme for making the family property inalienable), it has not been really disputed. Nor indeed could it well be disputed in this case. For the last part of the will shews clearly enough that the income was to be applied first in performing the sheba of the Thakoor who is mentioned as the object of the gift, and of other family Thakoors, and in meeting the prescribed monthly allowances, and in performing the daily and fixed rites and ceremonies 'as they are now performed and met '. The testator must have been well aware that after all these charges had been met there would be a very large surplus. In fact he directs that out of the surplus each adopted son shall receive Rs. 1,000/ monthly; but of the residue after that he says nothing. There is no indication that the testator intended any extension of the worship of the family Thakoors. He does not, as is sometimes done, admit others to the benefit of the worship. He does not direct any additional ceremonies. He shews no intention save that which may be reasonably attributed to a devout Hindu gentleman, viz. to secure that this family worship shall be conducted in the accustomed way. by giving his property to one of the Thakoors whom he venerates most. But the effect of that, when the estate is large, is to leave some beneficial interest undisposed of, and that interest must be subject to the legal incidents of property". But the judgment does not lay down any rule that where the income is expanding and the expenses are static, leaving a substantial residue, it must be presumed, notwithstanding the comprehensive and unrestricted nature of the disposition, that the settlor intended to create only a charge in favour of the deity. The question is always one of intention of the settlor to be determined from a review of all the dispositions under the deed of settlement. In Sri Sri Iswari Bhubaneshwari Thakurani vs Brojonath Dey and Others(1) certain properties were dedicated by two brothers to a domestic deity and it was directed that the right of Shebait should go to their male heirs by primogeniture. In dealing with a dispute whether under the deed of settlement, there was an absolute dedication to the deity, the Judicial Committee observed at p. 211: "The dedication is not invalidated by reason of the fact that members of the settlor 's family are nominated as (1) L.R. 64 I.A 203, 561 Shebaits and given reasonable remuneration out of the endowment and also rights of residence in the dedicated property. In view of the privileges attached to dedicated property it has not infrequently happened, as the Law Reports show, that simulate dedications have been made, and a close scrutiny of any challenged deed of dedication is necessary in order to ascertain whether there has been a genuine divestiture by the settlor in favour of the idol. The dedication, moreover, may be either absolute or partial. The property may be given out and out to the idol, or it may be subjected to a charge in favour of the idol. 'The question whether the idol itself shall be considered the true beneficiary, subject to a charge in favour of the heirs or specified relatives, of the testator for their upkeep, or that, on the other hand, these heirs shall be considered the true beneficiaries of the property, subject to a charge for the upkeep, worship and expenses of the idol, is a question which can only be settled by a conspectus of the entire provisions of the will ', Pande Har Narayan vs Surju Kanwari (L.R. 43 1.A. 143). It is also of importance to consider the extent of the property alleged to be dedicated in relation to the expense to be incurred and the ceremonies to be observed in the worship of the idol. The purposes of the ,dedication may be directed to expand as the income increases, or the purposes may be prescribed in limiting terms so that if the income increases beyond what is required for the fulfilment of these purposes it may not be protected by the dedication". In a recent judgment of this Court in Sree Ishwar Sridhar Jew vs Sushila Bala Dasi and Others(1) it was observed. that the question whether the idol itself is the true beneficiary subject to a charge in favour of the heirs of the testator, or the heirs are the true beneficiaries subject to a charge for the upkeep, worship and expenses of the idol, has to be determined by a conspectus of the entire deed or will by which the properties are dedicated and that a provision giving a right to the Shebaits to reside in the premises dedicated to the idol for the purpose of carrying on the daily and periodical worship and festivals does not detract from the absolute character of a dedication to the idol. It is inexpedient to construe the terms of one deed by reference to the terms of another, or to lay down general rules applicable to the construction of settlements varying in terms. In construing a deed, the Court has to ascertain the intention of the settlor, and for that purpose to take into consideration all the (1) ; 562 terms thereof. If, on a review of all the terms, it appears that after endowing property in favour of a religious institution or a deity, the surplus is either expressly or by implication retained with the settlor or given to his heirs, a partial dedication may readily be inferred, apparently comprehensive words of the disposition in favour of the religious. endowment notwithstanding. The terms of Ext. 11 (a) however disclose a clear intention that the entire property was to belong to the deity and no one else had beneficial interest or title thereto. The Shebaits and their descendants are given a certain interest in tile property, but that direction does not cut down the absolute interest conveyed to the deity, nor can it be interpreted as reserving a beneficial interest in favour of the settlor or his heirs. The direction operates to create a charge upon the estate of the deity, and not to reduce the estate itself to a charge. To recapitulate, therefore, the property is dedicated absolutely for the deb seba of the deity: no beneficial interest is reserved to the settlor or his heirs: and the direction for accumulation of the income does not affect the validity of that dedication. Provision for maintenance and residence of the Shebaits being an ordinary incident of such a dedication cannot be interpreted as restrictive of the estate of the deity. It is unnecessary to decide whether the directions for appropriation of a part of the income for persons other than the Shebails may be valid; if it be invalid, the interest will revert to the deity and not to the settlor. It must, therefore, be held that Ext. 11 (a) creates an endowment for the benefit of the deity absolutely, subject to certain charges in favour of the Shebaits and the descendants of the settlor. It is unnecessary, in view of the course which the proceedings in suit No. 67 of 1955 have taken, to set out the terms of Ext. 11 executed by Balai and Nirmala on September 15, 1944. Suit No. 67 of 1955 was filed originally by Balai against the two deities Sri Satyanarayan Jiu and Sri Lakshminarayan Jiu and Nirmala, and Balai sought to represent the two deities. On an objection raised to the constitution of the action by Nirmala, Sunil Sekhar Bhattacharjee was appointed guardian of the two deities for the action. Bhattacharjee filed a written statement denying the claim made by Balai and submitted mat the dedication in favour of the deity was absolute. An issue was raised about the nature of the endowment and the Trial Court declared that the endowment was partial and the beneficial interest remained vested in Balai. The Trial Court had rejected the case of the deities that there was an absolute dedication, and the guardian for the suit did not challenge that decree on behalf of the two deities. Nirmala appealed and contended that there was an absolute dedication in favour of the deity, but she did not represent the deities and could not raise that claim, unless she got herself formally appointed guardian of the deity by order of the Court. The High Court confirmed the decree passed 563 by the Trial Court, subject to certain modifications which are not material. In this appeal, the two deities are also impleaded as party respondents, but the deities have not taken part in the proceeding before this Court, as they did not in the High Court. The decree against the two. deities has become final, no appeal having been preferred to the High Court by the deities. It is not open to Nirmala to challenge the decree insofar as it is against the deities, because she does not represent the deities. The rights conferred by the deed Ext. 11 upon Nirmala are not affected by the decree of the Trial Court. She is not seeking in this appeal to claim a more exalted right under the deed for herself, which may require reexamination even incidentally of the correctness of the decision of the Trial Court and the High Court insofar as it relates to the title of the deities. It was urged, however, that apart from the claim which Nirmala has made for herself, the Court has power and is indeed bound under O. 41 r. 33 Code of Civil Procedure to pass a decree, if on a consideration of the relevant provisions of the deed, this Court comes to the conclusion that the deed operates as an absolute dedication in favour of the two deities. Order 41 r. 313, insofar as it is material, provides: "The Appellate Court shall have power to pass any decree and make any order which ought to have been passed or made and to pass or make such further or other decree or order as the case may require, and this power may be exercised by the Court notwithstanding that the appeal is as to part only of the decree and may be exercised in favour of all or any of the respondents or parties although such respondents or parties may not have filed any appeal or objection:" The rule is undoubtedly expressed in terms which are wide, but it has to be applied with discretion, and to cases where interference in favour of the appellant necessitates interference also with a decree which has by acceptance or acquiescence become final so as to enable the Court to adjust the rights of the parties. Where in an appeal the Court reaches a conclusion which is inconsistent with the opinion of the Court appealed from and in adjusting the right claimed by the appellant it is necessary to grant relief to a person who has not appealed, the power conferred by O. 41 r. 33 may properly be invoked. The rule however does not confer an unrestricted right to re open decrees which have become final merely because the appellate Court does not agree with the opinion of the Court appealed from. The two claims made against Nirmala and the deities in suit No. 67 of 1955, though capable of being joined in a single action were distinct. Against the deities it was claimed that the property was partially dedicated in their favour; against Nirmala it was 564 claimed that she was merely a benamidar for the settlor Balai and that she was not a Shebait under the deed of settlement. The High Court has passed a decree declaring that dedication in favour of the deities is partial and has further held, while affirming her right to be a Shebait that Nirmala was merely a benamidar in respect of the properties settled by the deed. There was no inconsistency between the two parts of the decree, and neither in the High Court nor in this Court did Nirmala claim a right for herself which was larger than the right awarded to her by the decree of the Trial Court. In considering the personal rights claimed by Nirmala under the deed Ext. 11, it is not necessary, even incidentally, to consider whether the deities were given an absolute interest. There were therefore two sets of defendants in the suits and in substance two decrees though related were passed. One of the decrees can stand apart from the other. When a party allows a decree of the Court of First Instance to become final, by not appealing against the decree, it would not be open to another party to the litigation, whose rights are otherwise not affected by the decree, to invoke the powers of the appellate Court under O. 41 r. 33, to pass a decree in favour of the party not appealing so as to give the latter a benefit which he has not claimed. Order 41 r. 33 is primarily intended to confer power upon the appellate Court to do justice by granting relief to a party who has not appealed, when refusing to do so, would result in making inconsistent, contradictory or unworkable orders. We do not think that power under O. 41 r. 33 of the Code of Civil Procedure can be exercised in this case in favour of the deities. Appeals Nos. 966 and 968 of 1964 must therefore be allowed with costs throughout. It is declared that the properties in deed Ext. 11(a) were absolutely dedicated in favour of the deity Sri Gopal Jiu. Suits Nos. 79 & 80 of 1954 will therefore stand dismissed. This will, however, be without prejudice to the concession made on behalf of Nirmala that she was a benamidar of her husband Balai in respect of the properties settled by the deed Ext. 11 (a). Appeal No. 967 of 1964 will stand dismissed with costs in favour of Balai. Bachawat, J. I agree entirely with what has fallen from my learned brother, Shah, J. with regard to the deed, Ext. 1 1(a), and 1 agree that the deed creates an endowment for the benefit of the deity absolutely, subject to certain charges in favour of the Shebaits and the descendants of the settlor. With regard to exhibit 11, my learned brother has held that it is not open to Nirmala Bala to challenge the decree passed in Suit No. 67 of 1955. With the greatest respect for my learned brother, I am unable to agree with this conclusion. The trial Court decreed that the dedication under exhibit 11 is partial and not absolute, and I think it was open to Nirmala Bala to challenge the decree in the 565 High Court, and on the appeal to the High Court being dismissed, it is open to her to challenge the decree of both the Courts by an appeal to this Court. It is true that the deities were represented by independent guardians ad litem for the purposes of this litigation. But Nirmala Bala is one of the joint Shebaits of the deity, and as such, she has a right to assail the decree. In Maharaja Jagadindra Nath Roy Bahadur vs Rani Hemanta Kumari Deb(1), Sir Arthur Wilson observed: "But assuming the religious dedication to have been of the strictest character, it shall remain that the possession and management of the dedicated property belong to the shebait. And this carries with it the right to bring whatever suits are necessary for the protection of the property. Every such right of suit is vested in the shebait, not in the idol". As a joint Shebait of the deity, Nirmala Bala has the right to file this appeal against the decree which declares that the dedication is partial and not absolute. Such an appeal is necessary for the protection of the property of the deity. The other Shebait and the deities are parties to the appeal, and I am unable to hold that the appeal is not maintainable at the instance of Nirmala Bala. Moreover, it is well settled that a Shebaiti right is a right of property. In The Commissioner, Hindu Religious Endowments, Madras vs Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt(3), B.K. Mukherjea, J. observed: "It was held by a Full Bench of the Calcutta High Court [Monahai vs Bhupendra(3)], that Shebaitship itself is property, and this decision was approved of by the Judicial Committee in Ganesh vs Lal Behary(4), and again in Bhabatarini vs Ashalata(5). The effect of the first two decisions as the Privy Council pointed out in the last case, was to emphasis the proprietary element in the Shebaiti right and to show that though in some respects an anomaly it was an anomaly to be accepted as having been admitted into Hindu Law from an early date. This view was adopted in its entirety by this Court in Angurbala vs Debabrata(6) . It follows that the shebaiti right of Nirmala Bala under the deed, exhibit 11 (a) is a right of property. This right is affected by the declaration that the deed, exhibit 11(a) created a partial and not absolute debuttar. The shebaiti right is an absolute debuttar is certainly different from the shebaiti right in a partial debuttar. The decree (1) [1904] L.R. 31 I.A. 203, 210 (2) ; , 1018. (3) (4) 63 I.A. 448. (5) 70 I.A. 57. (6) 566 under appeal therefore affects the shebaiti right of Nirmala Bala. She is aggrieved by the decree, and is entitled to challenge it in appeal. In this view of the matter, I hold that the appeal by Nirmala Bala from the decree in Suit No. 67 of 1955 is maintainable. I would, therefore, have examined the contention of the appellant with regard to exhibit 11 on the merits, and then disposed of the appeal. But as the majority view is that the appeal is not maintainable, no useful purpose will be served by an examination of the merits of the appellant 's case with regard to exhibit 11. ORDER Following the judgment of the majority, Appeals Nos. 966 and 968 of 1964 are allowed with costs throughout. It is declared that the properties in deed Ext. 11(a) were absolutely dedicated in favour of the deity Sri Gopal Jiu. Suits Nos. 79 & 80 of 1954 will therefore stand dismissed. This will, however, be without prejudice to the concession made on behalf of Nirmala that she was benamidar of her husband Balai in respect of the properties settled by the deed Ext. 11(a). Appeal No. 967 of 1964 is dismissed with costs in favour of Balai.

IN-Abs

HELD: (i) The question whether a deed of dedication creates an abosulte or partial dedication must be settled by a conspectus of all the provisions of the deed. If the property is wholly dedicated to the worship of the idol and no beneficial interest is reserved to the settlor, his descendants or other persons, the dedication is complete: if by the deed it is intended to create a charge in favour of the deity and the residue vests in the settlor, the dedication is partial. (ii) A reasonable provision for remuneration maintenance and residence of the Shebaits does not make an endowment bad, for even when property is dedicated absolutely to an idol, and no beneficial interest is reserved to the settlor, the property is held by the deity in an ideal sense. The possession and management of the property must, in the very nature of things, be entrusted to Sitebait or ' manager and nomination of the settlor himself and his heirs with reasonable remuneration out of the endowed property with right of residence in the property will not invalidate the endowment. [556E G] (iii) A provision for the benefit of persons other than the Shebait may not be valid, if it infringes the rule against perpetuities or accumulations, or rules against impermissible restrictions, but that does not affect the validity of the endowment. The beneficial interest in the provision found invalid reverts to the deity or the settlor according as the endowment is absolute or partial. If the endowment absolute and a charge created in favour of other persons is invalid, the benefit will enure to the deity, and will not revert to the settlor or his heirs. [556G H] (iv) There is no rule that when the income is expanding and the expenses are static, leaving a substantial residue, it must be presumed, notwithstanding the comprehensive and unrestricted nature of the disposition, that the settlor intended to create only a charge in favour of the deity. The question is always one of intention of the settlor to be determined from a review of all the dispositions under the deed of settlement. [560G] Surendrakeshav Roy vs Doorgasundari Dassee and Anr. L.R. 19 I.A. 108, explained. Sri Sri Iswari Bhubaneshwari Thakurani vs Brojonath Der and Ors. L.R. 64 I.A. 203 and Sree Ishwar Sridhar Jew vs Sushila Bala Desi and Ors. ; , relied on. 551 Per Subba Rao and Shah, JJ. When the guardian of the deities did not appeal against the finding of the trial court that there was a partial dedication, it was not open to a joint Shebait who was not a guardian, to appeal against the decree and contend that the dedication was absolute. When a party allows a decree of the court of First Instance to become final, by not appealing against the decree, it would not be open to another party to the litigation, whose rights are otherwise not affected by the decree, to invoke the powers of the appellate court under o. 41 r. 33 to pass a decree in favour of the party not appealing so as to give the latter a benefit which he has not claimed. [564D] Per Bachawat, J. (Partially dissenting) When the trial court decrees that the endowment in favour of the deities was not absolute, and the guardian ad litem of the deities does not appeal, it open to a joint shebait even when he is not a guardian to assail the decree in appeal. [565A] Maharaja Jagadindra Nath Roy Bahadur vs Rani Hemanta Kumari Debi, (1904) L.R. 31 I.A. 203, relied on. Sihebaiti right is a right to property. This right is affected by a declaration that the dedication in favour of the deities is partial and not absolute. The shebaiti right in an absolute debutter is different from the shebaiti right in a partial debutter. The joint shebait is en titled to defend his right even when the guardian of the deities does not appeal. [565E, H] The Commissioner of Hindu Religious Endowments, Madras vs Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt; , , referred to.

Civil Appeal No. 422 of 1964 Appeal by special leave from the order dated September 29, 1962 of the Central Government Industrial Tribunal at Dhanbad in Application No. 45 of 1960 in Reference Nos. 40 and 34 of 1960. section V. Gupte, Solicitor General and 1. N. Shroff, for the appellant Jitendra Sharma and Janardan Sharma, for the respondent. The Judgment of the Court was delivered by Gajendragadkar C.J. The short question of law which arises in this appeal relates to the scope and effect of the provisions contained in s 33(2) of the (No. 14 of 1947) (hereinafter called 'the Act '). The appellant, the Tata Iron & Steel Co. Ltd., Jamadoba, applied before the Chairman, Central Government Industrial Tribunal, Dhanbad, (hereafter called "the Tribunal") under section 33(2)(b) of the Act for approval of the order passed by it discharging the respondent, its employee section N. Modak, from its service. In its application, the appellant alleged that the respondent had been appointed as a Grade 11 Clerk in the Chief Mining Engineer 's Office at Jamadoba. One of the duties assigned to the respondent was to check arithmetical calculations according to sanctioned rate of the bills coming from the Heads of Department. He was required to bring to the notice of the Deputy Chief Mining Engineer cases of discrepancies or irregularities, and also cases where additions or alterations in the bills had been made, but not initialed. On rechecking of the bills which had been passed by the respondent, it was discovered that several additions and alterations made in the bills were not noticed by him and were not reported. This failure constituted misconduct under the Standing Orders of the appellant. For this misconduct, the respondent was charge sheeted (No. 51 dated 1/5 10 1960); that led to a departmental enquiry, and as a result of the report made by the Enquiry Officer, the appellant passed an order on December 17, 1960, terminating the services of the respondent as from December 24, 1960. The present applica tion was drafted on the 17th December and it reached the Tribunal on the 23rd December 1960. It appears that this application was made by the appellant under section 33(2)(b), because four industrial disputes were pending between the appellant and its employees at that time in References Nos. 27, 34, 40 & 49 of 1960. After this application was filed, the respondent challenged the propriety of the order passed by the appellant for which approval was sought by it, and several contentions were raised by him in support of his case that the enquiry held against him was invalid and improper and the 'order of dismissal passed against him was the result of mala fides. Evidence was led by the parties in support of their respective pleas 413 When the matter came to be argued before the Tribunal, it. was urged by the appellant that the application made by it no longer survived, because all the industrial disputes which were pending between the appellant and its employees and as as a result of the, pendency of which it had made the application under section 33(2)(b) of the Act, had been decided by the Tribunal; Awards had been, made in all the said References and they had been published in the Gazette. It does appear that the four References which we have already mentiond, ended in Awards made on 31 10 1960, 8 11 1960,. 14 4 1961, and 22 9 1961 respectively. The award on the present application was made on 29 9 1962, and it is common ground that, the time when the appellant urged its contention that the application made by it did not survive any longer, all the four References had, in fact, been disposed of. The plea thus raised by the appellant naturally raised the question as to what would be the effect of the awards pronounced by the Tribunal on industrial disputes pending before it at the time when the appellant moved the Tribunal tinder section 33(2)(b)? If, as a result of the pendency of an industrial dispute, between an employer and his employees, the employer is required to apply for approval of the dismissal of his employee under section 33 (2)(b), does such an application survive if the main industrial dispute is meanwhile finally decided and an award pronounced on it? That is the question which this appeal raises for our decision, aid the answer to this question would depend upon a fair determination of the true scope and effect of the provisions of section 33(2)(b) of the Act. This question has been answered by the Tribunal against the appellant. Having held that the application made by the appellant survived the decision of the main industrial disputes, the Tribunal ' has considered the merits of the controversy between the parties. Airier examining the evidence, the Tribunal has found that the enquiry made by the appellant before passing the impugned order of discharge against the respondent, was invalid. It has pointed out that the Enquiry Officer, Mr. Watcha, did not in fact record the statement of any witnesses who gave evidence before him, and the only record of the enquiry is the report made by Mr. Watcha. It has also noticed that the enquiry in question suffered from the serious infirmity that Mr. Watcha who acted as the Enquiry Officer himself gave evidence against the respondent, and the evidence which was actually recorded in the case was taken not by Mr. Watcha, but by Mr. Paravatiyar. In the result,the conclusion of the Tribunal on the merits was that the enquiry "was a farce, a mere eye wash, biased with pre determined result, and entirely mala fide and not at all fair". As a result of this conclusion, the Tribunal refused to accord approval to the order of discharge passed by the appellant against the respondent. It is against this order that the appellant has. come to this Court by special leave. Reverting then to the question of construing section 33 of the Act,. we may refer to some general considerations at the outset. Broadly. 414 stated. section 33 provides that the conditions of service, etc. should remain unchanged under certain circumstances during the pendency of industrial adjudication proceedings. It is unnecessary to refer to the previous history of this section. It has undergone many changes , but for the purpose of the present appeal, we need not refer to the ,aid changes. We are concerned with section 33 as it stands after its final amendment in 1956. Section 33 consists of five sub sections. For the purpose of this appeal, it is necessary to read subsections (1) & (2) of section 3 3 : "(1) During the pendency of any conciliation proceeding before a conciliation officer or a Board or of any proceeding before a Labour Court or Tribunal or National Tribunal in respect of an industrial dispute, 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 workmen concerned in such dispute save with the express permission in writing of the authority before which the proceeding is pending. (2)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 dis missal 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". A reading of the above two sub sections of section 33 makes it clear that its provisions are intended to be applied during the pendency of any proceeding either in the nature of conciliation proceeding or in the 415 nature of proceeding by way of reference made under section 10. The pendency of the relevant proceeding is thus one of the conditions prescribed for the application of section 33. Section 33(1) also shows that the provisions of the said subsection protect workmen concerned in the main dispute which is pending conciliation or adjudication. The effect of sub section (1) is that where the conditions precedent prescribed by it are satisfied, the employer is prohibited from taking any action in regard to matters specified by clauses (a) & (b) against employees concerned in such dispute without the previous express permission in writing of the authority before which the proceeding is pending. In other words, in cases falling under sub section (1), before any action can be taken by the employer to which reference is made by clauses (a) & (b), he must obtain express permission of the specified authority. Section 33(2) pproceedes to lay down a similar provision and the conditions precedent prescribed by it are the same as those contained in section 33(1.). The proviso to section 33(2) is important for our purpose. This proviso shows that where is action is intended to be taken by an employer against any of his employees which falls within the scope of cl. (b), he can do so, subject to the requirements of the proviso. If the employee is intended to be discharged or dismissed an order can be passed by the employer against him, provided he has paid such employee the wages for one month, and he has made an application to the authority before which the proceeding is pending for approval of the action taken by him. The requirements of the proviso have been frequently considered by Industrial Tribunals and have been the subject matter of decisions of this Court as well. It is now well settled that the requirements of the proviso have to be satisfied by the employer on the basis that they form part of the same transaction; and stated generally, the employer must either pay or offer the salary for one month to the employee before passing an order of his discharge or dismissal, and must apply to the specified authority for approval of his action at the same time, or within such reasonably short time thereafter as to form part of the same transaction. It is also settled that if approval is granted, it takes effect from the date of the order passed by the employer for which approval as sought. If approval is not granted the order of dismissal or discharge passed by the employer is wholly invalid or inoperative, and the employee can legitimately claim too continue to be in the employment of the employer notwithstanding the order passed by him dismissing or discharging him words, approval by the prescribed authority makes the order of discharge or dismissal effective; in the absence of approval such an orders is invalid and inoperative in law. Sub sections (3) & (4) of section 33 deal with cases of protected workmen, but with the provisions contained in these two subsections we are not concerned in the present appeal. That leaves section 33(3) to be considered. This sub section requires that where an application is made under the proviso to sub section (2), the specified authority has to 416 dispose of the application without delay; and indeed, it expressly prescribes that the said proceedings must be dealt with as expeditiously as possible. This sub section is naturally limited to cases falling under sub section In regard to cases falling under sub section (1), the employer can act only with the previous express sanction of the prescribed authority, and, therefore, there is no need to made any provision in regard to an application which the employer may make under sub section (1) requiring that the said application should be dealt with expeditiously. That is the general scheme of section 33. it is quite clear that section 33 imposes a ban on the employer exercising his common law, statutory, or contractual right to terminate the services of his employees according to the contract or the provisions of law governing such service. In all cases where industrial disputes are pending between the employers and their employees, it was thought necessary that such disputes should be adjudicated upon by the Tribunal in a peaceful atmosphere undisturbed by any subsequent cause for bitterness or unpleasantness. It was, however, realized that if the adjudication of such disputes takes long the employers cannot be prevented absolutely from taking action which is the subject matter of section 33(1) and (2). The Legislature, therefore, devised a formula for reconciling the need of the employer to have liberty to take action against his employees, and the necessity for keeping the atmosphere calm and peaceful pending adjudication of industrial disputes. In regard to actions covered by section 33(1), previous permission has to be obtained by the employer, while in regard to actions falling under section 33(2), he has to obtain subsequent approval, subject to the conditions which we have already considered. In that sense, it would be correct to say that the pendency of an industrial dispute is in the nature of a condition precedent for the applicability of section 33(1) & (2). It would, prima facie, seem to follow that as soon as the said condition precedent ceases to exist, section 33(1) and (2) should also cease to apply; and the learned Solicitor General for the appellant has naturally laid considerable emphasis on this basic aspect of the matter. It is also true that having regard to the conditions precedent prescribed by section 33(1) and (2), it may be possible to describe the application made by the employer either under section 33(1) or under section 33(2) as incidental to the main industrial dispute pending between the parties. We have noticed that such applications have to be made before the specified authority which is dealing with the main indus trial dispute; and so, the argument is that an incidental or an interlocutory application which arises from the pendency of the main industrial dispute, cannot survive the decision of the main dispute itself. That is another aspect of the matter on which the learned Solicitor General relies. He urges that it is during the pendency of the main industrial dispute that section 33 applies; that it applies in relation to workmen concerned with such main dispute; and that the 417 power conferred by it has to be exercised by the authority before which the main dispute is pending. These broad features of section 33 impress upon the applications made under section 33(1) and (2) the character of interlocutory proceedings, and thus considered, interlocutory proceedings must be deemed to come to an end as soon as the main dispute has been finally determined. On the other hand, there are several considerations which do not support the argument of the appellant that as soon as the main industrial dispute is decided, the application made by it for approval under section 33(2) should automatically come to an end. As we have already indicated, the application of the appellant can., in a sense, be treated as an incidental proceeding; but it is a separate proceeding all the same, and in that sense, it will be governed by the provisions of section 33(2)(b) as an independent proceeding. It is not an interlocutory proceeding properly so called in its full sense and significance; it is a proceeding between the employer and his employee who was no doubt concerned with the main industrial dispute along with other employees; but it is nevertheless a proceeding between two parties in respect of a matter not covered by the said main dispute. It is, therefore, difficult to accept the argument that a proceeding which validly commences by way of an application made by the employer under section 33(2)(b) should automatically come to an end because the main dispute has in the meanwhile been decided. What is the order that should be passed in such a proceeding, is a question which cannot be satisfactorily answered, unless it is held that the proceed ing in question must proceed according to law and dealt with as such. In this connection it is significant that though the Legislature has specifically issued by section 33(5) a directive to the specified authorities to dispose of the applications without delay and act as expeditiously as possible, it has not made any provision indicating that if the decision on the applications made under section 33(2) is not reached before the main dispute is decided no order should be passed on such applications. There is little doubt that the Legislature intends that applications made under section 33(2) should be disposed of well before the main dispute is determined; but failure to provide for the automatic termination of such applications in case the main dispute is decided before such applications are disposed of, indicates that the Legislature intends that the proceedings which begin with an application properly made under section 33(2) must run their own course and must be dealt with in accordance with law. The direction that the said proceeding should be disposed of as expeditiously as possible emphasises the fact that the legislature intended that proper orders should be passed on such applications without delay, but according to law and on the merits of the applications themselves. It is, however, urged by the learned Solicitor General that it would be futile to allow the present application to proceed any 418 further, because the appellant can proceed to dismiss the respondent notwithstanding the fact that the Tribunal does not accord its approval to its order in question. This argument, in out opinion, is misconceived. It cannot be denied that with final determination of the main dispute between the parties, the employer 's right to terminate the services of the respondent according to the terms of service revives and the ban imposed on the exercise of the said power is lifted. But it cannot be overlooked that for the period between the date on which the appellant passed its order in question against the respondent, and the date when the ban was lifted by the final determination of the main dispute, the order cannot be said to be valid unless it receives the approval of the Tribunal ' In other words, the order being incomplete and inchoate until the approval is obtained, cannot effectively terminate the relationship of the employer and the employee between the Appellant and the respondent , and so, even if the main industrial dispute is finally decided, the question about the validity of the order would still have to be tried and if the approval is not accorded by the Tribunal, the employer would be bound to treat the respondent as its employee and pay him his full wages for the period even though the appellant may subsequently proceed to terminate the respondent 's services. Therefore, the argument that the proceedings if continued beyond the date of the final decision of the main industrial dispute would become futile and meaningless, cannot be accepted. There is another aspect of this matter to which reference must be made. Section 33A makes a special provision for adjudication as to whether any employer has contravened the provisions of section 33. This section has conferred on industrial employees a very valuable right of seeking the protection of the Industrial Tribunal in case their rights have been violated contrary to the provisions of section 33. Section 33 A provides that wherever an employee has a grievance that he has been dismissed by his employer in contravention of section 33(2), he may make a complaint to the specified authorities and such a complaint would be tried as if it was an industrial dispute referred to the Tribunal under section 10 of the Act. In other words, the complaint is treated as an independent industrial proceeding and an award has to be pronounced on it by the Tribunal concerned. Now, take the present case and see how the acceptance of the appellants argument would work. As we have already pointed out, in the present case the Tribunal has considered the met its of the appellant 's prayer that it should accord approval to the proposed dismissal of the respondent and it has come to the conclusion that having regard to the relevant circumstances, the approval should not be accorded. If the appellant 's argument is accepted and it is held that as soon as the main industrial disputes were finally deter mined, the application made by the appellant under section 33(2) auto magically came to an end, the respondent would not be able to 419 get any relief against the appellant for the wrongful termination of his services between the date of the impugned order and the final disposal of the main industrial disputes; and this would mean that in a case like the present, section 33A would be rendered nugatory, because the employer having duly applied under section 33(2)(b), the employee cannot complain that there has been a contravention of section 33 by the employer, even though on the merits the dismissal of the employee may not be justified. That, in our opinion, could not have been the intention of the Legislature. This aspect of the matter supports the conclusion that a proceeding validly commenced under section 33(2)(b) would not automatically come to an end merely because the main industrial dispute has in the meanwhile been finally determined. It is of course true that under section 33 the authority to grant permission or to accord approval in cases falling under section 33(1) and (2) respectively is vested in the Tribunal, before which the main industrial dispute is pending, but that is not an unqualified or inflexible requirement, because section 33B(2) seems to permit transfers of applications before one Tribunal to another, and in that sense, the argument urged by the appellant that the condition that a specified Tribunal alone can deal with applications made to it is an inflexible condition, cannot be accepted. We are, therefore, satisfied that the Tribunal was right in over ruling the contention raised by the appellant that the application made by it for approval under section 33(2)(b) ceased to constitute a valid proceeding by reason of the fact that the main industrial disputes, the pendency of which had made the application necessary, had been finally decided. This question has been considered by several High Courts in this country. The High Courts of Calcutta, Madras and Mysore have taken the view for which the learned Solicitor General has contended before us, vide Alkali and Chemical Corporation of India Ltd. vs Seventh Industrial Tribunal, West Bengal and Ors.(1); Mettur Industries Ltd. vs Sundara Naidu and Anr.;(2) and Shah (A.T.) vs State of Mysore and Ors.(3) respectively. On the other hand, the Kerala, the Punjab, and the Allahabad High Courts have taken the view which we are inclined to adopt, vide Kannan Devan Hill Pro duce Company Ltd., Munnar vs Miss Aleyamma Varghese and Anr.;(4) Om Parkash Sharma vs Industrial Tribunal, Punjab and Anr.;(5) and Amrit Bazar Patrika (Private) Ltd. vs Uttar Pradesh State Industrial Tribunal and Ors.(6) respectively. In our opinion, the former view does not, while the latter does, correctly represent the true legal position under section 33(2)(b). That takes us to the merits of the findings recorded by the Tribunal in support of its final decision not to accord approval to the (1) [1964] II L.L.J. 568. (2) [1963] II L.L.J. 303. (3) [1964] I L.L.J. 237. (4) [1962] II L.L.J. 158. (5) [1962] II L.L.J. 272, (6) [1964] II L.L.J. 53, B(N)3SCI 14 420 action proposed to be taken by the appellant against the respondent. We have already indicated very briefly the nature and effect of the said findings. The learned Solicitor General no doubt wanted to contend that the said findings were not justified on the evidence adduced before the Tribunal. We did not, however, allow the learned Solicitor General to develop this point because, in our opinion, the findings in question are based on the appreciation of oral evidence, and it cannot be suggested that there is no legal evidence on the record. to support them. Usually, this Court does not under article 136 of the Constitution entertain a plea that the findings of fact recorded by the Industrial Tribunal are erroneous on the ground that they are based on a misappreciation of evidence. The propriety or the correctness of the findings of fact is not ordinarily allowed to be challenged in such appeals. The result is the appeal fails and is dismissed with costs. Appeal dismissed.

IN-Abs

The appellant applied under section 33(21)(b) of the to the Industrial Tribunal for the Tribunal 's approval of the order passed by the appellant discharging its employee the respondent. This application was made because certain industrial disputes were pending between the appellant and its employees, but when the matter came to be argued before the Tribunal, the pending disputes had been disposed of. Hence, the appellant contended that the application made by it no longer survived '. which the Tribunal rejected. In appeal by Special Leave. HELD:The Tribunal was right in overruling the appellant 's contention. [419 E]. A proceeding validly commenced under section 33(2)(b) would not automatically come to an end merely because the main industrial dispute had in the meanwhile been finally determined. [417 D E]. The application of the appellant can in a sense, be treated as an incidental proceeding; but it is a separate proceeding all the same, and in that sense it will be governed by the provisions of section 33(2)(b) as an independent proceeding. It is not an interlocutory proceeding properly so called in its full sense and significance; it is a proceeding between the employer and his employee who was no doubt concerned with the main industrial dispute along with other employees; but it is nevertheless a proceeding between two parties in respect of a matter not covered by the main dispute. [417 B D]. The order being incomplete and inchoate until the approval is obtained, cannot effectively terminate the relationship of the employer and the employee between the appellant and the respondent; and so even if the main industrial dispute was finally decided, the question about the validity of the order would still have to be tried and if the approval is not accorded by the Tribunal, the employer would be bound to treat the respondent as its employee and pay him full wages for the period even though the appellant may subsequently proceed to terminate the respondent 's service. [418 C E]. Besides, if it were held that with the final determination of the main industrial dispute such application would automatically come to an end, it would mean that section 33 A under which a complaint by the employee is treated as an independent proceeding, would be rendered nugatory. [419 A]. Alkali and Chemical Corporation of India Ltd. vs Seventh Industrial Tribunal, West Bengal and Ors. (1964) II L.L.J. 568, Mettur Industries Ltd. vs Sundara Naidu and Anr. (1963) II L.L.J. 303 and Shah (A.T.) vs State of Mysore and Ors (1964) I LL.J. 237, disapproved Kannan Devan Hill Produce Company Ltd. Munnar vs Miss Aleyamma Varughesa and Anr. (1962) II L.L.J. 158, Om Prakash Sharma vs Industrial Tribunal, Punjab and Anr. (1962) II L.L.J. 272 and Amrit Bazar Patrika (Private) Ltd. vs Uttar Pradesh State Industrial Tribunal and Ors. (1964) II L.L.J. 53, approved.

Appeal No. 73 of 1953. Appeal by special leave against the judgment and Decree dated the 31st January, 1950, of the High Court of judicature at Madras. (Rao and Nayudu JJ.) in Appeal No. 409 of 1946 arising out of the judgment and Decree dated the 31st January, 1946, of the Court of the Subordinate judge of Bapatla in Original Suit No. 96 of 1944. (1) 12 Rang. 243 (P.C.) 425 B. Somayya, Senior Advocate (M. Krishna Rao, with him) for the appellant. D. Munikaniah, Senior Advocate (K. R. Choudhury, with him) for the respondent. December 8. The Judgment of the Court was ,delivered by MUKHERJEA J. This appeal is directed against a Judgment and decree of a Division Bench of the Madras High Court dated the 31st January, 1950, reversing, on appeal, those of the Surbordinate judge, Bapatla, passed in Original Suit No. 96 of 1944. The suit, out of which the appeal arises, was commenced by the infant plaintiff, now appellant before us, represented by his maternal uncle as next friend, for recovery of possession, on partition, of a half share in the properties described in the schedule to the plaint on the allegation that they were the joint family properties of himself and his father, the defendant No. 1, in which he had an equal share with the latter. The plaintiff is admittedly the son of defendant No. 2, who is one of the legally married wives of defendant No. 1, but the latter denied that he was the father of the plaintiff and charged the plaintiff 's mother with misconduct. The defendant No. 3 in the suit, who is the other living wife of defendant No. 1 and has no issue of her own, is alleged to have developed ill feeling and jealousy towards the plaintiff and his mother and poisoned her husband 's mind against them, so much so, that the defendant No. 1 had actually instituted a suit in the Court of the District Munsif at Ongole questioning the legitimacy of the plaintiff. It was because of such conduct on the part of defendant No. 1 that the present suit had to be instituted. The defence put forward by defendant No. 1 to the claim of the plaintiff was a denial of his paternity, and the whole controversy in the suit centered round the point as to whether the plaintiff was the legitimate son of defendant No. 1 by defendant No. 2, Ms second wife. On the admitted facts of the case, there could be no question that the operation of section 112 of the Indian Evidence Act would be attracted and the 426 plaintiff being born during the continuance of a lawful wedlock between his mother and his alleged father, a Conclusive presumption of legitimacy would arise, unless it was proved that the parties to the marriage had no access to each other at any time when he could have been begotten. The point for determination, therefore, was, whether on the evidence adduced in the case the defendant No. 1, upon whom the burden Of proving non access admittedly lay, had succeeded in discharging that burden. The trial court decided this point in favour of the plaintiff and against defendant No. 1 and in that view substantially allowed the plaintiff 's claim. On an appeal being taken against this decision by defendant No. 1 to the Madras High court, the learned Judges, who heard the appeal, came to the opposite conclusion and held that from the facts and circumstances of the case an inference of non access between the husband and the wife could reasonably be drawn. The result was that the decision of the trial court was reversed and the plaintiff 's suit dismissed. it is the propriety of this decision of the Madras High Court that is challenged before us on behalf of the plaintiff, to whom special leave to file the appeal in forma pauperis was granted by this court. It may be stated at the outset that the presumption which section 112 of the Indian Evidence Act contemplates is a conclusive presumption of law which can be displaced only by proof of the particular fact mentioned in the section, namely, non access between the parties to the marriage at a time when, according to the ordinary course of nature the husband could have been the father of the child. Access and non access again connote, as has been held by the Privy Council (1), existence and non existence of opportunities for marital intercourse. It is conceded by Mr. Somayya, who appeared on behalf of the plaintiff appellant, that non access could be established not merely by positive or direct evidence; it can be proved undoubtedly like any other physical fact by (1) Vide Karapaya vs Mayandy. 12 Rang 243. 427 evidence, either direct or circumstantial, which is relevant to the issue under the provisions of the Indian Evidence Act, though as the presumption of legitimacy is highly favoured by law it is necessary that proof of non access must be clear and satisfactory. Mr. Somayya has also not contended seriously before us that the principle of English common law (1), according to which neither a husband nor a wife is permitted to 'give evidence of non access after marriage to bastardise a child born in lawful wedlock, applies to legitimacy proceeding in India. No such rule is to be found anywhere in the Indian Evidence Act and it may be noted that the old common law doctrine has itself been abrogated in England by the provision of section 7 of the Matrimonial Cause Act, 1950 (2 ). The position in law being thus made clear, the question for our consideration primarily is whether the learned judges of the High Court came to a correct decision on the facts of the case. For this purpose, it is necessary to have a clear picture of all the material events as they transpired in evidence, and we will begin with a narrative of the earlier facts about which there is little or no controversyl. Defendant No. 1 admittedly married three wives. The first wife died leaving a son aged 2 or 3 years at the time of her death. The defendant No. I then married the mother if the plaintiff and that was in or about the year 1930. From the time of this marriage down to about 1940 the couple seemed to have lived quite happily, except that there was no issue of the marriage. Sometime before June, 1940, the plaintiff 's mother fell ill and was sent to the Government hospital at Guntur for treatment. Her step son, that is to say, the son of defendant No. 1, by his predeceased wife,. who was also suffering from certain ailments, at the time, accompanied her to the hospital. After about a month both of them returned and as defendant No. 2 was medically advised to live separately from her husband for some time she went to her father 's place (1) Vide Russel vs Russel, ; (2)Vide Re Feniot, 428 The son of defendant No. 1 came back to the house ' of his father but his illness grew worse and in June, 1940, he died. In August, 1940, defendant No. 1 married his third wife who is defendant No. 3 in the suit. The case of defendant No. 2 is that her husband treated her well for about a year after he married the third defendant but later on grew cold and indifferent and began to neglect her. She made a grievance of this to her husband, but the latter told her that she might ' go away. Thereupon the defendant No. 2 did go to her father 's place and on 19th March, 1942, she filed an application in the Court of the District Munsif at Ongole praying for leave to use her husband in forma pauperis for separate maintenance. There were allegations in the plaint of abandonment and neglect by the husband. The defendant No. 1 in his answer to this application, which was filed on 7th September, 1942, denied that he neglected his wife, or was in any manner indifferent to her health and comforts. It was averred that as the petitioner did not bear him any child and the son by his first wife unfortunately died, he had no other alternative but to marry a third wife for the sake of progeny. It was expressly stated in the counter affidavit that the second wife was living all along in what was described as the mud terraced house and was getting her supply of food and other necessary articles from her husband ; as a matter of fact, after consuming all that she required for herself she was sending the surplus, that remained, to her parents. It appears that, before this application for leave to 'Sue as a pauper was heard by the court, there was an amicable settlement arrived at between the parties through the mediation of certain well wishers and two documents, namely Exs. P 5 and P 6, were executed by and between the parties both on the 28th September, 1942. Exhibit P 5 purports to be a deed of maintenance and under it the husband agreed to pay a sum of Rs. 100 per annum for food and raiment to his second wife during the period of her natural life, the payment to be made by the 30th of Magha Bahula 429 every year. Certain properties specified in the schedule to this document were kept as security for due payment of these amounts. The only recitals in this document were that the executant married a third wife as no son was born to him by the second wife, that thereupon the second wife instituted a suit for maintenance against him, and that under the advice of respectable friends the document was executed with the provisions contained therein. By exhibit P 6, the other document, a residential house, known as the mud terraced house, was given to defendant No. 2 for the purpose of her residence during her lifetime. The material portion of the document stands as follows : "You are my wife. Due to the affection I have towards you, I have given to you the property mentioned in the schedule hereunder . and this very day delivered possession of the same to you for your residential purposes for your lifetime. Hence from now you shall live in the said house and without powers of gift and sale the schedule property shall, after your lifetime, pass to me and my heirs. " Within a few days after the execution of his document defendant No. 1, on 5th of October, 1942, paid a sum of Rs. 100 to his second wife as maintenance allowance for one year in terms of the maintenance deed exhibit P 5, and the defendant No. 2 acknowledged payment of this money by putting her thumb impression on a receipt which has been marked exhibit D 3 in the suit. It may be mentioned here that the defendant No. 1 bad sometime before built another house which is described as "tiled house" or "upstair house" and he probably had the intention of removing to that house. As a matter of fact, however, he did not remove thereto, the ostensible reason assigned being that certain religious ceremonies connected with entering into a new house could not be performed. It is the case of defendant No. 2 that, after these documents were executed and registered at Addanki, she came back to the mud terraced house and lived there, since then, for several months along with her husband. During this period she became enceinte and when the 430 time for confinement came, she was taken to the Bayer Hospital at Cherala where on the 16th of October, 1943, she gave birth to the plaintiff. After delivery, she resided with her child at her father 's house and her husband came there at times to visit them. When the infant was 7 months old, she ;took him to her husband 's place but her husband asked 'her to remain for some time more with her father. While staying at her father 's house, she received summons of a suit instituted by her husband (being Suit No. 326 of 1944) in the Court of the District Munsif at Ongole against her praying for cancellation of the maintenance deed and the deed of settlement mentioned above on the ground that she was unchaste and had become pregnant by "immoral ways" and that the son born of her was not his son. It was after this notice that the present suit was instituted. As the plaintiff was admittedly born on the 16th of October, 1943, he must have been conceived sometime towards the latter part of December, 1942, or the beginning of January, 1943. The material point for consideration, therefore, is whether the defendant No. 1 has succeeded in showing that there was no opportunity of access between him and defendant No. 2 during this period ? The defendant No. 1 expressly stated in his deposition that his second wife was a perfectly chaste woman up to the time when the documents Exs. P 5 and P 6 were executed, and, even when she received the maintenance allowance of Rs. 100 from him in October, 1942. His specific case is that defendant No.2 did never come to reside with him in the mud terraced house after the compromise was arrived at in the maintenance case. Where she stayed was unknown to him and he heard that she went to Eddanapudi where she was living an immoral life with her paramour, one Cherakuri Venkanna. This part of the story of defendant No. 1, has not been, belived by either of the courts below and may be rejected as altogether untrustworthy. The learned judges of the High Court, although they disbelieved the specific allegation of un chastity made against defendant No. 2 by her husband 431 and did not find that &he was at Eddanapudi at the material period, yet relied on two sets of facts to be noticed presently, as establishing conclusively that defendant No. 2 did not live at the mud terraced house at any time after October, 1942, when she received the sum of Rs. 100 as maintenance allowance for one whole year from, her husband. The learned judges found, therefore, that there was no opportunity for intercourse between defendant No. 2 and her husband at the period when the boy must have been conceived. In the first place, the High Court takes the documents Exs. P 5 and P 6 as amounting to a sort Of separation arrangement under which the parties agreed to live separately from each other and this, according to the learned judges, fully bears out the story of the husband that defendant No. 2 never came to reside in the mud terraced house. The receipt of a sum of Rs. 100 by defendant No. 2 as advance payment of maintenance allowance for one year on 5th of October, 1942, indicates, according to the learned judges, a final confirmation of the separation arrangement and from this time onwards there was a definite cessation of marital relations between the parties. The second set of circumstances relied upon by the High Court are the events which happened subsequent to 5th of October, 1940, and which fortify the theory of a sepa ration between the husband and the wife. It is said that the story of defendant No. 2 that her husband accompanied her to the Bayer Hospital at Chirala when she went there for her confinement is incredible. It is equally incredible that defendant No. 2 did remain in her father 's house for so long a period after delivery with the consent of her husband. It would be an extremely unnatural conduct on the part of the husband, according to the High Court, if, as the evidence shows, he refused to recognise his own son when he was taken to him seven months after his birth and there is no explanation as to why he would file a suit for cancellation of the maintenance deed and the deed of settlement, by imputing unchastity to his wife and bastardy to his own son if the story of defendant 432 No. 2 about her previous relations with her husband was true. In our opinion, the learned judges of the High Court approached the facts of the case from a wrong standpoint altogether and their conclusions are based for the most part upon surmises and speculations and not what was actually proved by the evidence. There is no warrant, we think, for holding that the documents Exs. P 5 and P 6 were in the nature of a separation agreement. Such an inference not only goes against the tenor or the express terms of the documents but is not borne out even by the evidence of the mediators through whose mediation the documents were brought into being or of the persons who were admittedly present at the time when the documents were executed and signed the same as attesting witnesses. Exhibit P 5, as stated already, simply mentions the fact of the third marriage of defendant No. 1 and the institution of a suit for maintenance by his second wife. There is nothing in this document which even impliedly suggests that in consideration of receiving an allowance of Rs. 100 a year, the wife agreed to reside separately from her husband. So far as exhibit P 6 is concerned, the gift is expressly stated to be an affec tionate gift by the husband to the wife and it clearly indicates that it was the intention of the parties that the wife should reside there, and delivery of possession of the house was given to the wife on the very same day that the document was executed. We do not think that there is any justification for holding that these recitals were false and were not intended to be operative. D. W. 8, who is one of the attesting witnesses to the documents and was examined on behalf of defendant No. 1, says in his deposition that the documents were read over to the executant and he executed them after consenting to the recitals. P.W. 5, who was one of the mediators, says that defendant No. 2 used to live in the mud terraced house after compromise. Unless there is cogent evidence to the contrary and apparently there is no such evidence in the present case we should certainly 433 presume that, the document exhibit P 6 was acted upon and that the possession of the mud terraced house was actually given to defendant No. 2 in accordance with its terms. The High Court, in its judgment, records a rather curious finding on this point. "It may be," ' thus the judgment runs, "that even down to exhibit D 3 one may presume that in the very house allotted to her by exhibit P 6 she lived, so that up to the date of exhibit D 3 it may be that there is no impossibility of cohabitation between the parties. The real trouble arises with reference to the state of affairs after exhibit D 3. We find in exhibit D 1 1 which is the plaint in O.S. No. 326 of 1944 filed by the present first defendant against the present second defendant for a cancellation of Exs. P 5 and P 6 that he makes a definite allegation therein that from the time that the plaintiff married his third wife there has not been any bodily connection between him and the defendant. " The learned judges, in our opinion, misdirected themselves in allowing these statements made by the husband himself in the suit instituted by him nearly two years after the material period, to influence their decision in regard to the effect of exhibit P 6. Defendant No. 1 definitely admits that his second wife was perfectly chaste at the time when the sum of Rs. 100 was given to her on 5th of October, 1942, and the receipt exhibit D 3 was taken. There is not a scrap of evidence to show that there was any bitterness of feelings between the parties at that time. There could be no doubt that the feelings of the husband were changed and had become extremely bitter towards the plaintiff 's mother before he filed the suit for cancellation of the deeds in July, 1944; but the statements made by the husband in the plaint in that suit were made long after the dispute arose between the parties, no matter whatever the reason might be which gave rise to the dispute. In our opinion, the subsequent conduct of defendant No. 1 or the statements made by him in the suit of 1944 could not be regarded as part of the res gestae and were not admissible as evidence against the plaintiff. The ,defendant No. 1 could not certainly constitute himself an agent of the plaintiff for the purpose of making 434 admissions against the interest of the latter. If the story. of defendant No. 1 that the wife went to Eddanapudi and lived there an immoral life is disbelieved, as it has been disbelieved by the High Court, the conclusion becomes irresistible that she did reside at the mud terraced house as alleged by her and this is fully borne out by the terms of the document exhibit P 6. There is no evidence of any unnatural conduct on the part of defendant No. 1 towards the plaintiffs mother at about the time when the plaintiff was conceived. We do not consider it unreasonable, much less unnatural, if the father of defendant No. 2 alone took her to the hospital at Chirala at the time of her delivery and himself bore all the hospital expenses; nor is it a matter to be surprised at if defendant No. 2 after delivery stayed for several months with her infant child in her father 's house. Apparently for some reason or other, the husband took up an unnatural attitude, but this was a subsequent event and whether he had really any grievance against his wife, or his unnatural behaviour was due to the instigation of his third wife, it is not necessary for us to investi gate. On the evidence, as it stands, we are clearly of opinion that the defendant No. 1 did not succeed in proving that there was no opportunity for intercourse between him and defendant No. 2 at the time when the plaintiff was conceived. He rested his whole case upon the allegation of unchastity of the plaintiff 's mother and of the plaintiff being born as the result of fornication. While rejecting that story, the High Court, in our opinion, erred in holding that there was no opportunity for access between the parties at the material period, relying mainly upon what the husband himself said and did much after the estrangement of feelings took place between the parties, no matter whatever that was due to. In our opinion, on the evidence in the record thefindings of the High Court cannot possibly stand. The result is that the appeal 'is allowed, the judgment and decree of the High Court are set aside and those of the trial judge restored. The plaintiff will have his costs of all the 'courts. 435 The court fees payable to the Government will come out of defendant No. 1 in this case. We certify for two counsel and an agent in this appeal. Appeal allowed.

IN-Abs

The presumption under section 112 of the Indian Evidence Act is a conclusive presumption of law which can be displaced only by non access between the parties to the marriage at a time when according to the ordinary course of nature the husband could have been the father of the child. Access and non access connote existence and non existence of opportunities for marital intercourse. Karapaya vs Mayandy referred to. Non access can be proved by evidence direct or circumstantial though the proof of non access must be clear and satisfactory as the presumption of legitimacy is highly favoured by law. The principle of English common law according to which neither a husband nor a wife is permitted to give evidence of non access after marriage to bastardize a child born in lawful wedlock, does not apply to legitimacy proceedings in India as no such rule is to be found anywhere in the Indian Evidence Act and the old common law doctrine itself has been abrogated in England by the provisions of section 7 of the Matrimonial Cause Act, 1950. That by the evidence on the record the defendant No. 1 (husband) did not succeed in proving that there was no opportunity for intercourse between him and defendant No. 2 (his wife) at the time when the infant plaintiff was conceived and the High Court erred in holding that there was no opportunity for access between the parties at the material period.

iminal Appeal No. 18 of 1963. Appeal from the judgment and order dated September 24, 1962 of the Calcutta High Court in Criminal Appeal No. 601 of 1960. D. N. Mukherjee, for the appellant. P. K. Chakravarti and P. K. Bose, for the respondent. The Judgment of the Court was delivered by Mudholkar, J. The only point which has been urged in this appeal by certificate from a judgment of the High Court at Calcutta is whether the trial and conviction of the appellant for an offence under section 409, Indian Penal Code were barred by the provisions of section 403 of the Code of Criminal Procedure (hereinafter referred to as the Code). The facts which are not in dispute are these: The appellant was tried for an offence under section 409, I.P.C. by Mr. T. Bhattacharjee, Judge, Birbhum Special Court and sentenced to undergo rigorous imprisonment for four years. His conviction was maintained in appeal by the High Court but the sentence was reduced to rigorous imprisonment for two years. One of the points urged before the High Court was that upon the same facts and with respect to the same offence the appellant was tried earlier by Mr. N. C. Ganguly, Judge, Birbhum Special Court and acquitted thereof. He could, therefore, not have been tried over again in respect of that offence and consequently his conviction and sentence are illegal. What actually happened was this. The appellant who was a shed clerk at Sainthia Railway Station is alleged to have committed criminal breach of trust with respect to 8 bags of suji which had been booked by rail at Murarai by one Bhikam Chand Pipria, the consignee being the firm of Lalchand Phusraj of Sainthia. He was alleged to have done this in conspiracy with Ibrahim and Nepal Chandra Das. We are not concerned with these two persons 469 and so we can leave them out of account. The offence was investigated into and a charge sheet was submitted against the appellant under section 409, I.P.C. and two other persons by the Officer in charge, Government Railway Police, Asansol. Apparently he filed the charge sheet himself in the court of Judge, Birbbum Special Court. However, as set out in the order of Mr. Ganguly acquitting the appellant the case was distributed to the Birbhum Special Court for trial by notification No. 4515 J dated May 8, 1959 (Law Judicial Department), Government of West Bengal. The prosecution examined 21 witnesses before him and on August 28, 1959 he framed a charge against the appellant under section 409, I.P.C. The prosecution witnesses were cross examined on behalf of the appellant and the court examined him under section 342 of the Code. At the time of the hearing of arguments the Public Prosecutor placed before him a typed copy of a judgment of the High Court in Criminal Appeal No. 377 of 1958 in which it was held that a Special Court cannot, in view of the amendment of section 5(1) of the West Bengal Criminal Law Amendment (Special Courts) Act, 1949 by Act 27 of 1956 take cognizance upon a charge sheet because it is neither entitled to follow the procedure for trial under section 251 A nor can it take cognizancc under section 190(1)(c) unless in the latter case the provisions of section 191 of the Code were complied with. The attention of the learned Judge was also drawn to A. P. Misra vs The State(1) where it was held that where a magistrate could not legally take cognizance of an offence on the basis of a charge sheet the entire proceedings before him are without jurisdiction. In view of these decisions the learned Judge made an order of which the relevant portion runs thus: "So the proceeding is without jurisdiction. As the unreported decision of their Lordships was not available at the time of framing of charge, charge was framed against the accused person and the case continued as usual. As the unreported decision of their Lordships has come to the notice of this Court, the accused persons against whom charge was framed should be acquitted. As the accused persons are acquitted because the entire proceeding is without jurisdiction I am of opinion that it is necessary (sic) to discuss the evidence on record and decide the merits of the case. " Thereafter a formal complaint was preferred by the Public Prosecutor on May 16, 1960 and Mr. Bhattacharjee who had succeeded Mr. Ganguly as Judge of the Special Court, Birbhum took cognizance of the offence and commenced a fresh proceeding against all the accused persons, including the appellant. He framed a charge under section 409, I.P.C. against the appellant and eventually convicted and sentenced him with respect to it, as already stated, and the appeal from the conviction was dismissed by the High Court. (1) 470 In order to appreciate the argument advanced before us by Mr. D. N. Mukherjee on behalf of the appellant it is necessary to set out the provisions of sub section (1) of section 403 of the Code. They are as follows; "A person who has once been tried by a Court of competent jurisdiction for an offence and convicted or acquitted of such offence shall, while such conviction or acquittal remains in force, not be liable to be tried again for the same offence, nor on the same facts for any other offence for which a different charge from the one made against him might have been made under section 236 or for which he might have been convicted under section 237. " These provisions are based upon the general principle of auterfois acquit recognised by the English courts. The principle on which the right to plead auterfois acquit depends is that a man may not be put twice in jeopardy for the same offence. This principle has now been incorporated in article 20 of the Constitution. The defence of auterfois acquit, however, has no application where the accused person was not liable lawfully to be convicted at the first trial because the court lacked jurisdiction. This is what has been pointed out by the Court of Criminal Appeal in Thomas Ewart Flower vs R.(1). From the language used in section 403(1) of the Code it is clear that what can be successfully pleaded as a bar to a subsequent trial for the same offence or for an offence based on the same facts is that the accused had been (a) tried by a court, (b) of competent jurisdiction and (c) acquitted of the offence alleged to have been committed by him or an offence with which he might have been charged under section 236 or for which he might have been convicted under section 237, of the Code. Mr. Mukherjee, however, says that in so far as competency of the court is concerned it was there because the offence in question was cognizable by a Special Court and Mr. Ganguly made the order of acquittal as Judge of the Special Court. The competence of a court, however, depends not merely on the circumstance that under some law it is entitled to try a case falling in the particular category in which the offence alleged against the accused falls. In addition to this taking cognizance of the offence is also material in this regard. Under the Code of Criminal Procedure a court can take cognizance of an offence only if the conditions requisite for initiation of proceedings before it as set out in Part B of Chapter XV are fulfilled. If they are not fulfilled the court does not obtain jurisdiction to try the offence. In the case before us Mr. Ganguly took the view, though erroneously, that as one of the conditions requisite for taking cognizance of the offence was not satisfied he had no jurisdiction over the matter. Having come to that conclusion he had no option but to put a stop to those proceedings. It appears, however, that he (1) 471 felt that having already framed a charge the only manner in which he could put an end to the proceedings was by making an order of acquittal. It requires, however, no argument to say that only a court which is competent to initiate proceedings or to carry them on can properly make an order of acquittal, at any rate, an order of acquittal which will have the effect of barring a subsequent trial upon the same facts and for the same offence. Mr. Mukherjee, however, raises two contentions on this aspect of the matter. In the first place, according to him, the view taken by Mr. Ganguly that he could not have taken cognizance of the offence was erroneous as has been pointed out by this Court in Ajit Kumar Palit vs State of West Bengal(1) and, therefore, he could legally acquit the appellant. He further says that since Mr. Ganguly had not only framed a charge against the appellant but also examined all the witnesses both for the prosecution and for the defence and recorded the examination of the appellant he had completed the trial. In the second place, he says, that where a charge has been framed against an accused person in a warrant case the proceedings before the court can end either in acquittal or in conviction and in no other way. He points out that under section 494 of the Code the Public Prosecutor may with the consent of the court withdraw before a certain stage is reached, the prosecution of any person and that the only order which the court is competent to make is to acquit the accused if the withdrawal is made after a charge has been framed. It is true that Mr. Ganguly could properly take cognizance of the offence and, therefore, the proceedings before him were in fact not vitiated by reason of lack of jurisdiction. But we cannot close our eyes to the fact that Mr. Ganguly was himself of the opinion and indeed he had no option in the matter because he was bound by the decisions of the High Court that he could not take cognizance of the offence and consequently was incompetent to try the appellant. Where a court comes to such a conclusion, albeit erroneously, it is difficult to appreciate how that court can absolve the person arraigned before it completely of the offence alleged against him. Where a person has done something which is made punishable by law he is liable to face a trial and this liability cannot come to an end merely because the court before which he was placed for trial forms an opinion that it has no jurisdiction to try him or that it has no jurisdiction to take cognizance of the offence alleged against him. Where, therefore, a court says, though erroneously, that it was not competent to take cognizance of the offence it has no power to acquit that person of the offence. An order of acquittal made by it is in fact a nullity. In this connection we might profitably refer to the decision in Yusofally Mulla Noorbhoy vs The King(2). That was a case where there was no (1) [1963] 1 Supp. S.C.R. 953. (2) L.R. 76 I.A. 158. 472 valid sanction as required by cl. 14 of the Hoarding and Profiteering Prevention Ordinance, 1943 for the prosecution of the appellant therein on separate charges of hoarding and profiteering. The sanction for the prosecution had been granted by the Controller General of Civil Supplies who was authorised to give such sanction by virtue of a notification of the Government of India duly published. Charges were framed by the Magistrate and thereafter further evidence was called for by the prosecution and some or the witnesses were recalled for cross examination. On the date of hearing, however, counsel for prosecution made a statement to the following effect: "In view of the High Court decision in Revisional Application No. 191 of 1945, as this court is not competent to try this offence, he does not wish to tender the witnesses already examined for further cross examination nor to lead any further evidence. " Thereupon the Magistrate recorded an order in the following terms: "Mr. Mullick 's evidence is deleted. Accused acquitted for reasons to be recorded separately. " After referring to the statement of counsel for the prosecution and the order made on it the Magistrate continued: "On a perusal of the said decision, however, I find that the filing of this charge sheet by the prosecution itself is invalid in law, because the sanction is signed by the Con troller General under a Notification of the Government of India, and the said Notification does not state that the various officers therein mentioned are not below the rank of a District Magistrate. Thus it is the incompe tence of the prosecution to proceed against the accused without sanction as provided for in law. As, however, the invalidity of the sanction invalidates the prosecution in court, the accused was acquitted. " The Government filed an appeal against the order of acquittal The High Court allowed it and set aside the orders of the Magistrate acquitting the appellant and directed that the case should be tried by another Magistrate having jurisdiction to try it and deal with according to law. Against the decision of the High Court the appellant took an appeal to the Privy Council. The Privy Council accepted the view of the Federal Court in Basdeo Agar walla vs King Emperor(1) that the prosecution launched without valid sanction is invalid and held that under the common law plea of auterfois acquit or convict can only be raised where the (1) 473 first trial was before a court competent to pass a valid order of acquittal or conviction. Unless the earlier trial was a lawful one which might have resulted in a conviction, the accused was never in jeopardy. The principle upon which the decision of the Privy Council is based must apply equally to a case like the present in which the court which made the order of acquittal was itself of the opinion that it had no jurisdiction to proceed with the case and therefore the accused was not in jeopardy. As regards the second contention of Mr. Mukherjee it is necessary to point out that a criminal court is precluded from determining the case before it in which a charge has been framed otherwise than by making an order of acquittal or conviction only where the charge was framed by a court competent to frame it and by a court competent to try the case and make a valid order of acquittal or conviction. No doubt, here the charge was framed by Mr. Ganguly but on his own view he was not competent to take cognizance of the offence and, therefore, incompetent to frame a charge. For this reason the mere fact that a charge had been framed in this case does not help the appellant. Similarly the provisions of section 494 of the Code cannot be attracted to a case of this kind because that provision itself assumes the withdrawal by a public prosecutor of a charge competently made and before a court competent to entertain the application for withdrawal. In addition to the competent of the court, section 403 of the Code speaks of there having been a trial and the trial having ended in an acquittal. From what we have said above, it will be clear that the fact that all the witnesses for the prosecution as well as for the defence had been examined before Mr. Ganguly and the further fact that the appellant was also examined under section 342 cannot in law be deemed to be a trial at all. It would be only repetition to say that for proceedings to amount to a trial they must be held before a court which is in fact competent to hold them and which is not of opinion that it has no jurisdiction to hold them. A fortiori it would also follow that the ultimate order made by it by whatever name it is characterised cannot in law operate as an acquittal. In the Privy Council case it was interpreted by Sir John Beaumont who delivered the opinion of the Board to be an order of discharge. It is unnecessary for us to say whether such an order amounts to an order of discharge in the absence of any express provision governing the matter in the Code or it does not amount to an order of discharge. It is sufficient to say that it does not amount to an order of acquittal as contemplated by section 403(1) and since the proceedings before the Special Judge ended with that order it would be enough to look upon it merely as an order putting a stop to the proceedings. For these reasons we hold that the trial and eventual conviction of the appellant by Mr. Bhattacharjee were valid in law and dismiss the appeal. Appeal dismissed.

IN-Abs

A charge sheet was filed in the Special Court constituted under the West Bengal Criminal Law Amendment (Special Courts) Act, 1949, against the appellant for an offence under section 409, I.P.C. After the examination of the prosecution witnesses a charge was framed. Thereafter, the prosecution witnesses were cross examined and the accused was questioned under section 342 of the Criminal Procedure Code. At the time of hearing arguments, the Public Prosecutor placed before the Special Judge two judgments of the High Court according to which the Special Court could not take cognizance upon a charge sheet and that therefore the entire proceedings were without jurisdiction. Though the case was in fact allotted to the Special Judge by a Government notification, he held that he had no jurisdiction to proceed, and as the charge had already been framed, made an order a ,quitting the appellant. A formal complaint against the appellant was then preferred by the Public Prosecutor before the successor in office of the Special Judge and a fresh proceeding was commenced against the appellant which ended in his conviction. His appeal to the High Court was dismissed. In his appeal to this Court, the appellant contended that since he was tried and acquitted upon the same facts by the former Special Judge, his trial over again for the same offence was barred. by section 403 of the Code. HELD: The trial and eventual conviction of the appellant were valid in law, because, the earlier order of the Special Judge did not amount to an order of acquittal as contemplated by section 403(1) It was merely an order putting a stop to the proceedings. Section 403(1) can be successfully pleaded as a bar to a subsequent trial for the same offence or for an offence based on the same facts, where the accused had been (a) tried by a court (b) of competent jurisdiction and (e) acquitted. It is only a court which is Competent to initiate proceedings or to carry them on that can properly make an order of acquittal which will have the effect of barring a subsequent trial upon the same facts and for the same offence. It is true that in the instant case the former Special Judge could have properly taken cognizance of offence because of the allotment and, therefore, the proceedings before him were in fact not vitiated by reason of lack of jurisdiction. But where a court says, though erroneously, that it was not competent to take cognizance of the offence, it has no power to acquit that person of the offence. Therefore, the order a .quitting the appellant was in fact a nullity. [470E; 471A B, H] Yusofalli Mulla Noorbboy vs The King, L.R. 76 I.A. 158, applied. 468 The fact that a charge had been framed Would not help the appellant. A criminal court is precluded from determining the case before it in which a charge has been framed otherwise than by making an order of acquittal or conviction, only where the charge was framed by a competent court. But in the present case, since the former Special Judge was, on his own view, not competent to take cognizance of the offence, he was incompetent to frame the charge. Similarly, the provisions of section 494 of the Code could not be attracted, because, that provision also assumes the withdrawal by a Public Prosecutor of a charge competently made and before a court competent to entertain the withdrawal application. [473C E]. Moreover, the earlier proceedings could not be deemed to be a trial at all, because, for proceedings to amount to a trial, they must be held before a court which is in fact competent to hold them and which is not of the opinion that it has no jurisdiction to hold them. [473E F]

Appeal No. 108 of 1964. Appeal by special leave from the Award dated May 11, 1962, of the Industrial Tribunal, Bihar, Patna in Reference No. 4 of 1961. Ranen Roy, Jai Krishan, G.S. Chatterjee, E. Udayarathnam for A.K. Nag, for the appellants. Niren De, Addl.Solicitor General and Naunit Lal, for the respondent. The Judgment of the Court was delivered by Wanchoo, J. This is an appeal by special leave against the award of the Industrial Tribunal, Bihar. It relates to the discharge of 119 workmen of the respondent who were employed as cane carrier mazdoors or as cane carrier supervisors or jamadars. All these were seasonal workmen. It is necessary to set out in some detail the circumstances leading to the discharge. The respondent is a sugar factory and the crushing season starts usually in the first half of November each year. We are concerned in the present appeal with November and December 1960. It appears that from the season 1956 57, the respondent introduced an incentive bonus scheme in the factory. The scheme continued thereafter from season to season with certain changes. It also appears that in the beginning of each season, the respondent used to put forward the incentive bonus scheme and consult the workmen. The same thing was done when the season 1960 61 was about to start in November 1960. But the scheme for this season proposed by the respondent contained certain changes which were apparently not acceptable to the workmen. One of the features in the scheme was that the crushing of sugar cane per day should be 32,000 maunds. The general secretary of the union of the workmen suggested certain alterations for the consideration of the respondent on November 7, 1960, and one of the main alterations suggested was that the norm for per day 's crushing should be 125,000 maunds of cane and thereafter incentive bonus should be given at a certain rate. No agreement seems to have reached on the incentive bonus scheme, and the complaint of the respondent was that the secretary incited the workmen to go slow in consequence of the change in the scheme. Consequently mild go slow in cane the carrier department which is the basic department in a sugar mill began from the very start of the season on November 10, 1960. The L/P(N)4SCI 590 respondent 's case further was that on November 27, 1960, the workmen in the cane carrier department started in combination with one another to go slow deliberately and wilfully and in a planned manner and thus reduced the average daily crushing to 26,000 maunds cane which was much less than the average crushing in previous seasons. This conduct of the workmen was said to be highly prejudicial to the respondent and besides being technically unsafe, had brought into existence an acute shortage in the fuel position which might have resulted in the complete stoppage of the mill and a major breakdown of the machinery. When the position became serious the respondent issued a general notice on December 15, 1960 inviting the attention of the workmen concerned to this state of affairs which had been continuing of any rate since November 27, 1960. This notice was in the following terms: "At the instigation of Shri J. Krishna, the General Secretary of your Union, you since the very beginning of this season, have been failing in your duty to ensure adequate and regular loading of the cane carrier, and with effect from the 27th November, 1960, you, in combination with each other, have deliberately and wilfully resorted to a clear 'go slow ' tactics, a fact openly admitted by the above named General Secretary of your Union in presence of the Labour Superintendent and Labour Officer Muzzffarpur, in course of discussions held on the subject in the office of the Assistant Labour Commissioner on the 6th December, 1960. You have deliberately reduced the average daily crushing to more or less 26,000 maunds out of which more than 2,000 maunds is due to the newly introduced device of direct feeding of the cane carrier by cane carts weighed during nights and not attributable to any effort on your part. Thus the actual crushing given by you is practically something between 23,000 and 24,000 maunds only which is highly uneconomical and technically unsafe for this factory with the installed crushing capacity of more than 1,200 tons a day." About 14,000 bales of extra bagasse kept in stock as reserve have already been consumed in the past 12 days or so and now the factory is faced with a situation when at any moment its boilers may go out of steam for want of bagasse fuel leading to an abrupt stoppage of the mills and finally resulting into a major breakdown of machineries. "It is therefore hereby notified that unless you voluntarily record your willingness individually to discharge your duties faithfully and diligently by feeding the cane carrier so as to give a minimum average daily crush of 32,000 maunds, excluding stoppages other than those 591 due to overloading or under loading of the cane carrier, you will be considered to be no longer employed by the company. You must record your willingness in the office of the Factory Manager on or before 4 P.M. of Saturday the 17th December, 1960, failing which you shall stand discharged from the service of the company without any further notice with effect from 18 12 1960 and your place will be filled by recruiting other labour to man the cane carrier station." This notice was put on the notice board along with translations in Hindi and Urdu and it was also sent individually to the workmen in cane carrier department. A copy was also sent to the Secretary of the union with the workmen concerned to submit their willingness as desired by the respondent in the notice in question either individually or even collectively through the union. The secretary of the union replied to this notice on the same day and said that it was "full of maliciously false and mischievous statements". The secretary also denied that the workmen had adopted go slow tactics or that he had advised the workmen to adopt such tactics. Finally the secretary said that it was simply fantastic to ask a worker to give an undertaking to crush at least 32,000 maunds per day and if the service of any workman was terminated on his not giving the undertaking, the responsibility would be that of the respondent itself. The respondent 's case was that three workmen gave undertakings as required in the notice while the rest did not. Thereafter the situation in the factory deteriorated and the workmen grew more and more unruly and even started entering the factory without taking their attendance token. In consequence of this attitude of the workmen, the respondent issued a notice at 5 p.m. on December 17, 1960 which was in the following terms: "The following workers of the cane carrier station who failed to record their willingness in factory manager 's office by 4 p.m. this day the 17th December, 1960, to work faithfully and diligently in accordance with the management 's notice dated 15 12 1960, stand discharged from the company 's service and their names have been struck off the rolls with effect from 18th December 1960. From now on, the workers concerned have forfeited their right to go to and occupy their former place of work and any action contrary to this on their part will make them liable to prosecution for criminal trespass. "Their final account will be ready for payment by 4 p.m. on the 19th December 1960, when, or whereafter, they may present themselves at the company 's Office for receiving payment of their wages and other dues, if any, during working hours", and then mentions the names of 119 workmen of the cane carriers department. 592 Thus the services of the workmen concerned stood discharged from December 18, 1960 under this notice. This was followed by a general strike in pursuance of the notice served on the respondent by the union on December 17, 1960. The strike continued upto December 22, 1960 when as a result of an agreement it was decided that the case of the discharged workmen and the question of wages for the strike period be referred to adjudication. Consequently a joint application by both parties was made to Government on December 21, 1960. The Government then made a reference of the following two questions to the tribunal on January 25, 1961: 1. Whether the discharge of workmen mentioned in the Appendix was justified. If not, whether they should be re instated and/or they are entitled to any other relief? 2. Whether the workmen be paid wages for the period 16 00 hrs on December 18, 1960 to 8 00 hours on December 22, 1960? It may be mentioned that the respondent had held no enquiry as required by the standing Orders before dispensing with the services of the workmen concerned. Therefore, when the matter went before the tribunal, the question that was tried was whether there was go slow between November 27, 1960 and December. 15, 1960. The respondent led evidence, which was mainly documentary and based on the past performance of the factory to show that there was in fact go slow by the workmen concerned during this period. The appellants on the other hand also relying on the record of the respondent tried to prove that the cane carrier department had been giving normal work in accordance with what had happened in the past in connection with cane crushing. That is how the tribunal considered the question on the basis of the relevant statistics supplied by both parties and also oral evidence whether there was go slow during this period or not. After considering all the evidence it came to the conclusion that there was go slow during this period. Consequently it held that the discharge of the workmen was fully justified. It therefore answered the first question referred to it in favour of the respondent. The second question with respect to wages for the strike period was not pressed 9n behalf of the appellants and was therefore decided against them. Thereafter the appellants came to this Court and obtained special leave; and that is how the matter has come up before us. We are concerned in the present appeal only with the first question which was referred to the tribunal. Learned counsel for the appellants has raised three main contentions before us in support of the appeal. In the first place it is contended that the tribunal misdirected itself as to the Scope of the reference and that all that the tribunal was concerned with was to decide whether the discharge of the workmen for not giving an undertaking was justified 593 or not, and that it was no part of the duty of the tribunal to decide whether there was go slow between the relevant dates which would justify the order of discharge. Secondly, it is urged that the respondent had given no charge sheets to the workmen concerned and had held no enquiry as required by the Standing Orders. Therefore, it was not ' open to the respondent to justify the discharge before the tribunal, and the tribunal had no jurisdiction to go into the merits of the question relating to go slow. Lastly it is urged that the finding of the tribunal that go slow had been proved was perverse and the tribunal had ignored relevant evidence in coming to that conclusion. We shall deal with these contentions seriatim. We have already set out the relevant term of reference and it will be seen that 'it is wide and general in terms and asks the tribunal to decide whether the discharge of the workmen concerned was justified or not. It does not mention the grounds on which the discharge was based and it is for the tribunal to investigate the grounds and decide whether those grounds justify discharge or not. So if the tribunal finds that the discharge was due to the use of go slow tactics by the workmen concerned it will be entitled to investigate the question whether the use of go slow tactics by the workmen had been proved or not. But the argument on behalf of the appellants is that the notice of December 17 gives the reason for the discharge and the tribunal confined only to that notice and has to consider whether the reason given in that notice for discharge is justified. We have already set out that,notice and it certainly says that the workmen mentioned at the foot of the notice had failed to record their willingness to work faithfully and diligently in accordance with the respondent 's notice of December 15, 1960, and therefore they stood discharged from the respondent 's services and their names had been struck off the rolls from December 18, 1960. So it is argued that the reason for the discharge of the workmen concerned was not go slow but their failure to record their willingness to work faithfully and diligently. The tribunal had therefore to see whether this reason for the discharge of the workmen was justifiable, and that it had no jurisdiction to go beyond this and to investigate the question of go slow. We are of opinion that there is no force in this argument. Apart from the question that both parties before the tribunal went into the question of go slow and voluminous evidence was led from both sides either to prove that there was go slow or to disprove the same, it appears to us that it would be taking much too technical a view to hold that the discharge was due merely to the failure of the workmen to give the undertaking and that the go slow had nothing to do with the discharge. We are of opinion that the two notices of December 15 and December 17 have to be read together and it may be pointed out that the notice of December 17th does refer to the earlier notice of December 15th. If we read the two notices together, there can be in our opinion be no doubt that though the discharge is worded as if it was due to the failure to record their willingness to work faithfully and diligently, it was really due to the workmen concerned using go slow tactics. Notice of December 15, is in two parts. The first part sets out the facts and states what the workmen had been doing from the very beginning of the season and particularly from November 27, 1960. It states that on the instigation of the secretary of the union, the workmen had been failing in their duty to ensure adequate and regular loading of the cane carrier from the very beginning of the season. It further charges that with effect from November 27 they had in combination with one another deliberately and wilfully resorted to a clear go slow, a fact said to have been openly admitted by the secretary in the presence of the Labour Superintendent and Labour Officer, Muzaffarpur, in course of discussions held in the office of the Assistant Labour Commissioner on December 6, 1960. The notice then says that the average daily crushing is 26,000 maunds out of which more than 2,000 was due to the newly introduced device of direct feeding of the cane carrier by cane carts weighed during nights and not attributable to any effort on the workmen 's parts; thus the actual crushing had been practically reduced to something between 23,000 to 24,000 maunds per day, which was highly uneconomical and technically unsafe for the factory which had an installed crushing capacity of more than 1,200 tons a day i.e. over 32,000 maunds a day. The notice also says that about 14,000 bales of extra bagasse kept in stock as reserve and already been consumed in the last twelve days and the factory was faced with a situation when at any moment its boilers might go out of steam for want of bagasse fuel leading to an abrupt stoppage of the mill and finally resulting in a major break down of machinery. These facts which were given in the first part of the notice dated December 15, 1960 really show the charge which the respondent was making against the workmen concerned. Having made this charge of go slow in the manner indicated in the first part of the notice (and it may be mentioned that this notice was not only put on the notice board but was given to each workmen individually), the respondent then indicated in the second part what action it intended to take. In this part the respondent told the workmen concerned that unless they voluntarily recorded their willingness individually to discharge their duties faithfully and diligently by feeding the cane carrier so as to give a minimum average daily crush of 32,000 maunds, excluding stoppages other than those due to over loading or under loading of the cane carrier, they would be considered to be no longer employed by the respondent. They were given time up to 4 p.m. on December 17, 1960 to record their willingness failing which they would stand discharged from the respondent 's service without any further notice with effect from December 18, 1960. The second part of the notice thus indicated to the workmen concerned how much they had to crush every 595 day to avoid the charge of go slow. It further indicated that the respondent was prepared to let bygones be bygones if the workmen concerned were prepared to give an undertaking in the manner desired. Assuming that this course adopted by the respondent was unjust and even improper, reading of the two parts of the notice of December 15, 1960 shows that in the opinion of the respondent was the normal cane crushing per day and what was the charge of the respondent against the workmen concerned in the matter of go slow and what the respondent was prepared to accept if the workmen were agreeable to the claim of the respondent. It is clear therefore from the notice which was given on December 15, 1960 that the respondent thought that 32,000 maunds should be the normal crush every day excluding stoppages other than those due to over loading or under loading of the cane carrier. It also charged the workmen with producing much less than this for the period from November 27, 1960 to December 15, 1960, though it was prepared to 1st bygones be bygones, provided the workmen in future undertook to give normal production. It is in the background of this charge contained in the notice of December 15, 1960 that we have to read the notice of December 17, 1960. That notice says that the workmen had failed to record their willingness to work faithfully and diligently in accordance with the notice of December 15, 1960 and therefore they stood discharged, meaning thereby that the respondent was charging the workmen with go slow as indicated in the notice of December 15, 1960 and that as they were not prepared to give normal production even in future they were being discharged. Therefore, though in form the notice of December 17, 1960 reads as if the workmen were being discharged for not giving the undertaking as desired, the real basis of the notice of discharge of December 17, 1960 is the use of goslow which had already been indicated in the notice of December 15 given to each workman individually also. The reference was made on the joint application of both parties. If all that the workmen desired in their joint application for reference was that it should only be considered whether the discharge of the workmen for refusing to give an undertaking was justified, there was nothing to prevent the workmen to insist that in the joint application this matter should be specifically mentioned. In the joint application the first matter which was specified was in these terms: "Whether the discharge of workmen mentioned in the appendix was justified? If not, whether they should be reinstated and/or they are entitled to any other relief?" Now if all that was desired was that the tribunal should go into the question whether the discharge of the workmen on the ground that they had failed to give the undertaking should be investigated, it would have been easy to put this term only in the reference in the joint application thus; "Whether the discharges of the workmen mentioned in the appendix on the 596 ground of their failure to give an undertaking was justified?" The very fact that the matter specified as in dispute was put in the wide words already quoted above shows that the parties did not wish to confine their dispute only to the question whether the discharge on the ground of failure to give an undertaking was justified. Further we have already indicated that both parties understood the dispute to be whether go slow was justified or not and that is why voluminous evidence was led before the tribunal. The wide terms in which the reference was made along with the notice of December 17th read with the notice of December 15th leave no doubt in our mind that the reference included investigation of any cause which might have led to the discharge of the workmen. There is no doubt in this case that even though notice of discharge was pharsed as if the discharge was being made on account of the failure to give an undertaking the real reason for the discharge was that the workmen had been guilty of go slow between November 27 and December 15 and were not prepared in spite of the respondent 's giving them a chance to improve to show better results. Therefore taking into account the wide terms of reference, the manner in which it was understood before the tribunal, and the fact that it must be read along with the two notices of December 15 and 17, 1960, particularly because it was made soon thereafter at the joint application of the parties, we have no doubt that the tribunal was entitled to go into the real dispute between the parties, namely whether the discharge was justified on the ground that there was misconduct in the form of go slow by the workmen concerned between November 27, 1950 workmen therefore on this head must be rejected. Then we come to the question whether it was open to the tribunal when there was no enquiry whatsoever by the respondent to hold an enquiry itself into the question of go slow. It was urged on behalf of the appellants that not only there was no enquiry in the present case but there was no charge either. We do not agree that there was no charge by the respondent against the workmen concerned. The first part of the notice of December 15, 1960 which was served on each individual workmen was certainly a charge by the respondent telling the workmen concerned that they were guilty of go slow for the period between November 27 and December 15, 1960. It is true that the notice was not headed as a charge and it did not specify that an enquiry would follow, which is the usual procedure when a formal charge is given. Even so, there can be no doubt that the workmen concerned knew what was the charge against them which was really responsible for their discharge from December 18, 1960. It is now well settled by a number of decisions of this Court that where an employer has failed to make an enquiry before dismissing or discharging a workman it is open to him to justify the action before the tribunal by leading all relevant evidence before it, 597 In such a case the employer would not have the benefit which he had in cases where domestic inquiries have been held. The entire matter would be open before the tribunal which will have jurisdiction not only to go into the limited questions open to a tribunal where domestic inquiry has been properly held (see Indian Iron & Steel Co. vs Their workmen(1) but also to satisfy itself on the facts adduced before it by the employer whether the dismissal or discharge was justified, We may in this connection refer to M/s Sasa Musa Sugar Works (P) Limited vs Shobrati Khan(2), Phulbari Tea Estate vs Its Workmen(3) and the Punjab National Bank Limited vs Its Workman(4) There three cases were further considered by this court in Bharat Sugar Mills Limited.vs Shri Jai Singh(5), and reference was also made to the decision of the Labour Appellate Tribunal in Shri Ram Swarath Sinha vs Belaund Sugar Co. (6) It was pointed out that "the import effect of commission to hold an enquiry was merely this: that the tribunal would not have to consider only whether there was a prima facie case but would decide for itself on the evidence adduced whether the charges have really been made out". It is true that three of these cases, except Phulbari Tea Estate 's case(3), were on applications under section 33 of the . But in principle we see no difference whether the matter comes before the tribunal for approval under section 33 or on a reference under section 10 of the . In either case if the enquiry is defective or if no enquiry has been held as required by Standing Orders, the entire case would be open before the tribunal and the employer would have to justify on facts as well that its order of dismissal or discharge was proper. Phulbari Tea Estate 's(9) was on: a reference under section 10, and the same principle was applied there also, the only difference being that in that case, there was an enquiry though it was defective. A defective enquiry in our opinion stands on the same footing as no enquiry and in either case the tribunal would have jurisdiction to go into the facts and the employer would have to satisfy the tribunal that on facts the order of dismissal or discharge was proper. If it is held that in cases where the employer dismisses his employee without holding an enquiry, the dismissal must be set aside by the industrial tribunal only on that ground, it would inevitably mean that the employer will immediately proceed to hold the enquiry and pass an order dismissing the employee once again. In that case, another industrial dispute would arise and the employer would be entitled to rely upon the enquiry which he had held in the mean time. This course would mean delay and on the second occasion it will entitle the employer to claim the benefit of the domestic enquiry given. On the other hand, if in such cases the employer is given an opportunity to justify the (1) ; (2) [1959] Supp.S.C.R. 836.(3) [1960] IS.C.R. 32.(4) [1960] I.S.C.R.806.(5) [1962] 3 S.C.R.684.(6) [1954] L.A.C.697.598 impugned dismissal on the merits of his case being considered by the tribunal for itself and that clearly would be to the benefit of the employee. That is why this Court has consistently held that if the domestic enquiry is irregular, invalid or improper, the tribunal give an opportunity to the employer to prove his case and in doing so the tribunal tries the merits itself. This view is consistent with the approach which industrial adjudication generally adopts with a view to do justice between the parties without relying too much on technical considerations and with the object of avoiding delay in the disposal of industrial disputes. Therefore, we are satisfied that no distinction can be made between cases where the domestic enquiry is invalid and those where no enquiry has in fact been held. We must therefore reject the contention that as there was no enquiry in this case it was not open to the respondent to justify the discharge before the tribunal. (iii) The question whether there was go slow during the period from November 27 to December 15, 1960 is a question of fact and the tribunal has come to the conclusion that there was go slow during this period. Ordinarily this Court does not go into findings of fact recorded by a tribunal unless there are special reasons, as, for example, where the finding is based on no evidence, which of course is not the case here. Learned counsel for the appellants however urges that the finding of the tribunal that the workmen concerned were guilty of go slow is perverse and that evidence which was relevant and material has been ignored. As the case involves the discharge of as many as 119 workmen we have decided to go broadly into the evidence to see whether the finding of the tribunal is patently wrong. For this purpose we may first refer to the past history of the working of the respondent factory. It appears that till this court condemned the practice of go slow in the case of Bharat Sugar Mills(1). It was not unusual in the State of Bihar for workmen to give notice of go slow to employers as if it was a legitimate weapon to be used in matters of dispute between the employers and the workmen. In the present case the respondent had complained as far back at 1950 that go slow was being resorted to. In 1950 a court of enquiry was constituted to enquire into this question and it made a report that there was a slow down on the part of the workman for several days in February March 1950. It also came to the conclusion that the slow down was instigated and sponsored by union leaders. In 1951, the workmen gave notice of go slow in case their demands were not fulfilled (vide exhibit A 1) Similar notices were given in 1952 (vide exhibit A 2), In 1954 (vide exhibit A 3 and A 4) and in 1955 (vide Exs. A 5, A 6 and A 7 and on some occasions threats of go slow did actually materialise. Besides these notices the management had occasion to complain in 1955.1957, and 1958 more than once that go slow was being (x) [1962] 3 S.C.R,.599 resorted to at the cane carrier. Thus it appears that resorting to go slow was a common practice in this factory. It is in the background of this persistent attitude of the workmen that we have to see what happened in November 1960. We have already referred to the fact that the workmen were dissatisfied with the new incentive bonus scheme proposed by the respondent. It is not necessary to go into the merits of this new scheme which was proposed in September 1960. But it appears that when there was dispute in the 1959 60 season on the question of how much cane should be crushed, the secretary of the union had accepted in a conference with the Assistant Labour Commissioner that there had been a drop in the amount of cane crushed, though he maintained that it was still the average crush. He had also stated then that the workmen were dissatisfied with the incentive bonus scheme in that season and had withdrawn the extra efforts they were putting in after the introduction of the incentive scheme for the first time in 1956 57. Further it was admitted by the secretary in his evidence that when the bonus scheme was proposed in 1960 61, it was considered by the workmen in a meeting and it was decided that if the new system was introduced without the consent of the workmen they would not put in any extra effort for giving more than what was the normal crush in the mill. The evidence also shows that there were conferences about the new scheme and at one stage the respondent suggested that the norm should be 30,000 maunds crush per day while the union was agreeable to 29,500 maunds per day. But there was no agreement in this behalf and so that workmen carried out their resolve not to put in extra efforts to give more than the average normal crushing per day. Thus the season which began in November 1960 started with the withdrawal of extra efforts by the workmen which in plain terms means that the workman were not prepared to do what they had been doing in this previous season 1959 60 and were slowing down production as compared to what it was in 1959 60. It is in the background of this history and this admission that we have to look broadly into the evidence to see whether the tribunal 's conclusion that there was go slow is justified. The main contention on behalf of the respondent in this connection is that one has to see is that is called crushing speed for a day of 24 hours and it is this crushing speed which would determine whether there was go slow during the period in dispute. It has been urged that crushing speed per 24 hours is different from the actual crushing per day or the average crushing for a period, for the actual crushing per day from which the crushing speed is arrived at depends on a number of factors, particularly it depends on the amount of stoppages that take place during the day and if there are more stoppages the actual crushing on a particular day would necessarily go down. Crushing speed per twenty four hours on the other hand is arrived at by excluding the stoppages and then working out what would be the amount of cane 600 crushed in 24 hours if there had been no stoppages. The case of the respondent further is that when it gave the notice on December 15, 1960 asking for a crush of 32,000 maunds per day it really meant that the workmen should work in such a way as to give a crushing speed of 32,000 maunds per day, though the words "crushing speed" were not actually used in the notice. It is however pointed out that the notice when it mentions 32,000 maunds as the normal crush expected per day excluded stoppages other than those due to over loading or under loading of the cane carrier. Therefore, the respondent wanted the workmen to give a crushing speed of 32,000 maunds per day which would exclude stoppages, the only exception being stoppages due to over loading or underloading, which, according to the respondent, is due to the deliberate action of the cane carrier workmen to cause stoppages, We think that this explanation of what the respondent meant when it gave the notice of average daily crush of 32.000 maunds is reasonable, for it is impossible to accept that 32,000 maunds were required to be crushed irrespective of stoppages, beyond the control of the workmen. Further it is not in dispute that the labour force was more or less the same throughout these years, and therefore we have to see whether during the period from November 27 to December 15, 1960 there was any significant drop in the crushing speed. If there was such a significant drop that could only be due to go slow tactics which have been euphemistically called withdrawal of extra efforts. It is necessary therefore to took at the charts produced in this case to determine this question. The appellants mainly relay on chart exhibit W 3. That is however a chart of actual crushing per day during the period from 1954 55 to 1960 61 and has nothing to do with crushing speed which in our opinion would be the determining factor in finding out whether there was go slow. The actual crush may vary as we have already said due to so many factors, particularly due to stoppages for one reason or the other. The respondent produced another chart exhibit W 4 which shows the crushing speed for the entire season from 1954 55 to 1959 60. We consider that it would not be proper to take the figures for the years 1956 57 to 1959 60 in which years incentive bonus schemes were in force and which according to the workmen resulted in extra efforts on their part. But the figures of 1954 55 and 1955 56 would be relevant because in these years there was no incentive bonus scheme and no night weighment 'of carts. The workmen have also produced a chart showing cane crushed, actual crushing days and crushing per day; but this chart does not show the crushing speed and does not take into account the stoppages. It merely shows the actual number of working days and the average per day. That however would not be an accurate way of finding out whether in fact there was go slow during the period with which we are concerned. The respondent 's chart exhibit W 4 while showing the same amount of actual crushing also shows what would be the crushing 601 speed per 24 hours after excluding stoppages. This chart in our opinion is the proper chart for determining whether there was go slow during the revelant period. Now according to this chart (exhibit W 4) the daily average crushing speed in 1954 55 was 29,784 maunds and in 1955 56, 30,520 maunds without incentive bonus and without night weighment of carts. It appears that from the middle of 1959 60 season night weighment of carts started and it is not in dispute that resulted in an increase in the daily crushing and this increase is put at over 2,000 ' maunds per day by the respondent; the secretary of the union admitted that this would result in an increase of about 2,500 maunds per day. We have already said that in the years 1954 and 1955 there was no incentive bonus and if these figures are accepted as giving the average crushing speed per day (when there was no incentive bonus and no weighment of carts at night) it would in our opinion be not improper to accept that the crushing speed with night weighment of carts would be in the neighbourhood of 32,000 maunds per day in view of the admission that night weighment of carts resulted in an increase of crushing by about 2,000 maunds to 2,500 maunds per day. Therefore, when the respondent gave notice on December 15, 1960 that the average crushing per day should be 32,000 maunds excluding stoppages (except those due to over loading or underloading of the cane carrier, for which the workmen would be responsible) it Cannot be said that the respondent had fixed something which was abnormal. It is true that when negotiations were taking place in connection with the incentive bonus scheme for the year 1960 61, the respondent was prepared to accept a crushing speed of 30,000 maunds per day above which the incentive bonus scheme would apply. That is however easily understood for a proper incentive bonus scheme always fixes a norm which is slightly lower than the average in order that there may be greater incentive to labour to produce more than the average. Even so, when the incentive bonus scheme for 1960 61, was not acceptable to the workmen and they had already decided to withdraw what they called extra effort, the respondent would not be unjustified in asking for the full average crushing speed based on the production of the years 1954 55 and 1955 56, when there was no incentive bonus scheme and no night weighment of carts. It has been urged on behalf of the appellants that the crushing speed of 32,000 maunds per 24 hours is not correctly arrived at for it does not take into account half hour 's rest per shift which is permissible under section 55(1) of the Factories Act, No. 63 of 1948. Thus, according to the appellants, crushing speed should be worked out on 22 1/2 hours per day and the crushing will then be less by 1/16th and will only come to 30,000 maunds per day. Reliance in this connection is placed on section 55(2) of the Factories Act, which lays down that "the State Government . may by written order and for the reasons specified therein, exempt any factory from the provisions of sub section (1) so however that the total number of hours worked by a worker without an interval does not exceed 602 six. It is therefore urged that the workmen were entitled to half an hour 's rest per shift in any case because the shift was for eight hours. The respondent on the other hand relies on section 64(2) (d) for the Factories Act and its case is that the State Government had made rules under that provision in connection with sugar factories, which apply to it. Section 64(2) (d) is in these terms: "The State Government may make rules in respect of adult workers in factories providing for the exemption, to such extent and subject to such conditions as may be prescribed (d) of workers engaged in any work which for technical reasons must be carried on continuously from the provisions of sections 51, 52, 54, 55 and 56; We are of opinion that this provision in section 64(2) (d) being a special provision will over ride both sub sections(1) and (2) of section 55, for it gives power to the State Government by making rules to exempt certain types of factories from the application of the whole of section 55, subject to such conditions and to such extent as the rules may provide. It appears that rules were framed in this behalf by the Government of Bihar in 1950 by which sugar factories were exempted from the application of section 55 for purposes of handling and crushing of cane, among others subject to the condition that the workers concerned shall be allowed to take light refreshment or meals at the place of their employment, or in a room specially reserved for the purposes or in a canteen provided in the factory, once during any period exceeding four hours. Thus cane crushing operations are exempt from section 55(1) and section 55(2) subject to the condition mentioned above. We may also refer to section 64(5) which lays down that the rules made under this section shall remain in force for not more than three years. The rules to which reference has been made are of 1950; but there is nothing to show that these rules were not continued after every interval of three years and the position that the exemption applies to sugar factories even now as provided in these rules was not disputed. We shall therefore proceed on the basis that the exemption applied to sugar factories in Bihar. In view of this, the workmen cannot claim half an hour 's rest per shift as urged on their behalf, though sometime must be allowed for refreshment or light meals as provided in the provision granting exemption. This means that a few minutes would be allowed to each individual in turn in each shift for light refreshment or meals in such a way that the work does not stop. If we make a total allowance of half an hour or so in this connection the average crushing speed would be reduced to slightly over 31,000 maunds per day and that is all the adjustment that the appellants can claim in view of the exemption under section 64(2) (d). Let us now turn to the actual position between November 27 and December 15, 1960. This will appear from chart exhibit W 7. 603 That chart shows a crushing speed of 29,859 maunds per day from November 10 to 26, when, according to the respondent, there was only mild go slow. We are however concerned with the period from November 27 to December 15, 1960 and the crushing speed for 24 hours during that period was 27,830. Now if we take the average crushing speed as 32,000 maunds per 24 hours without any adjustment or even a little over 31,000 maunds with adjustment following upon the rule relating to exemption from section 55, there is certainly a significant drop in average crushing speed during this period. Further we find that there is a significant drop even as compared to the period between November 10 to 26, 1960, inasmuch as the drop was over 2,000 maunds per day. Therefore it cannot be said that the tribunal was incorrect in its conclusion that there had been go slow during the period from November 27 to December 15. It may be added that when comparisons are made on the basis of crushing speed and labour force is more or less constant, as is the ease here, other minor factors to which our attention was drawn on behalf of the appellants during argument do not matter at all. Even if we take the figure of 30,000 maunds as the crushing speed which the respondent had put forward at the time of the discussion on the incentive bonus scheme, we find that though there was not much difference during the period from November 10 to November 26, there was a significant drop of over 2,000 maunds per day from November 27 to December 15. Looking at the matter in this broad way and that is all that we are prepared to do, for we are examining a finding of fact of the tribunal we cannot say that its conclusion that there was go slow between November 27 and December 15 is not justified. Finally, it is urged that notice was given to the workmen on December 15 and they were discharged on December 17, 1960 without giving them a change to give the necessary production as desired in the notice. But as we have already indicated, the charge in the notice of December 15 was that the workmen had been going slow from November 27 and they were asked to give an undertaking to improve and the respondent was apparently willing to overlook the earlier lapse. Even assuming that the demand of an undertaking was unjustified, it does appear that the attitude of the workmen was that they would do no better; and in those circumstances they were discharged on December 17, 1960 on the basis of misconduct consisting of go slow between November 27 and December 16, 1960. That misconduct has been held proved by the tribunal and in our opinion that decision of the tribunal cannot be said to be wrong. In the circumstances the tribunal was justified in coming to the conclusion that the discharge was fully justified In this view of the matter, the appeal fails and is hereby dismissed. In the circumstances we order parties to bear their own costs. Appeal dismissed.

IN-Abs

The workers of the respondent started a go slow in its sugar factory. Therefore, the respondent issued a general notice to those workmen and individually to each workman notifying that unless he recorded his willingness to discharge his duties faithfully and diligently so as to give a certain minimum output, he will be no longer employed; and that he must record his willingness in the office by a certain time, failing which he shall stand discharged from the service of the respondent without any further notice. Because the appellants, who were 119 of such workmen. failed to record their willingness, the respondent issued a notice discharging their services. The respondent held no enquiry as required by the Standing Orders before dispensing with the, services of the appellants. A general strike followed resulting in a joint application by both the parties to the Government and the Government referred the question to the Tribunal, whether the discharge of the workmen was justified. The Tribunal came to the conclusion that there was go slow during the period, and consequently held that the discharge of the workmen was fully justified. In appeal by Special Leave the appellant contended that (i) all that the Tribunal was concerned with was to decide whether the discharge of the workmen for not giving an undertaking was justified or not, and that it was no part of the duty of the Tribunal to decide whether there was go slow which would justify the order of discharge; (ii) Since the respondent held no enquiry as required by the Standing Orders, it could not justify the discharge before the Tribunal and (iii) the finding of the Tribunal that go slow, had been proved was perverse and the Tribunal had ignored relevant evidence in coming to the conclusion. HELD: The contentions must be rejected. (i) Taking into account the wide terms of reference, the manner in which it was understood before the Tribunal, and the fact that it must b.e read alongwith the two notices, particularly because it was made soon thereafter at the joint application of the parties, the Tribunal was entitled to go into the real dispute between the parties, namely whether the discharge was justified on the ground that there was misconduct in the form of go slow by the workmen concerned. [596D] (ii) No distinction can be made between cases when the domestic enquiry is invalid and those where no enquiry has in fact been held. This Court has consistently held that if the domestic enquiry is irregular, invalid or improper, the Tribunal may give an opportunity 589 to the employer to prove his case and in doing so the Tribunal tries the merits itself. [598A C] Case law referred to. (iii) As the case involved the discharge of 119 workmen, this Court went into the evidence, and the evidence showed that the decision of the Tribunal was not wrong that there Was go slow and that the discharge was fully justified. [598E]

Appeal No. 999 of 1964. Appeal by special leave from the order dated March 25, 1954 of the Life Insurance Tribunal, Bombay in Case No. 27 of 1962. C. K. Daphtary, Attorney General, section J. Banaji, Atiqutor Rehman and K. L. Hathi, for the appellant. N. A. Palkhivala, section J. Sorabjee, J. B. Dadachanji, 0. C. Mathur and Ravinder Narain, for the respondent. The Judgment of the Court was delivered by Wanchoo J. The only question that arises for determination in this appeal by special leave from the order of the Life Insurance Tribunal, Bombay, is the interpretation of the words "life insurance fund" as used in paragraph 4 of Part B of the First Schedule to the , No. 31 of 1956, (hereinafter referred to as the Act). The question arose in connection with the payment of compensation to the respondent, the Crown Life Insurance Company, which is incorporated in Canada, by the appellant, the Life Insurance Corporation of India on the taking over of the business of the respondent by the appellant under the Act. The respondent claimed Rs. 27,86,658 as compensation while the appellant was prepared to pay Rs. 1, 1 1,466. The respondent claimed that as its life insurance fund was always in deficit before the Act came into force, there was no liability on it under cl.(d) of paragraph 4 of Part B of the First Schedule to the Act. The appellant on the other hand claimed that under that cl. (d), there was a surplus of Rs. 27,86,658 and therefore under cl. (d) a sum of Rs. 26,75,192 was to be debited towards the liabilities of the respondent. That is how the appellant arrived at the compensation of Rs. 1,11,466. The appellant claimed that the words "life insurance fund" in cl. (d) meant the difference between the total assets and the liabilities under cls. (a) and (c) of the said paragraph 4. The respondent on the other hand contended that the words "life insurance fund" in cl. (d) had the same meaning as those words had under the , No. 4 of 1938 (hereinafter referred to as the ). The respondent therefore claimed that as there was always a deficit in its working as shown by form 1 of the Fourth Schedule to the , no amount was to be deducted as liability under cl. (d) of the said paragraph 4. It is this difference in the meaning assigned to the words "life insurance fund" by the parties 477 that is responsible for the large difference in the amount claimed by the respondent and offered by the appellant. The Insurance Tribunal has accepted the contention put for ward on behalf of the respondent and has held that the words "life insurance fund" in cl. (d) of the said paragraph 4 have the same meaning as in the , and that there is only one meaning of these words in the . It has rejected the contention raised on behalf of the appellant and has in consequence awarded compensation at Rs. 27,86,658. Aggrieved by this order, the appellant got special leave from this Court; and that is how the matter has come up before us. The sole question that falls for determination therefore de pends on the interpretation of the words "life insurance fund" and for that purpose we shall have to consider certain provisions of the as well as of the Act. We may at the outset refer to section 2 (10) of the Act, which is as follows: " In this Act, unless context otherwise require (10) all other words and expression used herein but not defined and defined in the shall have the meanings respectively assigned to them in that Act. " It is not in dispute that the words "life insurance fund" appear In the though not in the definition section thereof. Section 2 (10) of the Act however does not refer only to the definitions in the definition section of the ; it lays down generally that any words and expressions used in the Act and defined in the shall have the meanings assigned to them in the (and that means anywhere in the ) unless the context otherwise requires. We have therefore to turn to the first to find out the meaning of the words "life insurance fund" as given therein and then to see whether the context of cl. (d) of the said paragraph 4 requires otherwise. If we come to the conclusion that it does not require otherwise, the words "life insurance fund" in cl. (d) of the said paragraph 4 will have the same meaning as in the . Let us therefore turn to the to see what the words "life insurance fund" mean under that Act. It has been urged in the first place on behalf of the appellant that the words "life insurance fund" under the have not one meaning only and therefore it is not possible to give that meaning to these words in cl. (d) with which we are concerned. In the alternative it is urged that the context requires that even if the words "lift insurance fund" have only one meaning under the , they have a different meaning under cl. We have therefore to find out what the words "life insurance fund" mean under the and whether they have the same meaning throughout the Act. We have already pointed out that the words "life insurance fund" have not been defined in section 2 (N)4SCI 4 478 of the insurance Act, which is the definition section. But there is no doubt that in section 10 of the , these words have been given a specific meaning to which we shall now refer. The was concerned not only with life insurance business but also with insurance business of other kinds, namely, marine, fire and miscellaneous. It was open to an insurance company to carry on either the life insurance business only or life insurance business along with insurance business of other kinds also. Therefore, section 10(1) of the provided that where an insurer carried on business of more than one kind, he was boUnd to keep a separate account of all receipts and payments in respect of each kind of business. Section 10(2) dealt specifically with life insurance and we therefore read the relevant part of that sub section: "Where the insurer carries on the business of life insurance, all receipts due in respect of such business shall be carried to and shall form a separate fund to be called the life insurance fund the assets of which shall. be kept distinct and separate from all other assets of the insurer and the deposit made by the insurer in respect of life insurance business shall be deemed to be part of the assets of such fund and every insurer sHall. furnish to the Controller a statement showing in detail such assets as at the close of every calendar year duly certified by an auditor or by a person qualified to audit under the law of the insurer 's country"; There are three provisos to this section to which it is unnecessary for our purposes to refer. Sub section (3) of section 10 is also material and runs as follow: "The life insurance fund shall be as absolutely the security of the life policy holders as though it belonged to an insurer carrying on no other business s than life insurance business and shall not be liable for any contracts of the insurer for which it,would not have been liable had the business of the insurer been only that of life insurance and shall not be applied directly or indirectly for any purposes other than those of the life insurance business of the insurer. " Section II (c) then provides for keeping a revenue account in form D of the Third Schedule in respect of each insurance business for which separate account was required to be kept under section 10(1). Regulation 1 of of the Third Schedule provides that form D as set out in is appropriate for life insurance business. A perusal of form D shows what items have to be entered on the ,receipts side of the form and these items are: premiums of an kinds, consideration for annuities, interest, dividends and rents (obviously from assets of the life insurance fund); regulation fees and other income. It is thus clear that the revenue account on the receipt side mainly has income from premiums and income arising 479 out of 'Investments from life fund and this forms the main basis of the life insurance fund. On the expenditure side of form D there is provision for claims under policies, annuities, surrenders, bonuses in cash, bonuses in reduction of premiums, expenses of management (i.e. salaries etc., travelling expenses, directors ' fees, auditors ' fees, and charges for advertisements, printing and stationary, other expenses of management, rents for offence belonging to and occupied by the insurer, rent of other offices kept by the insurer), bad debts and other expenditure. Thereafter a balance has to be struck and this balance is the balance of the life insurance fund. This balance is arrived at after taking into account the balance of the fund at the beginning of the year and after making adjustments with respect to profit and loss and transfers from appropriation account. It is this balance which goes into the balance sheet form A provided in the First Schedule of the as life insurance fund and includes as provided in section 10(2) the deposit made by the insurer in respect of life insurance business. There is no doubt therefore that the words "life insurance fund" under the have got the meaning assigned to it under section 10(2) read with section 11 and form D of the Third Schedule. It is equally clear that all the assets of an insurance company doing life insurance business do not form part of the life insurance fund, for example, if the insurance company has got share capital that is not part of the life insurance fund even though the deposit required by law to be made for life insurance business is part of the fund. So far therefore as section 10(2), section 1 1 and form D are concerned, life insurance fund has a definite meaning. The working of a life insurance company is in some respects different from that of ordinary companies inasmuch as it is not open to a life insurance company to distribute dividends unless there is surplus computed under the . This surplus is determined thus: First of all the life insurance fund as disclosed by revenue account in form D is found out. Then the valuation of the policies in force as on a certain date is determined by actuarial valuation which has to be made at least once in three years under section 13(1) of the . After valuation of the policies of different kinds they are grouped under different heads and their summary is set out in form H of the Fourth Schedule. Form 1 of the said Schedule provides for determining the surplus or deficit. This form is known as valuation balance sheet and the surplus or deficit is the difference between net liability in business as shown in form H and the life insurance fund as shown in balance sheet form A. Surplus will only result if the balance of life insurance fund is greater than the net liability under form H. Where however the balance of life insurance fund is less than the net liability under form H, there will be a deficiency and not surplus. Section 49(1) of the insurance Act then provides that no amount of the life insurance fund will be used to pay any dividend to share holders or any bonus to policy holders or for making any payment in service of any debenture, unless the valuation balance sheet in form 1 of the Fourth Schedule 480 shows a surplus. It is further provided that out of the surplus only 71 per centum shall be allocated to or reserved for shareholders with the consequence that the balance of 92 1/2 per centum of the surplus remains in the fund for policyholders or may be allocated as bonus to policyholders. The life insurance find as defined in section 10(2) is an absolute security of the life policy holders and cannot be used in any manner except in accordance with the provisions to which we have already referred. Thus the words "life insurance fund" have a definite meaning under the under section 10(2), read with section 1 1 and form D of the and the words "surplus" and "deficiency" have also special meaning appearing from a combined reading of section 13 of the and form H and form 1 of the Fourth Schedule. The next question is whether the words "life insurance fund" have any other meaning under the . These words appear in a number of provisions of that Act. It is not necessary however to refer to all of those provisions for it is not in dispute that in most of the provisions the words have the meaning assigned to them under section 10(2) of the . But three provisions have been specifically brought to our notice where it is said that the words have a different meaning. The first is section 56 which deals with winding up of insurance companies. In sub section (2) thereof reference is made to surplus of assets over liabilities and how such surplus which is called prima facie surplus in the sub section is to be dealt with. It will however be seen that the sub section does not use the words "life insurance fund" when speaking of prima facie surplus which is the difference between all assets and all liabilities. But it is urged that the marginal note to the section which is in these words "application of surplus assets of life insurance fund in liquidation or insolvency" shows that for the purpose of this section, the words "life insurance fund" as used in the marginal note may have a different meaning. We are however of opinion that this is not so. Sub section (2) after speaking of prima facie surplus, which is equal to total assets minus total liabilities, provides how the prima facie surplus is to be dealt within winding up proceedings. The sub section provides that this prima facie surplus would be divided into two parts and one part would be in proportion to the profits of the insurer allocated to policy holders. This part will naturally be determined with respect to form 1 of the Fourth Schedule which deals with life insurance fund and surplus or deficiency. The sub section thus provides that out of the prima facie surplus a certain amount will be deducted in proportion to the profit allocated to the policy holders, and remaining will be the amount which may go to shareholders in winding up. Therefore as we read sub section (2) we find that it deals with entire assets and these entire assets will certainly include the life insurance fund. The marginal note indicates how out of the prima facie surplus indicated in sub section (2) the surplus in the life insurance fund as arrived at in form shall be used. The argument that the words "life insurance fund" in 481 section 56(2) has a different meaning therefore has no force for two reasons. In the first place the section does not use the words "life insurance fund" and in the second place when the marginal note refers to surplus assets of life insurance fund it means in reality the surplus to be found in form 1, for the prima facie surplus will include that. We cannot therefore accept the contention that for the purposes of section 56(2) the words "life insurance fund" have a different meaning in view of the marginal note of section 56. The next section to which reference is made in this connection is section 58(3). Section 58 deals with schemes for partial winding up of insurance companies, i.e. winding up of one kind of business while another kind of business goes on. Section 58(3) provides that the, provisions of this Act relating to valuation of liabilities of the in , surer in liquidation and insolvency and to the application of surplus assets of the life insurance fund in liquidation or insolvency shall apply to the winding up of any part of the affairs of the company. It is argued that the words "life insurance fund" here are used in a different sense . We are of opinion that this is not so. Sub section (3) of section 58 has to be read along with section 56 and in particular with Sub section (2) thereof and as we have already indicated the words "life, insurance fund" in the marginal note of section 56 have no different meaning from that to be found in section 10(2) the same applies to the use of the words "life insurance fund" in section 58(3) mutates mutandis. Lastly reference was made to regulation 7 of of the First Schedule, which provides for a certificate that no part of the assets of the life insurance fund has been directly or indirectly applied in contravention of the provisions of the relating to the application and investment of life insurance funds. It is urged that the use of the plural suggests that a different meaning is to be given to the words "life insurance fund" here. We are unable to agree with this contention either. The use of the words "life insurance funds" in plural is merely due to the exigencies of grammar in this provision and does not mean that the words have a meaning different from that assigned to them in section 10(2) to which we have already referred. We must therefore reject the contention on behalf of the appellant that the words "life insurance fund" have any meaning other than that assigned to them in section 10(2) of the so far as that Act is concerned. Reference is then made to section 27(1) of the which requires that every insurer shall invest and at all times keep invested assets equivalent to not less than the sum of the amount of his liabilities to holders of life insurance policies in India on account of matured claims and the amount required to meet the liability on policies of life insurance maturing for payment in India subject to certain deductions. It is urged that this provision lays down that an insurer is required to keep certain sums invested to meet his liabilities mentioned therein and this shows that the entire assets of the insurer are security for the policy holders. It is true that this provision requires an insurer to keep certain assets invested and those 482 have to be equal to his liabilities on policies matured and policies yet to mature. This provision is for the protection of the policyholders ' interest. It has however in our opinion nothing to do with the life insurance fund as such. What in fact it provides is that when the life insurance fund shows a deficit in form it would be the duty of the insurer to see that he has further assets to cover the deficit, and that these assets are always kept invested in accordance with the ; but the section does not provide that the assets brought in to cover the deficit would become part of the life insurance fund. It is not in dispute that there is no other provision in the which requires that whenever. the life insurance fund is in deficit the insurer must put sufficient money in that fund itself to 'cover the deficit. It is true that form D of the Third Schedule includes an item "other income" but that does not mean that any sum kept invested by an insurer for the purposes of section 27(1) in order to cover the deficit in the life insurance fund becomes part of that fund. Note (e) which appertains to "other income" of the said form makes it clear that all the amounts received by the insurer directly or indirectly whether from his head office or from any other source outside 'India shall also be shown separately in the revenue account except such sums as properly appertain to the capital account. Therefore sums invested for purposes of section 27(1) of the do not necessarily form part of the life insurance fund. It is only such moneys which are included in form D and which are not of capital nature that form part of the life insurance fund. In the present case it is not in dispute that the business of the respondent 1 in India always had shown a deficit in form . It is also not in dispute that in order to meet that deficit as required by s, 27(1), the respondent took advantage of section 27(6) which provides that the assets required by this section to be held invested by an insurer incorporated or domiciled outside India shall subject to certain exceptions be held in India and all such assets shall be held in trust for the discharge 'of the liabilities of the nature referred to in sub section (1) and shall be vested in trustees resident in India and approved by the Central Government and the instrument of trust under this sub section shall be executed by the insurer with the approval of the Central Government and shall define the manner in which alone the subject matter of the trust shall be dealt with. Such an instrument of trust was executed by the respondent and the State Bank of India was the trustee of the fund required to be kept under section 27(1) read with section 27(6). But that in our opinion did not make the whole of this trust fund part of the life insurance fund as defined in section 10(2). The money required to cover the deficit in form I could only become part of the life insurance fund if that was included in the revenue account form D and in such a case there would then be no deficit left in the life insurance fund. It is not ill dispute that in this case funds brought in by the respondent from outside to cover the deficit were never put in the revenue account and were never made part of the life insurance fund, though 483 they remained vested in the trustee for the purpose of section 27(1) read with section 27(6). The appellant 's contention always was that the case of the respondent, for purpose of compensation, was covered by part B of the First Schedule to the Act and not by its Part A, and this was because there was a deficit in form I submitted by the respondent throughout its working. It appears that in spite of this deficit in the Indian working of the respondent, the respondent used to pay bonuses to its policy holders out of its global surplus and these payments were made in cash. Even so the appellant insisted and rightly that as form I showed deficit at the relevant time the respondent was not entitled to take advantage of Part A. of the First Schedule to the Act for purposes of compensation. In such circumstances it seems strange when admittedly there was always a deficit in form I submitted by the respondent in connection with its. Indian. business that the appellant should now say for the purpose of compensation that there is a surplus disclosed by the business of the respondent, 96 per centum of which would go to the appellant under cl. (d) of the aforesaid 4th paragraph, We are. therefore of opinion that the appellant cannot take advantage of section 27(1) and ask us to hold that all the funds which are mentioned in.s. 27(1) to be kept invested are part of the life insurance fund. Part B applies to. ' two kinds of insurance companies viz., those which had deficits and those which had surplus but had not distributed it at the relevant time. It is the latter class of companies that cl. (d) is really meant to cover. As we have already. said section 27(1) has nothing to do with the life insurance fund and is meant only as a safety device for policyholders, particularly in cases where there is deficit in the life insurance fund. : But where such deficit is made up for the purpose of section 27(1), the extra amount so invested by the insurer to make up the deficit does not automatically become part of the life insurance fund unless it is put through the revenue account form D. That was admittedly never done in this case and form I always showed a deficit in the case of the respondent. Section 27(1) therefore does not help the appellant, for it is not in dispute that an insurer is not bound to make up the deficit by putting money in the life insurance fund though he is bound to keep assets invested to make up the deficit; but such assets may be kept outside the life insurance fund. Now we come to the last question whether there is anything in the Act which requires that we should give a different meaning to the words "life insurance fund" in cl. (d) of the aforesaid 4th paragraph. We have already referred to section 2(10) of the Act which lays down that all other words and expressions used in the Act but not defined and defined in the shall have the meanings respectively assigned to them in that Act. Prima facie, therefore, the words "life insurance fund" used in cl. (d) of the aforesaid 4th paragraph have the same meaning as in the , and the question is whether the context of the Act requires that we should give a different meaning to these words. We are of opinion 484 that there is nothing in the context of the Act which requires that a different meaning should be given to these words. If anything, the Act shows that these words have the same meaning in cl. (d) of the aforesaid 4th paragraph as in the . In the first place we have to see what is the reason for the provision in cl. (d) of the aforesaid 4th paragraph. We have no doubt that the provision in cl. (d) is related to the provision in section 49(1) of the . We have already referred to that section and it requires that 921% of the surplus in form I shall be kept for the policy holders. Where therefore there is surplus in form 1, 921/2 per centum thereof is meant for the policy holders under this provision. Secondly when transfer of life insurance business from the life insurance companies to the Life Insurance Corporation took place a provision had to be made to carry out the effect of section 49(1) in connection with the transfer. That provision is to be found in cl. It lays down that where there is a surplus in the life insurance fund as a result of the actuarial valuation of policy liabilities made under cl. (b) of the aforesaid paragraph 4, 96 per centum of such surplus shall be shown as a liability. This means that just as under section 49(1), 921 per centum of the surplus in form I was meant for the policy holders so in the case of transfer, 96 per centum or that surplus shall go to the Life Insurance Corporation in order to meet the liabilities arising under section 49(1) of the for past surplus and to that extent the compensation to be paid to the insurance company from which the Life Insurance Corporation was taking over business would have to be reduced. This was with reference to the past and could not be with reference to the future, for so far as the future was concerned, the Life Insurance Corporation alone was responsible. But if there was a deficit in form I of the insurance company which was being taken over by the Life Insurance Corporation there could be no allocation to the policy holders under section 49(1) of the and there would be no liability for the past. So there would be no liability for the past under cl. (d) on the insurer whose business was being taken over by the Life Insurance Corporation. In the present case admittedly there was no surplus in form I in the case of the respondent and therefore there would be no liability on the respondent under cl. (d) of the aforesaid 4th paragraph. This in our opinion is the rationale behind the provision in cl. (d) and as there was always a deficit in connection with the working of the respondent, there could be no liability on the respondent under cl. But apart from this rationale behind cl. (d) we find that the language of Part A and Part B of the First Schedule relating to principles for determining compensation also leads to the same inference. Part A provides that compensation to be given to an insurer having a share capital on which dividend or bonus is payable who has allocated as bonus to policy holders the whole or any part of the surplus as disclosed in the abstracts prepared in accordance with of the Fourth Schedule to the in 485 respect of the last actuarial investigation relating to his controlled business as at a date earlier than January 1, 1955 shall be computed under that part. Clearly therefore this provision in Part A refers to surplus to be found by looking at form of the Fourth Schedule to the . Part B of the First Schedule to the Act then speaks of compensation to be given to an insurer having a share capital on which dividend or bonus is payable but who has not made any such allocation as is referred to in Part A. This immediately brings in the opening words of Part A and shows that Part B applies also to those insurers who having a surplus in form I have not allocated the whole or any part of such surplus to policyholders. The surplus in form I is arrived at as already indicated when the life insurance fund is larger than the liabilities on the policies still to mature. Clearly, Part B provides how compensation is to be paid to companies who had no surplus as disclosed in form 1 of the Fourth Schedule to the or who if they had any surplus in that form had made no allocation to policy holders. Therefore when cl. (d) of the aforesaid 4th paragraph speaks of the life insurance fund being in surplus that surplus has to be determined in accordance with form 1 of the Fourth Schedule to the subject to modifications indicated in Part B in the matter of valuation under form H and not in the manner suggested on behalf of the appellant. The word "surplus" in cl. (d) cannot have a meaning different from what it has in the opening words of Part B which come therein from Part A. The context therefore instead of showing that there is any other meaning of the words "life insurance fund" in cl. (d) shows that they have the same meaning in that clause as in form 1 of the Fourth Schedule to the . Another reason which points to the same conclusion,namely, that the words "life insurance fund" in cl. (d) have the same meaning as in form 1 of the Fourth Schedule to the , is to be found in section 35(1) and (2) of the Act. Section 35(1) permits a foreign insurer to repatriate certain assets. It says that an insurer incorporated outside India may, before the appointed day, make an application to the Central Government stating that among the assets appertaining to the controlled business of the insurer there are assets brought into India by him for the purpose of building up his life insurance business in India which should not be transferred to and vested in the Life Insurance Corporation. On receipt of such an application, the Central Government has to determine the value of the assets of the insurer appertaining to his controlled business in existence on December 31, 1955 in accordance with the provisions contained in paragraph 3 of Part B of the First Schedule to the Act and deduct therefrom the total amount of the liabilities of the insurer appertaining to his controlled business as on December 31, 1955 computed in accordance with the provisions contained in the Second Schedule to the Act; and if there is any excess, the Central Government may direct that such assets equivalent in value to the excess shall not be transferred to or vested in 486 the Life Insurance Corporation. It is obvious from these provisions that where the legislature intended to refer to all the assets and liabilities it said so in terms and did not use the words "life insurance fund". The use of the words "life insurance fund" in cl. (d) of the aforesaid 4th paragraph therefore must have the special significance assigned to these words in the and cannot be equated to the difference between the total assets and liabilities apart from liabilities towards policies yet to mature. Besides we are of opinion that if the words "life insurance fund" in cl. (d) are to be given the meaning for which the appellant is contending there will be a clear inconsistency between cl. (d) and it. 35 of the Act. Section 35 permits a foreign insurer to take away what may be called excess assets but a foreign insurer is not bound to make an application under section 35. Now take the case of the respondent. It is not in dispute that the respondent has taken away excess assets with the permission of the Central Government under section 35, to the tune of about rupees fifteen or sixteen lakhs. But if the respondent had not, chosen to make the application under section 35, all Ms assets would have to be considered under Part B relating to compensation. If that Was so, according to the contention put forward on behalf of the appellant as to the meaning of the words "life insurance fund", the total compensation under Part B of the First Schedule to 'which the respondent would have been entitled, would be Rs. 1.74,408. This means that as by making an application the respondent was able to take away Rs. 15,73,540 under section 35(2) he would further get Rs. 1,11,466 as compensation under Part B of the First Schedule to the Act. But if he had not made the application under section 35, he would only get Rs. 1,74,408 in all. There is no doubt that the legislature could not have intended such a result, namely, that the insurer should get away with a much larger amount if he applies under section 35 and should get a much smaller amount if he does not choose to apply under section 35. On the other hand, if we accept the contention of the respondent as to the meaning of the words " 'life insurance fund" it would make no difference to the compensation whether the insurer applies under section 35 or not. We must hold that the legislature intended that in either case an insurer would get the same amount whether it comes to him as compensation in one sum or comes to him as compensation plus repatriation of excess assets. If the words "life insurance fund" are interpreted to mean what the respondent says, the result would be this. If it applies for repatriation it would get Rs. 15,73,540 as repatriation of excess assets and Rs. 27,86,658 as compensation under Part B: total Rs. 43,60,198. If it does not apply for repatriation and if cl. (d) has the meaning urged on behalf of the respondent, its total compensation would come to the same figure, namely, Rs. 43,60,198. This clearly shows that the legislature intended the words "life insurance fund" to mean what they meant in section 10(2) for that would give in our opinion the same result whether an insurer applied under section 35 or not. 487 We have already said that cl. (d) provides for past surplus in form 1, the responsibility for which passes on to the Life Insurance Corporation when it takes over the life business of an insurer. So far as the future is concerned, cl. (b) of the aforesaid 4th paragraph provides for a higher valuation for with profits policies with the result that the liability which the insurer whose business is being taken over has to bear with respect to with profits policies is higher. The appellant apparently claimed an amount under cl. (d) on the ground that at future valuation the bonus payable to the policy holders would be reduced. Now cl. (d) in our opinion provides for cases where there have been surpluses in the past while the provision for the future in respect of profit policies is to be found in cl. The appellant therefore cannot lay claim to anything under cl. (d) unless there were surpluses in the past in form 1 of the Fourth Schedule to the . The contention that the appellant is likely to suffer if the meaning contended for by the respondent is given to the words "life insurance fund", particularly with respect to with profit policies has in the circumstances no force, for there is already a weightage in favour of calculating liability for with profit policies under cl. (b) of the 4th. paragraph of Part B of the First Schedule to the Act. Lastly there will be another curious result if the words "life insurance fund" in cl. (d) is given the meaning contended for on behalf of the appellant. Take the case of an Indian company which has shares but which has always been showing deficit in form 1 of the Fourth Schedule to the . If its life insurance fund for the purposes of cl. (d) is calculated in the manner contended for on behalf of the appellant the result would be that the share capital of such a company would also come into the assets and if as a result of the share capital going into assets the deficit in form is converted into surplus such a company would in conceivable circumstances lose 96 per centum of its share capital as if it was part of the life insurance fund. It is obvious that the share capital of an insurance company cannot be a part of the life insurance fund; but on the interpretation urged on behalf of the appellant even 96 % of the share capital may be lost to an insurance company, whose business is being taken over by the Life Insurance Corporation if the words "life insurance fund" are given the wide meaning for which the appellant is contending. We have therefore no doubt that the tribunal was right in its conclusion that the words "life insurance fund" as used in cl. (d) of the aforesaid 4th paragraph have the same meaning as that given to them in section 10(2) of the read with section 1 1 and form D of the Third Schedule to the . In this view of the matter, the appeal must fail. We therefore dismiss the appeal with costs to the respondent. The respondent will be at liberty to withdraw the money deposited in this Court towards compensation. Appeal dismissed.

IN-Abs

Under section 10(2) of the , where an insurer carries on the business of life insurance, all receipts due in respect of such business shall be carried to and form a separate fund called the life insurance fund. Section 11 (c) provides for keeping a revenue account in Form D of the Third Schedule, which applies to life insurance business also. This account, on the receipt side, has mainly income from premiums and out of investments from life fund and, on he expenditure side, all expenses and bad debts connected with the life business. A balance is struck after taking into account the balance of the fund at the beginning of the year and after making some adjustments and transfers, and the "life insurance fund" is arrived at. Form 1 of the Fourth Schedule to the , provides for determining the surplus or deficit, which is the difference between the net liability in business determined by actuarial valuation of policies in force and the Life Insurance Fund. If there is a surplus, section 49(1) of the provides, that 712 1/2 % of the surplus shall be allocated to shareholders, and the balance shall remain in the fund for policy holders. When transfer of life insurance business from the life insurance companies to the Life Insurance Corporation took place, a provision had to be made for carrying out the effect of s.49(1). That provision was made in Cl. (d) of para. 4 of Part B of the First Schedule to the , according to which, where there is surplus in the life insurance fund, as a result of the actuarial valuation of policy liabilities under Cl. (b) of the same Para. 4, 96 % of such surplus shall be shown as a liability, that is, 96% of that surplus shall go to the Corporation in order to meet the liabilities, and to that extent the compensation to be paid to the insurance company would be reduced. Part B applies to those insurers, who, having a surplus in Form 1 have not allocated the whole or any part of such surplus to policy Holders, and also provides, how compensation is to be paid to companies who had no surplus as disclosed in Form T. In the latter case, that is, if there was a deficit in Form 1, there could be no allocation to the policy holders under s.49(1) of the , and there would be no liability under Cl. On the taking over of the business of the respondent, a life insurance company incorporated in Canada, by the appellants, under the , the respondent claimed Rs. 27 lacs and odd as compensation. The respondent contended that the words "life insurance fund" in Cl. (d) referred to above had the same meaning as those words in the , and since there was deficit in its working as shown by Form 1. no amount was to be deducted as liability under Cl. The appellant was prepared to Day only Rs. 1 lac and odd, on the basis that, the words "life insurance fund" in Cl. (d) meant the difference between the total assets and the liabilities 475 under Cls. (a) and (c) and since there was a surplus of Rs. 27 lacs 'And odd, a sum of Rs. 26 lacs and odd, forming, 96% of it, was to be debited towards the liabilities of the respondent. The Insurance Tribunal accepted the respondent 's contention and awarded the compensation claimed by it. In its appeal to this Court, the appellant contended that: (i) the words "life insurance fund" under the have more than one meaning under that Act, and therefore it was not possible to give the meaning, claimed by the respondent, to those words in Cl. (d) under the Corporation Act, and (ii) even if those words have only one meaning under the , they have a different meaning under the Cl. HELD: (i) A combined reading of sections 10(2), 11 and 13 of the and Form D of the Third Schedule and Form 1 of the Fourth Schedule to the , shows, that the words "life insurance fund", "surplus" and "deficit" have only the definite meaning set out above, as contended by the respondent. [480B C] The contention, that the words "life insurance fund" have different meanings in sections 56(2) and 58(3), and in regulation 7 of of the First Schedule to the , has no force, because when the marginal note of section 56(2) refers to surplus assets of life insurance fund it means in reality the surplus to be found in Form 1 and the same applies to section 58(3); and as regards regulation 7, the plural is used in the words "life insurance funds" merely due to exigencies of grammar. [46OF: 481D E F G] It cannot be said that because section 27(1) of the lays down that an insurer is required to keep certain sums invested to meet his liabilities mentioned therein, the entire assets of the insurer are security for the policy holders and not merely the life insurance fund. This section only provides that when life insurance fund shows a deficit in Form 1 it would be the duty of the insurer to see that he has further assets to cover the deficit, and that these assets are always kept invested in accordance with the ; but the section does not provide that the assets brought in to cover the deficit would become part of the life insurance fund. It is only such moneys which are included in the revenue account, Form D, and which are not of a capital nature that form part of the life insurance fund. Since, in the instant case the business of the respondent in India had admittedly shown a deficit in Form 1, and the funds brought in by the respondent from outside to cover the deficit were never put in the revenue account, they were never made part of the life insurance fund, though they remained vested in a trustee under section 27(6) of the . [48 2B G] (ii) The Tribunal was right in its conclusion that the words "life insurance fund" as used in Cl. (d) of the aforesaid fourth paragraph have the same meaning as that given to them in section 10(2) of the read with section 11 and Form D of the Third Schedule to the . [483H] When Cl. (d) speaks of the life insurance fund being in surplus that surplus has to be determined in accordance with Form 1 subject to certain modifications indicated in Part B of the Corporation Act. The context. therefore, instead of showing that there is any other meaning of the words "life insurance fund" in Cl. (d), shows that they have the same meaning in that clause as in Form J. [485D, E] Section 35(1) and (2) of the Corporation Act also point to the same conclusion. because, these provisions show that where the legislature intended to refer to all the assets and liabilities it said so in terms and did not use the words "life insurance fund", Besides, if these 476 words were given the meaning for which the appellant contended, there would be an inconsistency between Cl., (d) and section 35, in that, the insurer would get away with a much larger amount if he applied for repatriation of excess assets under section 35, and would get a much smaller amount if he did not choose to apply under the section, a result which the legislature could not have intended. Moreover, the share capital of an insurance company cannot obviously form ptrt of the life insurance fund; but on the interpretation urged on behalf of the appellant, even 96% of the share capital may be lost to an insurance company, as part of the life insurance fund in conceivable,, circumstances, [486A C, F; 487G].

vil Appeal No. 308 of 1964. Appeal by special leave from the judgment and order dated September 10, 1962 of the Calcutta High Court in Income tax Reference No. 115 of 1957. A.V. Viswanatha Sastri, B. Sen Gupta and P.K. Ghosh, for the appellant. N.D. Karkhanis and R.N. Sachthey, for the respondent. The Judgment of the Court was delivered by Shah, J. The appellant is a Hindu undivided family and carries on business as a dealer in "iron scrap and hardware". Messrs Hoare Miller and Company Ltd. hereinafter called 'the Company ' were owners of a jute pressing factory installed on a piece of land belonging to the Company. Adjacent to that land were two pieces of land: one was leasehold, and the other held by the Company as a licensee from the Government of West 604 605 Bengal. On January 21, 1941 the Company leased out to one Ramnath Bajoria the jute pressing factory together with the machinery standing on the land owned by the Company for ten months commencing from January 10, 1941. Ramnath Bajoria failed to vacate and deliver up possession of the premises demised to him, after the expiry of the period of the lease, and the Company instituted a suit in ejectment against him. By an agreement dated October 31, 1942 the appellant agreed to purchase all the rights of the Company in the factory and the appurtenant premises for Rs. 2,45,000. On November 14, 1942 the Company delivered to the appellant possession of the property agreed to be sold, save and except the factory demised under the lease to Ramnath Bajoria and the machinery included in the lease. On February 26, 1943 the Company executed a conveyance in favour of the appellant conveying the factory and the appurtenant premises. On June 12, 1943 the appellant agreed to sell to one Ranada Prasad Saha the property purchased from the Company for Rs. 4,73,364/3/6 free from all encumbrances. On August 10. 1943 the appellant was substituted as a plaintiff in the suit filed by the Company against Ramnath Bajoria, and obtained possession of the factory premises. By a deed of conveyance dated September 30, 1943 the appellant conveyed to Ranada Prasad Saha the factory and the appurtenant premises and delivered possession thereof. In the deed of conveyance the property sold was described in three separate Schedules. Schedule I, Press House, office, residential buildings and three warehouses on land owned by the Company: Schedule 11 ; leasehold land together with a warehouse known as Kalibari godown: Schedule II1; two warehouses on land held as licensee by the Company from the Government of West Bengal. The Income tax Officer. District Ii(1), CAlcutta. brought to tax in the hands of the appellant Rs. 2,24,864 bring the profit arising out of the sale of the property to Ranada Prasad Saha. The Income tax Appellate Tribunal partially modified the order and reduced the total income by Rs. 7,000. The Tribunal then drew up a statement of case and referred the following question to the High Court of Judicature at Calcutta: "Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the surplus of Rs. 2,35,211 received by the assessee as a result of the sale of the jute press referred to in the Appellate order arose out of an adventure in the nature of trade and was therefore rightly assessed to tax?" The High Court answered the question in the affirmative. With special leave granted by this Court, the appellant has appealed to this Court. L/P(N)4SCI 12 606 At the material time, capital gains were not taxable, and the only question failing to be determined is whether profit made by the appellant by sale of the property to Ranada Prasad Saha was taxabIe under section 10 of the Indian Income tax Act. The Tribunal found the following facts proved: The appellant was carrying on business in iron scrap and hardware and never carried on any business in jute or in pressing jute. At the material time when the purchase of the Jute Press was made, the appellant had, because of abnormal conditions prevailing in the town of Calcutta, closed its business in iron scrap and hardware. The appellant purchased the jute press and the premises appurtenant thereto subject to litigation pending in the High Court, effected certain repairs and kept the factory in running condition, but made no attempt to start or organise the business of pressing jute, and his plea that he was not able to secure labour for working the press was not true. Soon after he bought the factory, the appellant received an offer from Ranada Prasad Saha to buy the factory and he immediately accepted the offer to sell it to him. These facts in the view of the Tribunal indicated that the appellant purchased the jute press, subject to litigation, with the sole object of reselling at profit at the earliest opportunity, and therefore the transaction was in the nature of a trading venture. The High Court substantially agreed with this view. Section 10 of the Indian Income tax Act, 1922 makes profits and gains of business, profession or vocation carried on by an assessee taxable. The expression "business" is defined in section 2(4) as inclusive of "any trade, commerce, or manufacture or any adventure or concern in the nature of trade, commerce or manufacture". It is common ground that the transaction of purchase and sale of the factory and appurtenant premises was an isolated venture. To reiterate the sequence of material events: the appellant agreed to purchase the Jute Press from the Company on October 31, 1942 subject to litigation pending in the High Court of Calcutta: possession of the property except the premises in the occupation of the tenant was obtained on November 14, 1942 and the sale deed was obtained on February 26, 1943: on June 12, 1943 the appellant agreed to sell the press to Ranada Prasad Saha: on August 10, 1943 the appellant was substituted as plaintiff in the suit flied by the Company against Ramnath Bajoria, and after obtaining possession of the demised premises the appellant executed on September 30, 1943 a sale deed conveying the property and delivered possession to Ranada Prasad Saha. Do these facts make out the case that the transaction was an adventure in the nature of trade? It is for the revenue to establish that the profit earned in a transaction is within the taxing provision and is on that account liable to be taxed as income. The nature of the transaction must 607 be determined on a consideration of all the facts and circumstances which are brought on the record of the income tax authorities. It has consistently been held by this Court that the question whether profit in a transaction has arisen out of an adventure in the nature of trade is a mixed question of law and fact: see G. Venkataswami Naidu & Company vs The Commissioner of Income tax(1) in which case this Court held that the expression "adventure in the nature of trade" in sub section (4) of section 2 of the Act postulates the existence of certain elements in the adventure which in law would invest it with the character of trade or business and that a tribunal while considering a question whether a transaction is or is not an adventure in the nature of trade, before arriving at its final conclusion on facts, has to address itself to the legal requirements associated with the concept of trade or business. Such a question is one of mixed law and fact and the decision of the tribunal thereon is open to consideration under section 66(1) of the Act. See also Saroj Kumar Maiumdar vs Commissioner of Income tax, West Bengal(2). A large number of cases were cited at the Bar in support of the respective contentions of the Commissioner and the assessee. Passages from judgments in the same case were often cited claiming support for the respective contentions. No useful purpose would be served by entering upon a detailed analysis and review of the observations made in the light of the relevant facts, for no single fact has decisive significance, and the question whether a transaction is an adventure in the nature of trade must depend upon the collective effect of all the relevant materials brought on the record. But general criteria indicating that certain facts have dominant significance in the context of other facts have been adopted in the decided cases. If, for instance, a transaction is related to the business which is normally carried on by the assessee, though not directly part of it, an intention to launch upon an adventure in the nature of trade may readily be inferred. A similar inference would arise where a commodity is purchased and sub divided, altered, treated or repaired and sold, or is converted into a different commodity and then sold. Magnitude of the transaction of purchase, the nature of the commodity, subsequent dealings and the manner of disposal may be such that the transaction may be stamped with the character of a trading venture: for instance, a man who purchases a large quantity of aeroplane linen and sells it in different lots, and for the purpose of selling starts an advertising campaign, rents offices, engages an advertising manager, a linen expert and a staff of clerks, maintains account books normally used by a trader, and passes receipts and payments in connection with the linen through a separate banking account: Martin vs Lowry(3): a person who carries on a money lending business purchases very cheaply a (2) [1959] Supp. 1 S.C.R. 640. (2) (3) 608 vast quantity of toilet paper and within a short time thereafter sells the whole consignment at a considerable profit: Rutledge vs The Commissioner of Inland Revenue(1); a person even though he has no special knowledge of the trade in wines and spirits, purchases a large quantity of whisky sells it without taking delivery of it at a considerable profit: Commissioners of Inland Revenue vs Fraser(2), may be presumed having regard to the nature of the commodity and extent of the transaction coupled with the other circumstances, to be carrying on an adventure in the nature of trade. These are cases of commercial commodities. But a transaction of purchase of land cannot be assumed without more to ' be a venture in the nature of trade. A director of a company carrying on the business of ware houseman purchasing a number of houses with a view to resale, and selling them at a profit some years after the purchase: Commissioners of Inland Revenue vs Reinhold(3): a person carrying on business in various lines, including an Engineering Works, purchasing land which was under requisition by the Government, negotiating sale thereof before the land was derequisitioned, and selling it after the land was released: Saroj Kumar Mazumdar vs Commissioner of Income tax, West Bengal(4); and a syndicate formed to acquire, an option over a rubber estate with a view to earn profit, and finding the estate acquired too small acquiring another estate and selling the two estates at a profit: Leeming vs Jones(3) may not be regarded as commencing a venture in the nature of trade. These are cases in which the commodity purchased and sold is not Ordinarily commercial, and the manner of dealing with the commodity does not stamp the transaction as a trading venture. It may be emphasized from an analysis of these cases that a profit motive in entering a transaction is not decisive, for, an accretion to capital does not become taxable income, merely because an asset was acquired in the expectation that it may be sold at profit. Purchase of the property by the appellant was an isolated transaction not related to the business of the appellant. The Tribunal and the High Court were, in our judgment, in error in holding that the right of the Company was not sold to the appellant in the lands in Sch. II and Sch. III properties. The land in Sch. II was leasehold, and on it was constructed a warehouse and the land in Sch. III was held as a licensee and two warehouses were standing thereon. The conveyance by the Company to the appellant is not on the record, but the recitals in the deed dated September 30, 1943 definitely indicate that the rights of the Company without any reservation were purchased by the appellant, and the appellant sold its entire rights in the properties in Schs. I, (1) (2) (3) (4) 11 T.C.297. (5) 15 T.C.333. 609 II and III without any reservation. It is true that the appellant had put the factory in a working condition, but had not organized a jute pressing business, had not obtained a licence for working the factory, had not attempted to secure orders for pressing jute, and had not employed labourers, The appellant 's claim that it was not s9 done because the appellant could not secure labourers has not been accepted. But that is not a decisive circumstance. The factory was in the occupation of the lessee Ramnath Bajoria and possession was obtained after August 10, 1943. But before the 10th of August an agreement of sale was executed by the appellant in favour of Ranada Prasad Saha. In the light of the sequence of events, the inference that the appellant had no intention to commence doing jute pressing business does not necessarily follow. Even if that inference be regarded as binding upon the Court it cannot be presumed that the sole intention of the appellant was to start a venture in the nature of trade. Barring the expectation of profit and realization of profit by sale of the property, there is no evidence bearing on the intention with which the property was purchased. In the deed of conveyance dated September 30, 1943 there is a reference to delivery of "joists, girders, fabricated steel, C.I. roofs, bolts, nuts, hooks and ceiling planks, being portions of the materials of the godowns and structures" standing on the land described in the third schedule. It was submitted that after purchasing the factory and the appurtenant premises the appellant demolished "certain godowns" in Sch. III land and sold the material as scrap. This, it was claimed, was if not part of the business = a venture similar to the normal business of the appellant. But there is no evidence on the record as to how many warehouses stood originally on Sch. III land. The sale deed dated September 30, 1943 clearly states that there were two warehouses on steel frames on the land held as licensee by the Company and possession of these was given to the purchaser Ranada Prasad Saha. Beside these warehouses there were three warehouses on the land described in Sch. I and one warehouse on the land described in Sch. It is not claimed that these warehouses were insufficient for carrying on the business of jute pressing: nor is there any evidence that the warehouse or warehouses which were demolished were in a serviceable condition. The only fact which may be taken to be established is that a warehouse or warehouses were demolished by the appellant and the materials were sold as part of the property sold under the deed dated September 30. From this circumstance, an inference that the entire property was purchased with intent to demolish and dispose of as scrap cannot be raised. Granting that the appellant made a profitable bargain when he purchased the property. and granting further that the appellant had when he purchased it a desire to sell the property if a favourable offer was forthcoming. these could not without other 610 circumstances justify an inference that the appellant intended by purchasing the property to start a venture in the nature of trade. Absence of advertisement inviting offers for purchasing the property, and absence of brokers in the negotiations for sale between the appellant and Ranada Prasad Saha, are circurmtances which lead to no positive inference. There is nothing to show that the appellant desired to convert the property to some other use. No brokers were employed for entering into a transaction of sale. It appears that Ranada Prasad Saha on coming to learn that the factory was for sale approached the Company after the sale deed was executed in favour of the appellant and he was informed that it had already been sold to the appellant. Thereafter Saha contacted the appellant and agreed to purchase the property. The property purchased was not sudh that an inference that a venture in the nature of trade must have been intended by the appellant in respect thereof may be raised. A person purchasing a jute press may intend to start his own business even if he is not already in that business, or he may let it out on favourable terms. The property purchased by the appellant was capable of being let out and it had in fact been let out by the Company before the date of sale in favour of the appellant. It was capable of fetching annual income, and there is no evidence that at the material time it could not be reasonably let out. We therefore discharge the answer given by the High Court in respect of the question submitted by the Tribunal and record a negative answer. The appeal is allowed. The Commissioner to pay the costs in this Court and the High Court. Appeal allowed.

IN-Abs

The assessee who was dealing in iron scrap and hardware had purchased a jute press and sold it at a profit. The Income tax Officer brought to tax in the hands of the assessee, the profit arising out of this sale. The Appellate Tribunal modified the order and reduced the total income. At the instance of assessee the Tribunal referred to the High Court, the question, whether the surplus received by the assessee as a result of the sale of the jute press arose out of an adventure in the nature of trade and was, therefore, liable to tax. The High Court answered the question in affirmative. In appeal; HELD: The question must be answered in the negative. Granting that the assessee made a profitable bargain when he purchased the property and granting further that the assessee had, when he purchased it, a desire to sell the property, if a favourable offer was forthcoming, these could not without other circumstances, justify an inference that the assessee intended by purchasing the property to start a venture in the nature of trade. [609H 610A] A profit motive in entering a transact on is no decisive, for, an accretion to capital does not become taxable income, merely because an asset was acquired in the expectation that it may be sold at a profit. [608F] Purchase of the property by the assessee was an isolated transaction not related to the business of the assessee. [608G] Case law referred to.

Appeals Nos. 206 to 210 of 1964. Appeals from the judgment and orders dated September 26, 1961 of the Calcutta High Court in income tax Reference No. 24 of 1957. Niren De, Additional Solicitor General, Ganapathy Iyer and R.N. Sachthey, for the appellants. Sampat lyengar, B.R.L. Iyengar and D.N. Gupta, for the respondents. The Judgment of the Court was delivered by Sikri, J. These appeals by certificate granted by the High Court of Calcutta under section 66(A)(2) of the Indian Income Tax Act, 1922, are directed against the judgment of the said High Court answering two questions referred to it against the Revenue. The questions are: (1) Whether the profit arising to the assessee company from miscellaneous insurance transactions of mutual character was assessable under the Indian Income Tax Act, and (2) If the answer to question No. (1) is in the affirmative, whether on the facts and in the circumstances of the case the balance of the profits as disclosed in the assessee company 's profit and loss account after deducting the various reserves should be the taxable profits within the meaning of Section 2(6C) read with Rule 6 of the Schedule of the Indian Income Tax Act. The relevant facts and circumstances are as follows: The respondent. the Calcutta Hospital and Nursing Home Benefits Association Limited, hereinafter referred to as the assessee, is a mutual insurance concern carrying on miscellaneous insurance business. The principal objects for which the Association was established were: (1) By means of insurance on the mutual principle to provide, or help towards providing, anywhere in the world for the expense of accommodation and treatment in hospitals 634 and nursing homes and of private nursing for members and their dependants; (2) To organise insurance on the mutual principle under Rules and Regulations to be framed for the purpose with the object of providing such hospital, medical, surgical, nursing and allied services as before mentioned, of supporting and assisting hospitals, in Calcutta or elsewhere; of relieving members or then dependants, in whole or in part from the payment of hospital and other charges while in receipt of such hospital, medical, surgical, nursing and allied services; and of reimbursing and repaying to members or their dependants in whole or in part, all payments for such hospital and other charges which they may have incurred or made which in receipt of such hospital, medical, surgical, nursing and allied services. The members were required to pay a monthly premium, but there was a waiting period of four months for all bench its other than maternity, for which the waiting period was one year. Benefits and privileges became available as from the first day of the fifth calendar month of registration (in respect of Maternity the 13th month) and continued to be available thereafter so long as the subscriptions were not in arrear. These appeals are concerned with the assessment years 1949 50 to 1953 54 and the relevant accounting years ended on December 31, 1948, December 31, 1949, December 31, 1950, December 31, 1951 and December 31, 1952, respectively. In the statement of the case, the Appellate Tribunal describes the accounts maintained by the assessee thus: "The assessee 's published revenue accounts contained three classifications, viz. (i) miscellaneous insurance business revenue account, (ii) profit and ' loss account and (iii) profit and loss appropriation account. In the miscellaneous insurance business revenue accounts were included subscriptions from the members, gross premia from the members and from such amounts were deducted general reserve and or contingency reserve. Reserve so made were transferred to the balance sheet as credit accounts. The claims paid or payable and the expenses of management were deducted from this revenue account. The balance of the miscellaneous insurance business revenue account was transferred to the profit and loss account to the credit of which was further added interest on investments and the debits included provision for taxation, interest on loan, contribution to provident fund and depreciation. The balance of this account being the balance of profit and loss account was transferred. to the profit and toss appropriation account. Therefrom, in one year, ended 635 31st December, 1949, further deduction was made against contingency reserve and the balance either loss or profit was carried forward. " We may now set out the facts regarding 1949 50 assessment. It is not necessary to state the facts regarding other assessment years. The Income Tax Officer for the assessment year 1949 50 added the reserve for taxation, Rs. 1000/ , to the net profit as per profit and loss account, which showed a profit of Rs. 1,653/ , and after deducting depreciation, he assessed the total income at Rs. 2,651/ . On appeal, the Appellate Assistant Commissioner upheld the order of the Income Tax Officer. Following the decision of the Bombay High Court in Bombay Mutual Life Assurance Society Ltd., vs Commissioner of Income Tax, Bombay City (1) he held that the income was assessable to income tax and that under Rule 6 of the Schedule to the Income Tax Act it was permissible for the Income Tax Officer to add the reserves to the income disclosed in the profit and loss account. On further appeal, the Appellate Tribunal found no difficulty in holding that section 2(6C) of the Income Tax Act, according to its true interpretation, included income or the profits of any insurance company of mutual assurance and the said profits shall be taken to be balance of the profits disclosed by the annual accounts. Regarding the reserve, the Tribunal held that the provision for reserve was not an expense to be deducted from the profits disclosed by the assessee company in order to arrive at the profits within the meaning of r. 6, and the Income Tax Officer was entitled to add back the reserve. The High Court held that the surplus, miscalled profit, arising to the assessee company from the miscellaneous insurance transactions of mutual character was not assessable under the Indian Income Tax Act and that, in any event, the assessee was entitled to deduct the reserve. The High Court distinguished Bombay Mutual Life Assurance Society, Ltd. vs Commissioner of Income Tax, Bombay City(1) on the ground that the Bombay decision was a life insurance decision and although it was a mutual life insurance society, nevertheless different and special rules applied to life insurance and the rules with which the Bombay decision was concerned were rules 2 and 3 which did not apply to mutual insurance other than life. The second point of distinction, according to the High Court, was the very distinctive clauses in the memorandum of objects and articles of association of the assessee. Section 2(6C) at the relevant time defined 'income ' to include " . . profits of any business of insurance carried on by a mutual insurance association computed in accordance with Rule 9 in Schedule. " We may mention that another section 2(6C) was substituted by Act XV of 1955, and the wording substituted by this Act in (1) 20 I.T.R.189. 636 sub clause (vii) is "the profits and gains of any business of insurance carried on by a mutual insurance association or by a co operative society computed in accordance with rule 9 in the Schedule. " But nothing turns on the change of the language as far as a mutual surance association carrying on business of insurance is concerned. Rule 9 of the Schedule reads thus ' "9. These rules apply to the assessment of the profits of any business of insurance carried on by a mutual insurance association . . Rule 6 with which we are concerned reads thus: "The profits and gains of any business of insurance other than life insurance shall be taken to be the balance of the profits disclosed by the annual accounts, copies of which are required under the , to be furnished to the Superinte ndent of Insurance after adjusting such balance so as to exclude from it any expenditure other than expenditure which may under the provisions of Section 10 of this Act be allowed for in computing the profits and gains of a business. Profits and losses on the realisation of investments and depreciation and appreciation of the value of investments shall be dealt with as provided in Rule 3 for the business of life insurance. " The Additional Solicitor General, appearing on behalf of the appellant, contends that the Bombay High Court was right in holding that "section 2(6C) imports into the definition of 'income ', which is to be found in the charging section 3, these profits which may not be profits in the ordinary sense of the term but which are made profits by reason of Rule 2 of the Schedule because Rule 2 really gives an artificial extension to the meaning of the word 'profits ' when it says that 'profits and gains shall be taken to be '. Therefore a new class of artificial income is created by this rule and that artificial income is included into the meaning of Section 3 by reason of this rule. " Mr. Sampat Ayyangar, learned counsel for the assessee, relying on the decision of the House of Lords in Arvshire Employers Mutual Insurance Association Ltd. vs Commissioner of Inland Revenue,(1) contends that the Legislature has not made its intention clear because it has used the word 'profits ' in section 2(6C) under a misapprehension that the surplus of a mutual insurance company (1) 637 carrying on insurance business is profits. He says that in Arvshire Employers Mutual Insurance Association case(1) the Legislature had proceeded on a similar misapprehension and the House of Lords held that section 31(1) of the Finance Act, 1933 (23 & 24 Geo. V.c. 19) did not succeed in making the profits of a mutual insurance company taxable. He urges that we should follow this precedent. He relies on the following passage from the speech of Lord Macmillan at p. 347: "The structure of Section 31(1) is quite simple. It assumes that a surplus arising from the transactions of an incorporated company with its members is not taxable as profits or gains. To render such a surplus taxable it enacts that the surplus, although in fact arising from transactions, of the comp any with its members, shall be deemed to be something which it is not, namely, a surplus arising from transactions of the company with non members. The hypothesis is that a surplus arising on the transaction of a mutual insurance company with non members is taxable as profits or gains of the company. But unfortunately for the Inland Revenue the hypothesis is wrong. It is not membership or non membership which determines immunity from or liability to tax, it is the nature of the transactions. If the transactions are of the nature of mutual insurance the resultant surplus is not taxable whether the transactions are with members or with non members. " He further relies on the observations of Lord Macmillan that "the Legislature has plainly missed fire. Its failure is perhaps less regrettable than it might have been, for the Sub section has not the meritorious object of preventing evasion of taxation, but the less laudable design of subjecting to tax as profit what the law has consistently and emphatically declared not to be profit." He says that similarly in this case the Legislature has plainly missed fire. In order to appreciate the scope of that decision, it is necessary to set out the relevant part of section 31 of the Finance Act, 1933. Section 31(1) enacted: "31. (1) In the application to any company or society of any provision or rule relating to profits or gains chargeable under Case I of Schedule D (which relates to trades) . any reference to profits or gains shall be deemed to include a reference to a profit or surplus arising from trans (1)T. C. 331. 638 actions of the company or society with its members which would be included in profits or gains for the purposes of that provision or rule if those transactions were transactions with non members, and the profit or surplus aforesaid shall be determined for the purposes of that provision or rule on the same principles as those on which profits or gains arising from transactions with non members would be so determined. " The Section adopted the device of a deeming provision. The profits arising from the transactions of a company or society with its members were deemed to be profits arising from transactions with non members. Parliament assumed that the latter were taxable. As this hypothesis was wrong, Parliament failed in its objective. But the Indian Legislature did not adopt any deeming device. It defined 'income ' to include profits of any business of insurance carried on by a mutual insurance association. What are those profits is then explained by reference to the Schedule. The effect of this in substance is to incorporate r. 6 into the definition. If the legislature had defined income to include profits of insurance carried on by a mutual insurance association computed according to r. 6, very little would have remained arguable. It is, however, urged that in r. 6 also the word 'profits ' means taxable profits. But r. 6 speaks of balance of profits as disclosed in the accounts submitted to the Superintendent of Insurance. The Superintendent of Insurance is not concerned with taxable profits. What he is concerned with, inter alia, is the balance of profits for the purpose of the . It is then urged that in the definition the word 'surplus ' should have been used instead of profits. But the word 'surplus ' has a technical significance in the , and it seems to us that it would have been inexpedient to use the word 'surplus '. At any rate. r. 6 would then have been drafted differently. It is finally urged that this is a taxing statute and we should give a strict construction to the definition. The definition could still operate if we interpret it in a narrow sense as to include profits from investments and other activities of a mutual insurance company. It is said that this definition was inserted to make it clear that such profits would be taxable. We cannot accede to this contention. It was well established that such profits would be taxable apart from the new definition, We cannot understand why it was necessary 639 to make it doubly clear. Moreover, r. 6 deals with balance of profits, which would include profits arising from the business of insurance of a mutual character. It deals with balance of profits as a composite thing. It is impossible to dissect this composite thing. If we were to accede to the assessee 's contention, the definition would serve no purpose whatsoever. It seems to us that the Legislature has evinced a clear intention to include the balance of profits as computed under r. 6 within 'the word 'income ' in section 3 of the Income Tax Act, and ' accordingly such balance of profits is taxable. We are unable to agree with the High Court that the Bombay case is distinguishable in principle. It is true that the Bombay High Court was concerned with r. 2, but when we go to the schedule and find out what is the balance of profits or surplus that has been made taxable, it does not make any difference to the construction of section 2(6C) whether it is r. 2 that is applied or r. 6. Therefore, disagreeing with the High Court, we answer the first question in the affirmative. This takes us to the second question. The answer to this question depends on the true interpretation of r. 6. It seems to us that on its language the Income Tax Officer is bound to accept the balance of profits disclosed by the annual accounts, copies of which have been submitted to the Superintendent of Insurance. He can only adjust this balance so as to exclude from it any expenditure other than expenditure which may under the provisions of section 10 be allowed for in computing the profits and gains of a business. We are not concerned here with the latter part of r. 6 dealing with profits and losses on the realisation of investments, and depreciation and appreciation of the value of investments. This Court examined the provisions of the in connection with the Schedule in Pandvan Insurance Company Ltd., Madurai vs The Commissioner Income Tax, Madras(1) and arrived at the conclusion that the "makes detailed provisions to ensure the true valuation of assets and the determination of the true balance of profits of an insurance business" and that r. 6 should be construed in the light of this background. Examining r. 6 in the light of this background, it seems to us that the intention of the rule is that the balance of profits as disclosed by the accounts submitted to the Superintendent of Insurance and accepted ' by him would be binding on the Income Tax Officer, 640 except that the Income Tax Officer would be entitled to exclude expenditure other than expenditure permissible under the provisions of section 10 of the Act . It is common ground in this case that these serves which were added to the balance of profits were not expenditure. Accordingly, agreeing with the High Court, we answer the second question in the affirmative . In the result, the appeals are accepted in part. Parties will bear their own costs in this Court. Appeals partly allowed .

IN-Abs

The respondent Association was a mutual insurance concern carrying on miscellaneous insurance business. The objects of the Association included provision of help anywhere in the world in respect of expenses of accommodation and treatment in nursing homes for members and their dependents. The members were required to pay a monthly premium. In the assessments for the assessment years 1949 50 to 1953 54 the Income tax Officer taxed the reserves for payment of income tax which had been debited to the profit and loss account. The Appellate Assistant Commissioner as well as the Appellate Tribunal upheld the Income tax Officer 's order. The questions arising in the proceedings were; (1) whether the balance of profits of a mutual insurance concern were included in the definition of the word 'income ' and if so (2) whether reserves for income tax could be taxed. At the instance of the respondent a reference was made to the High Court. That Court held that the surplus, miscalled profit, arising to the company from the miscellaneous insurance transactions of mutual character was not assessable under the Indian Income tax Act and that in any event, the assessee was entitled to deduct the reserves. The Revenue appealed to this Court with certificate. HELD: (i) In section 2(6C), the Legislature has evinced a clear intention to include the balance of profits under r. 6 within the meaning of the word 'income ' in 6. 3 of the Indian Income Tax Act, and accordingly such balance of profits is taxable. [639B C] Ayrshire Employers Mutual Insurance Association Ltd. vs Commissioner of Inland Revenue, , distinguished. "Profits." in r. 6 cannot be said to mean "taxable profits". Rule 6 refers to 'balance of profits ' as disclosed in the accounts submitted to the. Superintendent of Insurance. The Superintendent of Insurance is not concerned with taxable profits. What he is concerned with is the balance of profits under the Insurance Act. [638E F] Nor can the term 'profits ' in r. 6 be interpreted in the narrow sense of including only profits from investments and other activities of a mutual insurance company. Rule 6 deals with "balance of profits" as a composite thing. It is impossible to dissect this composite thing. [639A B] Bombay Mutual Life Assurance Society Ltd. vs Commissioner of Income tax, Bombay City, , affirmed. (ii) The Insurance Act makes detailed provisions to ensure the true valuation of assets and the determination of the true "balance of profits" of an insurance business and r. 6 should be construed in the light of this background. [639G H] 633 Pandyan Insurance Company Ltd. Madurai vs The Commissioner Income tax, Madras, ; , referred to. Examining r. 6 in the light of this background. the intention of the rule seems to be that the. balance of profits as disclosed by the accounts submitted to. the Superintendent of Insurance and accepted by him would be binding on the Income Tax Officer, except that the Income Tax Officer would be entitled to exclude expenditur.e other than expenditure permissible under the provisions of section 10 of the Act. In the present case it was common ground between the parties that the reserves which were added to the balance of profits were not expenditure. The High Court rightly held that the reserve for income tax could not be taxed. [639H 640B]

Appeal No. 62 of 1964. Appeal by special leave from the judgment and decree dated July 28, 1959 of the Allahabad High Court in Civil Miscellaneous Writ No. 2071 of 1959. A. V. Viswanatha Sastri, Rameshwar Nath, section N. Andley and P. L. Vohra, for the appellant. Gopal Singh and R. N. Sachthey, for the respondents. The Judgment of the Court was delivered by Subba Rao, J. The facts leading up to this appeal may briefly be narrated. Gujarat Cotton Mills Co. Ltd., hereinafter called the Company, is a limited company having its registered office at Ahmedabad. In the year 1938 the Company appointed Messrs. Pira Mal Girdhar Lal & Co., hereinafter called the Agency Firm, as its Managing Agents. On February 28, 1938, a formal agreement was entered into between the Company and the Agency Firm. The said Agency Firm was formed under an instrument of partnership dated February 26, 1938, with 11 partners 3 of them are compendiously described as the "Bombay Group" and the remaining 8 of them as the "Kanpur Group". With certain variations in the constitution of the Agency Firm, the said firm functioned as the Managing Agents of the Company till September 1946. In September 1946 shareholding of the partners of the Agency Firm in the Company was as follows: Kanpur Group 32,500 shares. Bombay Group 26,362 shares. 538 Because of certain differences between the partners, they decided among themselves to sell their shares and to surrender their Managing Agency. On September 7, 1946, the said 11 partakers entered into an agreement with the firm of Messrs. Chhuttu Ram & Sons of Bihar, hereinafter called the Purchaser Firm. Under that agreement it was provided that 65012 shares held by the 11 partners of the Agency Firm, directly or through their nominees, should be sold to the Purchaser Firm at Rs. 65 per share and that the Agency Firm should before November 15, 1946, resign its 'office of Managing Agency of the Company. It was a condition of the agreement that it should have operation only after the Purchaser Firm or its nominees were appointed as the Managing Agents of the Company. On October 30, 1946, the Company held its General Body Meeting and accepted the resignation of the Agency Firm and by another resolution appointed the Purchaser Firm as the Managing Agents in its stead. In terms of the agreement, the Purchaser Firm paid for the entire shareholding of the partners of the Agency Firm at Rs. 65 per share. The appellant is a Hindu undivided family. Its karta was one Dwarkanath and the present karta is his son Ramji Prasad. The said family was 'one of the II partners of the Agency Firm belonging to 'the Kanpur Group. Out of the total shareholding the appellant held 11,230 shares. It received the price for the said shares at the rate of Rs. 65 per share. It was assessed to income tax for the year 1948 49 and the Income tax Officer by his order dated June 5, 1952 assessed the excess amount of Rs. 2,98,909 realized by the assessee under the head "income from business", i.e., the difference in the amount for which it purchased the shares and that for which it sold them. On appeal, the Appellate Assistant Commissioner of Income tax confirmed the same. On further appeal, the Income tax Appellate Tribunal, Delhi Bench, held that the said receipt bad to be taxed as "capital gains" under section 12B. of the Income tax Act, 1922, and directed the Income tax Officer to modify the assessment in accordance with its order. The assessee made an application under section 35 of the Income tax Act to the Tribunal for further directions and the Tribunal, by its order dated March 26, 1954, amended its previous order dated August 3, 1953, by substituting the word "processed" in place of the word "assessed" in its previous order. The assessee raised various contentions before the Income tax Officer, inter alia, that the said income was not liable to be taxed under section 12B of the Income tax Act under the head "capital gains" and that in any case in order to determine the amount of capital gains the market value of the shares only should be taken into consideration, as the price of Rs. 65 per share included also the consideration for the relinquishment of the managing agency rights. The Income tax Officer rejected the said contentions of the assessee. He redetermined the assessable income under the heading "capital gains" but did not issue a notice of demand as prescribed in section 29 of the Income tax Act. After making an infructuous attempt to get suitable directions 539 from the Appellate Tribunal, on March 5, 1956, the assessee filed an application before the Income tax Officer to issue a notice of demand under section 29 of the Income tax Act so that it might prefer an appeal against the same to the appropriate authority. But the Income tax Officer refused to issue any such notice. The assessee preferred an appeal against that order to the Appellate Assistant Commissioner under section 30 of the Income tax Act and that was dismissed on March 8, 1957, on the ground that it was not maintainable. Meanwhile on September 27, 1956, the appellant filed an application before the Commissioner of Income tax under section 33A(2) of the Income tax Act for revising the order of the Income tax Officer dated September 28, 1955. On March 28, 1959, the Commissioner dismissed the revision petition on two grounds, namely, (1) that it was not clear whether the revision petition under section 33A of the Income tax Act was maintainable, and (ii) on merits. It may be noticed that long before the revision petition was dismissed, the appeal filed by the assessee against the order of the Income tax Officer to the Appellate Assistant Commissioner was dismissed on March 8, 1957. On November 18, 1957, the attention of the Commissioner was also drawn to the fact that the Bombay High Court in the case of a reference to that Court at the instance of the Bombay Group held that the market value of the shares should be taken into consideration to ascertain the excess realized on the sale of the shares of the assessee for the purpose of capital gains tax. The Commissioner ignored that decision in dismissing the revision. Thereafter, on July 28, 1959, the assessee filed Writ Application No. 2071 of 1959 in the High Court of Judicature at Allahabad, inter alia, for a writ of certiorari or any other direction or order of like nature to quash the order of the Income.tax Commissioner, Lucknow, dated March 28, 1959, and the Order of the Income tax Officer dated September 28, 1955, and for a writ of mandamus or any other order or direction of the like nature directing the Commissioner to pass a fresh order in accordance with the decision of the Bombay High Court and direct the Income tax Officer to pass a fresh order in accordance with law and to issue a notice of demand as required by section 29 of the Income tax Act. The High Court dismissed the said application in limine mainly on the following three grounds: (1) the affidavit filed in support of the writ petition was highly unsatisfactory and on the basis of such an affidavit it was not possible to entertain the petition; (2) the facts given in the affidavit were incomplete and confused; and (3) even on merits, there was no force in the revision petition Hence the appeal. Mr. A.V. Viswanatha Sastri, learned counsel for the appellant, contended that the affidavit filed in support of the petition was in accordance with law, and that, even if there were any defects, the Court should have given an opportunity to the appellant to rectify them; and that the High Court should have held 540 that the revision against the order of the Income tax Officer to the Commissioner was maintainable under section 33A of the Act, as the appeal against that order to the Appellate Assistant Commissioner was not maintainable and that it should have directed the Commissioner to entertain the revision and dispose of it in accordance with law directing the Income tax Officer to issue a notice of demand under section 29 of the Income tax Act. He further contended that the High Court went wrong in holding that the facts in the Bombay decision were different from those in the present case, for the facts in both the cases were the same and in fact they arose out of the same transaction, namely, the sale of the shares by the Agency Firm to the Purchaser Firm. Mr. Gopal Singh, learned counsel for the Revenue, while supporting the order of the High Court raised a preliminary objection, namely, that the order of the Commissioner under section 33A of the Income tax Act was administrative act and, therefore, no writ of certiorari would lie to the High Court to quash that order under article 226 of the Constitution. We shall first take the preliminary objection, for if we maintain it, no other question will arise for consideration. Article 226 of the Constitution reads: " . . 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." This article is couched in comprehensive phraseology and it exfacie confers a wide power on the High Courts to reach injustice wherever it is found. The Constitution designedly used a wide language in describing the nature of the power, the purpose for which and the person or authority against whom it can be exercised. It can issue writs in the nature of prerogative writs as understood in England; but the scope of those writs also is widened by the use of the expression "nature", for the said expression does not equate the writs that can be issued in India with those in England, but only draws an analogy from them. That apart High Courts can also issue directions orders or writs other than the prerogative writs. It enables the High Courts to mould the reliefs to meet the peculiar and complicated requirements of this county. Any attempt to equate the scope of the power of the High Court under article 226 of the constitution with that of the English Courts to 541 issue prerogative writs is to introduce the Unnecessary procedural restrictions grown over the years in a comparatively small country like England with a unitary form of government into a vast country like India functioning under a federal structure. Such a construction defeats the purpose of the article itself. To say this not to say that the High Courts can function arbitrarily under this article. Some limitations are implicit in the article and others may be evolved to direct the article through defined channels. This interpretation has been accepted by the Court in Basappa vs Nagappa(1) and P.J. Irani vs State of Madras(2). But we are satisfied that this case falls directly within the confines of the certiorari jurisdiction as understood in England. It is well settled that a writ of certiorari can be issued only to quash a judicial or a quasi judicial act and not an administrative act. It is, therefore, necessary to notice the distinction between the said two categories of acts. The relevant criteria have been laid down with clarity by Atkin, L.J., in King vs Electricity commissioners(3), elaborated by Lord Justice Scrutton in Rex vs London County Council(4) and authoritatively restated in Province of Bombay vs Kusaldas section Advani(5). The said decisions laid down the following conditions to be complied with: (1) The body of persons must have legal authority; (2) the authority should be given to determine questions affecting the rights of subjects; and (3) they should have a duty to act judicially. So far there is no dispute. But in decided cases, particularly in India, there is some mixing up of two different concepts, viz., administrative tribunal and administrative act. The question whether an act is a judicial act or an administrative one arises ordinarily in the context of the proceedings of an administrative tribunal or authority. Therefore, the fact that an order was issued or an act emanated from an administrative tribunal would not make it anytheless a quasi judicial act if the aforesaid tests were satisfied. The concept of a quasi judicial act has been conceived and developed by English Judges with a view to keep the administrative tribunals and authorities within bounds. Parker, J., in R.V. Manchester Legal Aid Committee(1) brought out the distinction between judicial and administrative acts very vividly in the following passage: "The true view, as it seems to us, is that the duty to act judicially may arise in widely different circumstances which it would be impossible, and, indeed, inadvisable, to define exhaustively . . When, on the other hand, the decision is that of an administrative body and is actuated in whole or in part by questions of policy, the duty to act judicially may arise in the course of arriving at that decision. Thus, if in order to arrive at the decision, the (1) ; (2) ; (3) (4) (5) ; (6) , 428.542 body concerned had to consider proposals and objections and consider evidence, then there is the duty to act judicially in the course of that inquiry . . . . . Further, an administrative body in ascertaining facts or law may be under a duty to act judicially notwithstanding that its proceedings have none of the formalities of and are not in accordance with the practice of a court of law . . . . . If on the other hand, an administrative body in arriving at its decision at no stage has before it any form of his and throughout has to consider the question from the point of view of policy and expediency, it cannot be said that it is under a duty at any stage to act judicially". The relevant principles have been succinctly stated in Halsbury 's Laws of England, 3rd Edn., Vol. 11, at pp. 55 and 56 thus: It is not necessary that it should be a court: an administrative body in ascertaining facts or law may be under a duty to act judicially notwithstanding that its proceedings have none of the formalities of, and are not in accordance with the practice of, a court of law. It is enough if it is exercising, after hearing evidence, judicial functions in the sense that it has to decide on evidence between a proposal and an opposition. A body may be under a duty, however, to act judicially (and subject to control by means of these orders) although there is no form of lis inter partes before it: it is enough that it should have to determine a question solely on the facts of the particular case, solely on the evidence before it, apart from questions of policy or any other extraneous considerations". "Moreover an administrative body, whose decision is actuated in whole or in part by questions of policy, may be under a duty to act judicially in the course of arriving at that decision . . If, on the other hand, an administrative body in arriving at its decision has before it at no stage any form of lis and throughout has to consider the question from the point of view of policy and expediency, it cannot be said that it is under a duty at any time to act judicially". These are innumerable decisions of this Court where it issued a writ of certiorari to quash a quasi judicial act of an administrative tribunal or authority. This Court set aside the order of the Andhra Pradesh State Government approving the order of nationalisation of road transport made by the Andhra Pradesh Road Transport Undertaking in Gullapalli Nageswara Rao vs Andhra Pradesh State Road Transport Corporation(1), the order of the Examination (1) [1959] Supp. 1 S.C.R. 319.543 Committee cancelling the examination results on the ground that it did not give opportunity to the examinees to be heard before the order was made in Board of High School and Intermediate Education, U.P., Allahabad vs Ghanshyam Das Gupta(1), and the order of the Revenue Board made in a revision petition against the order of the Deputy Commissioner impounding the document without hearing the aggrieved party in The Board of Revenue, U.P. vs Sardarni Vidyawati(2). In all these cases the Government, the Examination Committee and the Board of Revenue were administrative bodies, but the acts impugned were quasi judicial ones, for they had a duty to act judicially in regard thereto. The law on the subject may be briefly stated thus: The provisions of a statute may enjoin on an administrative authority to act administratively or judicially. If the statute expressly imposes a duty on the administrative body to act judicially, it is a clear case of a judicial act. But the duty to act judicially may not be expressly conferred but may be inferred from the provisions of the statute. It may be gathered from the cumulative effect of the nature of the rights affected, the manner of the disposal provided, the objective criterion to be adopted, the phraseology used, the nature of the power conferred or the duty imposed on the authority and other indicia afforded by the statute. In short, a duty to act judicially may arise in widely different circumstances and it is not possible or advisable to lay down a hard and fast rule or an inflexible rule of guidance. With this background let us look at the relevant provisions of the Income tax Act. Section 33A(2). The Commissioner may, on application by an assessee for revision of an order under this Act passed by any authority subordinate to the Commissioner, made within one year from the date of the order (or within such further period as the Commissioner may think fit to allow on being satisfied that the assessee was prevented by sufficient cause from making the application within that period), call for the record of the proceeding in which such order was passed, and on receipt of the record may make such inquiry or cause such inquiry to be made, and, subject to the provisions of this Act, pass such order thereon, not being an order prejudicial to the assessee, as he thinks fit. Provided that the Commissioner shall not revise any order under this sub section if (a) where an appeal against the order lies to the Appellate Assistant Commissioner or to the Appellate Tribunal but has not been made, the time within which such appeal may be made has not expired, [1962] Supp. 3 S.C.R. 36.(2) [1962] Supl.3 S.C.R. 50 ' 544 or, in the case of an appeal to the Appellate Tribunal, the assessee has not waived his right of appeal, or (b) where an appeal against the order has been made to the Appellate Assistant Commissioner, the appeal is pending before the Appellate Assistant Commissioner, or (c) the order has been made the subject of an appeal to the Appellate Tribunal. Provided further that an order by the Commissioner declining to interfere shall be deemed not to be an order prejudicial to the assessee. Under this sub section an assessee may apply to the Commissioner for revision of an order under the Act by an authority subordinate to him. Such application shall be filed within one year from the date of the order or within such further period as the Commissioner may think fit to allow. On receipt of such an application the Commissioner may call for the record of the proceeding in which such order was made and make such enquiry or cause such enquiry to be made. After such enquiry he can make an order not to the prejudice of the assessee but to his benefit. Such revision is not maintainable if the time prescribed for an appeal against such an order to the appropriate authorities has not expired or if an appeal against such an order is pending before the appropriate authorities. The scope of the revision is, therefore, similar to that prescribed under different statutes. Prima facie the jurisdiction conferred under section 33A(2) of the Act is a judicial one. The order that is brought before the Commissioner affects the right of the assessee. It is implicit in revisional jurisdiction that the revising authority shall give an opportunity to the parties affected to put forward their case in the manner prescribed. The nature of the jurisdiction and the rights decided carry with them necessarily the duty to act judicially in disposing of the revision. The fact that the Commissioner cannot make an order to the prejudice of an assessee does not possibly change the character of the proceeding. Though the Commissioner may not change the order of the inferior authority to the prejudice of the assessee, he may not give the full relief asked for by the assessee. But it is said that the Commissioner exercising jurisdiction under section 33A of the Act is only functioning as an administrative authority and all his orders made thereunder partake that character. Reliance is placed on the decision of the Judicial Committee in Commissioner of Income tax, Punjab, N.W.F. & Delhi Provinces, Lahore vs Tribune Trust, Lahore(1). There, the Judicial Committee held that the assessments, which were duly made by the Income tax (1947) L.R. 74 I.A. 306. 317, 318. 545. Officer in the proper exercise of his duty, were not a nullity, but were validly made and were effective until they were set aside; and that a reference to the High Court did not lie from an order under section 33 of the Act unless that order was prejudicial to the assessee in the sense that he was in a worse position than before the order was made. But the Board incidentally made the following observations: "On the contrary, section 33 follows a number of sections which determine the rights of the assessee and is itself, as its language clearly indicates, intended to provide administrative machinery by which a higher executive officer may review the acts of his subordinates and take the necessary action on such review. It appears that, as a matter of convenience, a practice has grown up under which the commissioner has been invited to act "of his own motion", under the section, and where this occurs a certain degree of formality has been adopted. But the language of the section does not support the contention, which lies at the root of the third question and is vital to the respondent 's case, that it affords a claim to relief". Continuing the same idea that Board observed: "The Commissioner may act under section 33 with or without invitation of the assessee: if he does so without invitation, it is clear that, if he does nothing to worsen the position of the assessee, the latter can acquire no right: the review may be a purely departmental matter of which the assessee knows nothing. If, on the other hand, the commissioner acts at the invitation of the assessee and again does nothing to worsen his position, there is no justification for giving him a new right of appeal". These observations were made in the context of a question whether a reference would lie to the High Court against an order of the Commissioner. But the question whether the order of the Commissioner under section 33 of the Act was a judicial or a quasi judicial act subject to the prerogative writ of certiorari was neither raised nor decided in that case: that question was not germane to the enquiry before the Board, for the appeal did not arise out of any order made in a writ of certiorari. Section 33, which was considered by the Privy Council was repealed by the Amending Act of 1939; but by Act XXIII of 1941 the revisional powers of the Commissioner were restored. Section 33 A took the place of section 33 with certain modifications. Sub section (1) of section 33A provided for the Commissioner acting suo motu; and sub section(2)thereof, on the application of the assessee. Under this section the Commissioner can exercise the revisional jurisdiction subject to the conditions mentioned therein. While section 33 only provided for the suo motu exercise of the jurisdiction, section 33A enables an assessee to apply to the Commissioner to revise the order of his subordinate officer. Some of the High Courts, under the impression that the Privy Council held that the act of the Commissioner was an administrative one, ruled that a writ of certiorari. would not lie to quash the order of the Commissioner under section 33A of the Act: see Sitalpore Colliery Concern Ltd. vs Union of India(1); Additional Income tax Officer, Cuddapah vs Cuddapah Star Transport Co. Ltd.(2); and Suganchand Saraogi vs Commissioner of Income tax, Calcutta(3). They did not consider the scope of the revision before the Commissioner and whether the orders made thereunder satisfied the well settled tests of "judicial act" laid down by this Court. In our view, for the reasons mentioned by us earlier, the said judgments were decided wrongly. That apart, on the assumption that the order of the Commissioner under section 33 A of the Act was an administrative one, the respondent would not be in a better position. What the appellant complains is that the Income tax Officer in terms of section 29 of the Act is under an obligation to issue a demand notice. If the said contention was correct, he did not discharge the duty imposed on him by the statute. If the Commissioner only made an administrative order in refusing to give any direction to the Income tax Officer, it would not exonerate the said officer from discharging his statutory duty. In that event the assessee would certainly be entitled to approach the High Court under article 226 of the Constitution for the issue of a writ of mandamus or other appropriate direction to the Income tax Officer to discharge his statutory duty. We, therefore, reject the preliminary objection of the respondents. The High Court mainly dismissed the writ petition on the ground that the affidavit flied in support of the writ petition was highly unsatisfactory and that on the basis of such an affidavit it was not possible to entertain the petition. In exercise of the powers conferred by article 225 of the Constitution and of other powers enabling it in that behalf the High Court of Allahabad framed the Rules of Court. Chapter XXII thereof deals with the procedure to be followed in respect of a proceeding under article 226 of the Constitution other than a writ in the nature of habeas corpus. The relevant rule is sub r.(2) of r. 1 of Ch.XXII, which reads: "The application shall set out concisely in numbered paragraphs the facts upon which the applicant relies and the grounds upon which the Court is asked to issue a direction, order or writ, and shall conclude with a prayer stating clearly, so far as circumstances permit, the exact nature of the relief sought. The application shall be accompanied by an affidavit or affidavits in proof of the facts referred to in the application. Such affidavit or affidavits shall be restricted to matters which are within the deponent 's own knowledge". The application filed in the High Court certainly complied with the provisions of sub r.(2) of r. 1 of Ch.XXII of the Rules of Court of the Allahabad High Court. It set out concisely in numbered paragraphs the facts upon which the applicant relied, the grounds on which the Court was asked to issue the direction and the exact nature of the relief sought. But it is said that the affidavit filed in support of the application did not speak to matters which were within the deponent 's own knowledge. Dhruva Das, the deponent of the affidavit, is a relative of the petitioner and he also looked after the case on his behalf as his pairokar and was fully conversant with the facts. He solemnly affirmed and swore as follows: "I Dhruva Das, aforesaid deponent do hereby solemnly affirm and swear that the contents of paras 1, 2, 3 and 50 partly are true to my personal knowledge, that the contents of paras.4, 5, 6, 7, 8, 9, 10.11, 12. 13, 14, 15, 16, 20, 21, 25, 27, 29 partly, 31, 32, 34, 37, 38.41, 42, 44 are based on 46 and 50 partly and paras 17, 18, 19, 22, 23, 24, 26, 28, 29, partly 30, 33 ', 35, 36, 39, 40, 43, 48 partly are based on perusal of the record, those of paras 47, 48 partly 49 and 50 partly are based on legal advice, which I believe to be true, that no part of this affidavit is false and nothing material has been concealed in it". In paragraphs which are based on a perusal of the record the deponent referred to the relevant orders of the Income tax authorities and also to the relevant agreements and the copies of the said orders and agreement were also annexed to the affidavit as schedules. It is not clear from the schedules whether certified copies or the original of the orders received by the appellant were filed. The said agreements and the orders afford sufficient basis to appreciate the case of the appellant and for disposing of the same. "Deponent 's own knowledge" in r. 1(2) of Ch.XXII of the Rules is wide enough to comprehend the knowledge of the appellant derived from a perusal of the relevant documents; and the affidavit in express terms disclosed and specified the documents, the source of the appellant 's knowledge. He swore in the affidavit that the documents annexed to the affidavit were true copies of public documents. If they are certified copies of public documents, they prove themselves; if they are original of the orders sent to the appellant, the deponent, as his agent, speaks to their receipt. It is, therefore, not correct to say that the facts stated in the affidavit are not based on the deponent 's knowledge. The other facts alleged in the affidavit are only introductory in nature and if they are excluded the result will not be affected. That apart, if the affidavit was defective in any manner the High Court, instead of dismissing the petition in limine, should have given the appellant a reasonable opportunity to file a better affidavit complying with the provisions of r. 1 of Ch.XXII of the Rules. We cannot, therefore, agree with the High Court that the petition was liable to be dismissed in limine in view of the alleged defects in the affidavit. 548 Nor can we agree with the High Court that the facts given in the affidavit are incomplete and confused. On the other hand, a careful perusal of the affidavit, along with the documents annexed thereto, discloses clearly the appellant 's case: it gives the necessary facts and the reliefs sought for. We do not find any missing link in the narrative of facts or any confusion in the nature of the reliefs asked for. We cannot also agree with the High Court that the decision of the Bombay High Court in Baijnath Chaturbhuj vs Commissioner of Income tax, Bombay City 11(1) was given on different facts and that it was impossible to contend that any part of the money paid by Messrs. Chaturam & Sons was really compensation for the managing agency rights. The Bombay decision was given in the context of the dispute between the Bombay Group and the Income tax authorities and was based upon the consideration of the very documents which are the basis of the appellant 's claim. We do not propose to express any opinion on the correctness or otherwise of that decision. But, the fact that a Division Bench of one of the High Courts in India had taken the view in favour of the appellant indicates that the question raised is, in our view, an arguable one and it requires serious consideration. We are satisfied that this is not a case where the High Court should have dismissed the writ petition in limine. We find in the decree issued by the High Court that Sri Gopal Behari appeared on behalf of the opposite parties; presumably he appeared as the appellant must have issued notice in terms of r. 1(4) of Ch.XXII of the Rules. Be that as it may, the High Court did not finally decide two important questions that really arose 'for consideration before it, namely: (i) whether a revision lay to the Commissioner under section 33 A(2) of the Act against the order of the Income tax Officer; and (ii) whether the Income tax Officer should have issued a demand under section 29 of the Act. If a revision lay to the Commissioner, the Commissioner should have considered the second question before dismissing it. Therefore, the question is whether a revision lay to the Commissioner under section 33 A(2) of the Act. A revision does not lie to the Commissioner against an order where an appeal against that order lies to the Appellate Assistant Commissioner but has not been made and the time within which such an appeal may be made has not expired or where an appeal against the order has been made, it is pending before him. It follows that if no appeal lies against the order an officer to the Appellate Assistant Commissioner, the Commissioner can revise that order under section 33 A of the Act. In the present case, pursuant to the directions of the, Tribunal, Delhi Bench, the Income tax Officer determined the assessee 's capital gains under section 12 B of the Act; but the Income tax Officer did not make any order under section 23(3) of the Act, nor (1957) 31/.T.R. 643. 549 did he issue a regular notice of demand as prescribed under section 29 of the Act. The result was, no appeal lay against the computation made by the Income tax Officer to the Appellate Assistant Commissioner. Indeed, on March 8, 1957, the Appellate Assistant Commissioner rejected the appeal filed by the appellant as being not maintainable. As no appeal lay to the Appellate Assistant Commissioner against the calculations made by the Income tax Officer, the Commissioner had certainly power to revise the said order. On March 5, 1956, the appellant flied an application requesting the Income tax Officer to issue a notice of demand as required by section 29 of the Act. But the said Officer declined to issue the notice of demand. The question is whether he was bound to issue a notice of demand under section 29 of the Act. Section 29 of the Act reads: "When any tax, penalty or interest is due in consequence of any order passed under or in pursuance of this Act, the Income tax Officer shall serve upon the assessee or other person liable to pay such tax, penalty or interest a notice of demand in the prescribed form specifying the sum so payable". Under this section, if a tax is due in consequence of an order from an assessee, the Income tax Officer is under a duty to serve on him a notice of demand. Pursuant to the directions given by the Tribunal the Income tax Officer made fresh calculations under the head 'capital gains ' and ascertained the amount due from the assessee. In the circumstances, pursuant to the said calculation, he should have passed an order and issued a notice of demand to the assessee. In not doing so, it must be held that the Income tax Officer did not discharge his duty which he was bound to do under the Act; with the result he had become amenable to a writ of mandamus directing him to do what he should have done under the ,Act. In the result, the order of the High Court is set aside and we issue a writ of certiorari quashing the order of the Commissioner and a writ of mandarnus directing the Income tax Officer to pass an order and issue a notice in accordance with law. The appellant will have his costs throughout. Appeal allowed.

IN-Abs

Pursuant to the directions of the Income tax Appellate Tribunal, the Income tax Officer, determined the assessee 's capital gains under section 12B of the Income tax Act, 1922. He did not, however, make any order under section 23(3) of the Act, nor did he issue a notice of demand under section 29 of the Act. The assessee filed an application before the Commissioner of Income tax, under section 33A(2) of the Act, for revising the computation made by the Income tax Officer drawing his attention to a decision of the Bombay High Court in Baijnath 's case, , as to how the capital gains should be ascertained. That decision was based upon a consideration of the very documents which were the basis of the assessees ' claim. The Commissioner dismissed the revision petition as not maintainable, as well as on merits, ignoring the Bombay decision. Meanwhile, the assessee filed an application requesting the Income tax Officer to issue a notice of demand under section 29, to enable him to file an appeal, but the Officer declined to do so. The assessee filed a writ application in the High Court for issuing appropriate writs to the Commissioner and the Income tax Officer, but the High Court dismissed it in limine. In his appeal to this Court, the assessee contended that (i) the High Court erred in holding that the affidavit filed in support of the writ petition was not in accordance with law, and that even if there were any defects the High Court should have given him an opportunity to rectify them, and (ii) the High Court erred in distinguishing the Bombay decision and in holding that there was no force in the revision filed before the Commissioner, and that, the High Court should have directed the Commissioner to entertain the revision and dispose of it in accordance with law by giving suitable directions to the Income tax Officer. The respondent raised a preliminary objection that as the order of the Commissioner was an administrative act, article 226 of the Constitution could not be invoked. HELD:(i) As no appeal lay to the Appellate Assistant Commissioner against the calculations made by the Income tax Officer, the Commissioner had powers under section 33A(2) to revise the Income tax Officer 's order. The jurisdiction conferred on the Commissioner by the section is a judicial one, The nature of the jurisdiction and the rights decided carry with them necessarily the duty to act judicially in disposing of the revision. Further, the fact that a Division Bench of one of the High Courts in India had taken a view in favour of the assessee, indicated that the question raised was arguable and required serious consideration. Therefore, a writ of certiorari quashing the order of the Commissioner dismissing the assessee 's revision petition, should be issued. [544E G; 548D] 537 Sitalpore Colliery Concern Ltd. vs Union of India, , Additional Income tax Officer, Cuddapah vs Cuddapah Star Transport Co. Ltd. and Suganchand Saraogi vs Commissioner of Income tax, , overruled. Even if the Commissioner only made an administrative order in refusing, to give any direction to the Income tax Officer, the assessee would still be entitled to approach the High Court under article 226, and a writ of mandamus directing the Income tax Officer to discharge his statutory duty of passing the order and issuing the notice of demand in accordance with law, should be issued. [546C E] (ii)The affidavit filed on behalf of the assessee was complete and compiled with the rules made by the High Court. The affidavit spoke only of matters which were within the deponent 's own knowledge, because, the phrase "deponent 's own knowledge" is wide enough to comprehend the knowledge derived from a perusal of relevant documents. Even if the affidavit was defective in any manner, the High Court instead of dismissing the petition in limine should have given the assessee, a reasonable opportunity to file a better affidavit. [547F G, H] (iii)The High Court was also in error in holding that the decision of the Bombay High Court was given on different facts, for the facts in both cases were the same and they arose out of the same transaction. [548B C]

Appeal No. 41 of 1964. Appeal from the judgment and order dated April 10, 1961 of the Madhya Pradesh High Court in Misc. Civil Case No. 154 of 1959. N.D. Karkhanis, Rameshwar Nath, S.N. Andley and P.L. Vohra, for the appellant. C.K. Daphtary, Attorney General, R. Ganapathy Iyer and R.N. Sachthey, for the respondent. 643 The Judgment of Subba Rao and Sikri, JJ. was delivered by Subba Rao, J. Shah, J. delivered a dissenting Opinion. Subba Rao, J. The appellant is a Hindu undivided family carrying on business at Jaora. It was a branch of a larger joint Hindu family composed of two branches one was Govindram and the members of his family and the other was Bachhulal and the members of his family. In the year 1942 there was a partition suit between the said two branches and under the decree made therein each item of the property was put up for sale by competitive bidding. One of the items of the said property, the sugar factory at Jaora, was knocked down in favour of Govindram for a sum of Rs. 34 lakhs. After all the items of the property were sold to one or other of the parties, final adjustments were made by cash payment. After the said partition Govindram and the members of his branch of the family continued to run the factory. For the assessment year 1950 51 the Income tax Officer, Ratlam, assessed the appellant in respect of the income from the said factory. The appellant contended that it was entitled to depreciation as provided under section 10(2) (vi) of the Income tax Act, 1922, hereinafter called the Act, on the said amount of Rs. 34 lakhs, being the amount for which it purchased the factory in the auction that was held pursuant to the partition decree. The Income tax Officer and, on appeal, the Appellate Assistant Commissioner rejected that contention and held that the value to be adopted for the purpose of depreciation would be the original cost of the said factory to the larger joint family. On a further appeal, the Income tax Appellate Tribunal held that so far as the 10/16th share in the factory which belonged to the appellant was concerned the cost to the appellant was the original cost to the larger branch; and so far as the 6/16th share of Bachhulal 's branch in the said factory was concerned the original cost was the amount for which the appellant 's branch purchased the 6/16th share of the other branch, i.e., Rs. 12,75,000/ . The following question was referred by the Tribunal to the High Court of Madhya Pradesh: "Whether on the facts and in the circumstances of this case, the assessee Hindu Undivided Family is entitled to claim depreciation in respect of the assets of the old Hindu Undivided Family on the basis of the original cost to the family or on the basis of the valuation at which the assessee took over the assets". The High Court held that the depreciation allowance should be computed on the basis of the original cost to the larger joint family and not on the basis of the valuation at which the assessee took over the assets. The assessee, by certificate granted by the High Court, has preferred the present appear to this Court against that order. The only question that arises in this appeal is whether the depreciation allowance should be computed in respect of the 644 10/16th share in the factory on the basis of the original cost to the larger joint family or on the basis of the valuation at which the assessee took over the factory. The answer to this question turns upon the relevant provisions of the Act and they read: Section 10(2): Such profits or gains shall be computed after making the following allowances, namely: (vi) in respect of depreciation of such buildings, machinery, plant or furniture being the property of the assessee, a sum equivalent, where the assets are ships other than ships ordinarily plying on inland waters, to such percentage on the original cost thereof to the assessee as may in any case or class of cases be prescribed and in any other case, to such percentage on the written down value thereof as may in any case or class of cases be prescribed: Section 10(5) of the Act defines "written down value" thus: "written down value" means (a) in the case of assets acquired in the previous year, the actual cost to the assessee: (b) in the case of assets acquired before the previous year the actual cost to the assessee less all depreciation actually allowed to him under this Act or any Act repealed thereby, or under executive orders issued when the Indian Income tax Act, 1886 (II of 1886) was in force". It is not disputed that no previous depreciation was allowed under any Act repealed by the Indian Income tax Act, 1922, or under any executive order issued under the Indian Income tax Act, 1886. Therefore, the appellant would be entitled to depreciation allowance on the original cost to it of the factory. What is the original cost of the 10/16th share in the factory to the appellant '? Two expressions in d. (vi) of sub section (2) of section 10 give the clue to the answer, and they are, (i) "being the property of the assessee", and (ii) "the original cost thereof". Therefore. depreciation is given in respect of property of an assessee on the original cost of the said property to him. The factory is the property of the assessee. What was the original cost of the property to the assessee '? Admittedly Govindram purchased it in the auction for Rs. 34 lakhs. Ordinarily that would be the cost of the factory to the assessee. It was conceded that it would be so if a third party had purchased it. But as the auction was only a step in the partitioning of the property of the larger family among the branches composing it, Govindram did not purchase it but only got it in the partition. It was then 645 contended that partition did not involve any conveyance or transfer, but it was only a process in and by which joint enjoyment was transformed into an enjoyment in severality and that, therefore, the. appellant did not get any new title to the factory or at any rate to the 10/16th share therein, but its title was traceable to the ownership of the larger joint family. On the said reasoning it was argued that the original cost of the factory to the larger joint family was the cost to the assessee within the meaning of the said provisions. The entire argument is based on a misapprehension of the scope of partition under Hindu Law. Coparcenery is a creature of Hindu law. The concept involves "community of interest, unity of possession and common enjoyment". Each coparcener 's right extends to the whole joint family property; though each one of them has interest in the whole family property, he has no definite share therein. Partitioning is the ascertainment of individual shares and it can be brought about by an unambiguous declaration of their intention to divide, ie., by a conscious alteration of their status. Such a declaration brings about a division in status. At that stage ' the members of an erstwhile joint family become tenants in common. The next step is the division by metes and bounds where under separate properties are allotted towards the said definite shares of the individuals. Whether the said process involves transfer or not within the meaning of the Transfer of Property Act, it certainly confers on a divided member an absolute title to a specified property, whereas before the partition he had only some interest in the entire joint family property. Though in one sense his interest in the property of the larger joint family has become crystallized into a specific property, in substance he acquires a title to a specific property. Even from a practical standpoint the legal fiction of "pre existing title" cannot be stretched too far. Take the following illustration: A and B were members of a joint Hindu family in 1930 and continued to be so till 1960 when a partition was effected between them. They had 4 houses in 4 villages; and the original cost of each of the houses was Rs. 100/ . If a partition had taken place in 1930 or thereabout, each one of the two brothers would have got 2 houses each, and the partition would have been equitable and fair. But during these 30 years one village developed into a town and the value of the house therein had increased to Rs. 500/ . There was no appreciable rise in price in regard to the other 3 houses and they together would fetch only Rs. 500/ in the market. In the result at the partition that was effected in 1960 the house, in the town was given to one of the brothers and the other three houses together were given to the other brother. What would be the cost of the house in the town to the brother to whom it was allotted? Clearly it would be Rs. 500/ , though the original cost of the house at the time it was built or purchased was only Rs. 100/ . Because of the uneven rise in prices of the different houses, instead of two houses he got only one house at the partition. The cost to him, therefore. would be the cost at which the 646 property was valued at the partition or at which it was auctioned for the purpose of partition. Take another illustration: Instead of partitioning the properties by evaluation thereof, the houses were sold to a third party. So far as the third party was concerned the cost price would be the price at which he purchased them. If instead, the properties were sold by auction between the brothers and the difference in prices was adjusted by cash payment, it would be incongruous to say that in the former the cost of the houses would be the cost actually paid by the third party purchaser and in the latter the cost of the houses would not be the price for which they were auctioned but the nominal price they bore in a remote past. Other illustrations may be visualized. Barring the cases of fraud, collusion and inflation and deflation of values for ulterior purposes, cost of an asset to a divided member must necessarily be its cost to him at the time of partition, whether mentioned in the partition deed or ascertained aliunde. Analogy drawn from comparable cases may also throw some light on the question. In the case of an assessee acquiring a property by purchase, gift, bequest or succession, courts have held that the cost of the property to the assessee was not the original cost of it to his predecessor but its actual cost to him at the time of the purchase, gift, bequest or succession, as the case may be: see Commissioner of Income tax, Madras vs The Buckingham & Carnatic Company, Ltd., Madras (1), and Jagta Coal Co. Ltd. v Commissioner of Income tax, West Bengal(2) purchase; Indian Iron & Steel Co. Ltd. vs Commissioner of Income tax, Bengal("), and Francis Vallabarayar vs Commissioner of Income tax, Madras(4) succession; and Commissioner of Income tax, Burma vs Solomon & Sons(5) bequest. A Division Bench of the Nagpur High Court in Commissioner of Income tax, U.P. & C.P.v. Seth Mathuradas Mohta(6) dealt with a case of partition. Therein, it held that the cost to the assessee, who was a divided member, of a property was the cost of it to the original joint Hindu family at the time it was acquired. The learned Judges gave various illustrations in support of their conclusion. It is true that, if the valuation of the properties was given nationally as a mode of choosing properties, there will be some plausibility in the contention that there is no change in the valuation between the date the property was purchased and the date when it was allotted to one of the members of the family. But, if the valuation of a property was not notional but was real and that was the basis for allocating properties to different shares, we do not see how the cost of a property allocated to a member would be that at which it was purchased in the remote past. We cannot agree with the view expressed by the Nagpur High Court. (1) (2) (3) (5) (4) (6) 647 In substance we do not see any difference in the matter of ascertaining the cost of an asset to an assessee whether he is a donee, purchaser, legatee, successor or a divided member of a joint Hindu family. It may be that in strict legal theory partion may not involve transfer, but the substance of the transaction is that an erstwhile member of a joint Hindu family, who has only an interest in the entire joint family property acquires an absolute title to a specific property. The cost of the property to the member at the date of partition would be the value given to it for the purpose of allotment, provided it was real, or the price at which he purchased it in auction or the value of it ascertained otherwise. It is nobody 's case in the present appeal that the valuation given to the property was notional and not a real one: indeed, the, property was sold in open auction between the members of the larger joint family and the value fetched thereunder entered into the scheme of the partition. We, therefore, answer the question as follows: That depreciation allowance should be computed on the basis of the valuation at which the assessee took over the assets. In the result, the appeal is allowed with costs here and in the High Court. Shah, J. A sugar factory in the former Indian State of Jaora belonged to a Hindu undivided family of Govindram and his nephew Bachhulal. In a suit filed by Bachhulal in 1942 in the Civil Court at Jaora against Govindram for partition of the properties of the undivided family, Govindram was declared entitled to a 10/16th share in the property of the family and Bachhulal to the remaining 6/16th share. A Commissioner was appointed for dividing the properties. Certain properties of the family were incapable of division by metes and bounds, and by order of the Court in which the suit was instituted those properties were put up for sale by "competitive bidding between the parties". A sugar factory at Jaora called 'the Govindram Sugar Factory ' was put up for competitive bidding, and the bid of Govindram for Rs. 34 lakhs being accepted, the sugar factory was allotted to his share. Other assets of the family were similarly allotted to Govindram or to Bachhulal according as he offered the higher bid. Account was then made between Govindram and Bachhulal of properties allotted on the basis of the bids accepted at the competitive bidding and Govindram was found liable to pay Rs. 11,26,200/ after taking into account a debit item of Rs. 12,75,000/ being the value of the 6/16th share of Bachhulal in the sugar factory. Govindram died in 1943, and the appellant is the Hindu undivided family which represents the branch of Govindram. 648 The Indian Income tax Act 9 of 1922 was applied to Part 'B ' States by the Finance Act 25 of 1950. In the assessment year 1950 51 which was the first year of assessment after the State of Jaora became part of the Indian Union, the appellant Hindu undivided family claimed depreciation allowance under section 10(2) (vi) of the Indian Income tax Act in respect of the sugar factory computed on a valuation of Rs. 34 lakhs. The Income tax Officer rejected the claim of the appellant and allowed depreciation only on the actual cost to the Hindu family of Govindram and Bachhulal before it was divided. The order of the Income tax Officer was confirmed by the Appellate Assistant Commissioner in appeal. The Income tax Appellate Tribunal held that the value for purposes of depreciation should be 10/16th share of the original cost to the larger Hindu undivided family plus Rs. 12,75,000/ (paid by Govindram on behalf of the assessee to Bachhulal for the latter 's 6/16th share in the sugar factory). At the instance of the appellant, the Tribunal referred the following question to the High Court of Madhya Pradesh under section 66(1) of the Income tax Act: "Whether on the facts and in the circumstances of this case, the assessee Hindu Undivided Family is entitled to claim depreciation in respect of the assets of the old Hindu Undivided Family on the basis of the original cost to the family or on the basis of the valuation at which the assessee took over the assets?" The High Court of Madhya Pradesh recorded the following answer: "that the depreciation allowance should be computed on the basis of the original cost to the joint family and not on the basis of the valuation at which the assessee took over the assets". In so answering the question, the High Court committed a clear error of law. The Commissioner had acquiesced in the order of the Tribunal and had not claimed that the original value to the larger Hindu Undivided Family was the only amount on which depreciation allowance was to be computed. The Income tax authorities had held ' that for the purpose of computing the depreciation allowance, the original cost to the joint family had to be the basis, but the Tribunal did not accept that view and held that the depreciation allowance in respect of the sugar factory was to be computed on the basis of 10/16th of the original value plus Rs. 12,75,000/ . The Commissioner having acquiesced in the order of the Tribunal, the only question on which the High Court was called upon to advise was whether in respect of the 10/16th share which fell to the share of Govindram, depreciation aIlowance may be computed on the basis of the original cost to the larger undivided family or on the basis of Rs. 34 lakhs being the value of the factory offered at the auction. 649 In the computation of profits and gains of any business carried on by an assessee, under the head "Profits and gains of business" by section 10 sub section (2) the assessee is entitled to an allowance for depreciation under el. The material part of sub section (2) cl. (vi) provides: "(2) Such profits or gains shall be computed after making the following allowances, namely : (vi) in respect of depreciation of such buildings, machinery, plant or furniture being the property of the assessee, a sum equivalent, where the assets are ships other than ships ordinarily plying on inland waters, to such percentage on the original cost thereof to the assessee as may in any case or class of cases be prescribed and in any other case, to such percentage on the written down value thereof as may in any case or class of cases be prescribed: The assets in respect of which the depreciation allowance is claimed being a factory, a percentage on the written down value as may be prescribed in respect of the buildings, machinery, plant and furniture therein is admissible as allowance. Sub section (5) of section 10 defines "written down value". It provided, insofar as it was material at the relevant time: "written down value ' means (a) in the case of assets acquired in the previous year, the actual cost to the assessee: Provided Provided further (b) in the case of assets acquired before the previous year the actual cost to the assessee less all depreciation actually allowed to him under this Act or any Act repealed thereby, or under executive orders issued when the Indian Income tax Act, 1886 (II of 1886), was in force:" The depreciation allowance under section 10(2)(vi) in respect of a factory has to be allowed in the manner prescribed on the actual value to the assessee limited to the buildings, machinery, plant and furniture. No previous depreciation has been allowed under any Act repealed by the Indian Income tax Act, 1922 or under any executive order issued under the Indian Income,tax Act, 1886 and therefore the appellant is entitled to depreciation allowance under section 10 (2) (vi) on the actual cost to the assessee of assets for which depreciation is admissible. 650 The factory originally belonged to a larger Hindu undivided family. In the scheme of partition devised under the preliminary decree the factory was allotted to Govindram, his bid of Rs. 34 lakhs having been accepted by the Court. The true effect of the scheme under which the properties were put up for competitive bidding under the order of the Court was that the interest of the other member was to be conveyed at a value based on the offer made by the higher bidder. In other words, each party was given an option to purchase the share of the other, but the option was exercisable only by the person who offered the higher bid for the asset. By the preliminary decree, the share of Govindram was defined at 10/16th and he became entitled to that share in every item of property and Bachhulal became entitled to the remaining 6/16th share in each such item. But some of the properties were found incapable of physical division and a scheme was devised under which one of the sharers was entitled to purchase the share of the other on a valuation based on the bid offered by him, provided it was the higher of the two bids. Value of the bid was however taken into account only for making up accounts. In substance the appellant purchased by being declared the higher bidder the 6/16th share belonging to Bachhulal in the sugar factory for Rs. 12,75,000/ . He was, and remained the owner of the 10/16th share, and that share was neither sold nor conveyed to him: he merely purchased the share of Bachhulal for Rs. 12,75,000/ . The Tribunal was therefore right in holding that in respect of the 6/ 16th share, Rs. 12,75,000/ paid by Govindram was the actual cost to him. On this part of the case apparently no dispute was or could be raised before the High Court. But the appellant contends that even for the purpose of the 10/16th share, the depreciation allowance should be computed on the basis of a valuation of Rs. 34 lakhs bid by Govindram for the factory. Our attention was invited to a large number of authorities in support of the contention raised by the appellant that the price of the sugar factory on the basis of which the share of Bachhulal was valued should be regarded as decisive of the value of the asset on which depreciation allowance is admissible. The argument in substance is that the actual cost of the sugar factory is Rs. 34 lakhs, that being the price at which the factory was acquired by Govindram. An asset which is admissible to depreciation allowance may be obtained by gift, inheritance or succession. In such a case the person who acquires an interest in the asset pays no price for it, but on that account it cannot be said that he is not entitled to depreciation allowance. In respect of such an asset, in the absence of any statutory provision, depreciation would be computed on the market value on the date of acquisition of interest. An asset may be acquired by purchase, in which case in the absence of evidence to show that the valuation was unduly inflated, the value 651 paid by the assessee is the actual cost to him, and not the value paid by his vendor for acquiring it. Again property which is owned jointly by more persons than one, by the acquisition of the interest of the other joint owners becomes the property of a single owner. In Francis Vallabarayar vs Commissioner of Income tax, Madras(1) a Division Bench of the Madras High Court held that an assessee is entitled in assessment of tax under section 10 of the Income tax Act, to depreciation allowance in respect of machinery or plant, which he acquires by inheritance, on the market value of such property at the date of inheritance. The same principle would apply to cases of gift and succession. The Legislature has by adding cl. (c) in sub section (5) of section 10 by section 8 of the Indian Income tax (Amendment) Act 25 of 1953, defined 'written down value ' in the case of assets acquired by the assessee by way of gift or inheritance as being the written down value as in the case of previous owner or the market value thereof whichever is less. In the case of purchase, as we have already observed, in the absence of fraudulent over valuation with a view to obtain an unfair advantage, the price paid by the purchaser would be regarded for the purpose of depreciation allowance as the actual cost to him, and not the original cost to the vendor: Commissioner of Income tax vs The Buckingham Carnatic Company Ltd. C): Jogta Coal Company Ltd. vs Commissioner of Income tax, West Bengal C). Cases in which full title to an asset, in respect of which depreciation is claimed, is obtained in consequence of partition of a Hindu undivided family introduce a complication, which is a peculiar product of the rules of Hindu law. Under the Mitakshara system the essence of a coparcenary is unity of ownership, and so long as the family remains joint no individual member can claim that he has a definite share in the joint property. Until partition takes place, there is community of interest and unity of possession between all the members: it is only on partition that the interest of each member becomes definite. "Partition . . . is really a process in and by which a joint enjoyment is transferred into an enjoyment in severalty. Each one of the sharers had an antecedent title and therefore no conveyance is involved in the process . "Gutta Radha kristnayya vs Gutta Sarasamma(4). By the preliminary decree Govindram and BachhuIal acquired definite interest in the sugar factory proportionate to the shares declared by the decree in the entirety of the estate, and. the scheme by which Govindram became owner of the sugar factory was in truth one by which he purchased 6/16th share of Bachhulal. He was by the decree, which recognised his pre existing title, entitled to 10/16th share and he purchased the remainder. The (1) 40/.T.R. 426. (2) 3/.T.R. 385. (3) 36/.T.R. 521. (4)I.L.R. 5scI 3 652 scheme of "competitive bidding" was adopted only for the purpose of valuing the interest of the other sharer at which the first sharer was to purchase it. The highest bidder took the entire asset and paid a share of the value bid by him equal to the share of the other sharer in the family estate. Govindram was the owner of 10/16th share: by offering the bid for Rs. 34 lakhs he did not purchase the 10/16th share. He merely purchased the 6/16th share of Bachhulal at a price based on total valuation of the sugar factory at Rs. 34 lakhs. The dicta to the contrary in Commissioner of Income tax U.P. & C.P.v. Seth Mathuradas Mohta (1) on which the High Court relied do not, in my judgment, lay down the correct rule. In that case coparceners of a Hindu family consisting of two members owning a Ginning Factory which was originally purchased for Rs. 23 lakhs decided to separate, and as the Ginning Factory could not be divided it was put to auction and purchased by 'A ' for Rs. 28 lakhs. 'A ' was debited in taking account with half the amount offered by him. Subsequently 'A ' claimed depreciation allowance on the basis of Rs. 28 lakhs which he had paid alleging that that was the original cost to him. The Income tax authorities rejected the claim, and adopted the original value to the joint family as the actual value to 'A ' for computing depreciation allowance under section 10(2)(vi). In dealing with a reference made by the Tribunal on the question whether the Income tax Officer had the power to ignore the valuation made by the parties in ascertaining the original cost of the machinery and building to the assessee, the High Court observed: " . the original cost is the cost of acquiring title. The cost of acquiring title is to be ascertained at the time when the property is acquired by the coparcenary. Thereafter one is not concerned with cost strictly so called but one is concerned with a mode of partition. As a result of the partition each (fraud, over reaching and the like being put on one side) is to be regarded as having got half by the mode of division adopted whether that mode be through Court, arbitration, private auction or drawing lots or any other mode agreed upon. The original cost of the property is not increased though one side might in the result get what a third person would regard as less than half though what the person concerned (at least in the case of private auction) thought at the time was at least equal to half; otherwise he would not have bid so much". These observations were not necessary for the purpose of answering the question posed before the Court. The question posed before the High Court related not to what the true value for computing the allowance for depreciation was. but to the power of the (1) 7 I.T.R.160. 653 Income tax Officer to ignore the valuation placed by the parties in the deed of partition in ascertaining the true value for the purpose of such computation. Death or birth of coparceners does not alter the identity of the Hindu undivided family which utilizes an asset for earning income or profit. Death of a coparcener merely extinguishes an existing interest, but there is no devolution of that interest. But where the joint family status is severed and the rights of the parties are crystalised and a member acquires the interest of the other in any item of property though arbitration, agreement, decree of the Court or a private auction, there is a transfer of interest from one to the other in that property and the value paid or taken into account for acquisition of that interest would normally be regarded qua that share as the actual cost to the acquirer for the purpose of section 10(2)(vi), but the value of his own share is determined by the actual cost to the family. Counsel for the appellant placed strong reliance upon Commissioner of Income tax vs Bai Shirinbai K. Kooka (1) which belongs to a different branch of the law of Income tax. Where an assessee brings his investments into his business, the question arises whether in assessing income tax payable on income earned by sale or disposition of such investment the original value at which they were acquired or the market value as at the date on which they were brought into the business has to be taken into account. In Shirinbai 's case(1) the assessee who held by way of investment several shares in different companies commenced a business in shares by converting the shares into stock in trade of the business. The assessee subsequently sold those shares in the course of the business at a profit. A majority of this Court held that the assessee 's assessable profits on the sale of the shares was the difference between the sale price of the shares and the market price of the shares prevailing on the date when the shares were converted into stock in trade of the business, and not the difference between the sale price and the price at which the shares were originally purchased by the assessee. The Court in that case distinguished the earlier case decided by this Court Sir Kikabhai Premchand vs Commissioner of Income tax(2) in which it was held that the assessee was entitled to value at cost price, certain business assets which were after withdrawal from the business settled upon trust. But neither of these cases has a bearing on the computation of depreciation allowance which is qua building, machinery, plant (not being ships) or furniture to be a percentage of the written down value. A person who transfers his investments which are not part of his business into the stream of his business may value the investments at the prevailing market rate on the date on which they are brought into the business. In Shirinbai 's case(1) the Court was (1) (2) 654 called upon to ascertain commercial profits earned by sale of stockin trade and in so doing regarded the owner as investor and as businessman as two different entities. S.K. Das, J., speaking for the majority observed that normally the commercial profits out of a transaction of sale of an article must be the difference between. what the article cost the business and what it fetched on sale. But it is difficult to appreciate how that principle would apply in the computation of depreciation allowance. The asset viz. the sugar factory at all material times remained a business asset. It was at one time owned by Govindram and Bachhulal, and if the Income tax Act, 1922 had then applied, depreciation allowance would have been computed on the basis of the value to the family. Acquisition of the interest of Bachhulal by Govindram did not alter the character or use of the asset: nor did it make any fundamental alteration in its value to the appellant so as wholly to displace its original value even in respect of the share which Govindram continued to own. Superficial analogies are often misleading and more so in taxation laws. In computing profits assets brought into the business and subsequently sold may be regarded as inducted at the prevailing market rates, for the taxing authority is concerned to deal with the business profits, arising out of a transaction of sale to the business. When depreciation allowance is to be computed, the taxing authorities have to consider what the original cost to the assessee was and valuation of a business asset adopted for the purpose of valuing the share of one of the owners from whom his share was purchased cannot be regarded by any principle of commercial accounting as notionally altering the original cost of his own share in the asset to the acquirer. The assessee does not purchase his own share at the valuation put by him at the private auction: he merely purchases the share of the other sharer at a valuation made on the bid offered by him. I am unable therefore to agree with counsel for the appellant that for the purpose of valuing 10/16th share of Govindram the basis should be the valuation of Rs. 34 lakhs which was adopted for valuing Bachhulal 's share. therefore answer the question as follows: That depreciation allowance should be computed on the basis of 10/16th share of the original cost to the joint family of the assets which are admissible to depreciation allowance plus an appropriate amount attributable to the assets admissible to depreciation allowance on the footing that the value of 6/16th share of Bachhulal in the factory was Rs. 12,75,000/ . The order passed by the High Court will accordingly be modified. There will be no order as to costs. ORDER In accordance with the majority judgment, the appeal is allowed with costs here and in the High Court.

IN-Abs

On partition being effected through a suit, a Hindu joint family who has only an interest in the entire joint family property acfamily. The preliminary decree passed by the Court determined 10/16 as the share of the appellant family and 6/16 as that of the other branch. Those assets of the erstwhile larger joint family which could not be physically divided were auctioned between the two branches and in this manner a sugar mill was purchased for 34 lacs by the appellant family. In Income tax proceedings depreciation under section 10(2) (vi) of the Indian Income tax Act, 1922 was claimed on the above valuation of 34 lacs. The claim was rejected by the Income tax Officer as well as the Appellate Assistant Commissioner, on the ground that the value for the purpose of depreciation was not the price determined at the family auction, but the original cost to erstwhile larger joint family. The Tribunal held that the 6/16 share of the other branch was purchased at the auction and its value had to be taken as the basis of the price determined at the auction, but the appellant family 's own share of 10/16 was not purchased at the auction and therefore had to be valued at the original cost to the larger joint family. In reference, the High Court held that the distinction made by the Tribunal was wrong and that the shares of both branches had to be valued on the basis of the original cost to the larger family. Appeal was filed before this Court with certificate. HELD: Per Subba Rao and Sikri, JJ. It may be that in strict legal theory partition may not involve a transfer, but the substance of the transaction is that an erstwhile member of a joint Hindu family who has only an interest in the entire joint family property acquires an absolute title to a specific property. The cost of the property to the member at the date of partition would be the value given to it for the purpose of allotment. provided it was real, or the price at which he purchased it in auction, or the value of it ascertained otherwise. [647A C] In the case of assessees acquiring a property by purchase, gift, bequest, or succession, courts have held that the cost of the property to the assessee was not the original cost of it to his predecessor but its actual cost to him at the time of the purchase, gift, bequest or succession. In substance there is no difference in the matter of ascertaining the cost of an asset to an assessee whether he is a donee, purchaser, legatee, successor, or a divided member e.f a joint Hindu family. [646D; 647A] 642 Commissioner of Income tax, Madras vs The Buckingham & Carnatic Company, Ltd., Madras (1935)3 I.T.R. 384(P.C.), Jagata Coal Co. Ltd. vs Commissioner of Income tax, West Bengal , Indian Iron & Steel Co. Ltd. vs Commissioner of Income tax, Bengal, (1943) 11 I.T.R. 328 (P.C.), Francis Vallabaravar vs Commissioner of Income tax, Madras and Commissioner of Income tax, Bombay vs Solomon & Sons , referred to. Commissioner of Income tax, U.P. & C.P.v. Seth Mathuradas Mohta, (1939)7 I.T.R. 160, disapproved. In the present case the valuation given to the property was not notional but a real one; indeed the property was sold in the open auction between the members of the larger joint family and the value fetched thereunder entered into the scheme of partition. [647 C D] Therefore, even in respect of the appellant 's own share of 10/16, the valuation for the purposes of section 10(2)(vi) had to be on the basis the price which the appellant bid at the auction. Per Shah, J. (dissenting). By the preliminary decree the appellant family became entitled to a 10/16th share in every item of the property of the larger joint family; the other branch became entitle to the remaining i.e. 6/16th share in each item. The appellant being already owner of 10/16th share could not purchase the same at the auction. In substance the appellant purchased, by being declared the highest bidder, the remaining 6/16th share belonging to the other branch. [650 C E] The asset in question, viz, the sugar factory, at all material times remained a business asset. Acquisition of the interest of the other branch by the appellant did not alter the character or use of the asset; nor did it make any fundamental alteration in its value to the appellant so as wholly to displace its original value even in respect of its share which it continued to own. [654 B D] The Tribunal therefore, had rightly held that in respect of the 6/16th share of the other branch, depreciation had to be allowed to the appellant on the basis of the auction price. The High Court wrongly interfered with this finding the Revenue not having appealed against it. On the appellant 's 10/16th share, which the appellant could not be said to have purchased, depreciation had to be calculated on the basis of original cost to the larger family. [654 E G] Case law discussed.

Appeals Nos./55 157 1964. Appeals by special leave from the judgment and order dated August 8, 1961 of the Andhra Pradesh High Court in Case Referred No. 25 of 1957. section V. Gupte, Solicitor General, N. D. Karkhanis and R.N. Sachthey, for the appellant (in all the appeals). G.S. Pathak, B. Datta and T. Satyanarayan, for the respondent (in all the appeals). The Judgment of the Court was delivered by Subba Rao, J. These appeals by special leave raise the question of construction of section 24(2) of the Indian Income tax Act, 1922, hereinafter called the Act. The material facts may briefly be stated. The, Cocanada Bank Ltd., Kakinada, hereinafter called the assessee, is a private limited company carrying on banking business with its head office at Kakinada and a branch at Dayal Bagh. The assessee 's sources of income are banking business and interest from government securities. For the assessment year 194950 its income was assessed as follows: Interest on securities . Rs. 84,880 Other banking activities . Rs. 64,400 (loss) Net loss . Rs. 55,912 The following tabular form shows at a glance the factual position in regard to the income of the assessee under different heads during the said three years: Business Year of assessment Interest on income or securities loss as finally Total decided by the A.A.C. 1 2 3 4 Rs. Rs. Rs. 1. 1950 51 . 5,191 886 6077 2. 1951 52 . 2174 1,177 3351 3. 1952 53 . 1885 9,121 11,006 621 For the three succeeding years the department showed the income under the said two separate heads but allowed the said loss to be set off against the income under the head "business" and disallowed it against the income under the head "interest on securties". The view of the Income tax Officer was confirmed, on appeal, by the Appellate Assistant Commissioner and ', on further appeal, by the Income tax Appellate Tribunal. The following question was referred by the Tribunal to the High Court for its opinion: "Whether on the facts and in the circumstances of the case, the assessee was entitled to set off the business loss of Rs. 55,912 brought forward from the preceding year against the entire income including interest on securities held by the assessee. " The High Court, having regard to the decision of this Court in United Commercial Bank Ltd., Calcutta vs Commissioner of Income tax, West Bangal(1) remitted the case to the Income tax Tribunal, Hyderabad Bench, for making a fuller statement of case on the question whether these securities in question formed ' part of the trading assets held by the assessee in the course of its business as a banker and whether its dealing with the securities from which it received interest was as much the assessee 's business as receiving deposits from clients and withdrawals by them. The Income tax Tribunal, on a further hearing, held that the receipt of interest from securities was as much the assessee 's business as its other banking activities like receiving deposits from the clients and withdrawals by them. On receipt of the supplementary statement of case from the Tribunal the High Court answered the reference in favour of the assessee. Hence the present appeals. Learned counsel for the Revenue argued that the income from business and securities fell under different heads, namely, section 10 and section 8 of the Act respectively, that they were mutually exclusive and, therefore, the losses under the head "business" could not be carried forward from the preceding year to the succeeding year and set off under section 22(4) of the Act against the income from securities held by the assessee. Learned counsel for the assessee, on the other hand, contended that though for the purpose of computation of income, the income from securities and the income from business were calculated separately, in a case where the securities were part of the trading assets of the business, the income therefrom was part of the income of the business and, therefore. the losses incurred under the head "business" could be set off during the succeeding years against the total income of the business, i.e., income from the business including the income from the securities. The relevant section of the Act which deals with the matter of set off of losses in computing the aggregate income is section 24. The (1) ; 622 relevant part of it, before the Finance Act, 1955, read: "(1) Where any assessee sustains a loss of profits or gains in any years under any of the heads mentioned in section 6, he shall be entitled to have the amount of the loss set off against his income, profits or gains under any other head in that year." (2) Where any assessee sustains a loss of profits or gains in any year, being a previous year not earlier than the previous year for the assessment for the year ending on the 31st day of March, 1940, in any business, profession or vocation, and the loss cannot be wholly set off under subsection (1), so much of the loss as is not so set off or the whole loss where the assessee had no other head of income shall be carried forward to the following year and set off against the profits and gains, if any, of the assessee from the same business, profession or vocation for that year; and if it cannot be wholly set off, the amount of loss not so set off shall be carried forward to the following year. While sub section (1) of section 24 provides for setting off of the loss in a particular year under one of the heads mentioned in section 6 against the profit under a different head in the same year, sub section (2) provides for the carrying forward of the loss of one year and setting off of the same against the profit or gains of the assessee from the same business in the subsequent year or years. The crucial words, therefore, are "profits and gains of the assessee from the same business", i.e., the business in regard to which he sustained loss in the previous year. The question, therefore, is whether the securities formed part of the trading assets of the business and the income therefrom was income from the business. The answer to this question depends upon the scope of section 6 of the Act. Section 6 of the Act classified taxable income under the following several heads: (i) salaries; (ii) interest on securities; (iii) income from property; (iv) profits and gains of business, profession or vocation; (v) income from other sources; and (vi) capital gains. The scheme of the Act is that income tax is one tax. Section 6 only classifies the taxable income under different heads for the purpose of computation of the net income of the assessee. Though for the purpose of computation of the income, interest on securities is separately classified, income by way of interest from securities does not cease to be part of the income from business if the securities are part of the trading assets. Whether a particular income is part of the income from a business falls to be decided not on the basis of the provisions of section 6 but on commercial principles. To put it in other words, did the securities in the present case which yielded the income form part of the trading assets of the assessee? The Tribunal and the High Court found that they were the assessee 's trading assets and the income therefrom 623 was, therefore, the income of the business. If it was the income of the business, section 24(2) of the Act was immediately attracted. If the income from the securities was the income from its business, the loss could, in terms of that section, be set off against that income. A comparative study of sub sections (1) and (2) of section 24 yields the same result. While in sub s.(1) the expression "head" is used in sub section (2) the said expression is conspicuously omitted. This designed distinction brings out the intention of the Legislature. The Act provides for the setting off of loss against profits in four ways. To illustrate, take the head "profits and gains of business, profession or vocation". An assessee may have two businesses. In ascertaining the income in each of the two businesses, he is entitled to deduct the losses incurred in respect of each of the said businesses. So calculated, if he has loss in one business and profit in the other both falling under the same head, he can set off the loss in one against the profit in the other in arriving at the income under that head. Even so, he may still sustain loss under the same head. He can then set off the loss under the head "business" against profits under another head, say "income from investments", even if investments are not part of the trading assets of the business. Notwithstanding this process he may still incur loss in his business. Section 24(2) says that in that event he can carry forward the loss to the subsequent year or years and set off the said loss against the profit in the business. Be it noted that clause (2) of section 24, in contradistinction to cl. (1) thereof, is concerned only with the business and not with its heads under section 6 of the Act. Section 24, therefore, is enacted to give further relief to an assessee carrying on a business and incurring loss in the business though the income therefrom falls under different heads under section 6 of the Act. Some of the decisions cited at the Bar may conveniently be referred to at this stage. The Judicial Committee in The Punjab Cooperative Bank Ltd. vs Commissioner of Income tax, Punjab(1) has clearly brought out the business connection between the securities of a bank and its business, thus: "In the ordinary case of a bank, the business consists in its essence of dealing with money and credit. Numerous depositors place their money with the bank often receiv ing a small rate of interest on it. A number of borrowers receive loans of a large part of these deposited funds at somewhat higher rates of interest. But the banker has al ways to keep enough cash or easily realisable securities to meet any probable demand by the depositors . . ." In the present case the Tribunal held, on the evidence, and that was accepted by the High Court, that the assessee was investing its amounts in easily realisable securities and, therefore, the said securities were part of the trading assets of the assessee 's banking business. The decision of this Court in United Commercial Bank Ltd., 624 Calcutta vs Commissioner of Income tax, west Bengal(1) does not lay down any different proposition. It held, after an exhaustive review of the authorities, that under the scheme of the Income,tax Act, 1922, the head of income, profits and gains enumerated in the different clauses of section 6 were mutually exclusive, each specific head covering items of income arising from a particular source. On that reasoning this Court held that even though the securities were part of the trading assets of the company doing business, the income therefrom had to be assessed under section 8 of the Act. This decision does not say that the income from securities is not income from the business. Nor does the decision of this Court in East India Housing and Land Development. Trust Ltd., vs Commissioner of Incometax, West Bengal(2) support the contention of the Revenue. There. a company, which was incorporated with the objects of buying and developing landed properties and promoting and developing markets, purchased 10 bighas of land in the town of Calcutta and set up a market therein. The question was whether the income realised from the tenants of the shops and stalls was liable to be taxed as "business income" under section 10 of the Income tax Act or as income from property under section 9 thereof. This Court held that the said income fell under the specific head mentioned in section 9 of the Act. This case also does not lay down that the income from the shops is not the income in the business. In Commissioner of Income tax, Madras vs Express Newspapers Ltd.,C), this Court held that both section 26(2) and ' the proviso thereto dealt only with profits and gains of a business, profession or vocation and they did not provide for the assessment of income under any other head, e.g., capital gains. The reason for that conclusion is stated thus: "It (the deeming clause in section 12B) only introduces a limited fiction, name ly, that capital gains accrued will be deemed to be income of the previous year in which the sale was effected. The fiction does not make them the profits or gains of the business. It is well settled that a legal fiction is limited to the purpose for which it is created and should not be extended beyond its legitimate field . . The profits and gains of business and capital gains are two distinct concepts in the Income,tax Act; the former arises from the activity which is called business and the latter accrues because capital assets are disposed of at a value higher than what they cost the assessee. They are placed under different heads; they are derived from different sources; and the income is computed under different methods. The fact that the capital gains are connected with the capital assets of the business cannot make them the profit of the business. They are only deemed to be income of the previous year and not the profits or gains arising from the business during that year." (1) ; (2) (3) , 260 625 It will be seen that the reason for the conclusion was that capital gains were not income from the business. Though some observations divorced from content may appear to be wide, the said decision was mainly based upon the character of the capital gains and not upon their non inclusion under the heading "business". The limited scope of the earlier decision was explained by this Court in Commissioner of Income tax, Bombay City Iv. Chugandas & Co.(1). Therein this Court held that interest from securities formed part of the assessee 's business income for the purpose of exemption under section 25(3). Shah, J., speaking for the Court, observed: "The heads described in section 6 and further elaborated for the purpose of computation of income in sections 7 to 10 and 12, 12A, 12AA and 12B are intended merely to indicate the classes of income: the heads do not exhaustively delimit sources from which income arises. This is made clear in the judgment of this Court in the United Commercial Bank Ltd. 's case(" '). that business income is broken up under different heads only for the purposes of computation of the total income: by that break up the income does not cease to be income of the business, the different heads of income being only the classification prescribed by the Indian Income tax Act for computation of income. " The same principle applies to the present case. We, therefore, hold that under section 24(2) of the Act the income from the securities which formed part of the assessee 's trading assets was part of its income in the business and, therefore, the loss incurred in the business in the earlier year could be set off against that income also in the succeeding years. In the result, we hold that the High Court was right in answering the question referred to it in the affirmative. The appeals are dismissed with costs. One hearing fee. Appeals dismissed. (1) [19651 ; , 24.

IN-Abs

The respondent bank had income from banking business and interest on securities. For the assessment year 1949 50 its loss from banking business was set off against the income from interest on securities but for the succeeding three years the income tax officer set off the said loss which had been carried forward, only against the income. from banking business and disallowed it against the income under the head 'interest on securities '. The view of the Income Tax Officer was upheld by the Appellate Assistant Commissioner and on further appeal by the Appellate Tribunal. The Tribunal however referred to the High Court, at the instance of the assessee, the question whether the assessee was entitled to set off business loss brought forward from the preceding assessment year against the entire income including interest on securities. The High Court remitted the case to the Tribunal for a finding whether the securities in Question formed part of the trading assets held by the assessee. The Tribunal held that the receipt of interest from securities was as much the assessee 's business as its other banking activities. On receipt of the supplementary statement of case the High Court answered the reference in favour of the assessee. The Revenue appealed to this Court. It was urged for the Revenue that the income from business and securities fell under different heads, namely section 10 and section 8 of the Act respectively, that they were mutually exclusive and, therefore, the losses under the head "business" could not be carried forward from the preceeding year to the succeeding year and set off under section 24(2) of the Act against the income from securities held by the assessee. HELD: (i) While subs. (1) of section 24 provides for setting off of the loss in a particular year under one of the heads in section 6 against the profit under a different head in the same year, subs. (2) provides for the carrying forward of the loss of one year and setting off the same against the profit or gains of the assessee from the same business in subsequent years. This cl. (2) of section 24 in contradistinction to cl. (1) thereof is concerned only with the business and not with its heads under section 6 of the Act. This designed distinction brings out the intention of the legislature to give further relief to an assessee carrying. on business and incurring loss in the business though the income therefrom falls under different heads under section 6 of the Act. [622E; 623E F] (ii) The scheme of the Act is that income tax is one tax. Section 6 only classifies the income under different heads for the purpose of computation of the net income of the assessee. Though for the purpose of computation of the income, interest on securities is separately classified, income by way of interest on securities does not cease to be part of the income from business if the securities are part of the 620 trading assets. Whether a particular income is part of the income from a business falls to be decided not on the basis of the provisions of s.6 but on commercial principles. [622G H] (iii) In the present case the Tribunal and the High Court found that the securities were the assessee 's trading assets and the income therefrom was, therefore, the income of the business. If it was income of the business, section 24(2) of the Act was immediately attracted. If the income from the securities was the income from its business, the loss could, in terms of that section, be set off against that income. [622H 623A] The Punjab Co operative Bank Ltd. vs Commissioner of Incometax, Punjab, (1940)8 I.T.R. 635 and Commissioner of Income tax Bombay City I vs Chugandas & Co. (1965) 55 I.T.R. 17, relied on. United Commercial Bank Ltd. vs Commissioner of Income tax West Bengal; , , East India Housing and Land Development Trust Ltd. vs Commissioner of Income tax, West Bengal , and Commissioner of Income tax, Madras vs Express Newspapers Ltd. , distinguished.

vil Appeals Nos. 676 and 677 of 1962. Appeals by special leave from the judgment and order dated February 2,7. 1960 of the Life Insurance Tribunal, Nagpur in Case No. 30 / XII of 1959. O.P. Malhotra, Hamendra K. Shah, .1. B. Dadachanji, O.C. Mathur and Ravinder Narain, for the appellants (in C.A. No. 767/ 62). H.M. Thakar, S.N. Andley, Rameshwar Nath and P.L. Vohra, for the appellant (in C.A. No. 677/62). C.K. Daphtary, Attorney General, D.P. Mehta and K.L. Hathi, for respondent No. 1 (in both the appeals). The Judgment of the Court was delivered by Raghubar Dayal, J. These appeals, by special leave, are against the decree of the Life Insurance Tribunal, Nagpur, in proceedings on an application by the Life Insurance Corporation of India (hereinafter called the Corporation) under section 15 of the (Act XXXI of 1956), shortly termed as the LIC Act, for ordering the Vishwabharti Insurance Company, Bombay. Damji Valji Shah and Jayantilal Hirijibhai Chawda, appellants in the C.A. 676 of 1962, Ghanshyamdas, appellant in C.A. 677 of 1962, the aforementioned individuals being directors of the Vishwabharti Insurance Company, and another director, to pay to the Corporation jointly and severally the sum of Rs. 82,000/ together with interest there at 6 % per annum from September 1, 1956, till full payment. The decree ordered the company to pay a further sum. but we are not concerned with that part of the decree as the company has not appealed against it. (D)5SCI 4 668 The facts of the case briefly are these. The company was a composite insurer. i.e., an insurer who carried on. in addition to life insurance business. other classes of insurance business. The LIC Act came into force on july 1. 1956 and the Corporation was established on September 1. 1956 which was the "appointed day" according to section 2(1) of that Act. On that day. in view of section 7. all the assets and liabilities appertaining to the life insurance business (called the controlled business, vide section 2(3)) of the Company stood transferred to and vested in the Corporation. It was found that certain amounts which had been transferred from the Life Insurance Fund in the books of the company to the General Department had not been transferred in accordance with the provisions of the (Act 4 of 1938) which governed the company and should have continued to be included in the assets appertaining to the controlled business of the company. It was therefore that an application under section 15 of the LIC Act was made by the Corporation to the Tribunal. We may now state how this amount of Rs. 82.000/ happened to be transferred from the Life Insurance Fund (or the Life Fund) of the company to its General Department. The company had to keep separate accounts of all receipts and payments m respect of each class of insurance business. in view of section 10(1) of the lnsurance Act. It had to maintain d Life Fund in connection with its life insurance business in view of section 10(2). Sub section (2) provided that where an insurer carried on business of life insurance. all receipts due in respect of such business be curried to and would form a separate fund called the Life insurance Fund and its assets be kept distinct and separate from all other assets c, If the insurer and deposits made by the insurer in respect of life insurance business. Sub section (3) of section 10 provided that the life insurance fund would be as absolutely the security of the life policy holders as though it belonged to an insurer carrying on no other business than life insurance business and that it should not be applied directly or indirectly for any purpose other than those of the life insurance business of the insurer. The amount in this fund had to be sufficient to meet the net liabilities in regard to the life insurance policies issued by the company, If it was not so maintained. the company stood the chance of being barred from carrying on life insurance business. By resolution dated December 18, 1948. Rs. 1.10.000/ were transferred from the General Department to the Life Department as advance to the Life Department Revenue Account for being added to the Life Fund. subject to the condition that the Life Department would not be liable to pay any interest thereon and that no repayment of the lcan would be made except out of the valuation surplus of the Life Department. The first actuarial valuation report of the company for the year 1944 48. dated July 18 669 1949, showed that the net liability of the company was Rs. 6,55,7 18/and that the amount in the Life Fund was Rs. 6,57,450/and therefore the fund showed a surplus of Rs. 1,732/ over the net liabilities. If the sum of Rs. 1,10,000/ had not been transferred to the Life Department Revenue Account prior to December 31, 1948, this valuation report would have shown the net liability exceeding the amount in the life fund by about a lakh of rupees. It is clear that the amount was so transferred in order to avoid the consequences of the net liabilities exceeding the Life Fund. The Profit & Loss Appropriation Account for the year 1949 shows that Rs. 60,000/ out of this amount of Rs. 1,10,000/ was written off as the company had made profits. Rs. 32,000/ were again similarly transferred to the Life Fund from the General Department with retrospective effect from December 31, 1952 in order to strengthen the position of the Life Fund. The second actuarial valuation report for the period 1949 52, dated September 9, 1953, showed that the policy liability amounted to Rs. 15,3,3,068, that the Life Fund stood at Rs. 15,35,890/ and that thus the Life Fund exceeded the net liability by Rs. 2,822/ . There was thus a surplus as Rs. 32,000/ had been transferred to strengthen the Life Fund, with retrospective effect in view of the resolution dated August 20, 1953 which reads. "Resolved that a loan of Rs. 32,000/ (thirty two thousand only) bearing no interest be hereby given to Life Department by General Department with retrospective effect as on 31st December 1952, the repayment of which shall be made only out of the future Valuation Surplus or surpluses of the Life Department or it may be written off from the future profits of the General Department. This will have effect in the accounts of the Company for the year ended 31 st December 1952. " It is to be noted that this resolution itself said that the amount would be repaid only out of the future Valuation Surplus or pluses of the Life Department or might be written off from the future profits of the General Department. It was this amount of Rs. 82,000/ (Rs. 50,000, ' plus Rs. 32,000/ ) which, by a resolution dated January 6. 1956 was transferred to the General Department from the Life Fund. The resolution reads: "Resolved that a loan of Rs. 82,000/ (eighty two thousand only) advanced to Life Department Revenue Account by General Department be and is hereby repaid to Genera1 Department and the balance of Rs. 60,000/ 670 due to General Department by Life Department Revenue Account be and is hereby kept in reserve for future and hence no adjustment in regard to Rs. 60,000/ will be made for the present." This resolution was confirmed by the Board of Directors at its meeting dated February 6, 1956. We may now refer to the changes in law with respect to life insurance business in 1956 and an anticipation of which probably led to the resolution of January 6, 1956. On January 19, 1956, the Life Insurance (Emergency Provisions) Ordinance, 1956 (Ord. No. 1 of 1956) was promulgated by the President. It came into force from that day which was called the 'appointed day '. Section 3(1) provided that the management of the 'controlled business ' of a11 insurers would vest in the Central Government on and from the appointed day. 'Controlled business ', according to cl. (2) of section 2, meant all the business appertaining to the life insurance business, if the insurer carried on any other class of insurance business also. Clause (b) of sub section (3) prohibited the incurring of any expenditure by the insurer without the previous approval of the person specified by the Central Government in that behalf, from the assets appertaining to the controlled business otherwise than for the purpose of making routine payments etc. , specified in that clause. Those purposes do not include the repayment of an advance made from the General Department to the Life Fund or to the Life Department Revenue Account. Clause (c) of sub section (3) further prohibited the insurer, without the previous approval of the authorised person, to transfer or otherwise dispose of any such assets appertaining to the controlled business or create any charge or hypothecation, lien or other encumbrance thereon. It would therefore appear that possibly the Board of Directors were not right in confirming the resolution of January 6, 1959 after the Ordinance had come into force. However, that is not the point raised in these proceedings. We have already referred to the coming into force of the LIC Act an July 1, 1956 and of the transfer and vesting in the Corporation of all the assets and the liabilities pertaining to the life insurance business in view of section 7 of that Act. Section 15 provides that the Corporation may apply for relief to the Tribunal in respect of a transaction which is made by the insurer whose controlled business had been transferred to and vested in the Corporation under the Act at any time within 5 years before January 19, 1956 and by which the composite insurer has transferred any property from his life department to his general department without consideration or for an inadequate consideration and the transfer was not reasonably necessary for the purpose of the controlled business of the insurer or was made with an unreasonable lack of prudence 671 on the part of the insurer regard being had in either case to the circumstances at the time. The Corporation, in such proceedings, had to make all parties to the transaction parties to the application. Sub section (2) of section 15 empowered the Tribunal to make such order against any of the parties to the application as it thought just having regard to the extent to which those parties were respectively responsible for the transaction or benefited from it and all the circumstances of the case. Section 16 provided for the payment of compensation to the insurer whose Controlled business had been transferred to and vested in the Corporation under the Act. Section 17 provided for the constitution of Tribunals which were empowered by sub section (4) to regulate their own procedure and decide all matters within their competence. Section 41 provided that no civil Court would have jurisdiction to entertain or adjudicate upon any matter which a Tribunal was empowered to decide or determine under the Act. Section 44 inter alia provided that nothing contained in the Act would apply in relation to any insurer whose business was being voluntarily wound up or was being wound up under orders of the Court. The Corporation, by its application under section 15, contended that the transfer of Rs. 82,000/ from the Life Fund to the General Department under the resolution of January 6, 1956, was illegal. being contrary to and in contravention of the insurance Act and as such was inoperative, bad in law and not binding on the petitioner. It was further contended that the said transfer was without consideration and was not reasonably necessary for the purpose of the controlled business of the company and/or was made with unreasonable lack of prudence on the part of the company, regard being had to the circumstances at the time. It was therefore that it prayed inter alia for a decree against the respondents for a sum of Rs. 82,000/ with interest. It impleaded the company as respondent No. 9, the appellants in C.A. 676 of 1962 as respondents Nos. 1 and 4 and the appellant in C.A. 677 of 1962 as respondent No. 2. Ghanshyamdas and Damji Valji were also parties to the resolution dated February 7. 1956. Other directors who were parties to the resolution of January 6 were also impleaded. The aforesaid three directors, the appellants before us, contested the claim of the Corporation and justified the transfer of Rs. 82,000/ to the General Department from the Life Fund on the ground that the amount had been lent by the General Department to the Life Department and had been paid back to the General Department by transfer from the Life Fund when the LifE Fund showed surplus, according to the report of the Actuary dated July 25, 1955. It was also contended before the Tribunal that the petition could not be proceeded with without the leave of the Bombay High Court in view of section 446 of the Indian Companies 672 Act and that the petition was also not maintainable by reason of section 44 of the LIC Act. Several other grounds were also taken before the Tribunal. We are not now concerned with them. The Tribunal held that the amounts of Rs. 1,10,000/ and Rs. 30,000/ were not advanced to the Life Department as loans and that the transfer of Rs. 82.000/ was not out of the valuation surplus and that therefore the transfer of this amount could not be said to be for consideration and necessary or reasonably necessary for the purpose of the controlled business of the company or even a prudent transaction having regard to the interest of the life policy holders. It held that no leave of the Bombay High Court was necessary for proceeding with the petition and that the petition was maintainable and that section 44 of the LIC Act did not bar the applicability of the provisions of the Act to the respondent company. It therefore decreed the suit and ordered the company and the directors, respondents 1 to 4, to pay to. the Corporation jointly and severally a sum of Rs. 82,000/ together with interest thereon at 6 per cent per annum from September 1, 1956 till full payment. It is against this decree that C.A. 676 of 1962 has been filed, by special leave, by Damji Valji Shah and Jayantilal Hirjibhai Chawda and C.A. 677 of 1962 by Ghanshyamdas. This judgment will govern both these appeals. The points raised by learned counsel for the appellants are: (i) The Tribunal had no jurisdiction to proceed with the proceedings on the petition presented by the Corporation without the leave of the High Court in view of section 446 of the , the company having been ordered to be wound up by the High Court on November 9, 1959, (ii) In view of section 44(a) of the LIC Act none of the provisions of the Act applied to the company and therefore the Tribunal could not proceed on the application of the Corporation subsequent to the company being wound up. (iii) The transfer of Rs. 82,000/ from the Life Fund to the General Department of the company was for consideration and was necessary for the life insurance business. The fourth point sought to be urged was that the provisions of section 15(1)(f) of the LIC Act were ultra rites as they contravened the provisions of articles 14 and 19 of the Constitution. This contention was not raised before the Tribunal during the arguments and was therefore considered by it to have been abandoned. We did not therefore allow it to be raised before us. Sub section (1) of section 446 of the provides that when a winding up order has been made or the Official Liquidator has been appointed as Provisional Liquidator. no suit or other legal proceeding shall be commenced or, if pending at the date of the winding up order, shall be proceeded with against the company except by leave of the Court and subject to such terms as the 673 Court may impose. Sub section (2) provides. inter alia, that the Court which is winding up the company shall, notwithstanding anything contained in any law for the time being in force, have jurisdiction to entertain or dispose of any suit or proceeding and any claim made by or against the company. Sub section (3) provides that any suit or proceeding by or against the company which is pending in any Court other than that in which the winding up is proceeding may, not withstanding anything contained in any other law for the time being in force, be transferred to and disposed of by that Court. The question is whether these provisions would affect the proceedings of the Tribunal. In this connection, reference may be made to section 41 of the LIC Act which provides that no civil Court shall have jurisdiction to ' entertain or adjudicate upon any matter which a Tribunal is empowered to decide or determine under that Act. It is not disputed that the Tribunal had jurisdiction to entertain the application of the Corporation and adjudicate on the matters raised thereby. The Tribunal is given the exclusive jurisdiction over this matter. It is in view of the exclusive jurisdiction which sub section (2) of section 446 of the confers on the company Court to entertain or dispose of any suit or proceeding by or against a company or any claim made by or against it that the restriction referred to in sub section (1) has been imposed on the commencement of the proceedings or proceeding with such proceedings against a 'company after a winding up order has been made. In view of section 41 of the LIC Act the company Court has no jurisdiction to entertain and adjudicate upon any matter which the Tribunal is empowered to decide or determine under that Act. It is not disputed that the Tribunal has jurisdiction under the Act to entertain and decide matters raised in the petition filed by the Corporation under section 15 of the LIC Act. It must follow that the consequential provision of sub section (1) of section 446 of the will not operate on the proceedings which be pending before the Tribunal or which may be sought to be commenced before it. Further, the provisions of the special Act i.e, the LIC Act, will over ride the provisions of the general Act viz., the which is an Act relating to companies in general. It is however contended for the appellants that in view of section 44(a) of the LIC Act, section 41 will not apply to the company whose business was being wound up under orders of Court and that therefore the provisions of section 446 of the will affect the proceedings before the Tribunal. The contention is not sound. The question of the applicablity of the Act to a particular insurer is to be considered in relation to facts existing when the Act came into force. In view of section 44 of the LIC Act it will not apply to 674 an insurer whose business is being wound up under orders of Court at the time when that Act came into force in 1956 or on the 'appointed day ' i.e., September 1, 1956. when the assets and liabilities pertaining to the controlled business of the company stood transferred and vested in the Corporation. The company was not being wound up under orders of the Court on July 1, 1956 when the Act came into force or on the appointed day mentioned earlier. The Act did apply to the company. It cannot cease to apply merely because subsequently the company was ordered to be wound up. The word 'insurer ' is defined in cl. (6) of section 2 of the LIC Act and means an insurer as defined in the who carries on life insurance business in India and includes the Government and a provident society as defined in section 65 of the . On November 9, 1959, when the company was ordered to be wound up it was not an 'insurer ' within the meaning of the definition as the company did not carry on life insurance business in India on that date. Its life insurance business had been taken over by the Corporation on the appointed day and it ceased to carry on that business thereafter. It follows therefore that the company was not an insurer on November 9. 1959 and cannot take advantage of the provisions of cl. (a) of section 44 of the LIC Act. We are therefore of opinion that the Tribunal had jurisdiction to continue the proceedings after November 9, 1959 when the company was ordered to be wound up and that the provisions of section 446, , or section 44(a), LIC Act, do not in any way affect its jurisdiction to continue the proceedings. We now come to the third point raised for the appellants. We agree with the Tribunal that the amounts of Rs. 1.10,000/ and Rs. 32,000/ were not lent to the Life Department as such by the General Department. No question of lending money by one department of the company to the other can be ordinarily contemplated. The assets of the company really constitute one entity, even though the company maintains separate accounts with respect to its various insurance business. It carried on other types of insurance business also. We have already shown how the provisions of the require the company to keep a separate account for the life insurance business and to have a separate fund known as the Life Insurance Fund and to which were to be creditedreceipts due in respect of the life business and the amount deposited by the insurer in respect of life insurance business. Such a deposit is to be made in view of section 7(1) of the . This requires ' the insurer to deposit and keep deposited with the Reserve Bank of India for and on behalf of the Central Government either in cash or in approved securities or partly in cash and partly in approved securities the sums specified in the various clauses in 675 regard to the different types of life insurance businesses. Clause (a) requires a deposit of Rs. 2,00,000/ where the business done or to be done is life insurance only. Clause (e) requires a deposit of Rs. 3,00,000 / where the business done or to be done is life insurance and any one of the three el. asses mentioned in clauses (b) to (d). Clause (e) further provides that out of the deposit of Rs. 3,00,000/ , Rs, 2.00,000/ ' shall be the deposit for 'life insurance business. Section 7 lays down a statutory amount which the insurer has to deposit. It does not however restrict the insurer to deposit a larger amount in respect of life insurance business. Sectionplaces certain restrictions about the use to be made of the deposits under section 7. Section 8(2) hewever deals with any deposit and provides that where a deposit is made in respect of life insurance business, the deposit made in respect thereof shall not be available for the discharge of any liability of the insurer other than liabilities arising out of policies of life insurance issued by the insurer. This means that when an insurer puts certain money in the funds pertaining to the life insurance business and especially to a life insurance fund. such an amount can be used only for the discharge of liabilities of the insurer arising out of life insurance policies issued by him. The amounts of Rs. 1,10,000/ and Rs. 32,000/ would thus amount to deposits made by the company in respect of life insurance business in order to augment the life fund. This can be done either to bring the funds to an amount exceeding the expected net liabilities on the policies or merely to augment that fund. It makes no difference to the company how it distributed its funds so long as its statutory liabilities were satisfied. The very conduct of the company with respect to these amounts belies the alleged nature of the transfers of these amounts to the Life Department. The sum of Rs. 60,000/ out of Rs. 1.10,000/ was written off in 1949. A loan of such an amount is not usually written off. No special reason is assigned for writ ing off the loan. The resolution about the transfer of Rs. 32,000, 'itself speaks of the possibility of the amount being written off. A lender does not think in this way at the time he advances a loan. It is clear that the amount was really being transferred to the Life Fund through the Life Department Revenue Account as otherwise the Life Fund on the actuarial valuation would have stood at a figure much below the amount of the net liabilities on the policies as calculated in Form H, Schedule Four to the , which is a Form giving summary and valuation of the policies of the company as at the date of the valuation. Form I is for the valuation balance sheet of the company at the corresponding date and requires in one column the net liability under business as shown in the summary and valuation of policies and in the other column the balance of life insurance fund as shown 676 in the balance sheet, and also provides for noting the eventual position about the Life Fund being in surplus or in deficiency as compared to the net liability. When the amount was not lent as a loan, no question of its repayment as such could have arisen in 1956. of course, whenever the Life Fund showed an actuarial valuation surplus that surplus or part of it could be transferred to the General Department according to the desire of the management. The amount of Rs. 82,000/ was not transferred as a result of the actuarial valuation as contemplated by the various resolutions which authorised the transfer of the amount from the General Department to the Life Department Revenue Account. It was definitely provided in those resolutions that no repayment of the amount would be made except out of valuation surpluses of the Life Department. The expression 'valuation surplus ' has a technical meaning under the Act. Section 13(1) of the provides that every insurer carrying 0n life insurance business shall. in respect of the life insurance business transacted in India. cause once at least in every three years an investigation to be made by an actuary into the financial condition of the life insurance business carried on by him, including the valuation of his liabilities in respect thereto. An abstract of the report of the actuary is to be made in accordance with the regulations contained in of the Fourth Schedule and in conformity with the requirements of of that Schedule. Section 13(2) provides that the provisions of sub section (1) regarding the making of an abstract shall apply whenever at any other time an investigation into the financial condition of the insurer is made with a view to the distribution of profits or an investigation is made of which the results are made public. The abstract is to be certified on behalf of the insurer to the effect that full and effective particulars of every policy under which there is a liability either actual or contingent have been furnished to the actuary for the purpose of investigation. Section 15 requires the submission of the aforesaid abstract to the Controller within the specified period. of the Fourth Schedule requires that every extract prepared in accordance with the requirements of that part of the Schedule will have the statement of a consolidated revenue account in Form G, a summary and valuation in Form H. a valuation balance sheet in Form I and a statement in Form DDD as set forth in Part H of/he Third Schedule annexed to it. The valuation balance sheet in Form I requires the noting of a surplus, if any, of the balance of the life insurance fund as compared to the net liability in the business as shown in the summary and valuation of policies. It is the surplus no, led in this 677 Form 1 which is really the valuation surplus. It was out of such surplus that the company resolved that the advances of Rs. 1,10,000/and Rs. 32,000/ could be paid to the General Department by the Life Department. No such actuarial valuation was made by the actuary prior to the transfer of Rs. 82,000/ to the General Fund by the resolution dated January 6, 1956. Reliance in this connection is placed on behalf of the appellants on the letter of the actuary dated July 25, 1955. The actuary states: "On the above basis, the valuation shows a policy liability of Rs. 20,20,421. The Life Insurance Fund is Rs. 21,32,455. Thus there is a surplus of Rs. 1.12.033. The surplus includes Rs. 53,300 being the amount of appreciation on investments taken into account by you in the past two years. Thus the net working surplus is Rs. 58,733/ . The cost of Bonus at the rate of Rs. 10/ per thousand is approximately Rs. 48,000/ . Thus the surplus is sufficient to enable a bonus declaration at the above rate even after excluding the appreciation amount or setting it apart as an additional reserve for future use. Conclusion: The result is satisfactory. Continuing the same method of working as you have followed. the statutory valuation as on 31 12 55 will surely enable you to declare a higher bonus. " Firstly, it does net appear that the actuary had really conducted an investigation and submitted the valuation report as required by section 13, of the . There is nothing on the record to show that any abstract in Form I, Fourth Schedule, was prepared and submitted to the Controller. Further. the letter shows that the net working surplus was only Rs. 58,733/ as the ostensible surplus of Rs. 1,12,033/ included Rs. 53,300/ by which certain investments of the company had appreciated in that period. When the net working surplus was much less than Rs. 82,000/ which were transferred from the Life Department to the General Department, the transfer of Rs. 82,000/ cannot be said to have been in accordance with the terms on which the alleged loan was made to the Life Department from the General Department. When the Life Department had not Rs. 82,000/ with itself, there could not have been any necessity to pay that amount to the General Department. In fact, the alleged loan could be paid only when there would have been a valuation surplus in the accounts of the lfie Department but this does not mean that the Life Department was bound to pay back the amount the moment it had any valuation surplus. 678 Its liability to pay the alleged loan could arise only when there was a valuation surplus. Its paying the amount actually would depend upon the circumstances prevailing at the time. In the circumstances, we cannot resist the conclusion that the Directors passed a resolution for the transfer of this amount January 6, 1956 in anticipation of some law depriving the company of its life insurance business. It may be that it was a close secret that an Ordinance would be issued on January 19. But all the same, possibly. persons in the insurance world could have had an inkling of the trend of events. The content of the resolution passed on January 6, indicates that the directors had no clear idea at the time as to how much the Life Department, according to them, owed to the General Department. The resolution speaks not only of the transfer of Rs. 82,000/ to the General Department but also refers to the balance of Rs. 60,000/ due to the General Department by the Life Department Revenue Account. The amount had been written off in 1950 and could not have thereafter been considered to be a loan advanced to the Life Department Revenue Account from the General Department. It seems that the resolution was passed in some hurry and the Directors couId not definitely decide as to how any further amount upto Rs. 60,000/ could be taken back to the GeneraI Department from the Life Department Revenue Account. Any way, such a resolution of the Directors indicates that any entries with respect to the alleged loans were made for the purpose of accounting and the necessities of the business. Money in the Life Fund had to be augmented in 1948 and 1952 in order to make the Life Fund exceed the net liabilities of the company on account of the life insurance policies. We are therefore of opinion that the Tribunal took a correct view about the nature of the transfer of Rs. 1,10,000/ in 1948 and Rs. 32,000/ in 1952 to the Life Insurance Fund and rightly held that the transfer of Rs. 82,000/ to the General Department by ' resolution dated January 6, 1956, was not in accordance with the provisions of the and that consequently that amount continued to form part of the assets of the life insurance business of the company upto September 1, 1956 and that as such vested in the Corporation which could recover it from the company and the directors responsible for the transfer of the amount to the General Department. The appeals therefore fail and are dismissed with costs, one hearing fee. Appeals dismissed.

IN-Abs

Indian section 10 Transfer of Funds from Life Insurance Fund to General Department of composite insurer Permissibility. The appellants were directors of an insurance company which was a composite insurer i.e. one carrying on other classes of life insurance business besides life insurance. Under section 10(1) of the Indian Life , a composite insurer had to keep separate accounts in respect of the different classes of business, and its receipts in respect of life insurance business had to go into a fund called the Life Insurance Fund which could be applied only for the put the Life Insurance business and had always to be sufficient to meet the net liabilities of the Life Insurance business. By resolution dated December 18, 1948, a sum of Rs. 1,10,000 was transferred from the General Department of the company to the Life Department to be added to the Life Fund; if this had not been done the said fund would have shown a deficit in the actuarial valuation report dated July 18, 1949. In the profit appropriation account of the company for the latter year a sum of Rs. 60,000 out of the above sum was written off so that the sum advanced was reduced to Rs. 50,000. A further sum of Rs. 32,000 was again similarly transferred from the General to the Life Department by resolution passed in August 1953. with retrospective effect from December 31, 1952, in order to strengthen the position of the Life Fund which again would have shown a deficit if this had not been done. The advances thus made on both occasions were according to the relevant resolutions repayable only out of the 'valuation surplus ', if any, ' in the life department. On January 8, 1956, the Board of Directors of the company transferred a sum of Rs. 82,000 from the Life Department to the General Department. by way of repayment of the above loans. On January 19, 1956, by Ordinance No. 1 of 1956 the management of the life insurance business of all insurers in the country passed to the Central Government. On September 1. 1956, the Life Insurance Corporation of India came into being under the , and the assets and liabilities of the life insurance business carried on by all insurers became vested in it. The corporation filed an application under section 15 of the said Act before the Tribunal constituted under the Act alleging that transfer of Rs. 82,000 from the Life Department to the General Department of the aforesaid company was without consideration and not for any 665 666 necessity of the life insurance business and prayed for a decree against appellants and the company jointly and severally for the said amount. The Tribunal overruled the defendants ' objections as to its jurisdiction and granted a decree to the Corporation as prayed. The company did not appeal but the appellants came to this Court by special leave. The following contentions were raised on behalf of the appellants; (1) The tribunal had no jurisdiction to proceed with the proceedings on the petition presented by the Corporation without the leave of the High Court in view of section 446 of the , the Company having been ordered to be wound up the High Court on November 9, 1959; (2) In view of section 44(a) of the L.I.C. Act none of the provisions of the Act applied to the company and therefore the Tribunal could not proceed on the application of the Corporation subsequent to the company being wound up; (3) The transfer of Rs. 82,000 from the Life Fund to the General Department of the company was for consideration and was necessary for the life insurance business. HELD: (i) The provisions of section 446 of the did not affect the proceedings before the Tribunal. It is in view of the exclusive jurisdiction conferred upon the company court in sub section (2) of section 446 of the to entertain and dispose of any suit or proceeding by or against a company which is being wound up that provision has been made in subs. (1) of that section that no suit or proceeding shall be filed, or if pending, proceeded with against such a company without permission having been taken from the Court. In view of the provision in section 41 of the L.I.C. Act the company court has no jurisdiction to try matters which a Tribunal under the is empowered to entertain and decide. It could not be disputed that the Tribunal was empowered to try the Corporation 's application under section 15 and the Company Court therefore had no jurisdiction to entertain or decide it. It must follow that the consequential provision of sub section (1) of section 446 would not operate on the proceedings before the Tribunal. [673E G] Further, the provisions of the Special Act i.e. the L.I.C. Act will over ride the provisions of the general Act viz. the which is an Act relating to companies in general. [673H] (ii) The company could not take advantage of the provisions of section 44(a) of the L.I.C. Act. [674D E] Section 44(a) provides that the provisions of the Act will not apply to an insurer whose business is being wound up under orders of court. But the question of the applicability of the Act to a particular insurer is to be considered in relation to facts existing at the time when the Act came into force i.e. July 1, 1956 or on the appointed day, i.e. September 1, 1956, when the assets and liabilities of the controlled insurer of the company stood transferred and vested in the Corporation. The company was not being wound up under orders of Court on the above dates. The L.I.C. Act and therefore section 41 thereof did apply to the company. It could not cease to apply merely because subsequently the company was ordered to be wound up. [673H 674B] Section 44(a) was not applicable to the company for the further reason that when it was ordered to be wound up in 1959 it was not an 'insurer ' within the meaning of that word in section 2(6) since it was not carrying on life insurance business on that date. the said busi 667 ness having been taken over by the Corporation on the 'appointed day ' [674C D] (iii) The Tribunal rightly passed a decree in favour of the Corporation. No question of lending money by one department of the company to the other can ordinarily be contemplated. The assets of the company really constitute one entity even though the company maintains separate accounts with respect to its various insurance businesses. From the facts it was clear that the amounts of Rs. 1,10,000 and Rs. 32,000 had been transferred from the General Department to the Life Fund to meet the deficit in the Life Fund which was likely to occur on both occasions. The circumstances showed that the sum of Its. 82,000 was transferred back to the General Department in a hurry in anticipation of some law depriving the company of its life insurance business. It was moreover a condition of the alleged 'loans ' that they would be repaid only when there. was a 'valuation surplus ' in the Life Fund. There was no such surplus in the Life Fund at the time when the sum was transferred from it the General Department. [674G]

Appeal No. 310 of 1964. Appeal by special leave from the judgment and order dated December 1 '3, 1961 of the Calcutta High Court in Income tax Reference No. 74 of 1956. N.D. Karkhanis, Gopal Singh and R.N. Sachthey, for the appellant. A.V. Viswanatha Sastrt, section Murthy and B, P. Maheshwari, for the respondent. The Judgment of the Court was delivered by Sikri, J. This is an appeal by special leave directed the judgment of the High Court at Calcutta in a reference under 612 section 66 of the Income Tax Act. The four questions referred to the High Court by the Income Tax Appellate Tribunal are: "(1) Whether on the facts and circumstances of this case the Income tax Officer, Central Circle XIV, Calcutta, was competent to file the appeal before the Tribunal against the order of the Appellate Assistant Commissioner of Income Tax, Range A. Calcutta? (2) Whether on the facts and circumstances of this case the sum of Rs. 2,50,000 represented the surplus on the sale of lands which was the stock in trade of the assessee company or was the value of goodwill alleged to have been transferred? (3) Whether on the facts and circumstances of this case by the sale of the whole business concern it could be held that there was taxable profit in the sum of Rs. 2.50,000? (4) Whether on the facts and circumstances of this case and in view of the findings of the Tribunal that the entire share capital of the vendee company (excepting seven ordinary shares) was taken over by the vendor firm in lieu of the sale price of the business as a whole, there was any profit in the amount of Rs. 2,50,000 the same being taxable under the Indian Income Tax Act? The relevant facts and circumstances are these. The respondent, M/s Mugneeram Bangur & Co. (Land Department) Calcutta (hereinafter referred to as the vendors) were a firm carrying on the business of land development in Calcutta. By an agreement dated July 7, 1948, the partners of the firm agreed to sell all the business of the said firm to the Amalgamated Development Limited, here in after called the vendee, which company was promoted by the partners of the firm. The relevant paragraphs of the said agreement are as follows: "And Whereas the Vendors have agreed to sell and the company has agreed to purchase all the said business on the basis hereinafter set out. Now it is hereby agreed and declared between the parties as follows: 1. The Vendors do hereby agree to sell and the company both hereby agree to purchase All That the said business with effect from the eighth day of July One thousand nine hundred and forty eight. Together with the goodwill of the said business And all stock in trade, fixtures. tools, implements. furniture, fittings and all other articles and things belonging to the said business or in any way used in the same including the benefit and advantages of all contracts. 613 2. The purchase price shall be Rupees thirty four lakhs ninty nine thousand and three hundred paid and satisfied by the Company allotting to the Vendors or their nominees seventeen thousand five hundred Redeemable Preference shares of Rupees one hundred each and seventeen thousand four hundred and ninetythree Ordinary s hares of Rupees one hundred each in the capital of the Company which will be accepted by the Vendors in full satisfaction of the said purchase price. The Company shall undertake and discharge all debts and liabilities of the Vendors including development expenses such as opening out roads, laying out drains and sanitary arrangements providing electricity in the areas and providing a School in Tolly gunge for education of Children for which the Vendors have given an undertaking to the Tollygunge Municipality and also the liability of the Vendors in respect of the deposits made with them by various intending purchasers of lands but excluding the liabilities of the Vendors for Income tax, Super tax or any other tax or duty on income or revenue in respect of the profits of the business". The sum of Rs. 34,99,300 was arrived at in the Schedule thus: (In rupees) 1. Laud . . 12,68,628 7 7 2. Goodwill . . . . 2,50,000 0 0 3. Motor Car & Lorries . . 25,866 8 6 4. Furniture, Fixture etc . . . 5,244 5 6 5. Mortgage secured . . 71,62,367 6 0 6. Deposits for purchase of land . . 53,500 0 0 7. Advance paid to pleaders solicitors, contractors ' staff and other outstanding . . 1,83,622 3 6 8. Cash in Bank . . 71,800 1 8 36,21,029 0 9 Less liabilities . 1,21,729 0 9 34,99,300 0 0 614 The consideration of Rs. 34,99,300 was paid by allotment of 17,500 Redeemable Preference shares of Rs. 100 each and 17,493 Ordinary shares of Rs. 100 each, the allotment being to the vendors partners or their nominees. Thus the vendors received shares of the face value of Rs. 34,99,300 for the assets transferred to the company. The Income Tax Officer held that the sum of Rs. 2,50,000 was actually charged by the vendors as a lump sum amount of profits on sale of valuable stock in trade and not goodwill as alleged. The Appellate Assistant Commissioner, on appeal, held that the said sum of Rs. 2,50,000 was the value of the goodwill. He further held that since the transfer was a transfer of business as a going concern, the profit was the capital gain and therefore not liable to tax. Relying on Doughty vs Commissioner of Taxes,(1) he held that as "the transfer is a transfer of all assets of the firm to a company the transfer is a capital sales". The Income Tax Officer filed an appeal before the Appellate Tribunal. The Appellate Tribunal held that although the sale was the sale of a business as a going concern, the value of the stock could be traced, and, therefore, the profits arising out of the sale was taxable income. Regarding the goodwill, the Tribunal observed: "We do not think that there was much value of the goodwill of the business that was transferred. Mugneeram Bangur & Co. was a firm constituting of several partners and Mugneeram Bangur & Co. Land Department was a separate firm consisting of the same partners with. however. different shares in the firm Mugneerarn Bangur & Co. were also carrying on business in lands and buildings along with its activities in other businesses. Our attention was drawn by the Department Representative to the fact that in the case of transfer of lands and buildings of the assessee firm the conveyances were as a rule executed in the name of Mugneeram Bangur & Co. The assessee 's learned Counsel did not object to this fact. We are therefore accepting it as correct. If so, there was nothing in the name of Mugneerarm Bangur & Co. Land Department. The conversion of the said firm into a Company in an entirely different name would also indicate that not much of importance was attached to the name of Mugneeram Bangur & Co. Land Department. In the circumstances. in our opinion, the price paid by the purchase Core Dany was not on the consideration of the goodwill of the [1927] A.C. 327. 615 vendors but upon taking over the entire going concern and paying the consideration not in money but by allotment of shares. In such circumstances, the surplus was out of the sale of the business as a whole, including the stock in trade of the assessee firm. Since the other assets transferred had definite value which would not increase in value by the process of transfer, the only value that could increase was the value of the stock in hand, that being the land in the present case. In our opinion, therefore, the amount of Rs. 2,50,000 was really the excess value of the lands sold along with the other assets". But the Tribunal dismissed the appeal on the ground that although the vendors were a different entity from the vendee, the first being a partnership and the second being a limited company, the transaction was mere adjustment of the business position of the partners. It further observed that the Income Tax Department was not entitled to take mere book keeping entries as the evidence of any profit in the matter. The High Court first answered question No. 4, thus: "There was no profit in the transaction by which the entire stock in trade and the business of the firm were transferred to the limited company. Again the fact that two outsiders were brought in as directors with seven shares allotted to them out of 39,300 shares ' makes no difference. In Sir Homi Mehta 's case 400 shares out of 6,000 shares were allotted to Sir Homi Mehta 's sons. Nor again can I see any difference in principle between the case of conversion of business into a private limited company and one in which it is converted into a public limited company if in the latter company outsiders are not allotted any sizeable proportion of the shares issued". The High Court felt that this answer was enough to dispose of the matter, but as questions 2 and 3 had been referred, they answered them. Regarding question No. 2, the High Court held that "as the assets of the firm transferred to the company have been itemised and as there can be no question of variation of the figures given in items 3 to 8 in the agreement for sale, it must be held that Rs. 2,50,000 shown as the value of the goodwill must be represented by surplus on the sale of lands which was the stock in trade of the assessee company". Regarding question No. 3, the High Court held that even if the value of the stock in trade taken over by the assessee was greater than the figure shown therefore in the agreement for sale in view of the answer to question 4, there was no profit which could be taxed. 616 We may mention that it is not necessary to deal with question No. 1 because it was given up before the High Court. Mr. Karkhanis, learned counsel for the appellant. urges that the Doughty 's case(1) was wrongly decided in one respect and that the 'vendors and the vendee being different entities. it is not permissible to tear the corporate veil to see whether the partners of the vendors were the same persons as the shareholders of the vendee. He says that if the veil is not torn, then there was a sale by the vendors to the vendee and profits arose out of the sale. Learned counsel for the respondent, Mr. Viswanatha Sastri, says that if the third question is answered in his favour, it would not be necessary to deal with the other questions. As we are inclined to answer the third question in the favour of the vendors, it is not necessary to deal with the other questions and the arguments addressed in respect of them. The Appellate Tribunal held in this case that the sale was a sale of business as a going concern. This is also apparent from clause 1 of the agreement set out above. If this is so Doughty 's case(1) applies. The facts in Doughty 's case may be conveniently taken from the headnote in that case. "In 1920, two partners carrying on business in New Zealand as general merchants and drapers sold the partnership business to a limited company in which they became the only shareholders. The sale was of the entire assets, including goodwill, the consideration being fully paid shares, and an agreement by the company to discharge all the liabilities. The nominal value of the shares being more than the sum to the credit of the capital account of the partnership. in its last balance sheet, a new balance sheet was prepared showing a larger value for the stock in trade. The Commissioner of Taxes treated the increase in value so shown as a profit on the sale of the stock in trade, and assessed the appellant upon it for income tax under the Land and Income Tax Act, 1916, of New Zealand,. which imposes the tax on all profits or gains derived from any business". The Privy Council decided the case in favour of the appellant on two grounds, the first being that "if the transaction is to be treated as a sale, there was no separate sale of the stock. and no valuation of the stock as an item forming part of the aggregate which was sold". In connection with this ground, Lord Phillimore observed that "income tax being a tax upon income, it is well established that the sale of a whole concern which can be shown to be a sale at a profit as compared with the price given for the business, or at which it stands in the books does not give rise to as profit taxable to income tax". He further observed that "where. however, the business consists, as in the present case, entirely in buying and selling, it is more difficult to distinguish between an ordinary and a realization sale the 617 object in either case being to dispose of goods at a higher price than that given for them, and thus to make a profit out of the business. The fact that large blocks of stock are sold does not render the profit obtained anything different in kind from the profit obtained by a series of gradual and smaller saks. This might even be the case if the whole stock was sold out in one sale. Even in the case of a realization sale, if there were an item which could be traced as representing the stock sold, the profit obtained by that sale, though made m conjunction with a sale of the whole concern, might conceivably be treated as taxable income". Lord Phillimore concluded with the following observations: "If a business be one of purely buying and selling. like the present, a profit made by the sale of the whole of the stock, if it stood by itself, might well be assessable to income tax; but their view of the facts (if it be open to them to consider the facts) is the same as that of Stout C.J. that is, that this was a slump transaction". This Court. in Commissioner of Income tax, Kerala vs West Coast Chemicals and Industries Ltd.(1) understood the Doughty 's case(2) thus: "This case shows that where a slump price is paid and no portion is attributable to the stock in trade, it may not be possible to hold that there is a profit other than what results from the appreciation of capital. The essence of the matter, however, is not that an extra amount has been gained by the selling out or the exchange but whether it can fairly be said that there was a trading from which alone profits can arise in business". It follows from the above that once it is accepted that there was a slump transaction in this case. that the business was sold as a going concern. the only question that remains is whether any portion of the slump price is attributable to the stock in trade the learned counsel for the appellant relies on two grounds to support the contention that there is profit attributable to the sale of land which was stock in trade of the vendors. He says first that in the schedule to the agreement the value of land and the value of goodwill and other items is specified. He says that although the amount of Rs. 2,50,000 was shown as price of goodwill, it was really excess value of the land sold along with other assets. Secondly. he says, relying on the passage already cited above from Doghty 's case(" ') that the vendors ' business was a business of purely buying and selling land. In our opinion. on the facts of this case it cannot be said that the vendors were carrying on the business of purely buying and selling land. In (1) (2) [1927] A.C. 327. 618 this case the vendors were engaged in buying land, developing it and then selling it. The agreement itself shows that the vendors had already incurred debts and liabilities for development expenses such as opening out roads, laying out drains and, sanitary arrangements, providing electricity and providing for a school. It seems to us that in the case of a concern carrying on the business of buying land, developing it and then selling it, it is easy to distinguish a realisation sale from an ordinary sale, and it is very difficult to attribute part of the slump price to the cost of land sold in the realisation sale. The mere fact that in the schedule the price of land is stated does not lead to the conclusion that part of the slump price is necessarily attributable to the land sold. there is no evidence that any attempt was made to evaluate the land on the date of sale. As the vendors were transferring the concern to a company, constituted by the vendors themselves, no effort would ordinarily have been made to evaluate the land as on the date of sale. What was put in the schedule was the cost price, as it stood in the books of the vendors. Even if the sum of Rs. 2,50,000 attributed to goodwill is added to the cost of land, it is nobody 's case that this represented the market value of the land. In our view the sale was the sale of the whole concern and no part of the slump price is attributable to the cost of land. If this is so, it is clear from the decision of this Court in Commissioner of Income tax, Kerala vs 14lest Coast Chemicals and Industries Ltd.(1) and Doughty 's case(2) that no part of the slump price is taxable. We, therefore, answer question No. 3 in the negative. As stated before, in view of this answer, it is not necessary to answer questions Nos. 2 and 4. The appeal is accordingly dismissed with costs. Appeal dismissed. (1) 46 I.T.R.135. (2) [1927] A.C. 327.

IN-Abs

The business of the assessee firm, carrying on land development business was sold as a going concern to a company promoted by the assessee s partners. The purchase price included sums for the value of land, goodwill, etc. The amount shown as the value of the goodwill v:as sought to be assessed to income tax on the grounds (i) that the assessee 's business was purely one of buying and selling land and (ii) the amount was profit attributable to the sale of land which was the stock in trade of the assessee. In appeal to this Court. HELD: On the facts of this case it could not be said that the assessees were carrying on the business of purely buying and selling land. They were engaged in buying land, developing it and then selling it. The sale was the sale of the whole concern and no part of the slump price was attributable to the cost of the land. If that was so, no part of it was taxable. [617H 618A, E] Commissioner of Income tax, Kerala vs West Coast Chemical and Industries Ltd. and Doughty vs Commissioner of Taxes (1927) A.C. 327, applied. In the case of a concern carrying on the business of buying land, developing it and the selling it is easy to distinguish a realisation sale from an ordinary sale, and it is very difficult to attribute part of the slump price to the cost of land sold in the realisation sale. The mere fact that in the schedule the price of land was stated did not lead to the conclusion that part of the slump price was necessarily attributable to the land sold. There was no evidence that any attempt was made to evaluate the land on the date of sale. As the assessees were transferring the concern to a company. constituted by the assessees themselves, no effort would ordinarily have been made to evaluate the land as on the date of sale. [618B D]

Appeal No. 123 of 1952. Appeal against the Judgment and Order, dated the 22nd March, 1951, of the High Court of Judicature at Calcutta (Harries C.J. and Banerjee J.) , in Reference No. 2 of 1951 in Civil Rules Nos. 20 and 21 of 1950. December 11. The Judgment of the Court was delivered by PATANJALI SASTRI C.J. This is an appeal from a judgment, of the High Court of Judicature at Calcutta declaring certain provisions of the West Bengal Land Development and Planning Act, 1948, (hereinafter referred to as the "impugned Act ") unconstitutional and void. The impugned Act was passed on October 1, 1948, primarily for the settlement of immigrants who had migrated into the Province of West Bengal due to communal disturbances in East Bengal,and it 560 provides for the acquisition and development of land for public purposes ' including the purpose aforesaid. A registered Society called the West Bengal Settlement Kanungoe Co operative Credit Society Ltd., respondent No. 4 herein, was authorised to undertake a development scheme, and the Government of the State of West Bengal, the appellant herein, acquired and made over certain lands to the society for purposes of the development scheme on payment of the estimated cost of the acquisition. On July 28, 1950, the respondents I to 3, the owners of the lands thus acquired, instituted a suit in the Court of the Subordinate Judge, 11 Court at Alipore, District 24 Parganas, against the society for a declaration that the impugned Act was void as contravening the Constitution and that all the proceedings taken thereunder for the acquisition aforesaid were also void, and of no effect and for other consequential reliefs. The State of West Bengal was subsequently impleaded as a defendant. As the suit involved questions of interpretation of the Constitution respondents 1 to 3 also moved the High Court under article 228 of the Constitution to withdraw the suit and determine the constitutional question. The suit was accordingly transferred to the High Court and the matter was heard by a Division Bench (Trevor Harries C.J. and Banerjee J.) who, by their final judgment, held that the impugned Act as a whole was not .unconstitutional or void save as regards two of the provisions contained in section 8 which, so far as it is material here, runs as follows: "A declaration under section 6 shall be conclusive evidence that the land in respect of which the declaration is made is needed for a public purpose and, after making, such declaration, the Provincial Government may acquire the land and thereupon the provisions of the Land Acquisition Act, 1894, (hereinafter in this section referred to as%, the said Act), shall, so far as may be, apply: Provided that (b) in determining the amount of compensation to be awarded for land acquired in pursuance of this 561 Act the market value referred to in clause first of sub section (1) of section 23 of the said Act shall be deemed to be the market value of the land on the date of publication of the notification under sub section (1) of section 4 for the notified area in which the land is included subject to the following condition, that is to say if such market value exceeds by any amount the market value of the land on the 3 1 st day of December, 1946, on the assumption that the land had been at that date in the state in which it in fact was on the date of publication of the said notification, the amount of such excess shall not be taken into consideration. " The provision making the declaration of the Government conclusive as to the public nature of the purpose of the acquisition and the limitation of the amount of compensation so as not to exceed the market value of the land on December 31, 1946, were declared ultra vires the Constitution and void. The Attorney General, appearing for the appellant, rightly conceded that inasmuch as article 31(2) made the existence of a public purpose a necessary condition of acquisition the existence of such a purpose as a fact must be established objectively and the provision in section 8 relating to the conclusiveness of the declaration of Government as to the nature of the purpose of the acquisition must be held unconstitutional but he contended that the provision was saved by article 31(5)of the Constitution which provides: "Nothing in clause (2) shall affect (a) the provisions of any existing _ law other than a law to which the provisions of clause (6) apply, or. . . " Clause (6) reads thus: "Any law of the State enacted not more than eighteen months before the commencement of this Constitution may within three months from such commencement be submitted to the President for his certification; and, thereupon, if the President public notification so certifies, it shall not be called question in any court on the ground that it contract the provisions of clause (2) of this article, 562. contravened the provisions of sub section (2) of section 299 of the Government of India Act, 1935. " It was argued that the impugned Act having been passed within 18 months before the commencement of the Constitution and not having been submitted to the President for his certification, it was a law to which the provisions of clause (6) did not apply and, therefore, as an existing law, the impugned Act was not affected by clause (2) of that article. The argument is manifestly unsound. Article 31(6) is intended to save a State law enacted within 18 months before the commencement of the Constitution provided the same was certified by the President while, article 31(5) saves all existing laws passed more than 18 months before the commencement of the Constitution. Reading the two clauses together, the intention is clear that an existing law passed within 18 months before January 26, 1950, is not to be saved unless it was submitted to the President within three months from such date for his certification and was certified by him. The argument, if accepted, would reduce article 31(6) to ameaningless redundancy. The only serious controversy in the appeal centred round the constitutionality of the " condition " in proviso (b) to section 8 limiting the compensation payable so as not to exceed the market value of the land on December 31, 1946. The Attorney General, while conceding that the word " compensation " taken by itself must mean a full and fair money equivalent, urged that, in the context of article 31(2) read with entry No. 42 of List III of the Seventh Schedule, the term was not used in any rigid sense importing equivalence in value but had reference to what the legisla ture might think was a proper indemnity for the loss sustained by the owner. Article 31(2) provides: No property, movable or immovable, including any interest in, or in any company owning, any commercial or industrial undertaking, shall be taken sesion of or acquired for public purposes under law authorising the taking of such possession acquisition, unless the law provides for 563 compensation for the property taken possession of or acquired and either fixes the amount of the compensation, or specifies the principles on which, and the manner in which, the compensation is to be determined and given. and entry 42 of List III reads thus Principles on which compensation for property acquired or requisitioned for the purposes of the Union or of a State or for any other public purpose is to be determined, and the form and the manner in which such compensation is to be given. It is argued that the term " compensation " in entry 42 could not mean full cash equivalent, for then, the power conferred on the legislature to lay down the principles on which compensation is to be determined and the form and the manner in which such compensation is to be given would be rendered nugatory. On the other hand, the entry showed that the compensation to be "given " was only " such compensation " as was determined on the principles. laid down by the law enacted in exercise of the power, and, as the concluding words used in article 31(2) are substantially the same as in the entry, the Constitution, it was claimed, left scope for legislative discretion in determining the measure of the indemnity. We are unable to agree with this view. While it is true that the, legislature is given the discretionary power of laying down the principles which should govern the determination of the amount to be given to the owner for the property appropriated, such principles must ensure that what is determined as payable must be compensation, that is, a just equivalent of what the owner has been deprived of. Within the limits of this basic requirement of full indemnification of the expropriated owner, the Constitution allows free play to the legislative judgment as to what principles should guide the determination of the amount payable. Whether such principles take into account all the elements which make up the true value of the property appropriated and exclude matters which are 74 564 to be neglected, is a justiciable issue to be adjudicated by the court. This, indeed, was not disputed. Reference was made to certain Australian cases where the opinion was expressed that the terms of compulsory acquisition of property were matters of legislative policy and judgment. The decisions largely turned on the absence of any constitutional prohibition in regard to deprivation of private property without compensation as in the Fifth Amendment of the American Constitution and on the use of the words " just terms " instead of " compensation " in section 51 (xxxi) of the Commonwealth Constitution which conferred power on the Parliament to make laws with respect to " the acquisition of property on just terms from any State or person. . " (cf. Grace Brothers Pty. Ltd. vs The Commonwealth(1). Those decisions, therefore, are of no assistance to the appellant here. Turning now to the provisions relating to compensation under the impugned Act, it will be seen that the latter part of the proviso to section 8 limits the amount of compensation so as not to exceed the market value of the land on December 31, 1946, no matter when the land is acquired. Considering that the impugned Act is a permanent enactment and lands may be acquired under it many years after it came in. to force, the fixing of the market value on December 31,1946, as the ceiling on compensat I ion, without reference to the value of the land at the time of the acquisition is arbitrary and cannot be regarded as due compliance in letter and spirit with the requirement of article 31 (2). The fixing of an anterior date for the ascertainment of value may not, in certain circumstances, be a violation of the constitutional requirement as, for instance, when the proposed scheme of acquisition becomes known before it is launched and prices rise sharply in anticipation of the benefits to be derived under it, but the fixing of an anterior date, which might have no relation to the value of the land when it is acquired, may be, many years later, cannot but be regarded as arbitrary. The learned Judges (1) ; 565 below observe that it is common knowledge that since the end of the war land, particularly around Calcutta, has increased enormously in value and might still further increase very considerably in value when the pace of industrialisation increases. Any principle for determining compensation which denies to the owner this increment in value cannot result in the ascertainment of the true equivalent of the land appropriated. We accordingly hold that the latter part of proviso (b) to section 8 of the impugned Act which fixes the market value on December 31, 1946, as the maximum compensation for lands acquired under it offends against the provisions of article 31 (2) and is unconstitutional and void. The appeal is dismissed with costs. Appeal dismissed. Agent for respondents Nos. 1, 2 and 3: section C. Banerjee. Agent for the intervener: G. H. Rajadhyaksha.

IN-Abs

The West Bengal Land Development and Planning Act, 1948, passed primarily for the settlement of immigrants who had migrated into West Bengal due to communal disturbances in East Bengal provides for the acquisition and development of land for public purposes including the purpose aforesaid: Held, that the provisions of section 8 of the West Bengal Act XXI of 1948 making the declaration of the Government. conclusive as to the public nature of the purpose of the acquisition and the limitation of the amount of compensation so as not to exceed the market value of the land on December 31, 1946, are ultra vires the Constitution and void 559 (i)inasmuch as article 31(2) of the Constitution made the existence of a public purpose a necessary condition of acquisition, the existence of such a purpose as a fact must be established objectively ; (ii)that in view of the fact that the impugned Act is a permanent enactment and lands may be acquired under it many years after it came into force, the fixing of the market value on December 31, 1946, as the coiling on compensation without reference to the value of the land at the time of acquisition, is arbitrary and cannot be regarded as due compliance in letter and spirit with the requirements of article 31(2) (iii)the Act is not saved by article 31(5) from the operation of article 31(2) as it was not certified by the President as provided for by article 31(6). Held, further, that while entry No. 42 of List III of the Seventh Schedule confers on the legislature the discretionary power of laying down the principles which should govern the determination of the amount to be given to the owner of the property appropriated, article 31(2) requires that such principles must ensure that what is determined as payable must be "compensation", that is, a just equivalent of what the owner has been deprived of. Whether such principles take into account all the elements which make up the true value of the property appropriated and exclude matters which are to be neglected is a justiciable issue to be adjudicated by the Court.

Appeals Nos. 262 to 264 of 1964. Appeals from the judgment and decrees dated January 5, and January 22, 1959, and 24th November 1960 of the Patna High Court in appeals from Original Decrees Nos. 401 of 1953, and 297 and 298 of 1954 respectively. S.R. Ghosal and R.C. Prasad, for the appellant (in all the appeals). D.P. Singh, R.K. Garg, S.C. Agarwala and M.K. Ramamurthi for the respondent (in all the appeals). SUBBA RAO. J. delivered a dissenting opinion. The Judgment of SHAH, and BACHAWAT JJ. was delivered by SHAH J. Subba Rao, J. I regret my inability to agree with brother Shah, J., on one of the questions raised in the appeals, namely, whether the Land Acquisition Officer can, after making the award under section 12 of the Land Acquisition Act, 1894, hereinafter called the Act, fixing the compensation for the land acquired and apportioning the same among the persons interested in the land, refer the question of apportionment under section 30 of the Act to the decision of the Court. Shah, J., held he could; but, with great respect to him, I take a different view. The facts are fully stated in the judgment of Shah, J., and they need not, therefore, be restated here. The answer to the problem raised falls to be decided on a conspectus of the relevant provisions of the Act. Section 9 of the Act enjoins on the Collector to cause public notice to be given at convenient places on or near the land to be taken, stating that the Government intends to take possession of the land ', and that claims to compensation for all interests in such land may be made to him; under sub section (2) thereof such notice shall state the particulars of the land so needed and shall require persons interested in the land to appear personally or by agent before the Collector at a time and place therein mentioned and to state the nature of their respective interests in the land and the amount and, particulars of 579 their claims to compensation for such interests, and their objections, if any, to the measurements made under section 8. Under section 11, on the day fixed or on any other day to which the enquiry has been adjourned, the Collector shall proceed to make an enquiry and shall make an award under his hand of (i) the true area of the land; (ii) the compensation which in his opinion should be allowed for the land; and (iii) the apportionment of the said compensation among all the persons known or believed to be interested in the land, of whom, or of whose claims, he had information, whether or not they have respectively appeared before him. Under section 12, "such award shall be filed in the Collector 's office and ' shall, except as hereinafter provided, be final and conclusive evidence, as between the Collector and the persons interested, whether they have respectively appeared before the Collector or not, of the true area and value of the land, and the apportionment of the compensation among the persons interested. ' ' The group of sections, viz, sections 9 to 15, describes the subject matter and the nature of the enquiry to be held by the Collector and ' provides for the making of the final award in respect of the said subject matter; ss.18 to 28 provide for reference to Court and the procedure to be followed therein in respect thereof. Sections 29 and 30 fall under part IV of the Act under the heading "Apportionment of compensation". As the decision mainly turns upon these provisions, it will be convenient to read them in full. Section 29. Particulars of apportionment to be specified Where there are several persons interested ', if such persons agree in the apportionment of the compensation, the particulars of such apportionment shall be specified in the award, and as between such persons the award shall be conclusive evidence of the correctness of the apportionment. Section 30. Dispute as to apportionment When the amount of compensation has been settled under Section 11, if any dispute arises as to the apportionment of the same or any part thereof, or as to the persons to whom the same or any part thereof is payable, the Collector may refer such dispute to the decision of the Court. While section 11 imposes a statutory duty on the Collector to enquire in respect of the three matters mentioned therein, sections 29 and 30 deal with the manner of deciding the dispute in respect of one of the said matters, viz., apportionment of the compensation fixed; under section 29, if the claimants agree in the apportionment of the compensation, the agreed particulars shall be specified in the award and the said award is final as between them. It is manifest that this agreement necessarily refers to the apportionment to be made under section 11 before the award is made, for the section in terms says that the agreed particulars shall be entered ' in the award. If there is no such agreement, section 30 comes into play. It also refers to a stage after the compensation has been settled and before the apportionment is made and included in the award. If there was no agreed formula, the Land Acquisition Officer has the discretion, presumably when 580 there is a complicated question, to refer the dispute in respect of the apportionment to the Court. But he need not do so if he thinks fit to decide the dispute for himself. The Land Acquisition Act discloses a well knit scheme in the matter of making an award. The Land Acquisition Officer, after issuing notice calling for objections, decides on the three matters prescribed in section 11, i.e., the true area of the land, the amount of compensation and the apportionment of the compensation. Before making the apportionment of the compensation he can resort to any of the following three methods: (i) to accept an agreed formula; (ii) to decide for himself; and (iii) to refer to the Court if he thinks that the decision of the Court is necessary. But once the award is made, it becomes final and it can be reopened only in the manner prescribed, i.e., by way of a reference under section 18 of the Act. This construction makes for the smooth working of the provisions of the Act and does not lead to any anomalies. It also does not affect the right of the aggrieved parties to proceed in the manner prescribed by the Act for getting the award vacated or modified ', as the case may be. It is said that if this view be accepted, a person who acquires a right after the award by transfer inter vivos or by devolution of interest will be without a remedy. I do not see any difficulty in that regard. Under section 18 he may ask for a reference. He may apply to be brought on record after the reference is made to the Court. It may also be that he may proceed in a civil Court to recover the compensation from the persons who received ' it on the basis of his title. On the other hand, the contrary view will lead to an incongruous position. It enables the Land Acquisition Officer to reopen a final award in the teeth of the express provisions of section 12 of the Act. It further enables him to make a reference without any period of limitation and thus to disturb the rights finally settled by the award. I, therefore, hold that the Land Acquisition Officer cannot make a reference under section 30 of the Act in the matter of apportionment of compensation after the award has been made by him apportioning the compensation under section 11 and ' has been filed under section 12 thereof. During the course of the arguments it was suggested that as the interest of Dr. Grant devolved on the Government it may be held that the Government was in substance brought on record in the place of Dr. Grant in the reference made under section 18 of the Act to the District Court. But the point was not raised at any stage of the proceedings. Indeed no application was filed in the District Court for bringing the Government on record in the place of Dr. Grant. In the circumstances I am not justified ' in permitting the respondent to raise the said point for the first time before this Court. In the result, I set aside the decision of the High Court and restore that of the District Court. The appellant will have his costs throughout. 581 Shah, J. Dr. Gregor Hug Grant hereinafter called 'Dr. Grant ' was the proprietor of the Dumka Estate in the District of Santhai Parganas in the State of Bihar. By a notification under section 4(1) of the Land Acquisition Act, 1894 published on June 8, 1949 the Government of Bihar notified for acquisition a larger area of land out of the estate of Dr. Grant for establishing "an agricultural farm. " The Collector made on March 25, 1952 awards setting out the true area of the land notified for acquisition, compensation which in his opinion should ' be allowed for the land and apportionment of the compensation among all the persons known or believed to be interested in the land. The awards were filed in the Collector 's office on the same day. In respect of Plot No. 142, Rs. 575/14/were awarded by the Collector as compensation in equal shares to Dr. Grant and the members of the village community, who had also made a claim for compensation. In respect of Plot No. 68, the Collector awarded Rs. 294/6/ as compensation. In respect of acquisition of an area admeasuring 88.91 acres consisting of several plots, the Collector awarded Rs. 1,64,446/5/10 as compensation and directed apportionment in the manner set out in the award. On May 5, 1952 Dr. Grant applied to the Collector under section 18 of the Land Acquisition Act that the three matters be referred for determination by the Court of the amount of compensation payable to the owners. Similar applications were filed in respect of Plot Nos. 68 & 142 by the members of the village community. In consequence of a notification issued under section 3 of the Bihar Land Reforms Act 30 of 1950 the Dumka Estate vested on May 22, 1952 in the State of Bihar. In exercise of the power under section 16 of the Land Acquisition Act, the Government of Bihar took over possession on August 21, 1952 of the Lands notified for acquisition. On October 15, 1952 the Government Pleader submitted a petition before the Collector claiming that the compensation money awarded to Dr. Grant had since the publication of the notification under the Bihar Land Reforms Act become payable to the State Government, and the dispute between Dr. Grant and the State Government regarding the right to payment may be referred to the Court under section 30 of the Land Acquisition Act. The Collector made on November 5, 1952 three references to the District Court, Santhai Parganas. Two out of those references were made in exercise of powers under sections 30 & 18 of the Land Acquisition Act, and the third under section 30. The District Judge by his order dated April 9, 1954 held that the State of Bihar had no interest in the property notified for acquisition when the award was filed before the Collector under section 12 of the Land Acquisition Act, and the State could, lay no claim to the compensation money awarded. The District Judge upheld the apportionment of compensation between Dr. Grant and the village community and enhanced the valuation of the land and directed that compensation at the enhanced rate be awarded. 582 Against the order of the District Judge in the references, three appeals Nos. 401 of 1953, 2c)7 of 1954 and 298 of 1954 were preferred by the State to the High Court of Judicature at Patna. The High Court held that title of the owner to the land acquired under the Land Acquisition Act could not be extinguished under that Act till possession was taken under section 16 of the Act, and that since the title of Dr. Grant in the land acquired stood statutorily vested in the State by virtue of the notification issued under the Bihar Land Reforms Act, he was not entitled to receive the compensation money. In the view of the High Court, title to the compensation money had vested in the State Government before possession was obtained by the State Government under section 16 of the Land Acquisition Act, and that it was open to the Collector, on a dispute raised by the State about the right to receive the compensation money, to make a reference to the Court under section 30 of the Act. With certificate granted by the High Court, these three appeals have been preferred by Dr. Grant. Three contentions have been urged in support of the appeals: (1) the Collector had no authority to refer the matter under section 30 after he had apportioned the amount of compensation under section 11 (2) since title to compensation is derived solely from and on the date of the award, the notification under section 3 of the Bihar Land Reforms Act did not deprive Dr. Grant of his right to receive compensation, and (3) the State Government was not "a person interested" within the meaning of the Land Acquisition Act, and could not apply for a reference under section 30. After a notification is issued under section 6 of the Land Acquisition Act, the appropriate Government may acquire the land notified in the manner set out in sections 7 to 16. Section 9 provides for an enquiry into the area of the land, into compensation which is payable and apportionment of compensation. The Collector is by section 11 authorised to make an award setting out the true area of the land, the compensation which, in his opinion, should be allowed for the land and the apportionment of the said compensation among all the persons known or believed to be interested in the land, or of whose claims, he has information, whether or not they have respectively appeared before him. The award when filed in the Collector 's office becomes final and conclusive evidence as between the Collector and the persons interested whether they have respectively appeared before the Collector or not, of the true area and value of the land and the apportionment of compensation among the persons interested. The land vests absolutely in the Government, free from all encumbrances when possession is taken by the Collector under section 16. By section 17 authority is conferred upon the Collector, when in cases of urgency the appropriate Government so directs, to take possession of waste or arable land even before making an award. Section 48 authorises the Government to withdraw from the acquisition any land of which possession has not been taken. 583 By section 18 the Collector is enjoined to refer to the District Court for determination, objections as to the measurement of the land, the amount of compensation, the persons to whom it is payable, or the apportionment thereof among the persons interested. Part IV deals with apportionment of compensation. If the persons interested agree in the apportionment of the compensation, the particulars of such apportionment shall be specified in the award (section 29): if there be no such agreement, the Collector may, if a dispute arises as to the apportionment of the compensation or any part thereof or as to the persons to whom the same or any part thereof is payable, refer such dispute under section 30 for decision by the Court. Part V of the Act which contains sections 31 to 34 deals with payment of compensation. Under section 31 the Collector has to tender payment of the compensation awarded by him to the persons interested entitled thereto according to the award. By the third proviso to sub section (2) of section 31, liability of any person, who may receive the whole or any part of the compensation awarded under the Act, to pay the same to the person lawfully entitled thereto, is not affected. Sections 32 & 33 deal with investment of money deposited in respect of land belonging to persons incompetent to alienate the land and ' in other cases, but with these we are not concerned. Section 34 obliges the Collector to pay interest at the rate of six per centum per annum if compensation is not paid or deposited on or before taking possession of the land from the time of taking possession until it is so paid or deposited '. There are two provisions sections 18(1) and 30 which invest the Collector with power to refer to the Court a dispute as to apportionment of compensation or as to the persons to whom it is payable. By sub section (1) of section 18 the Collector is enjoined to refer a dispute as to apportionment, or as to title to receive compensation, on the application within the time prescribed ' by sub section (2) of that section of a person interested who has not accepted the award. Section 30 authorises the Collector to refer to the Court after compensation is settled under section 11, any dispute arising as to apportionment of the same or any part thereof or as to the persons to whom the same or any part thereof is payable. A person shown in that part of the award which relates to apportionment of compensation, who is present either personally or through a representative, or on whom a notice is served under sub section (2) of section 12, must, if he does not accept the award, apply to the Collector within the time prescribed under section 18(2) to refer the matter to the Court. But a person who has not appeared in the acquisition proceeding before the Collector may, if he is not served with notice of the filing, raise a dispute as to apportionment or as to the persons to whom it is payable, and apply to the Court for a reference under section 30, for determination of his right to compensation which may have existed before the award, or which may have develoved upon him since the award. Whereas under section 18 an application made to the Collector must be made within the period prescribed by sub s.(2) cl. (b), there is no such period 584 prescribed under section 30. Again under section 18 the Collector is bound to make a reference on a petition filed by a person interested. The Collector is under section 30 not enjoined to make a reference: he may relegate the person raising a dispute as to apportionment, or as to the person to whom compensation is payable, to agitate the dispute in a suit and pay the compensation in the manner declared. by his award. We are unable to agree with the view expressed by the Mysore High Court in Boregowda and another vs Subbaramiah and others that if the Collector has made apportionment of the compensation money by his award his power to refer a dispute under section 30 cannot be exercised. Clause (iii) of section 11 enjoins the Collector to apportion the compensation money among persons known or believed to be interested in the land: he has ' no discretion in the matter. Exercise of the power under section 30 to refer the dispute relating to apportionment or as to the persons to whom it is payable is, it is true, discretionary: the Collector may, but is not bound to exercise that power. It is however not predicated of the exercise of that power that the Collector has not apportioned the compensation money by his award. We are also unable to agree with the Mysore High Court that the power under section 30 of the Land Acquisition Act has to be exercised on a motion within the period prescribed by section 18(2) of the Land Acquisition Act. In our judgment the powers exercisable by the Collector under section 18(1) and under section 30 are distinct and may be invoked in contingencies which do not overlap. By virtue of the notification issued under the Bihar Land Reforms Act the right of Dr. Grant vested in the State of Bihar. On March 25, 1952 when the Collector made an award under section 11, the only persons interested in the award were Dr. Grant and the members of the village community, but the title of Dr. Grant in the land notified for acquisition stood, by operation of the Bihar Land Reforms Act, transferred as from May 22, 1952 to the State of Bihar. A dispute then arose between the State Government and Dr. Grant "as to the persons whom" compensation was payable. The State had no right to the compensation payable for the land under a title existing before the date of the award of the Collector, and no application for reference could be made by the State, as a person interested within the meaning of section 18(1). The title of the State to receive compensation arose only when in consequence of the notification under section 3 of the Bihar Land Reforms Act, the title of Dr. Grant to the Estate was divested. An award by the Collector is strictly speaking an offer made to the person interested in the land notified for acquisition: the latter may accept the offer, but is not bound to accept it. He may ask for a reference to the Court for adjudication of his claim for adequate compensation. The person interested may even accept (1)A.I.R. 585 the compensation under protest as to the sufficiency of the amount and ask for a reference. It is also open to the Government, even after the award is made, but before possession is taken, to withdraw from acquisition of any land in exercise of the powers conferred by section 48 of the Land Acquisition Act. It is therefore not the award of the Collector which is the source of the right to compensation: the award quantifies the offer of the appropriate Government, which is made because the Government has taken over, or intends to take the land of the owner under the authority conferred by the Land Acquisition Act. In Serju Prasad Sahu vs The State of Uttar Pradesh and Others(1) it was observed by this Court in considering the scheme of the Act that the right of the owner of the land is extinguished when Government takes possession of the land after an award of compensation is made. This is also supported by the scheme of the Act. Interest is made payable under section 28 on the additional amount of compensation awarded by the Court from the date on which the Collector had taken possession. Similarly under section 34 interest is made payable on the compensation from the date on which the possession is taken, if the same be not paid or deposited on or before taking possession of the land. The right of the State of Bihar arose on May 22, 1952 when the title to the land vested in it by virtue of the notification issued under the Bihar Land Reforms Act. There is nothing in the Land Acquisition Act which prohibits the Collector from making a reference under section 30 for determination of the title of the person who has since the date of the award acquired a right to the compensation. If after a reference is made to the Court, the person interested dies or his title devolves upon another person, because of inheritance, succession, insolvency, forfeiture, compulsory winding up or other form of statutory transfer, it would be open to the party upon whom the title has devolved to prosecute the claim which the person from whom the title has devolved could have prosecuted. In Promotha Nath Mitra vs Rakhal Das Addy(2) it was held that a reference made by the Collector under section 30 of the Land Acquisition Act at the instance of a proprietor of land may be prosecuted by the purchaser of his rights after the award at a revenue auction. If the right to prosecute a reference by a person on whom the title of the person interested has devolved be granted, there is no reason why the right to claim a reference of a dispute about the person entitled to compensation may not be exercised by the person on whom the title has devolved since the date of the award. The scheme of the Land Acquisition Act is that all disputes about the quantum of compensation must be decided by resort to the procedure prescribed by the Act; it is also intended that disputes about the rights of owners to compensation being ancillary to the principal dispute should be decided by the Court to which power is entrusted. Jurisdiction of the Court in this behalf is not restricted (1)A.I.R. (2) 586 to cases of apportionment, but extends to adjudication of disputes as to the persons who are entitled ' to receive compensation, and there is nothing in section 30 which excludes a reference to the Court of a dispute raised by a person on whom the title of the owner of land has, since the award, devolved. It was strongly pressed that under section 31 of the Land Acquisition Act the Collector is bound to tender payment of compensation awarded by him to the persons entitled ' thereto according to the award and that implied that a right in the amount of compensation arises to the person to whom compensation is directed to be paid under the award, and therefore the only persons who can raise a dispute under section 30 are those whose names are set out in the award. This contention stands refuted by the plain terms of section 30. The Collector is not authorised to decide finally the conflicting rights of the persons interested in the amount of compensation: he is primarily concerned with the acquisition of the land. In determining the amount of compensation which may be offered, he has, it is true, to apportion the amount of compensation between the persons known or believed to be interested in the land, of whom, or of whose claims, he has information, whether or not they have appeared before him. But the scheme of apportionment by the Collector does not finally determine the rights of the persons interested in the amount of compensation: the award is only conclusive between the Collector and the persons interested and not among the persons interested. The Collector has no power to finally adjudicate upon the title to compensation, that dispute has to be decided either in a reference under section 18 or under section 30 or in a separate suit. Payment of compensation therefore under section 31 to the person declared by the award to be entitled thereto discharges the State of its liability to pay compensation (subject to any modification by the Court), leaving it open to the claimant to compensation to agitate his right in a reference under section 30 or by a separate suit. The dispute between the State of Bihar and Dr. Grant has been expressly referred by the Collector to the Court for decision. Under the Bihar Land Reforms Act, the title of Dr. Grant to the Land notified for acquisition became vested ' in the State, and there fore the right to compensation for the land acquired devolved upon the State. A dispute between Dr. Grant and the State as to their conflicting claims to the compensation money was clearly a dispute which could be referred under section 30 of the Land Acquisition Act to the Court and was in fact referred to the Court. We are unable to agree with counsel for Dr. Grant that the reference made by the Collector under section 30 was incompetent, because the State was not interested in the compensation money on the date when the award was made. The right of the State of Bihar has undoubtedly arisen after the award was made, but once the title which was originally vested in Dr. Grant stood statutorily transferred to the State, it was open to the State to claim a reference, not because the 587 State was a person interested ' in the compensation money before the date of the award, but because of the right which has arisen since the award was made. We therefore dismiss the appeals with costs There will be one hearing fee. ORDER Following the judgment of the majority, the appeals are dismissed with costs. There will be one hearing fee.

IN-Abs

The appellant owned certain lands in the State of Bihar in respect of which proceedings under the Land Acquisition Act were started. Under section 11 of the Act the Collector fixed the area of the land to be acquired and the compensation payable, and also apportioned the compensation between the appellant and the members of the village community who had claimed compensation for some. portions of the land. The award was then filed under section 12. The appellant and members of the village community being dissatisfied asked the Collector to make. references under section 18 to the Court. After the award was given but before possession under section 16 of the Act was taken the Bihar Land Reforms Act, 1950 was passed and by the operation of s.3 of the Act the appellant 's land became vested in the State. On behalf of the State an application was made to the Collector to make a reference to the Court under section 30 of the Act claiming that the compensation under the award was payable to it as it had acquired the appellant 's title to the land. The District Court held that the compensation was not payable to the State but, on appeal, the High Court held in favour of the State. The appellant came to this Court with certificate. It was contended on behalf of the appellant that (1) the Collector had no authority to refer the matter under section 30 after he had apportioned the amount of compensation under section 11; (2) since title to. compensation is derived solely from and on the date of the award, the notification under section 3 of the Bihar Land Reforms Act did not deprive the appellant of his right to receive compensation; and (3) the State Government was not 'a person interested within the meaning of the Land Acquisition Act, and could not apply for a reference. under section 30. HELD: Per Shah and Bachawat, JJ. (i) There are two provisions in the Act under which the Collector can make a reference to the Court, namely, section 18 and section 30. The powers under the two sections are distinct and may be invoked in contingencies which do not overlap. A person shown in that part. of the award which relates to apportionment of compensation who is present either personally or through a representative or on whom notice is issued under section 12(2), must, if he does not accept the award, apply to the Collector to refer the matter to the Court under section 18 within the time prescribed thereunder. But a person who has not appeared in the acquisition proceedings before the Collector may, if he is not served with notice of filing, raise a dispute as to apportionment or as to the persons to whom it is payable and apply to the Court for a reference under section 30, for determination of his right to compensation which may have existed before the award, or which may have devolved upon him since the award. For a reference under section 30 no period of limitation is prescribed. [583E 584A] 577 (ii) It is not predicated of the exercise of the power to make a reference under section 30 that the Collector has not apportioned the compensation money by his award. [584D] Boregowda and Anr. vs Subbaramiah and Ors., A.I.R. , disapproved. (iii.) The award made by the Collector under section 11 is not the source of the right to compensation. An award is strictly speaking only an offer made by the Government to the person interested in the land notified for acquisition; the person interested is not bound to accept it and the Government can also withdraw the acquisition under section 48. It is only when possession of the land has been taken by the Government under section 16 that the right of the owner of the land is extinguished. Therefore the appellant 's contention that title to compensation is derived solely from and on the date of the award, could not be accepted. [584H 585C] (iv), The liability of the Government under section 31 to pay compensation to the person entitled thereto under the award does not imply t.hat only the persons to whom compensation is directed to. be paid under the award may raise a dispute under section 30. The scheme of apportionment by the Collector under section 11 is conclusive only between the` Collector and the persons interested and not among the persons interested. Payment of compensation under section 31 to the persons declared in the award to be entitled thereto discharges the State of its liability to pay compensation leaving it open to the claimant to compensation to agitate his right in a reference under section 30 or by a separate suit. [586B F] (v) Under the Bihar Land Reforms Act the title of the appellant to the land notified for acquisition became vested in the. State and therefore the right to compensation for the land acquired devolved upon the. State. A dispute then arose between the State Government and the appellant "as to the persons to whom" compensation was payable. The State had no right to the compensation payable for the land under a title existing before the date of the award of the Collector and no application could be made by it as a person interested within the meaning of section 18. But a dispute between the appellant and the State as to their conflicting claims to the compensation money was clearly a dispute which could be referred under section 30 of the Act to the. Court. There is nothing in section 30 which excludes a reference to the Court of a dispute raised by a person on whom the title of the owner of the land has since the award, devolved. [584G; 586A, G, H] Promotha Nath Mitra vs Rakhal Das Addy, 11 Cal. L.J. 420, referred to. Per Subba Rao, J. (i) The Land Acquisition Officer cannot make a reference under section 30 of the Act in the matter of apportionment of compensation after the award has been made by him apportioning the compensation under section 11 and has been filed under section 12. The Land Acquisition Act discloses a well knit scheme in the matter of making an award. The Land acquisition Officer after issuing notice calling for objections decides on the three matters prescribed in section 11 i.e. the true area of the land, the amount of compensation and the apportionment of the compensation. Before making the apportionment he can resort to any of the following three methods. (i) to accept ' an agreed formula; (ii) to decide for himself; and 578 (iii) to refer to the Court if he. thinks that the decision of the Court is necessary. But once the award is made, it becomes final and it can be reopened only in the manner prescribed i.e. by way of a reference under section 18 of the Act. It is not correct to say that on the above view a person who acquires a right after the award by transfer inter vivos or by devolution of interest will be without a remedy. Such a person may ask for a reference under section 18. He may apply to be brought on record after the reference is made to the. Court. He may proceed to the Civil Court to recover the compensation from the persons who received it on the basis of his title. On the other hand the contrary view will lead to an incongruous position. It enables the Land Acquisition Officer to reopen a final award in the teeth of the express provisions of section 12 of the Act. It further enables him to make a reference without any period of limitation and thus to disturb the rights finally settled by the award. [580B G]

Appeals Nos. 213 and 214 of 64. Appeals from the judgment and order dated April 4, 1961, of the Madras High Court in Case Referred No. 130 of 1956. Niren De,Additional Solicitor General R. Ganapathy Iyer and R.N. Sachthey, for the appellants (in both the appeals. A. V. Vishwanatha Sastri, M.M. Ismail and R. Gopalakrishnan, for the respondent in both the appeals. The Judgment of the Court was delivered by Subba Rao, J. In the t,own of Nagore in Tanjore District, Madras State, there is a Durgha consecrated to Hazerath Sayed Shahul Hameed Quadir Ali Ganja Savoy Andavar, who lived some 400 years ago. The said Durgha receives large income from immovable properties endowed to it and the offerings in cash and kind made by the devotees. The Durgha and its properties are now being administered under a scheme settled by the Madras High Court on March 16, 1955. Under the scheme the management of the administration of the affairs of the said Durgha vests hereditarily in 8 trustees called Nattamaigars, who constitute a board of trustees. The said board of trustees shall from among themselves elect one as a managing trustee and he shall hold office for a term of 3 years. The managing trustee shall at the end of each fasli prepare a balance sheet verified by the manager and ascertain the net amount available for payment to kasupangudars, who are the descendants of Saiyed Muhammed Eusoof, the foster son of the saint. The Managing Trustee shall declare the amount due to each of the kasupangu (share) and shall allocate the amount to each kasupangudar (sharer) in the list to be prepared for that purpose 661 in each year. He shall pay the amount to each kasupangudar in accordance with the list. It is said that at present there are 640 kasupangudars. Briefly stated under the scheme the management of the properties of the Durgha, both movable and immovable, vests in Nattamaigars, and the kasupangudars are entitled to the surplus in accordance with their shares. For the assessment years 1953 54 and 1954 55 the Income tax Officer assessed the surplus income in the hands of the Managing Trustee as an association of persons. The Appellate Assistant Commissioner, on appeal, confirmed the same. On further appeal, the Income tax Appellate Tribunal took the same view. At the instance of the assessee, the Tribunal submitted the following question for the opinion of the High Court of Madras under s.66(1) of the Income tax Act. 1922, hereinafter called the Act: "Whether the provisions of Section 41 can be said to apply to the assessees in this case. " A Division Bench of the High Court, which heard the reference. held that the Managing Trustee qua the surplus income managed the property and derived the income on behalf of the kasupangudars and that the assessment should be made on the said Managing Trustee to the extent of the interest of each of the kasupangudars in the income received by him. In the result it answered the question in the affirmative and in favour of the assessee. The Commissioner of Income tax, Madras, on a certificate of fitness granted by the High Court, has preferred the present appeals against the said Order. The learned Additional Solicitor General, appearing for the Revenue, contended that the Natmaigars being trustees, the properties of the Durgha vested in them and, therefore, they or the Managing Trustee administered the trust properties in their own right and not on behalf of the kasupangudars and hence s.41 of the Act did not apply, with the result the Income tax Officer had rightly assessed the surplus income in the hands of the trustees as an association of persons. Mr. A.V. Viswanatha Sastri, learned counsel for the assessee respondent, argued, on the other hand, that the Nattamaigars of the Durgha were not trustees as understood in the law of trust but were only managers managing the properties on behalf of the Durgha and kasupangudars. On that assumption, his argument proceeded. as the Nattamaigars, as managers, held the surplus on behalf of the kasupangudars for distribution in definite shares, s.41 of the Act was attracted. At the outset we may make it clear that in this appeal we are concerned only with the surplus remaining on hand with the Nattamaigars after meeting the expenses of the Durgha. 662 The problem presented in these appeals falls to be decided on a true construction of s.41 of the Act. The material part of s.41 reads: (1) In the case of income, profits or gain chargeable under this Act, which the Courts of Wards, the Administrators General, the Official Trustees or any receiver or manager (including any person whatever his designation who in fact manages property on behalf of another) appointed by or under any order of a Court, or any trustee or trustees appointed under a trust declared by a duly executed instrument in writing whether testamentary or otherwise (including the trustee or trustees under any Wakf deed which is valid under the ), are entitled to re ceive on behalf of any person, the tax shall be levied upon and recoverable from such Court of Wards, AdministratorsGeneral, Official Trustee, receiver or manager or trustee or trustees, in the like manner and to the same amount as it would be leviable upon and recoverable from the person on whose behalf such income, profits or gains are receivable, and all the provisions of this Act shall apply accordingly. Under this section the income of properties receivable by the enumerated persons for the benefit of others is liable to be assessed to tax in their hands in the like manner and to the same amount as it would be leviable upon and recoverable from the person or persons on whose behalf such income is receivable. This section centres on the basic fact that the person in whose hands the income is assessable shall be entitled to receive the same on behalf of any person; if he is not so entitled, the provisions of the section cannot be invoked. it is contended that, as the properties vested in the managing trustee and he received the income in his own right and not on behalf of the beneficiaries, though for their benefit,, the said income in the hands of the managing trustee fell outside the scope of s.41 of the Act. There are two answers to this contention. The doctrine of vesting is not germane to this contention. In some of the enumerated perso,ns in the section the property vests and in others it does not vest, but they only manage the property. In general law the property does not vest in a receiver or manager but it vests in a trustee, but both trustees and receivers are included in s.41 of the Act. The common thread that passes through all of them is that they function legally or factually for others: they manage the property for the benefit of others. That the technical doctrine of vesting is not imported in the section is apparent from the fact that a trustee appointed under a trust deed is brought under the section though legally the property vests in him. In the case of a Muslim Wakf the property vests in the Almighty; even so the mutawallis are brought under the section. A reasonable interpretation of the 663 section is that all the categories of persons mentioned therein are deemed to receive the income on behalf of another person or persons or manage the same for his or their benefit. None of them has any beneficial interest in the income; he collects the income for the benefit of others. In this view, even if the Nattamaigars were trustees in whom the properties of the Durgha vested, they should be deemed to have received the income only on behalf of the kasupangudars in definite shares. The same conclusion will be reached even if the problem was approached from a different angle. In the well known decision of the Privy Council in Vidya Varuthi Thirtha vs Balusami Ayyar(1) the inappropriateness of the use of the expression "trustee" to the manager of a Hindu or Mahommedan religious endowments was brought out. Therein their Lordships observed: "Neither under the Hindu Law nor in the Mahommedan system is any property "conveyed" to a shebait or a mutawalli, in the case of a dedication. Nor is any property vested in him; whatever property he holds for the idol or the institution he holds as manager with certain beneficial interests regulated by custom and usage. Under the Mahommedan Law, the moment a wakf is created all rights of property pass out of the wakf, and vest in God Almighty. The curator, whether called mutawalli or saijadanishin, or by any other name, is merely a manager. He is certainly not a "trustee" as understood in the English system." The Privy Council, in the context of a wakf property, reaffirmed the said observations, in Allah Rakhi vs Mohammad Abdur Rahirn(2). The effect of the said decisions is that Nattamaigars are only the managers of the properties in which the Durgha and the kasupangudars have beneficial interests. The properties do not vest in them. They receive the income therefrom on behalf of both of them. After meeting the expenses of the Durgha they hold the. balance on behalf of the kasupangudars and distribute the same in accordance with their shares. In this view, in terms of section 41 of the Act the Nattamaigars are the managers of the properties on behalf of others and, are entitled to receive the income therefrom on behalf of them. With the result, the income which they hold on behalf of the kasupangudars can be assessed only in their hands in the manner prescribed thereunder. But it is said that whatever may the doctrine of Hindu or Mohammadan law, under the terms of the aforesaid scheme the properties vested in the Nattamaigars and, therefore, they receive the income in their own right and* not on behalf of the kasupangudars. A careful reading of the relevant (1)(1921) L.R. 48 I.A. 302, 315. (2) (1933) L.R.61. '. I.A. 50. 664 part of the scheme does not countenance this argument. Clause 3 of the scheme, which is the material clause, reads: "The management and administration of the affairs of the Nagore Durgha at Nagore, Tanjore District, and other thakias and shrines connected therewith (mentioned in Schedule A hereunder) and all properties movables and ' immovables which belong to or have been or may hereafter be given, dedicated, endowed thereto, shall subject 10 the provisions thereof vest hereditarily in the eight trustees or nattamaigars of the Durgha who shall constitute the Board of Trustees. Each trustee or nattamaigar is entitled to hold ' office for life, and after him the trusteeship shall devolve on his next male heir in accordance with the custom prevailing in respect of such office in the Durgha. " Under this clause the management and administration of the Nagore Durgha and its properties vest in the Nattamaigars. What vests in the Nattamaigars is not the properties of the Durgha but the management and administration thereof. Unless the words are clear we are not prepared to hold that the High Court in framing a scheme for the endowments of the Durgha had introduced a foreign concept of "trust" in derogation of Mohammadan law. 'We, therefore, hold that the scheme did not vest the properties of the Durgha in the Nattamaigars. Lastly, a faint argument was raised to the effect that under the scheme the managing trustee was not appointed under any order of a Court but was appointed by an agreement among the trustees. But in cl. 4 of the scheme the High Court gave a specific direction that the managing trustee shall be elected from among the Board of Trustees. The Managing Trustee elected was certainly appointed under an order of a Court, for the election was held pursuant to the order of the Court. That apart, in the view we have taken, namely, that the Nattamaigars are not trustees in the English sense of the term, this question does not arise for consideration. In the result, we hold that the High Court has rightly answered the question referred to it in the affirmative and in favour of the assessee. The appeals fail and are dismissed with costs. One hearing fee. Appeals dismissed.

IN-Abs

A scheme was settled in 1955 by the Madras High Court for the management of the income and properties of the Durgah consecrated to a saint in Tanjore District. Under the scheme the management of the properties of the Durgah was to be in the hands of eight trustees called Nattamaigars one of whom was to be elected by them as Managing Trustee. The net income of the trust was to be distributed among descendants of the foster son of the saint, called Kasupangudars, whose definite shares were to be determined each year by a list prepared by the Managing Trustee. For the assessment years 1953 54 and 1954 55, the Income tax Officer assessed the surplus income of the wakf in the hands of the Managing Trustee as an association of persons. The trustees unsuccessfully appealed to the Appellate Assistant Commissioner and the Appellate Tribunal. The controversy centred round the question whether s.41 of the Indian Income tax Act, 1922 applied to the case. In a reference made by the Tribunal at the instance of the assessee the High Court held that that section 41 applied to the case and that the income was received by the trustees on behalf of the beneficiaries. Aggrieved, the Commissioner of income Tax appealed, by certificate, to this Court. It was contended on behalf of the appellant that as the properties vested in the managing trustee and he received the income in his own right and not on behalf of the beneficiaries, though for their benefit, the said income in the hands of the managing trustee fell outside the scope of s.41 of the Act. HELD: The High Court had rightly answered the question in favour of the assessee. (i) The technical doctrine of vesting is not imported into section 41. This is apparent from the fact that a trustee appointed under a trust deed is brought under the section though legally the property vests in him. In the case of a Muslim Wakf the property vests in the Almighty; even so the mutawallis are brought under the section. Thus in some of the persons enumerated in the section property vests and in others it does not. A reasonable interpretation of the section is that all categories of persons mentioned therein are deemed to receive them on behalf of another person or persons or manage the same for his or their benefit. None of them has any beneficial interest in the income; he collects the income for the benefit of others. In this view even if the Nattarnaigars were trustees in whom the 65 660 properties of the Durgah vested, they should be deemed to have received the income only on behalf of the Kasupangudars in definite shares. [662G 663B] (ii) The mutawalli of a Muslim Wakf is merely a manager and not a "trustee" as understood in the English system. [663E] Vidya Varuthi Thirtha vs Balusami Ayyar, (1921) 48 I.A. 32 and Allah Rakhi vs Mohammad Abdur Rahim, (1933) 61 I.A. 50, relied on. Therefore in terms of s.41 of the Act the Nattamaigars were the manager of the properties on behalf of other and were entitled to receive the income therefrom on behalf of them. [663G H] (iii) Under c1.3 of the scheme it was the "management and administration" of the Durgah and its properties which was vested in the Nattamaigars and not the properties themselves. In the absence of clear words it could not be held that the High Court in framing a scheme for the endowments of the Durgah had introduced a foreign concept of "trust" in derogation of Mohammadan Law. The scheme therefore did not vest the properties of the Durgah in the Nattamaigars and the contention on behalf of the Revenue could not succeed. [664D, E]

il Appeal No. 329 of 1962. Appeal from the judgment and decree dated September 26. 1957 of the High Court in Appeal from Original Decree No. 253 of 1949. 656 Sarjoo Prasad and R.C. Prasad, for the appellants. A.V. Viswanatha Sastri and D. Goburdhun. for respondents nos. 1 to 4 and 6. The Judgment of the Court was delivered by Sarkar, J. This appeal arises out of a suit brought by the appellants in 1947 for a declaration that the defendants first party had acquired no right or title to a property under certain deeds and that the deeds were inoperative and void. The suit was decreed by the trial Court but on appeal by the defendants first party to the High Court at Patna that decree was set aside. The High Court having granted a certificate of fitness, the appellants have brought the present appeal. The defendants first party have alone contested the appeal and will be referred to as the respondents. The High Court held that as the appellants were not in possession of the property at the date of the suit as found by the learned trial Judge and the respondents were, their suit must fail under the proviso to s.42 of the Specific Relief Act as the appellants had failed to ask for the further relief of recovery of possession from the respondents. In this view of the matter the High Court did not consider the merits of the case. The fact however was that at the date of the suit the property was under attachment by a magistrate under powers conferred by section 145 of the Code of Criminal Procedure and was not in the possession of any party. This fact was not noticed by the High Court but the reason why it escaped the High Court 's attention does not appear on the record. The only point argued in this appeal was whether in view of the attachment, the appellants could have in their suit asked for the relief for delivery of possession to them. If they could not, the suit would not be hit by the proviso to section 42. The parties seem not to dispute that in the case of an attachment under section 146 of the Code as it stood before its amendment in 1955, a suit for a simple declaration of title without a prayer for delivery of possession is competent. The respondents contend that the position in the case of an attachment under section 145 of the Code is different, and in such a case the magistrate holds possession for the party who is ultimately found by him to have been in possession when the first order under the section was made. It was said that a suit for declaration of title pending such an attachment is incompetent under the proviso to section 42 unless recovery of possession is also asked for. It appears that the attachment under section 145 in the present case is still continuing and no decision has yet been given in the proceeding 's resulting in the attachment. In our view, in a suit for declaration of title to property filed when it stands attached under section 145 of the Code, it is not necessary to ask for the further relief of delivery of possession. The fact 657 if it be so, that in the case of such an attachment, the magistrate holds possession on behalf of the party whom he ultimately finds to have been in possession is, in our opinion, irrelevant. On the question however whether the magistrate actually does so or not, it is unnecessary to express any opinion in the present case. The authoritie 's clearly show that where the defendant is not in possession and not in a position to deliver possession to the plaintiff it is not necessary for the plaintiff in a suit for a declaration of title to property to claim possession: see Sunder Singh Mallah Singh Sanatan Dharm High School, Trust vs Managing Committee, Sunder Singh Mallah Singh Rajput High School.(1) Now it is obvious that in the present case, the respondents were not in possession after the attachment and were not in a position to deliver possession to the appellants. The magistrate was in possession, for whomsoever, it does not matter, and he was not of course a party to the suit. It is pertinent to observe that in Nawab Humayun Begam vs Nawab Shah Mohammad Khan(2) it has been held that the further relief contemplated by the proviso to section 42 of the Specific Relief Act is relief against the defendant only. We may add that in K. Sundaresa lyer vs Sarvajana Sowkiabil Virdhi Nidhi Ltd.(3), it was held that it was not necessary to ask for possession when property was in custodia legis. There is no doubt that property under attachment under section 145 of the Code is in custodia legis. These cases clearly establish that it was not necessary for the appellants to have asked for possession. In Dukkan Ram vs Ram Nanda Singh(1) a contrary view appears to have been taken. The reason given for this view is that the declaratory decree in favour of the plaintiff would not be binding on the magistrate and he was free inspite of it to find that possession at the relevant time was with the defendant and deliver possession to him. With great respect to the learned Judge deciding that case, the question is not whether a declaratory decree would be binding on the magistrate or not. The fact that it may not be binding would not affect the competence of the suit. The suit for a declaration without a claim for the relief for possession would still be competent in the view taken in the cases earlier referred to, which is, that it is not necessary to ask for the relief of delivery of possession where the defendant is not in possession and is not able to deliver possession, which, it is not disputed, is the case when the property is under attachment under section 145 of the Code. We think that Dukkan Ram 's(4) case had not been correctly decided. We may add that no other case taking that view was brought to our notice. (1) (1937) L.R. 65 I.A. 106. (2) A.I.R. 1943 P.C. 94. (3) I.L.R. (4) A.I.R. 1961 Pat. 658 For these reasons, we hold that the suit out of which this appeal has arisen was competent. We, therefore, allow the appeal but as the merits of the case had not been gone into by the High Court, the matter must go back to that Court for decision on the merits. The appellant will get the costs here and below. Appeal allowed and case remanded.

IN-Abs

There was dispute about the property in suit between theappellants and the respondents. The property was attached by the Magistrate under section 145 of the Criminal Procedure Code. Subsequently the appellants filed a suit for declaration of their title to the property but made no prayer for the cansequential relief of possession. The suit was decreed by the trial court but the High Court set aside the decree on the ground that the suit was bad under section 42 of the Specific Relief Act for failure to sue for possession. Appeal to this Court was filed with certificate of fitness. HELD: In a suit for declaration of title to property, filed when it stands attached under section 145 of the Criminal Procedure Code, it is not necessary to ask for the further relief of delivery of possession. The fact, if it be so, that in the case of such an attachment the Magistrate holds possession on behalf of the party whom he ultimately finds to have been in possession, is irrelevant. [656H 657B] Moreover the further relief contemplated by the proviso to section 42 of the Specific Relief Act is relief against the defendant only. In the present case the Magistrate was in possession and he was not a party to the suit. [657C D] Further it is not necessary to ask for possession when the property is in custodia legis. There is no doubt that property under attachment under section 145 of the Code is in custodia legis. [657E3 Sunder Singh Mallah Singh Sanatan Dharam High School, Trust vs Managing Committee, Sunder Singh M.allah Singh Rajput High School, (2937)L.R. 65 I.A. 10,6 and Nawab Humayun Begum vs Nawab Shah Mohammad Khan, A.I.R. 1943 P.C. 94, relied on. K. Sundarama Iyer vs Sarvajana Sowkiabil Virdhi Nidhi Ltd. I.L.R. , approved. Dukhan Ram vs Ram Nanda Singh, A.I.R. 1961 Pat. 425, disapproved.

ORIGINAL JURISDICTION: Civil Appeal No. 900 of 1963. Appeal by special leave from the judgment and order dated April 21, 1961 of the Andhra Pradesh High Court in C.M.P. No. 239 of 1950. WITH Writ Petition No. 146 of 1961. Petition under article 32 of the Constitution of India for the enforcement of the fundamental rights. AND Civil Miscellaneous Petition No. 186 of 1962. Appeal against the order of the Registrar dated November 21, 1961 refusing to receive the petitioner 's application for refund of Court fees. The appellant appeared in person. K.R. Chaudhuri and B.R.G.K. Achar, for the respondent (in C.A. No. 900/63 and W.P. No. 146/1961). 746 The Judgment of Subba Rao, Wanchoo, Hidayatullah and Sikri, JJ. was delivered by Hidayatullah, J. Shah, J. delivered a separate Opinion. Hidayatullah, J. On January 11, 1960, the Advocate General applied to the High Court of Andhra Pradesh, Hyderabad for action against the appellant Prabhakar Rao H. Mawle under section 2 of the Vexatious Litigation (Prevention) Act 1949 (Madras Act VIII of 1949), on the allegation that Mawle had been "habitually" and without any reasonable ground instituting "vexatious proceedings" in the courts within the cities of Hyderabad and Secunderabad and also in the High Court and appearing in the cases in person; that he was responsible for a considerable amount of litigation or, in other words, that he was a vexatious and habitual litigant. In support of the petition for the invocation of the punitive provisions of the Act, the Advocate General referred to the following cases: (1) In C.R.P. No. 176.5/58 Mawle described the judgment of the lower court as: " . . . shocking to the sense of justice, a grave dereliction of duty, flagrant abuse of fundamental principles of law and the natural justice, full with errors patent on the face, showing a gross manifest injustice done through the tyrannical arbitrary acts. " It was stated that Mawle apologised to the High Court to escape proceedings for contempt of court. (ii) He filed a writ petition No. 1369/18 after the above Civil Revision Petition was dismissed and then preferred an appeal CCCA 42/59. ' (iii) He filed a stay petition against an intended execution before steps were taken and when the petition was dismissed he filed an appeal C.M.A. 86/59 and obtained stay. (iv) He filed an appeal against the dismissal of the writ petition 1369/58. He was thus said to have asked for five remedies in one suit (O.S. 200 of 1958). (v) In an appeal filed on 3 6 1959 he did not pay court fee of Rs. 995 as stamps were not available undertaking to pay the balance which he did not pay. (vi) In S.R. 38516 and S.C.C.M.P. Mawle stated that as he had appeared in person "without any weightage to his submissions though of law, for in the ends of justice, as against the professional privileges claimed by both these veteran advocates (Mr. O.V. Subbanayadu and 747 Mr. Hari Narayanalal) even though they had taken the role of a party, sole witnesses, swearing false affidavits . . ". (vii) In S.R. 12409/59 against decree in O.S. 109/1958, though himself the sole defendant, Mawle caused to be preferred an appeal in forma pauperis by his wife and children, getting the judgments under appeal privately printed and certifying them as true. (viii) C.R.P. No. 1094/59 against the judgment in suit No. 198/2 dismissed against his tenant he filed a revision petition which was dismissed in limini. (ix) C.R.P. No. 988/1959 filed against I.A. 230/58 in O.S. 99/2 of 1957 of the City Civil Court, Hyderabad was dismissed in limini. (x) He has filed S.R. 31845/59 as L.P.A. against an order refusing to review C.R.P. against a Small Cause Suit and S.R. No. 27605/59 as a L.P.A. against an order in a petition refusing to condone the delay in filing a review petition in a C.R.P. (xi) C.R.P. 954/1959 filed against an order in L.R. petition in a Small Cause Suit, originally attempted to be filed as an appeal, C.M.P. 55 18 filed and stay ordered on condition that Mawle should deposit the decretal amount. He then withdrew the C.M.P. (xii) Several criminal matters in High Court. Complaint in Cr. 406/58 and Crl. R.C. 506/59. (xiii) C.M.P. 1858/57 for taking action against the respondent for alleged contempt of court. (xiv) S.R. No. 43198/59, a L.P. Appeal. The Advocate General claimed that though the Act was not extended to the area covered by the former Hyderabad State, it must be treated as the law in force there by reason of the . Mawle was heard on notice and, as was to be expected from a litigant of his sort, flied a fairly long statement in reply denying each accusation and explaining his conduct. He questioned the jurisdiction of the High Court of Andhra Pradesh to take action under the Act as its provisions were not extended to the area comprised in the former State of Hyderabad. He challenged the Act as ultra vires and unconstitutional on the ground that it abridged the right of citizens to seek redress in a court of law. He stated that he was a businessman and a landlord and owned considerable properties in the city of Hyderabad and other cities in the District and the State. He produced a certificate from the District Magistrate. He explained that owing to unpleasant experience he had L/P(D)5SCI 9 748 to take away his work from advocates and since 1952 he had started conducting his own cases. He alleged that he had to recover a couple of lakhs of rupees from his clients/tenants etc. and had, therefore to file a large number of cases. He attempted an explanation of the cases to which the Advocate General had referred in his petition. The High Court by its judgment dated April 21, 1961, now under appeal, held that the Act was both constitutional and intra vires, that the High Court had jurisdiction to make the order and that action under the Act was called for. The High Court ordered that no proceeding, civil or criminal, should be instituted by Mawle in the City of Hyderabad without the leave of the High Court, in the city of Secunderabad, without the leave of the Chief City Civil Judge and elsewhere without the leave of the District and Sessions Judge concerned. A copy of the order of the High Court was published in the Gazette of Andhra Pradesh as required by the Act. Mawle sought a certificate under Articles 132, 133, or 134 of the Constitution but the certificate was refused on the ground that no substantial question of law as to the interpretation of the Constitution or otherwise was involved. The petitioner then applied for and obtained special leave from this Court and filed the present appeal. The Act with which we are concerned, though a copy substantially of 16 and 17 Vict. 30 (now replaced by section 51 of the Supreme Court of Judicature Consolidation Act, 1925:15 & 16 Geo V c. 49) is perhaps the only one of its kind in India. Its provisions are extremely brief and they may be read here: "1. Short title, extent and commencement. (1) This Act may be called the Vexatious Litigation (Prevention) Act, 1949. (2) It extends to the whole of the State of Madras. (3) It shall come into force at once. Leave of court necessary for vexatious litigant to institute proceedings. (1) If, on an application made by the Advocate General, the High Court is satisfied that any person has habitually and without any reasonable ground instituted vexatious proceedings, civil or criminal, in any Court or Courts, the High Court may, after giving that person an opportunity of being heard. order that no proceedings, civil or criminal, shall be instituted by him in any Court (i) in the Presidency town, without the leave of the High Court; and (ii) elsewhere, without the leave of the District and Sessions Judge. 749 (2) If it appears to the High Court that the person against whom an application is made under subsection (1) is unable, on account of poverty, to engage a pleader, the High Court may engage a pleader to appear for him. Explanation For the purpose of this section 'pleader ' has the same meaning as in section 2, clause (15) of the Code of Civil Procedure, 1908. Leave to be granted only if prima facie ground exits The leave referred to in section 2, sub sect=on (1), shall not be given in respect of any proceedings unless the High Court or, as the case may be, the District and Sessions Judge, is satisfied that there is prima facie ground for such proceedings. Proceedings instituted without leave to be dismissed. Any proceedings instituted by a person against whom an order under section 2, sub section (IL has been made, without obtaining the leave referred to in that sub section shall be dismissed: Provided that this section shall not apply to any proceedings instituted for the purpose of obtaining such leave. (5) Publication of orders. A copy of every order made under section 2, sub section (1) shall be published in the Fort St. George Gazette. " The High Court of Andhra Pradesh has held that it enjoys all the jurisdiction of the former High Court of Madras and thus the provisions of the Act create a jurisdiction in the High Court capable of being exercised in Telangana area even though the Act as such, 'has not been extended to this part of the territory of the State. The High Court also holds that the Act is perfectly valid. In this appeal in addition to questioning the order on the above ground and also merits the appellant contends that the Madras Act itself was invalid inasmuch as it was not covered by any Entry in List II or III of the Government of India Act, 1935 and had not received the assent of the Governor General. This argument is without substance. The Act had received the assent of the Governor General and the subject of the legislation was covered by Entries 2 of List II and 2 and 4 of List III of the Government of India Act, 1935. The next argument of the appellant be fore us is that this Act is unconstitutional because it prevents some citizens from approaching the court and obtaining relief to which everyone is entitled in a State governed by Rule of Law. This argument really invokes article 19 and article 14. The latter Article is invoked because the Act, according to the appellant, seeks to create an unreasonable distinction between litigant and litigant. This argument is also not acceptable to us because the litigants who are to 750 be prevented from approaching the court, without the sanction of the High Court etc., are in a class by themselves. They are described in the Act as persons who 'habitually ' and 'without reasonable cause ' file vexatious actions, civil or criminal. The Act is not intended to deprive such a person of his right to go to a court. It only creates a check so that the court may examine the bona fides of any claim before the opposite party is harassed. A similar Act, passed in England, has been applied in several cases to prevent an abuse of the process of court. In its object the Act promotes public good because it cannot be claimed that it is an inviolable right of any citizen to bring vexatious actions without control, either legislative or administrative. The Act subserves public interest and the restraint which it creates, is designed to promote public good. The Act does not prevent a person declared to be habitual litigant from bringing genuine and bona fide actions. It only seeks to cut short attempts to be vexatious. In our judgment, the Act cannot be described as unconstitutional or offending either article 19 or article 14. The next contention of the appellant is that the Act has not been extended to the area of the former State of Hyderabad and the High Court cannot exercise jurisdiction in that area. This contention merits close scrutiny. The High Court has given a history of the evolution of the State and of the High Court of Andhra Pradesh. It is common knowledge that the High Court of Madras was rounded by Letters Patent of 1865 and exercised all original, appellate and other jurisdictions conferred by that Letters Patent. The Act, which was passed by the Madras Provincial Legislature in 1949 conferred jurisdiction upon the Madras High Court to deal with cases of habitual litigants who were persistently filing vexatious actions and were guilty of an abuse of the process of court. This jurisdiction belonged to the High Court of Madras by virtue of the Act and was not an inherent jurisdiction whether as a Court of Record or otherwise. When the State of Andhra was formed in 1953 by the Andhra State Act of 1953, the High Court of Madras ceased to exercise jurisdiction over the territory of the State of Andhra. This jurisdiction was then to be exercised by the High Court of Andhra from a date to be appointed by the President. The jurisdiction of the Andhra High Court was to be the ' same as that of the Madras High Court. Section 30 of the Andhra State Act read as follows: "30. Jurisdiction of Andhra High Court. The High Court of Andhra shall have, in respect of the territories for the time being included in the State of Andhra, all such original, appellate and other jurisdiction as, under the law in force immediately before the prescribed day, is exercisable in respect of the said territories or any part thereof by the High Court at Madras." 751 By virtue of this section the new High Court possessed the same powers and jurisdiction as the original Madras High Court in its territory. But by section 53 of the Andhra Act no change was effected in the territorial extent of the laws and references in all laws to the State of Madras were to be adapted to refer to the new State in its application to the new State of Andhra. In other words, the Act continued to be an Act in force in the Andhra State and the Andhra High Court possessed the same jurisdiction as the former Madras High Court. So far no difficulty can be seen, but it is obvious that the original jurisdiction of the High Court of Madras in the Presidency Town could not be exercised at Guntur and did not follow the High Court. The next change came in 1956 by the . By that Act certain territories were amalgamated with the State of Andhra and prominent among those territories was the former Hyderabad State which for convenience may be referred to here as 'the Telangana Area '. The city of Hyderabad and the city of Secunderabad are in that area. The contained a special provision to limit the territorial extent of the laws in force in the different areas which were combined to form the State of Andhra Pradesh. Section 119 of the provided as follows: " 119. Territorial extent of laws. The provisions of shall not be deemed to have effected any change in the territories to which any law in force immediately before the appointed day extends or applies. and territorial reference in any such law to an existing State shall, until otherwise provided by a competent Legislature or other competent authority, be construed as meaning the territories within that State immediately before the appointed day. " The appellant relies upon this provision to state that the area of operation of the Act can only be the former territories of the State of Andhra and the Act is not applicable in the territory comprised in the Telangana Area. The other side contends that by virtue of section 65 the High Court of Andhra Pradesh acquires all the jurisdiction of the High Court of the State of Andhra and therefore it acquires the jurisdiction invested by the Act in the former Andhra High Court. Section 65 of the reads as follows: "65. High Court of Andhra Pradesh. (1) As from the appointed day, (a) the jurisdiction of the High Court of the existing State of Andhra. shall extend to the whole of the territories transferred to that State from the existing State of Hyderabad; 752 (b) the said High Court shall be known as the High Court of Andhra Pradesh; and The question that arises is whether the application of the Act in the Telangana area is made impossible by section 119 of the Act of 1956 or depends upon section 65 of that Act. If the Act under which action is purported to be taken can be said to have operated territorially then it is obvious that the extent of territory in which it was to apply was not only not enlarged by the but under section 119 was kept rigid by limiting it to the territory of the former Andhra State. If, however, that Act created a jurisdiction in the High Court to deal with a particular class of litigants, who were habitually bringing vexatious suits it may be then possible to contend that jurisdiction continues to vest in the High Court of Andhra Pradesh. The High Court has viewed this matter from the latter angle and come to the conclusion that section 65 and not section 119 controls the matter. The argument of the High Court is that the Act controls litigation and creates a new procedure in respect of persons who indulge habitually in vexatious litigation. The Act confers a jurisdiction to put such persons under a procedural restraint and this jurisdiction, the High Court holds. inhered in the former Madras High Court and later in the Madras and the Andhra High Courts separately and now it inheres in the Andhra Pradesh High Court. In the opinion of the High Court, the jurisdiction can be exercised within all the territories subject to the Andhra Pradesh High Court including the Telangana Area, Mr. K.R. Choudhury in supplementing this reasoning points out that the High Court of Madras could take action against any person who acted in a manner to attract the provisions of the Act, irrespective of where the person came from. He contends that a vexatious litigant from Bengal or Bombay could be visited with the punitive provisions of the Act and submits that there is no reason why the Andhra Pradesh High Court cannot control the practice and procedure in the courts of the Telangana area in the same way. According to him, the Act must be treated as extended to the Telangana area as the Andhra Pradesh High Court continues to possess all the jurisdiction of the former Madras High Court. This was also the original plea of the Advocate General in his petition in the High Court, though not apparently accepted by the High Court. We do not accept the argument of Mr. Choudhury. The Madras Act was applied by the legislature only to the Madras Presidency. Suppose it had been applied to one district only. Could the High Court have said that notwithstanding the limited application, it would take action in the other districts of the Madras Presidency? If it could not have extended the territorial limits of the 753 application of the Act in Madras Presidency, the position is not any different now, in view of the provisions of section 119 of the which clearly lay down that no law of one of the amalgamating States is to be extended to the area of the other amalgamating States except by a competent legislative or other competent authority and further that the law shall be construed as restricted to the territories within each State immediately before the Reorganisation. The territorial area is thus not only not enlarged but is frozen. We may now consider whether section 65 of the makes any difference to this position. The Act was designed to control vexatious litigation and it created for the purpose, a new procedure which applied to persons whose visits to courts, as litigants, were not only frequent but were also habitually vexatious. The Act enabled the Advocate General to apply to the High Court and the High Court on being satisfied that a person had been acting in this manner, could make an order that no proceeding there forward was to be filed by that person in the Presidency town without the leave of the High Court and elsewhere without the leave of the District & Sessions Judge. The Act was intended to apply in the whole of the Presidency of Madras including the area carved away from the Presidency of Madras and made into the State of Andhra in 1953 and which is now a part of the State of Andhra Pradesh after 1956. The Act was intended to operate territorially as indeed the clause dealing with the extent of application of the Act itself shows. In its operative part also the order was to be made with a territorial distinction between the Presidency Town and the rest of the Presidency of Madras. The order to be passed under the Act contemplated leave of the High Court before a suit was filed in the Presidency Town and the leave of the District & Sessions Judge elsewhere. It is plain that on its terms the Act cannot apply in the State of Andhra Pradesh atleast in so far as the Presidency Town mentioned in section 2(1)(i) is concerned. That Presidency Town was the city of Madras and therefore section 2(1)(i) of the Act cannot apply in Andhra Pradesh, because there is no Presidency Town in Andhra Pradesh to which section 2(1)(i) can now refer. The distinction between the city of Hyderabad and other parts of the State of Andhra Pradesh has been artificially brought into existence by the High Court by making the order in respect of the city of Hyderabad as if it was a Presidency Town. This is legislation pure and simple and it cannot be undertaken by the High Court. Section 2(1)(i) of the Act can no longer apply without a proper amendment. It may, however, be contended that section 2(1)(ii) can apply and the whole of the new State of Andhra Pradesh may be taken to be governed by sub cl. It would, however, be somewhat strange to make the District & Sessions Judge decide whether a particular litigant should be allowed to move the High Court in appeal, revision or in an original proceeding. The Act is unworkable in the State of Andhra Pradesh without substantial modifications to it. 754 This is not a question merely of procedural jurisdiction as the High Court has reasoned. No doubt the Act as it stood, vested a jurisdiction in the High Court to deal with a particular type of litigant but the Act made the High Court to deal with the matter territorially. It ,is because the territory has changed that the question arises whether the old jurisdiction of the High Court can now ' take in new territory. All laws are intended to operate territorially and no Provincial Legislature in India possessed extra territorial jurisdiction. That the Madras Legislature enacted was to operate in its own territory and it said so in the Act. If new territories are to be governed by the Act it must be extended to the new territories and till it is extended the Act can only operate within the old territories and this is the obvious result of section 119 of the . Thus there are two difficulties in the way of holding that this Act is operative in the TeIangana area of the new State of Andhra Pradesh. To begin with it has not been extended to the area known as the TeIangana area and, till extended, section 119 of the expressly prohibits an extension to the Telangana area by judicial construction. Secondly, there being no Presidency Town as such in the new State of Andhra Pradesh, section 2(1)(i) cannot now be made applicable to the new State of Andhra Pradesh, until some other town is substituted by the Legislature in its place. The mention of the Presidency Town in section 2(1)(i) was not with a view to indicate the seat of the High Court but was so made because the High Court possessed original jurisdiction in that area. The words 'Presidency Town ' might, of course, have been amended to read Hyderabad, the seat of the Andhra Pradesh High Court, but this has not been done. No doubt the court under section 121 of the possesses a power to construe laws by adapting them in such a manner as to facilitate their application to the newly formed State, but the power which is exercisable is only a power of simple adaptation and not a power of legislation. An increase in the territories in which an Act is to apply is dependent on legislation such as is contemplated by section 119 of the . What the High Court has done is more than an adaptation. It has not only substituted the city of Hyderabad for the Presidency town but it has also made the law applicable to Telangana courts contrary to the intendment of section 119 of the . Formerly the seat of the High Court was different and the Act must, on the same reasoning have applied there, so that the words 'Presidency Town ' must have read as Guntur at first and now they read Hyderabad. In our opinion, the High Court was in error in holding that the Act merely created a procedural jurisdiction in the High Court of Madras which on its division into two High Courts, inhered in both the High Courts and continues to inhere in the High Court of Andhra Pradesh even for purposes of areas to which the Act has not been extended. In this 755 view of the matter the order made by the High Court cannot be sustained and it must be discharged. We have not gone into the merits and there is much that justified action against Mawle. He has filed dozens of cases and has flooded courts with litigation often by way of repeated petitions on the same matter. As we find that the Act is not available against him we say nothing more. We may place on record that Mawle expressed his willingness before us to be restrained in his litigation and we hope that he will now make amends for his past conduct. We expect him to behave properly in future. The appeal is allowed but in the circumstances of the case we make no order about costs. Shah, J. The Provincial Legislature of Madras exercising power under the Government of India Act, 1935 enacted the Vexatious Litigation (Prevention) Act 8 of 1949, The material provisions of the Act are: "2. (1) If, on an application made by the Advocate General, the High Court is satisfied that any person has habitually and without any reasonable ground instituted vexatious proceedings civil or criminal, in any Court or Courts, the High Court may, after giving that person an opportunity of being heard, order that no proceedings, civil or criminal, shall be instituted by him in any Court (i) in the Presidency town, without the leave of the High Court; and (ii) elsewhere, without the leave of the District and Sessions Judge. (2) * * * 3. The leave referred to in section 2, sub section (1), shall not be given in respect of any proceedings unless the High Court or, as the case may be, the District and Sessions Judge, is satisfied that there is prima facie ground for such proceedings. Any proceedings instituted by a person against whom an order under section 2, sub section (1), has been made, without obtaining the leave referred to in that subsection shall be dismissed: Provided that this section shall not apply to any proceedings instituted for the purpose of obtaining such leave. A copy of every order made under section 2, subsection (1), shall be published in the Fort St. George Gazette. " 756 By this Act the High Court of Madras was invested with power to place restrictions upon vexatious litigants. The principle of this legislation, it appears, was borrowed from statute 16 & 17 Vict. 30 enacted by the British Parliament. By article 225 of the Constitution, the jurisdiction of the High Court of Madras, subject to the provisions of the Constitution and to the provisions of any law of the appropriate Legislature remained the same as immediately before the commencement of the Constitution. On September 14. 1953 the State of Andhra was carved out of the territories of the State of Madras by the Andhra State Act 30 of 1953. Section 28 of that Act provided: "(1) As from the 1st day of January, 1956, or such earlier date as may be appointed under sub section (2) there shall be a separate High Court for the State of Andhra." The High Court of Andhra which was constituted by a notification issued by the President had by section 30, in respect of the territories included in the State of Andhra, all such original, appellate and other jurisdiction as under the law in force immediately before the prescribed day was exercisable in respect of the territories or any part thereof by the High Court at Madras. The Andhra High Court was therefore a successor of the High Court of Madras and exercised all the powers and administered the same law which the Madras High Court exercised in the territories comprised in the Andhra State. By section 2(1) of Act 8 of 1949 the High Court of Madras was competent to issue an order against any person that no proceedings, civil or criminal, shall be instituted by him in any Court (i) in the Presidency town without the leave of the High Court, and (ii) elsewhere, without the leave of the D:strict and Sessions Judge; and this power, by virtue of section 30 of Act 30 of 1953 became exercisable by the Andhra High Court. The expression "Presidency town" means by the (section 3(44)). the local limits of ordinary original jurisdiction of the High Court of Judicature at Calcutta, Madras or Bombay ,as the case may be, and there was no Presidency town within the area of the Andhra State as constituted by Act 30 of 1953. The Parliament had. however, with a view to meet anomalies of the present nature expressly provided by section 55 that "Notwithstanding that no provision or insufficient provision had been made under section 54 for the adaptation of a law made before the appointed day, any court, required or empowered to enforce such law may, for the purpose of facilitating its application in relation to the State of Andhra. * * construe the law with such alterations not affecting the substance as may be necessary or proper to adapt it to the matter before the court * *. " The expression "Presidency town" must in the context of the constitution of a separate High Court for Andhra, after the State of Andhra was formed, mean 757 the Capital town of the State in which the High Court was located Such an adaptation does not affect the substance of the Act, and it would facilitate application thereof to the changed circumstances. The new State of Andhra Pradesh was constituted under the 37 of 1956 by incorporating certain areas specified in section 3 to the territory of the old State of Andhra. By section 65(1)(a) from the appointed day i,e. November 1, 1956 'the jurisdiction of the High Court of the existing State of Andhra was,, it was declared, to extend to the whole of the territories transferred to that State from the existing State of Hyderabad, the High Court was to be known as the High Court of Andhra Pradesh, and the principal seat of ' the High Court was to be at Hyderabad. The jurisdiction of the High Court of Andhra was by the express provision made in section 65(1)(a) exercisable over the whole of the territory transferred to that State from the existing State of Hyderabad. The phraseology used by the Legislature, in my judgment, authorises the new High Court of Andhra Pradesh to exercise all jurisdiction which the High Court of Andhra could exercise before the appointed day. The High Court of Andhra Pradesh made an order against the appellant on April 21, 1961 that no proceedings, civil or criminal shall be instituted by the appellant in the city of Hyderabad without the leave of the High Court; in the city of Secunderabad without the leave of the Chief City Civil Judge; and elsewhere without the leave of the District and Sessions Judge concerned. This was manifestly a personal direction 'which imposed restrictions upon the appellant. The power to impose a ban under section 2, it may be noticed, vests only in the High Court: the power to remove the ban in specific cases is exercisable by the High Court, or a Judge of the District and Sessions Court according as the proceeding is to be instituted in a Court in the capital of the State where the High Court is located, or in any Court in the mofussil. There can therefore be no question of conflict of jurisdiction between the High Court and the District Court. Once the High Court pronounces an order under section 2, it may be removed in appropriate cases only by the High Court where the proceeding is to be instituted in any Court in the Capital town in which the High Court is located and elsewhere by order of the District and Sessions COurt. The Act confers jurisdiction upon the High Court and does not as a condition of its exercise require that the person to be restrained must be residing or have a domicile in any area within the jurisdiction of the Court invested with jurisdiction. Nor has the order contemplated to be passed any direct territorial operation: it is issued against a person individually and restrains him from instituting proceedings without leave of the Court specified in that behalf. A person wherever residing or domiciled may ' therefore be restrained ,by an order under section 2. 758 But it is said that notwithstanding the comprehensive phraseology used by the Legislature in section 65, because of section 119 of the 37 of 1956 a somewhat anomalous situation has resulted. It is claimed that the power with which the High Court is invested to prevent a litigant from instituting proceedings which are vexatious may be exercised in respect of proceedings to be instituted in courts within the limits of the former State of Andhra or which arise from proceedings decided by Courts in that area. The upshot of the argument is that a litigant may be treated as vexatious only in respect of proceedings to be instituted by him in the Courts of the Districts within the former State of Andhra and in respect of proceedings sought to be brought before the High Court in exercise of its appellate, revisional or superintending jurisdiction from orders made by Courts within the territory of the former State of Andhra: he 'may therefore be subjected to a disability in respect of proceedings to be instituted in some districts in the State and also in respect of proceedings reaching the High Court from cases instituted in those districts, and not in respect of the rest. What the effect of such a view may be upon the exercise of the High Court 's jurisdiction under articles 226 and 227 of the Constitution. or the original jurisdiction, for instance, under the Companies Act or the Banking Companies Act, the appellant who has argued his case personally did not attempt to tackle. Section 119 of the provides: "The provisions of shall not be deemed to have effected any change in the territories to which any law in force immediately before the appointed day extends or applies, and territorial references in any such law to an existing State shall, until otherwise provided by a competent Legislature or other competent authority, be construed as meaning the territories within that State immediately before the appointed day. " By that section the territorial extent of the laws in operation prior to the appointed day, until amended by a competent Legislature or other competent authority, continues. But section 119 must be read harmoniously with section 65(1)(a). The latter clause declares in unambiguous terms that the jurisdiction of the High Court of the existing State of Andhra shall extend to the whole of the territories transferred to that State from the existing State of Hyderabad. If it be granted that the High Court of the State of Andhra had jurisdiction to pass orders under the Vexatious Litigation (Prevention) Act, it would be difficult to hold that section 119 of Act 37 of 1956 still restricts the exercise of the power by the High Court to prevent a vexatious litigant from instituting proceedings in certain areas in the mofussil and not in others or from instituting proceedings by way of appeals or revisions from orders and decrees in proceedings instituted in the Courts in the area within the former State of Andhra and not elsewhere. The Parliament having by Act 30 of 1953 invested the 759 High Court of Andhra with authority to exercise all jurisdiction which the High Court of Madras possessed within the territories of the State of Andhra as constituted and thereafter having by section 65(1)(a) of Act 37 of 1956 extended the exercise of that authority over the entire territory of Andhra Pradesh, and in my judgment, it would be impossible to accept the argument that in respect of the jurisdiction conferred by the Vexatious Litigation (Prevent;on), Act 8 of 1949 the High Court was incompetent to pass the order which it did against the appellant. I need not add anything to what Hidayatullah, J., has said in upholding the constitutionality of the provisions of the Act, for 1 agree with him that the Act is not unconstitutional as offending either article 19 or article 14 of the Constitution. On the merits, however, I am of the opinion that the cases which the appellant had instituted in the various Courts did not justify a drastic order of the nature passed against him. The appellant claims that he is the owner of a large estate in the city of Hyderabad, and that is not denied: he also carries on an extensive business and in the course of carrying on his business and managing his estate, he has often to seek recourse to courts of law. The appellant says that because of certain reasons (which need not be set out) he conducts his litigation before the Courts without any professional assistance. Assuming that the appellant has in instituting and prosecuting cases which he had instituted shown less objectivity and more enthusiasm than a lawyer may in similar cases show, and had attempted to obtain benefit of what he thought were lacunas in the law, imposition of a blanket restriction against him of the nature imposed by the High Court may not seem to be warranted. I am unable to agree having carefully considered the nature of the Various cases filed by the appellant or from the general progress of those cases as set out in the list of cases filed in this Court and the orders passed therein that those proceedings are vexatious or frivolous. I would therefore allow the appeal, but not on the grounds which are set out by Hidayatullah, J. Appeal allowed.

IN-Abs

By section 2(1) of the Madras Vexatious Litigation (Prevention) Act 1949, the High Court of Madras was competent to issue an order against any person that no proceedings shall be instituted by him in any court (i) in the Presidency town without the leave of the High Court, and (ii) 'elsewhere without the leave of the District and Sessions Judge. On the application of the Advocate General of Andhra Pradesh the High Court of Andhra Pradesh ordered that no proceeding should be instituted by the appellant in the City of Hyderabad without leave of the High Court, in the City of Secunderabad without leave of the Chief City Civil ;Judge and elsewhere, without leave of the concerned District and Sessions Judge. In his appeal to this Court, the appellant contended that: (i) the High Court had no jurisdiction to take action under the Act as its provisions were not extended to the Telangana area of the State, which formed part of the former State of Hyderabad; and (ii) the Act was unconstitutional because it prevented some citizens from approaching the Court, which everyone is entitled to in a State governed by the rule of law. HELD: (i) (Per K. Subba Rao, K.N. Wanchoo, M. Hidayatullah and S.M. Sikri, J5.) The High Court was in error in holding that the Act merely created a procedural jurisdiction to put persons who indulge habitually in vexatious litigation under a procedural restraint in the former High Court of Madras, which jurisdiction, on its division into the two High Courts of Madras and Andhra Pradesh inhered in both the High Courts and continued to inhere in the High Court of Andhra Pradesh even for the purposes of those areas to which the Act had not been extended. [752 D F] The Act was passed by the Madras Provincial Legislature,and conferred jurisdiction upon the Madras High Court to deal with habitual litigants indulging in vexatious litigation. It was not an inherent jurisdiction of the Madras High Court. By sections 30 and 53 of the Andhra State Act, 1953, the Vexatious Litigation (Prevention) Act continued to be in force in the Andhra State, and the Andhra High Court possessed the same jurisdiction as the former Madras High Court. But the Act is unworkable in the State of Andhra Pradesh which is formed under the , by adding the Telangana area of the former Hyderabad State to the State of Andhra; and section 65 of the does not alter the position. [753 H] 744 All laws are intended to operate territorially and no Provincial Legislature in India, possesses extra territorial jurisdiction. What the Madras Legislature enacted was to operate in its own territory and it said so in the Vexatious Litigation (Prevention) Act. In its operative part also, the order under the Act was to be made with a territorial distinction between the Presidency town and the rest of the Presidency of Madras. The Act vested a jurisdiction in the High Court to deal with a particular type of litigant, but the Act made the High Court deal with the matter territorially and if new territories we 're to be governed by it had to be extended to the new territories and till so extended, the Act can only operate within the old territories. Under section 119 of the , no law of one of the amalgamating States is to be extended to the area of the other amalgamating States, except by a competent legislative or other competent authority, and further, the law shall be construed as restricted to the territories within each State immediately before the reorganisation. Since the Act has not been extended to the Telangana area, the application of the Act in that area is made impossible by section 119, and it cannot be extended by judicial construction. No doubt, the Court possesses a power, under section 121 of the , to construe laws by adapting them in such a manner as to facilitate their application to the newly formed State, but the power is of adaptation and not legislation. An increase in the territories in which an Act is to apply is dependent on legislation such as is contemplated by section 119. [753 F H; 754 A C] Moreover, there being no Presidency town in the State of Andhra Pradesh, section 2(1)(i) of the Act is inapplicable in the State of Andhra Pradesh. The mention of the Presidency town in the sub section was not with a view to indicate the seat of the High Court, but because the Madras High Court, possessed original jurisdiction in the Presidency town. Therefore, the distinction between the City of Hyderabad and other parts of Andhra Pradesh, drawn by the High Court as if the City of Hyderabad was a Presidency town, was an artificial distinction which should not have been drawn by the High Court. Section 2(1)(ii) is also inapplicable because, the contention that the entire State may be taken to be governed by that sub clause would lead to the strange result that the District and Sessions Judge would decide whether a particular litigant should be allowed to move the High Court in, appeal, revision or in an original proceeding. [754 E H] Per Shah, J. (Dissenting): Parliament having by the Andhra State Act invested the High Court of Andhra with authority to exercise all jurisdiction which the High Court of Madras possessed, within the territories of the State of Andhra, and thereafter, having by section 65(1)(a) of the extended the exercise of that authority over the entire territory of Andhra Pradesh, it would be impossible to accept the argument that in respect of the jurisdiction conferred by the Vexatious Litigation (Prevention) Act, the High Court of Andhra Pradesh was incompetent to pass the order which it did against the appellant. [759 A C] The Andhra High Court was a successor of the Madras High Court and exercised all the powers and administered the same law which the latter exercised in the territories comprised in the Andhra State. Since Parliament expressly provided by section 55 of the Andhra State Act, that a court may construe a law which it has to enforce, with such alterations not affecting the substance as may be necessary or proper to adapt it to the matter before the court, the expression "Presidency town" must, in the context of the constitution of a separate Andhra High Court, mean the town of the State in which the 745 High Court was located. If it be granted that the High Court of: Andhra had jurisdiction to pass orders under the Vexatious Litigation (Prevention) Act, it would be difficult to hold that section 119 of the restricts the exercise of the power by the High Court of Andhra Pradesh to prevent a vexatious litigant from instituting proceedings in 'and from Certain areas of the Andhra Pradesh and not elsewhere. Section 65(1) of the which must be read harmoniously with section 119 authoring the High Court of Andhra Pradesh to exercise all jurisdiction, which the High Court of Andhra could exercise, over all the territories transferred to the State of Andhra Pradesh from the existing State of Hyderabad. The Vexatious Litigation (Prevention) Act, does not require that the person to be restrained must be residing in or have a domicile within the jurisdiction of the Court, nor has the order contemplated to be passed, any direct territorial operation. It is a personal direction which imposes restrictions upon the person restrained. Once the High Court pronounces an order, it may be removed in appropriate cases only by the High Court, where the proceeding is to be instituted in any court in the town in which the High Court is located, and elsewhere, by order of the District and Sessions Court; and so, there is no conflict of jurisdiction between the High Court and the District Court. [756 D H] z (ii) (By Full Court): The Act is not unconstitutional. The litigants who are prevented from approaching the court without proper sanction are persons who habitually file vexatious actions. Even they are not deprived of their right to go to a court in genuine and bona fide actions, but the Act only creates a check. The object of the Act is to promote public good, because, it cannot be claimed that it is an inviolable right of any citizen to bring vexatious actions without control.

vil Appeal No. 215 of 1964. Appeal from the judgment and order dated August 24, 1961 of the Madras High Court in Case referred No. 102 of 1957. Niren De, Additional Solicitor General, R. Ganapathy Iyer and R.N. Sachthey, for the appellant. R. Thiagarajan, for the respondent. The Judgment of the Court was delivered by Shah, J. The respondent is a private limited Company. It carried on business in hides and skins, minerals, tobacco and other commodities, and also acted as managing agents for the Nellor Power and Light Company Ltd. and for two other Companies. T.M. Ayyadurai, T.M. Rangachari and P.C. Chakrabarti were directors of the Company. Each director was paid a fixed remuneration of Rs. 4,800/ per annum for attending to the business of the Company. On June 21, 1951 the respondent was appointed by the Central Government as its agent for buying, checking, weighing, leaf drying. storing. transporting, retaining and reselling tobacco under and in accordance with the directions issued from time to time. The Central Government agreed to pay to the respondent price of the tobacco purchased, charge at the rate of one anna per lb. for tobacco not redried, and at the rate of two annas per lb. for tobacco redried. and commission on all purchases. On June 22, 1951 the respondent passed a resolution placing T.M. Ayyadurai in "special charge" for arranging purchases of tobacco on credit, 694 inspecting tobacco at Guntur and at Madras Port, and for supervising shipment of tobacco, and agreed to pay him 30 per cent of the net profit as remuneration. Under the contract with the Government of India Rs. 1,38,454/ became due to the respondent as commission in the account year ending March 31. After providing Rs. 41,473/ for expenses, 30 per cent of the balance being Rs. 29,094/ was paid to T.M. Ayyadurai as commission and was claimed in the assessment year 1952 53 as a permissible deduction under section 10(2)(xv) of the Indian Income tax Act, 1922. The Income tax Officer allowed only 10 per cent of the net profit for the services rendered by T.M. Ayyadurai in the contract for tobacco purchase and sale. and disallowed Rs. 19,796/ out of the amount claimed by the respondent. The managing agency agreement of the respondent with the Nellore Power and Light Company Ltd., was terminated with effect from September 28, 1951 when the Government of the State of Madras in exercise of the powers conferred upon it by the Electrical Undertakings Acquisition Act, 1949 compulsorily ac quired the undertaking of that Company, and the respondent was paid Rs. 17,346/ as compensation for premature termination of its agency. This amount was taken into account by the Income tax Officer in computing the income of the respondent in the assessment year ending March 31. 1952. Appeals against the order passed by the Income tax Officer to the Appellate Assistant Commissioner and to the Tribunal challenging the disallowance of part of the commission and inclusion of compensation for termination of the managing agency agreement were unsuccessful. The Tribunal thereafter being directed by the High Court of Judicature, Madras under section 66(2) of the Indian Income tax Act, drew up a statement of the case and referred the following two questions to the High Court: "(1) Whether on the facts and in the circumstances of the case the disallowance of a sum of Rs. 19,796/ out of the remuneration paid to Mr. T.M. Ayyadurai is justifiable; and (2) Whether a sum of Rs. 17,346/ which represented compensation received by the assessee for the loss of the managing agency of the Nellore Power and Light Company Ltd. is income liable to tax?" The High Court answered both the questions in the negative. Allowance in respect of the amount covered by the first question was sought by the respondent under section 10(2)(xv) of the Income tax Act, 1922, which provided: "any expenditure not being an allowance of the nature described in any of the clauses (i) to (xiv) inclusive. and 695 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 question whether an amount claimed as expenditure was laid out or expended wholly and exclusively for the purpose of such business, profession or vocation has to be decided on the facts and in the light of circumstances of each case. But as observed by this Court in Eastern Investments Ltd. vs Commissioner of Income tax, West Bengal(1) the final conclusion on the admissibility of an allowance claimed is one of law. The High Court had therefore power to call upon the Tribunal to submit a statement of the case under section 66(2) of the Indian Income tax Act. In considering whether the expenditure to remunerate a person for services rendered is allowable under section 10(2)(xv) the Income tax Officer must have regard to all the circumstances, such as, nature and special character of the service, practice if any in the trade for payment of a percentage of profit to an employee in similar circumstances, qualifications of the employee for rendering the service, amount if any paid by the assessee to another person for rendering similar service, normalcy of the allowance having regard to the practice in the trade, existence of any other extraordinary and abnormal circumstances in the arrangement or special reasons or circumstances which may suggest that the transaction was abnormal, and the like. The normal business of the respondent was in hides and skins, minerals and tobacco. It does not appear, however, that the turnover of the Company was large. The contract to purchase tobacco on behalf of the Government of India was apparently out of the way of the normal business of the respondent and demanded the setting up of a special organisation. Under the terms of the contract the respondent was to be the agent of the Central Government for buying, checking, weighing, leaf drying, storing, transporting, retaining and reselling tobacco under and in accordance with the directions given to it from time to time by the Government. The respondent agreed to buy tobacco within the ceiling price fixed as and when directed by the Government, and was responsible for buying proper grades of tobacco, for correctly checking the weights, for taking delivery from the sellers, for redrying it whenever so directed, for securing proper packing for transport by rail road or sea so as to conform to standards of packing usually employed in the export of tobacco or standards to the satisfaction of the purchaser, and for getting the tobacco inspected by the Tobacco Grading Inspectorate of the Indian Central Tobacco Committee according to the AGMARK standards. The respondent had to place a go down at the disposal of the Government within their premises at Guntur. The respondent had to use its best (1) 20 I.T.R. I. 696 endeavour to buy as cheaply as possible within the ceilings prescribed and to sell it for such maximum price as may be obtainable, not being below the price prescribed by the Government, to re sell tobacco which the Government may direct it to sell by instructions in writing, in such manner and at such price as may be specified by the Government, and to finance the entire transaction of purchasing tobacco in the first instance out of its own funds. The respondcat was to take all necessary steps to safeguard the stocks and to maintain fire fighting services. Goods purchased by the respondent if not of the grade or quality were liable to be rejected by order of the Tobacco Grading Inspector. Performance of the contract evidently required expert knowledge of the practical side of the business of purchasing tobacco, getting it redried if it was raw, and of packing, storing, transporting and shipping it. The respondent had entered into a profitable contract, but any negligence in purchasing, storing, packing, transporting and shipping the goods might have resulted in serious losses to the respondent. The Income tax Officer accepted that the expenditure for payment of remuneration for attending to the contract was laid out for the purpose of the business of the respondent, but reduced the stipulated rate to 10 per cent on two grounds: that T.M. Ayyadurai was the brother of T.M. Rangachari, and that he was, as a director of the Company, bound to attend to all the activities of the Company including the contract. There is no evidence that the agreement was motivated by considerations other than strictly business considerations. There is also no evidence that as a director T.M. Ayyadurai was bound to attend to all the activities of the Company including the special contract with the Central Government. The duties which the director was bound to perform for earning the remuneration of Rs. 400/ per month are not on the record, but even in the opinion of the taxing authorities the duties of T.M. Ayyadurai as director did not cover attendance to the contract with the Government. T.M. Ayyadurai and T.M. Rangachari are brothers, but that by itself is not sufficient to justify an inference that unreasonable or excessive remuneration was agreed to be paid. The person who was called upon to attend to a contract of this magnitude was required to have expert knowledge of the business, apply his time exclusively thereto, travel from time to time, maintain supervision and control at the stage of purchase, redrying, packing, transport and loading for shipment. Presumably T.M. Ayyadurai was such a person, and that is why he was selected for earning for the respondent a large amount of commission by duly performing the contract. The Appellate Assistant Commissioner merely paraphrased the decision of the Income tax Officer and regarded 10 per cent of the net profits as reasonable. The Appellate Tribunal observed that the Appellate Assistant Commissioner had given "clear and 697 convincing reasons in support of the disallowance" to which they had nothing more to add. An analysis of the reasons given by the Income tax Officer discloses no grounds to support the view that remuneration at a rate exceeding 10 per cent of the net profit was excessive or unreasonable. We are of the view that the contract with the Government was for the respondent an important contract requiring constant and vigilant application and supervision by a person well acquainted with the practical details of the business. If the management of the respondent as prudent businessmen for advancing the interest of the respondent bona fide regarded 30 per cent of the net profits as reasonable remuneration, the revenue authorities were not justified in reviewing their opinion and reducing the rate of remuneration. It is true that if on a consideration of the relevant materials, the Appellate Tribunal is of the opinion that a particular remuneration stipulated to be paid is not bona fide, or is unreasonable, the High Court in exercising its advisory jurisdiction has no power to interfere with that opinion. But the material circumstances relating to the nature of the contract, the services to be performed and the nature of the duties by the employee were not at all taken into account by the Tribunal and the income tax authorities. We therefore agree with the High Court that the first question should be answered in the negative. The contract under which the respondent Company was appointed managing agent for the Nellore Power and Light Company Ltd., was to ensure till 1960, but it had to be prematurely terminated because the Government of Madras exercising its powers under the Madras Electrical Undertakings Acquisition Act, 1949 had compulsorily acquired the electricity undertaking. With the acquisition of that undertaking the right of the respondent as managing agent ceased. Under section 15 of the Electrical Undertakings Acquisition Act, the Government was bound to pay compensation which would include compensation for termination of the managing agency agreement. The respondent received Rs. 17,346/as compensation for termination of the agency, computed in the manner laid down in section 15 of that Act. Prima facie, such a receipt being in lieu of extinction of an asset of the assessee, is a capital receipt. It was urged, however, on behalf of the revenue that the respondent was carrying on business of taking up managing agencies and that by the extinction of one of the managing agencies, the business structure of the respondent was not impaired. In a recent judgment delivered by this Court in Kettlewell Bullen and Company Ltd., vs Commissioner of Income tax, Calcutta(1). it was pointed out that: "It may be broadly stated that what is received for loss of capital is a capital receipt: what is received as profit in a trading transaction is taxable income. But the (1) 698 difficulty arises in ascertainting whether what is received in a given case is compensation for loss of a source of income, or profit in a trading transaction. " The Court further observed: "It cannot be said as a general rule. that what is determinative of the nature of the receipt is extinction or compulsory cessation of an agency or office. Nor can it be said that compensation received for extinction of an agency may always be equated with price received on sale of goodwill of a business. The test applicable to contracts for termination of agencies is: what has the assessee parted with in lieu of money or money 's worth received by him which is sought to be taxed? If compensation is paid for cancellation of a contract of agency. which does not affect the trading structure of the business of the recipient, or involve loss of an enduring asset, leaving the taxpayer free to carry on his trade released from the contract which is cancelled, the receipt will be a trading receipt: where the cancellation of a contract of agency impairs the trading structure, or involves loss of an enduring asset, the amount paid for compensating the loss is capital. " Turning to the facts of the present ease, it must in the first instance be observed that it is for the revenue to establish that a particular receipt is income liable to tax, and beyond stating that the respondent was the managing agent of the Nellore Power and Light Company Ltd. and of two other Companies, there is no other evidence about the nature of the business of the two other Companies of which the respondent was the managing agent. about their relative importance qua the managing agency of the Nellore Power and Light Company Ltd., and whether by reason of the extinction of the managing agency of the Nellore Power and Light Company Ltd., any enduring asset was lost to the respondent, or its trading organisation was adversely affected. The Income tax Officer observed that the "Company 's business of Managing Agency as such had not come to an end", the Company still continues as "managing agents of other companies". Even after surrender of one of the agencies, the Company carries on business as before, its structure not being affected" and therefore "the receipt is to be considered as revenue, in accordance with the decision in Kelsal Parsons and Company vs C.I.R. 21 T.C. No. 608.", and with that view the Appellate Assistant Commissioner and the Tribunal agreed. But in the absence of evidence as to what effect the determination of the managing agency of the Nellore Power and Light Company Ltd., had upon the business of the respondent, the mere circumstance that the respondent had managing agencies of two other companies without more will not bring the ease within Kelsal Parsons and Company vs Commissioners of Inland Reve 699 nue(1). In Kettlewell Bullen and Company 's case(2) this Court pointed out that ordinarily compensation for loss of office or agency is regarded as a capital receipt, but the rule is subject to an exception that payment received even for termination of an agency agreement, where the agency is one of many which the assessee holds, and the termination of the agency does not impair the profit making structure of the assessee, but is within the framework of the business, it being a necessary incident of the business. that existing agencies may be terminated, and fresh agencies may be taken, is revenue and not capital. Kelsal Parsons and Company 's case(1) falls within the exception to the ordinary rule, and circumstances which brought the case of the respondent within the exception must be clearly established. The High Court was of the opinion that compensation received for taking over the Nellore Power and Light Company Ltd., was a capital receipt not liable to be taxed, and on the materials placed before us, we are unable to disagree with the High Court on this question. The appeal therefore fails and is dismissed with costs. Appeal dismissed, (1) 21T.C. 608.

IN-Abs

Managing Agency Compensation for termination of Circumstances in which such compensation is revenue. The respondent, a private limited company, carried on business in tobacco and other commodities and also acted as managing agents for the N company and for two other companies. It had three directors, all of whom were paid a fixed remuneration for attending to the business of the company. On June, 21, 1951, the respondent company was appointed an agent of the Central Government for buying, checking, leaf drying, and retaining and reselling tobacco under, and in accordance with, directions issued from time to time. On June 22 1951 the respondent passed a resolution placing one of the directors, A, in "special charge" of all the work under the contract with the Central Government and agreed to pay him 30 per cent of the net profits from the contract. Under this arrangement, for the year ended 31st March 1952, commission at 30 per cent was calculated and paid to A and was claimed in the assessment year 1952 53 as a permissible deduction under section 10(2)(xv) of the Income tax Act, 1922. The Income tax Officer allowed only 10 per cent of the net profit for the services rendered by A and disallowed the balance :amount claimed by the respondent. The managing agency agreement of the respondent with the N Company was terminated in September 1 '951, when the State Government acquired the undertaking of that company, and the respondent was paid Rs. 17,346 as compensation for premature termination of its agency. This amount was taken into account by the Income tax Officer in computing the respondent 's income for the year ended March 31, 1952. Appeals against the order of the Income tax Officer to the Appellate Assistant Commissioner and to the Tribunal challenging the disallowance of part of the commission and inclusion of the compensation for termination of the managing agency were unsuccessful. On a reference on both these points, the High Court decided them in the respondent 's favour. HELD: (i) The contract with the Government was, for the respondent, an important contract requiring special attention by a person well acquainted with the practical details of the business. If for such special services the management as prudent business men for advancing the interest of respondent bona fide regarded 30 per cent of the net profits as reasonable remuneration, the revenue authorities were not justified in reviewing that opinion and reducing the rate of remuneration. [697B, C] 693 Where, on a consideration of the relevant materials the Appellate Tribunal is of the opinion that a particular remuneration is not bona fide, or is unreasonable, the High Court, in exercising its advisory jurisdiction, has no power to interfere with that opinion; but in the present case, material circumstances relating to the nature of the contract and the special services to be performed were not at all taken into account by the revenue authorities. [697C E] (ii) Ordinarily, compensation for loss of office or agency. is regarded as a capital receipt; but this rule is subject to an exception that payment received even for termination of an agency agreement, where the agency is one of many which the assessee bolds, and the termination of the agency does not impair the profit making structure of the assessee, but is within the frame work of the business, it being a necessary incident of the business that existing agencies may be terminated and fresh agencies may be taken, is revenue and not capital. However, in the absence of evidence as to what effect the determination of the managing agency of the N company had upon the business of the respondent, the mere circumstance that the respondent had managing agencies of two other companies without more would not bring the present case within the exception [698H; 699 A c] Kelsal Parsons & Co. vs Commissioners of Inland Revenue, 21T.C. and Kettlewell Bullen & Co. C.I.T. Calcutta, explained and distinguished.

ivil Appeals Nos. 96 to 98 of 1964. Appeals by special leave from the judgments and orders dated September 22, 1960, and December 6, 1960 of the Punjab High Court in Income tax References Nos. 19 of 1958 and 6 of 1959 respectively. S.V. Gupte, Solicitor General, R. Ganapathy Iyer and R.N. Sachthey, for the appellant. Deva Singh Randhawa and Harbans Singh, for the respondent. The Judgment of the Court was delivered by Shah, J. On April 10, 1953 the estate of the joint Hindu family of which the respondent was a member was partitioned, and the respondent was allotted, besides other properties, 400shares of the Simbhaoli Sugar Mills Private Ltd., and was made liable to pay a business debt amounting to Rs. 3,91,875/ due by the family to R.B. Seth Jessa Ram Fateh Chand of Delhi. On April 14, 1953 the respondent executed a deed of trust in respect of 300 out of the shares of the Simbhaoli Sugar Mills which fell of to his share. The following are the material provisions of the deed of trust. "AND WHEREAS on partition, the author was allotted amongst other properties, four hundred shares of the Simbhaoli Sugar Mills Ltd., and fixed with liability for discharge of certain debts of the Joint Hindu Family AND WHEREAS for discharge of the debts detailed in the schedule appearing hereafter, the author now as absolute owner of the said shares has decided to settle on trust three hundred shares numbering 1 to 300 both inclusive, out of the said shares for the benefit of his creditors and other beneficiaries named hereafter and for the objects mentioned hereafter. The author as holder of 300 shares out of the capital of Simbhaoli Sugar Mills Ltd. divesting himself of all proprietary rights in the said shares. hereby declares that the said shares shall from this day be irrevocably held on Trust by the Trustees to be used by them for all or any of the purposes following, that is to say : (a) To pay off the debts as detailed in Schedule 'A ' attached hereto: These debts were incurred for the benefit of the Joint Hindu Family of the author and on disruption of the Joint Hindu Family and partition of properties among its members, made payable by the author. 686 And after his debts are paid off. (b) To provide for the maintenance and education of the children and grand children of the author. (c) To open and run Hospitals and Nursing Homes. (d) To open and run School or SchooLs for the education of boys or girls in scientific and technical subjects. To open and maintain a reading room and a lending library. (f) To provide for the maintenance and education of orphans, widows and poor people and for that to give scholarships for inland and overseas studies to found orphanage. widow houses and poor houses and to do all other things that the trustees may deem fit for carrying out the objects of the Trust. " By el. 3 four persons including the respondent were appointed trustees, and the respondent was to hold the office of Chairman of the Trust during his lifetime. The trust deed then provided: "In the books of the Company, the shares will stand in the name of the Chairman for the time being, who will have the power to operate the Bank accounts of the Trust, to preside at the meetings, exercise the right of th e vote in respect of the shares of the Trust. " Clause 5 provided: "It is hereby declared that the trustees shall have the following powers in addition to the powers and the authorities hereinfore contained: (i) The trustees shall not be entitled to sell the shares except as provided hereafter but they can mortgage or pledge the same for raising funds as they may feel necessary for paying off the debts of the author, provided (ii) . . (iii) . . . (iv) . . Clause 6 provided: "That in carrying out the objects of the trust the trustees shall keep in mind and abide by the following directions: (i) The payment of the debts of the author as detailed in Schedule 'A ' referred to above shall receive the topmost priority and the trustees shall not spend any money out of the trust property or its income 687 in any direction till they have paid off all the debts of the author, provided always if the trustees are unable to pay off the debts, out of the income i.e. dividends, bonuses etc. of the shares within a period of ten years they shall be entitled to sell the same or part of it and thus pay off the debts that may be due at that time. (ii) After debts are discharged the trustees shall spend the income of the trust property. remaining in their hands after full discharge of the debts, on the maintenance of the children and grand children of the author and the remaining 20% on all or any of the other objects of the trust as the Trustees may think best. (iii) . . The respondent claimed before the Income tax Officer, Eward. Amritsar that the dividend received by the trustees in respect of 300 shares of the Simbhaoli Sugar Mills was the income of the Trust and that he had no concern with that income as he had "divested himself irrevocably of the ownership of the shares" and that in any event Rs. 19,856/ being the amount due as interest to R. B. Seth Jessa Ram Fateh Chand should be allowed as a permissible deduction in computing the net income from dividend of the shares. The Income tax Officer rejected the contentions of the respondent, holding that the Trust was a "fictitious transaction". The Appellate Assistant Commissioner held that the respondent had not "irrevocably transferred the 300 shares of the Simbhaoli Sugar Mills" and therefore by virtue of section 16(1)(c) proviso one the respondent could not escape liability to pay tax on the dividend from the share. The respondent appealed to the Income tax Appellate Tribunal. but without success. At the instance of the respondent the Tribunal drew up a statement of the case and referred the following questions to the High Court at Chandigarh: "(1) Whether the dividend income of 300 shares of the Simbhaoli Sugar Mills, Private Ltd. transferred by the assessee to section Raghbir Singh Trust was the income of the assessee liable to tax? (2)Whether the assessee was entitled to claim deduction of Rs. 19,856/ paid as interest to R.B. Seth Jessa Ram Fateh Chand against the dividend income of the aforesaid 300 shares?" The High Court answered the first question in the negative and declined to answer the second question. With special leave. the Commissioner of Income tax has appealed to this Court. Section 2 sub section (15) defines "total income" as meaning total amount of income, profits and gains referred to in sub section (1) of section 4 688 computed in the manner laid down in the Act. Section 16 of the Income tax Act enumerates the exemptions and exclusions admissible in the computation of total income in certain specified cases. The material part of cl. (c) of sub section (1) of section 16 is as follows: "In computing the total income of the assessee (c) all income arising to any person by virtue of a settlement or disposition whether revocable or not, and whether effected before or after the commencement of the Indian Income tax (Amendment) Act, 1939 (VII of 1939), from assets remaining the property of the settlor or disponer, shall be deemed to be income of the settlor or disponer, and all income arising to any person by virtue of a revocable transfer of assets shall be deemed to be income of the transferor: Provided that for the purposes of this clause a settlement, disposition or transfer shall be deemed to be revocable if it contains any provision for the retransfer directly or indirectly of the income or assets to the settlor, disponer or transferor, or in any way gives the settler, disponer or transferor a right to reassume power directly or indirectly over the income or assets: Provided further that the expression 'settlement or disposition ' shall for the purposes of this clause include any disposition, trust, covenant, agreement or arrangement, and the expression 'settlor or disponer ' in relation to a settlement or disposition shall include any person by whom the settlement or disposition was made: Provided further that this clause shall not apply to any income arising to any person by virtue of a settlement or disposition which is not revocable for a period exceeding six years or during the lifetime of the person and from which income the settlor or disponer derives no direct or indirect benefit but that the settlor shall be liable to be assessed. on the said income as and when the power to revoke arises to him." Clause (c) was intended, while seeking to protect a genuine settlement by which the tax payer intends to part with control over property and its income. to circumvent attempts made by him to reduce his liability to pay income tax by the expedient of so arranging a settlement or disposition of property that the income does not accrue to him, but he reserves a power over or interest in the property settled or disposed of, or in the income thereof. By cl. 689 c) income arising to any person by virtue of a settlement or disposition whether revocable or not is deemed to be income of the settlor or disponer if the assets remain the property of the latter. Again income arising to any person by virtue of a revocable transfer of assets is deemed to be the income of the transferor. The first proviso then deems a settlement statutorily revocable, if it contains any provision for retransfer directly or indirectly of the income or assets settled, to the settlor, or where it gives to the settlor a right to reassume power directly or indirectly over the income or assets. By the second proviso the expression "settlement or disposition" includes a disposition, trust, covenant, agreement or arrangement the Legislature has thereby sought to bring within the net, transactions similar to though not strictly within the description of settlements and dispositions. The third proviso carves out from the amplitude of cl. (c) as expounded by the first and the second provisos income arising to any person from a settlement which is not revocable for a period exceeding six years or during the lifetime of the person and from which income the settlor derives no benefit direct or indirect. It was observed in a recent judgment of this Court: Commis sioner of Income tax, Bihar and Orissa vs Rani Bhuwanesliwari Kuer(1) that: "By the first proviso, settlements, dispositions or transfers of the character described therein, are deemed revocable for the purpose of the principal clause. The function of proviso I and proviso 2 is plainly explanatory. The second proviso in terms says that the expression settlement or disposition" is to include any disposition, trust, covenant, agreement or arrangement, and the expression "settlor or disponer" is to include any person by whom the settlement or disposition was made. Similarly the first proviso states that settlements, dispositions or transfers, if they are of the character described, shall for the purpose of the principal clause be revocable transfers. " The terms of section 16(1)(c) first proviso are reasonably plain. A settlement or disposition is deemed to be statutorily revocable if there is a provision therein for retransfer of the income or assets or which confers a right to reassume power over the income or assets. The provision may even be for retransfer indirectly or for conferring power to reassume indirectly over the income or the assets. But the actual retransfer or exercise of the power to reasume is not necessary; if there be a provision of the nature con templated, the proviso operates. The terms of the deed may now be examined. The shares were settled upon trust, and four trustees one of whom was the respondent were appointed. Genuineness of the trust is no longer (1) ,202. 690 in dispute. The direction that the shares are to stand in the name of the Chairman for the time being appears to have been necessitated by section 33 of the Indian Companies Act, 1913 which prevented notice of any trust, expressed, implied or constructive to be entered on the register. The deed recites that the shares are to be held on trust irrevocably by the trustees for all or any of the purposes mentioned therein. The purpose for which the shares are to be held in the first instance is to pay off the debt due to R.B. Seth Jessa Ram Fatch Chand, and it is only after the debt is paid off that the directions in cls. (b) to (f) of cl. 2 come into operation. The deed is in terms expressly irrevocable, but on that account the operation of the first proviso is not excluded. If by the direction for application of the income for satisfaction of the debts due by the respondent, it could be said in law that there is a provision for retransfer directly or indirectly of the income or a right to reassume directly or indirectly power over the income, the settlement would be deemed revocable, recital that it is irrevocable notwithstanding. But the income from the shares since the execution of the deed of settlement arises to the trustees and it is liable to be applied for the purposes mentioned in the deed. The income has to be applied for satisfaction of debts which the settlor was under a obligation to discharge. but that is not to say that there is a provision for retransfer of the income or assets to the settlor, or that the settlor is invested with power to reassume the income or assets. The assets and the income are unmistakably impressed with the obligations arising out of the deed of trust. The settlor it is true obtains benefit from the trust consequent upon satisfaction of his liability, but on that account the first proviso is not attracted. We are unable to accept the argument of counsel for the revenue that by the use of the expression "indirectly" in the first proviso the Legislature sought to bring within the purview of el. (c) cases where the settler was under the guise of a trust seeking to discharge his own liability. The proviso contemplates cases in which there is a provision for retransfer of the income or assets and such provision is for retransfer directly or indirectly. It also contemplates cases where there is a provision which confers a right upon the settlor to reassume power over the income or assets directly or indirectly. It is the provision for retransfer directly or indirectly of income or assets or for reassumption of power directly or indirectly over income or assets which brings the case within the first proviso. Cases in which there is a settlement, but there is no provision in the settlement for retransfer or right to reassume power do not fail within the proviso, even if as a result of the settlement, the settler obtains a benefit. It has been held in two cases decided by the High Court of Bombay that a person under an obligation arising out of his status 691 may execute a trust to discharge his own obligation without attracting the operation of section 15(1)(c). In Ramji Keshavji vs Commissioner of Income tax, Bombay(1) under a consent decree. the assessee executed a deed of trust conveying certain properties for the benefit of his wife. to the trustees. The deed provided that the net income from the properties shall be paid to the assessee 's wife during her lifetime and that she shall maintain her minor children by the assessee anal "run the household". It was held by the High Court that the income derived from the trust property and payable to the assessee 's wife during her lifetime could not be deemed to be the assessee 's income, for the direction in the deed did not amount to a provision for retransfer of the income or assets or for reassumption of power directly or indirectly over income or assets within the meaning of the first proviso to section 16(1)(c). In D.R. Shahapure vs Commissioner of Income tax, Bombay(2) the assessee with the object of making a provision for his wife made an entry in his business books of account crediting Rs. 20,000/ , and endorsed against the entry. "The capital supplied to you will remain entirely mine but you will get the income over it up to the end of your life. This capital I will not take back up to the end of your life but I will do business for you on this capital and see that you get Rs. 600 per annum for you". No specific assets were set apart to. meet the sum of Rs. 20,000/ and there were no other entries in the books with regard to it. The High Court held that the entry was an irrevocable covenant to pay the income accruing on Rs. 20,000/ with a guarantee that it shall be Rs. 600 a year, and therefore the case was covered by the third proviso to section 16(1) (c) of the Act and the income which was paid to the wife under the covenant could not be deemed to be the income of the assessee under the first part of section 16(1)(c). In our view these cases were correctly decided. The appeals fail and are dismissed with costs. One hearing fee. Appeals dismissed. (1) (1945)13 I.T.R.105.

IN-Abs

The respondent executed a deed of trust in respect of certain shares owned by him in a company. The deed directed the trustees to apply the income and property of the trust in the first instance for paying off the settlor 's debts, and thereafter for other purposes of the trust. In proceedings under the Indian Income tax Act, 1922 it was held by the Income tax Officer that the trust was a fictitious transaction. The Appellate Assistant Commissioner held that the transfer of the shares for the purpose of the trust was not irrevocable and therefore under the proviso to section 16(1)(c) the respondent could not escape liability. The Tribunal upheld the order of the Assistant Commissioner but referred to the High Court, inter alia, the question whether the income from the trust property could be taxed in the hands of the assessee. The High Court answered the question in the negative. The Commissioner of Income tax, appealed to this Court. HELD: After the execution of the deed of settlement the income from the shares arose to the trustees and was liable to be applied for the purposes mentioned in the de.ed. The income had first to be applied for satisfaction of debts which the settlor was under an obligation to pay, but this did not amount to a re transfer of the income or assets to the settlor, nor did it invest the settlor with a power to re assume the income or assets. The assests and the income were unmistakably impressed with the obligations arising out of the trust. The settlor certainly obtained a benefit from the trust consequent upon the satisfaction of his liability but on that account the first proviso to section 16(1) was not attracted. [690D F] The proviso contemplates cases in which there is a provision for retransfer of the income or assets and such provision is for retransfer directly or indirectly. It also contemplates cases where there is a provision which confers a right upon the settler to reassume power over the income or assets directly or indirectly. It is the provision for retransfer directly or indirectly of income or assets or for reassumption of power directly, or indirectly over income or assets which brings the case within the proviso. Cases in which there is a settlement, but there is no provision in the settlement for retransfer or right to reassume power do not fall within the proviso, even if as a result of the settlement, the settler obtains some benefit. 1[690G, H] Ramji, Keshavji vs C.I.T. Bombay, and D.R. Shahapura vs C.I.T., Bombay approved.

Appeal No. 427 of 1964. Appeal by special leave from the judgment and order dated August 28, 1959 of the Bombay High Court in Civil Application No. 1638 of 1959. Bishan Narain, J. P. Mehta, section N. Prasad, J. B. Dadachanji, O.C. Mathur and Ravinder Narain, for the appellant. R. M. Hazarnavis, K. L. Hathi, Atiqur Rehman, for the res pondent. The Judgment of the Court was delivered by Shah, J. Respondent in this appeal is the owner of a build ing used as a cinematograph theatre. By a registered deed dated December 23, 1960, the appellant obtained a lease of the theatre at a monthly rental of Rs. 1,801/ . The appellant applied under section 11 of the Saurashtra Rent Control Act 22 of 1951 hereinafter called 'the Act ' for an order fixing the standard rent of the theatre. He submitted that the rent stipulated to be paid under the lease was "excessive, exorbitant and improper" and that the standard rent of the theatre, having regard to its situation and size and the amenities provided therein, could not exceed Rs. 350/per mensem. The respondent by his written statement submitted that the rent stipulated under the lease was reasonable. The Court of First Instance fixed the standard rent of the whole theatre at Rs. 1,030/12/ being the one twelfth of the gross return of 6% on the cost of construction of the theatre and the cost of furniture installed therein. But the learned Judge held that the respondent had not delivered to the appellant possession of the basement and of a part of the building which was intended to be used for a restaurant, and on that account reduced the standard rent payable by the appellant by Rs. 220/ 182 Against the order of the Civil Judge, the respondent preferred an appeal under section 28(1) of the Act to the District Court, Gohilwad, and the appellant preferred cross objections to the order appealed from. The District Court agreed with the Trial Court that the cost of construction of the building and cost of the furniture was Rs. 2,06,150/ , and held that standard rent should be fixed on the basis of a return of 7 % of the cost of the building and furniture, and on that footing computed the standard rent at Rs. 1,200/ per mensem. The District Court further held that possession of the space reserved for a restaurant was delivered to the appellant and since about June 1952 it was in the appellant 's occupation. It was however common ground between the parties that possession of the cellar was not delivered by the respondent to the appellant. It was the case of the respondent that the cellar was not included in the premises let out. It was the case of the appellant that it was so included. On the view that the cellar was not included in the tenancy, the District Court directed that standard rent of the premises in the occupation of the appellant be fixed at Rs. 1,150/ per mensem. Against the order of the District Court, second appeal No. 552 of 1959 preferred by the appellant to the High Court of Judicature at Bombay was by order dated March 30, 1959 dismissed under 0. 4 1, r. 11 (1) of the Code of Civil Procedure. The respondent also preferred an appeal to the High Court. For reasons which we are unable to ascertain this appeal was not made ready for hearing before the Bombay High Court, and on reorganisation of the State of Bombay that appeal was transferred to the High Court of Gujarat and we were informed at the Bar that the appeal is now pending before that High Court. Against the order of the Bombay High Court dismissing his appeal, the appellant has appealed to this Court. It is somewhat unfortunate that the appeal filed by the res pondent has been admitted to the file and is to be heard on the merits, while the appeal filed by the appellant was summarily dismissed. Counsel for the appellant submitted that we should set aside the order of the High Court of Bombay, since a second ap. peal under section 28 of the Act Jay to the High Court on a question of fact as well as of law, and as there was "voluminous evidence" on the record which had to be considered in determining the appropriate standard rent, the High Court of Bombay committed a grave error in summarily dismissing the appeal. We are unable to agree with that plea. Section 28(1) of the Act provides: "Notwithstanding anything contained in any law, but subject to the provisions of the Provincial Small Cause Court Act, as adapted and applied to the State of 183 Saurashtra, an appeal shall lie from a decree or order made by a Civil Judge or a Munsiff exercising jurisdiction under section 27 to the District Court and a second appeal to the High Court. " It was said that the expression "second appeal" in section 28(1) of the Act means an appeal from an appellate decree, but restrictions imposed by section 100 of the Code of Civil Procedure upon the power of the High Court are not attracted to a "second appeal" under s 28 of the Act. Ordinarily, says counsel for the appellant, an appellate Court is competent to examine the correctness of the decision appealed from on the ground that the decision is erroneous in point of law or fact, and in the absence of any express provision to the contrary, restrictions imposed on the power of the High Court under one statute cannot be imported merely because of similarity of nomenclature, when exercising jurisdiction under another statute unless those restrictions are imposed by express enactment or necessary intendment. It was said that the State of Saurashtra has not imposed restrictions upon the power of the High Court in dealing with a second appeal under section 28 of the Act, and the High Court was competent and was indeed bound to entertain all objections to the correctness of the judgment appealed from. It is true that in the body of section 100 of the Code of Civil Procedure the Legislature has not used the expression "second appeal". That expression however occurs in the marginal note of section 100 and in the text of sections 101, 102 & 103. Section 101 is enacted to make explicit what is clearly implied in section 100 Code of Civil Procedure: section 102 prohibits second appeals from decrees in certain classes of suits; and section 103 confers power upon the High Court to determine questions of fact in certain conditions. It is clear therefore that the expression "second appeal" in the Code means an appeal to a High Court from the decision in a civil suit or proceeding of a first appellate Court subordinate to the High Court. Section 27 of the Act does not confer any special jurisdiction upon the courts described therein, for the Act creates no new rights; it only seeks to regulate the rights and obligations of landlords and tenants in respect of certain classes of tenancies in urban areas. The disputes directed to be dealt with under the Act are essentially disputes of a civil nature: and the courts invested with Power under section 27 of the Act have to adjudicate upon the disputed right in the light of the special provisions and not by the Transfer of Property Act and the Contract Act. The Act has again merely declared that a second appeal will lie to the High Court against decrees or orders passed by the courts exercising jurisdiction under section 27, but thereby the essential character of a second appeal under the Code is not altered. The procedure in the trial of suit, 184 applications and proceedings under the Act is the procedure prescribed by the Code of Civil Procedure, except where it is other. wise provided expressly or by clear implication. It is true that certain orders contemplated to be made under the Act determining rights and obligations of the parties are made appealable under section 28, though such orders are not appealable under the Code, but that is not a ground for holding that the Legislature intended to confer upon litigants a right of second appeal unhampered by the restrictions imposed by section 100 of the Code. In Doshibai Khanna vs Sandhi Suleman Gulmamad(1) a single Judge of the Gujarat High Court, following an unreported judgment of that Court in Nagardas Harichand vs Modi Mohanlal(1) observed that in a second appeal under the Act correctness of the decision of the District Court on questions of fact was liable to be canvassed in the High Court. For reasons already mentioned, we are unable to agree 'With the view that in a second appeal under section 28 of the Act, questions which may not be raised in an appeal under section 100 of the Code of Civil Procedure may be raised. It is true that in Union of India vs Mohindra Supply Com pany(1) this Court held that by providing in section 39(2) of the , that "no second appeal shall lie from an order passed in appeal under this section", it was intended to prohibit an appeal under the Letters Patent. But the Court reached that conclusion because of the scheme of the . The Legislature having prohibited a second appeal under the , obviously the limits of the power which the Court could. exercise if such an appeal were entertained could not fall to be determined in that case. Section 11 of the Act does not contemplate that the decision of the Court determining standard rent shall be incorporated into a decree of the Court, and by section 28 of the Act a second appeal lies to the High Court against an order determining standard rent. The orders which determine on the merits, rights and obligations of the parties arising out of the relation of landlord and tenant, may have serious consequences, and the Legislature has conferred a right of appeal to the party aggrieved by those orders. But the right of appeal on that account is not released from the restriction which are attracted by its very nature. We are of the view that a second appeal under section 28 of the Act may be entertained by the, High Court within the limits prescribed by section 100 of the Code of Civil Procedure, and it is not open to the parties to demand reappraisal of the evidence by the High Court on the ground that the District Court has erred in its view of the evidence. The High Court of Bombay was apparently of the view that no question of law arose in the appeal, and it was competent to dismiss the appeal under 0. 4 1, r. 1 1 (1) of the Code. (1) (2) S.A. No. 381 of 1960 decided on Septr. 21, 1954. (3) 185 It was then urged that the judgment of the Distt. Court proceeded upon misconception of the evidence on the record, and on that account a second appeal would lie within the limits prescribed by section 100 of the Code of Civil Procedure. It was said that in computing the cost of construction, the appellate Court had taken into consideration several items of expenditure which may not properly enter into the cost of construction. According to the books of account of the respondent the total cost incurred by the respondent was Rs. 2,11,790/5/ . This amount included the cost of transport, miscellaneous items, pan Biding, distribution of sweets, and Puja totaling Rs. 8,855/15/3. The trial Judge was of the view that certain miscellaneous items were not allowable in the computation of the total cost of the building and he held that an amount of Rs. 5,640/5/ should be disallowed and with that view the appellate Court agreed. We do not think that the Courts below committed any error of law or misconceived the evidence in holding that only Rs. 5,640/5/ be disallowed out of the total cost of construction on the ground that they could not reasonably enter the computation. It was then said that the Courts below committed an error in taking into consideration the whole price paid by the respondent for the land and building purchased by him. The appellant had purchased for Rs. 30,701 / an area of land together with houses thereon and had demolished the houses and had erected the theatre in respect of which this dispute has arisen. The houses had, it appears, been let out and rent was being received by the owner. It was urged. by the appellant that the rent should be capitalised and the value of the land determined by deducting from the price paid by the respondent such capitalised value of the structure. But that would be a wholly faulty method of valuation. Rent received from a structure, is determined not merely by the nature of the structure and the accommodation provided thereby, but also by the situation and the amenities provided by the land on which the structure stands. A building when let out forms a composite unit with the land on which it stands, and the rent received from the building cannot be wholly attributed to the building. The respondent purchased the property with a view to pull down the houses thereon and to put up a building adapted for use as a cineniatograph theatre. It is true that some rent was recovered from the tenants before the structures were pulled down. But since the respondent purchased the land and the buildings for putting up a new building thereon, he may reasonably be regarded as having paid for the property purchased the value of the land and of the debris of the superstructures. The debris which by sale fetched Rs. 9,171/3/ has been given credit for in arriving at the total cost of the theatre. It is also worthy of note that one Masataram, a consulting architect, estimated the cost of the structure to be Rs. 2,35,777/1/2 186 at the rates prevailing in 1950. He stated that the prices prevailing in 1954 when he gave evidence were a little lower than the prices prevailing in 1950, "though in respect of certain items the prices may have gone up". The Trial Court and the District Court regarded his evidence as reliable, but having regard to the fact that in constructing the theatre the respondent had used some second hand material, the Courts below held that the cost of the structure was truly shown by the accounts of the respondent, and that conclusion must be accepted. It is then urged that ordinarily in towns like Bombay, Ahmedabad and Poona standard rent is determined as equivalent to one twelfth of the gross return on the sum invested by the landlord at the rate of 8.66 % on the cost of the building, and at the rate of 6 % on the value of the land, and since the cross rate includes municipal taxes which vary between 25% to 33 33% of the letting value standard rent is considered as reasonable if it fetches to the landlord 4 1/2% per annum on the value of the land and 5 1/2 % on the cost of building. It is true that in the city of Bhavnagar no municipal taxes and rates were, at the material time, charged by the Municipality, and therefore some adjustment would have to be made in ascertaining the percentage of gross return on the investment in determining standard rent. It is common ground that charges for water supply arc made by the Municipality. There is however no evidence on the record to show as to what the rates for water supplied by the Municipality were. It was faintly suggested by counsel for the appellant that the water charges are payable by the tenant, but there is nothing to support that contention. The appellate Court has, on a consideration of the evidence, come to the conclusion that an overall rate of 7 % on the investment for the building and land may be regarded in the town of Bhavnagar as an adequate return to the landlord. What rate of return in respect of the landed property may be regarded as reasonable in determining the standard rent under section II of the Act depends upon certain vs friable factors. Normal expected yield from immovable property in the locality, return from alternative investments, municipal and other charges, the use to which the property is to be put, its condition, repairs it needs to keep it in tenantable condition and a host of other related circumstances must enter into the determination. On a review of the reasons given, it cannot be said that the District Court committed any error of principle in coming to the conclusion that 7% gross return on the cost of construction should be regarded as an adequate return from the property in the town of Bhavnagar which is utilised for a cinematograph theatre. Two other questions remain to be considered. Eventhough it was not pleaded in the petition filed by the appellant that possession of a part of the building let out was not delivered, the appellant was permitted, without objection, to raise that question at 187 the trial. It was the case of the appellant that possession of the cellar and the space reserved for a restaurant were not delivered to him, and on that account appropriate deduction should be made from the standard rent. The respondent conceded that possession of the cellar was not given to the appellant, but his case was that he did not deliver the cellar because it was not included in the premises demised in favour of the appellant. Unfortunately the lease has not been printed in the paper book and the parties have not chosen to produce for our perusal a copy of the lease. We have not thought it necessary to hold up the proceeding in this Court in view of the ultimate order we propose to make in this appeal. The trial Court was of the view that having regard to the carpet area of the cellar Rs. 100/ per mensem should be deducted from the standard rent of the entire building. The District Court without giving any reasons observed that fair standard rent for the cellar would be Rs. 501 per mensem. In our view the Court was not right in reducing the proportionate rent of the cellar from Rs. 100/ to Rs. 501 . The question whether the cellar was let out to the appellant under the terms of the lease will be determined by the High Court of Gujarat before which the appeal filed by the respondent is pending. We have for the purpose of this appeal held, agreeing with the Distt. Court, that the standard rent of the entire building is Rs. 1,200/ per mensem. If the cellar is not included in the tenancy, Rs. 100/will have to be deducted and the standard rent will be Rs. 1,100/per mensem. The other matter in dispute relates to the space intended to be used for a restaurant. The respondent contended that possession of that room was delivered to the appellant: the appellant denied that it was so delivered. It is common ground that it was part of the premises leased. Enquiry into the question whether by reason of default on the part of the landlord in delivering possession of a part of the premises let out under the lease any loss was occasioned to the tenant and to what relief the tenant is entitled on that account is foreign to the determination of standard rent. We therefore decline to enter into the question whether possession of the space intended for use as restaurant was delivered by the respondent to the appellant. The decision of the Courts below on that part of the case is vacated. We accordingly modify the order passed by the District Court and declare that the standard rent of the whole building including the space for the restaurant and the cellar is Rs. 1,200/ per mensem. We further declare that if the cellar is not included in the tenancy, standard rent of the premises let out will be Rs. 1,100/per mensem. The appellant has substantially failed in this appeal. He will pay 7/8th of cost of the respondent in this appeal. Appeal dismissed and decree modified.

IN-Abs

The respondent was the owner of a building used as a cinematograph theatre. By a registered deed dated December 23, 1960, the appellant obtained a lease of the theatre at a monthly rental of Rs. 1801/ . He then applied under section 11 of the Saurashtra Rent Control Act 22 of 1951 for an order fixing the standard rent of the theatre. The Court of First Instance taxed the standard rent of the whole theatre at Rs. 1030/12/ . Against this order the respondent filed an appeal under section 28(1) of the Act to the District Court. That court fixed the rental at Rs. 1150/ . Against the order of the District Court second appeal under section 28(2) of the Act was preferred by the appellant to the High CouRT. It was dismissed under 0.41, r. 11(1); of the Code of Civil Procedure. Aggrieved, the appellant came to this Court. It was contended, inter alia, that (i) a second appeal under section 28 of the Act was not governed by section 100 of the Code of Civil Procedure, (ii) that in calculating the cost of the building the courts below erred in taking into consideration the whole price paid by the respondent for the land as well as the buildings standing on it at the time of purchase, and that (iii) the District Court erred in taking 7% as an adequate return in respect of the property in question. HELD: (i) The second appeal under section 28 of the Act may be entertained by the High Court within the limits provided by section 100 of the Code of Civil Procedure, and it is not open to the parties to demand reappraisal of the evidence by the High Court on the ground that the District Court had erred in its view of the evidence. The High Court was competent to dismiss the appeal under 0.41, r, 11(1) of the Code. [184 G] The expression 'second appeal ' in the Code means an appeal to the High Court from the decision in a civil suit or proceeding of a first appellate court subordinate to the High Court. [183 F] The disputes directed to be dealt with under the Act are essentially disputes of a civil nature and the courts invested with the power under section 27 of the Act have to adjudicate upon the disputed rights in the light of its special provisions. The procedure in the trial of suits, applications and proceedings under the Act is the procedure prescribed by the Code of Civil Procedure except when it is otherwise provided expressly or by clear implication. [183 G] It is true that the proceedings under section 11 do not result in 2 decree and that certain orders under the Act are made appealable under section 28 though such orders are not appealable under the Code. But the right of appeal On that account is not released from the restrictions which are attracted by its very nature. [184 A B, F G] 181 Doshibai Khanna vs Sandhi Suleman Gulmamad, and Nagardas Harichand vs Modi Mohanlal, S.A. No. 381 of 1960 dt. 21 9 1964, disapproved. Union of India vs Mohindra Supply Co. ; , distinguished. (ii) The courts below did not commit any error in taking into consideration the whole price paid by the respondent for the land and building purchased by him. A building when let out forms a composite unit with the land on which it stands and the rent received from the building cannot be wholly attributed to the building. [185 F G] (iii) On a review of the reasons given it could not be said that the District Court committed any error of principle in coming to the conclusion that 7% gross return on the cost of construction should be regarded as an adequate return from the property in question. [186 G]

vil Appeal No. 211 of 1964. Appeal from the judgment and order dated February ,22, 1961 of the Bombay High Court in Miscellaneous Application No. 352 of 1959. Niren De, Additional Solicitor General, R. Ganapathy lyer and R.N. Sachthey, for the appellants. A.V. Viswanatha Sastri, T.A. Ramachandran, J.B. Dadachanji, O.C. Mathur and Ravinder Narain, for the respondents. The Judgment of the Court was delivered by Sikri, J. This appeal is in pursuant to a certificate of fitness granted by the High Court of Maharashtra at Bombay under article 133(1)(c)of the Constitution is directed against the judgment of the said High Court in a petition under article 226 of the Constitution filed by the respondent. The India Fisheries (P) Ltd. hereinafter called the respondent was a private limited company and was directed to be wound up by an order of the Bombay High Court, dated October 11, 1950, and a Court Liquidator was appointed as the Official Liquidator thereof with all powers under section 179 of the Indian Companies Act. 1913 (VII of 1913) to be exercised by him under section 180 without sanction or intervention of the Court save and except in case of sales of immovable property belonging to the respondent. For the assessment year 1948 49, the respondent was assessed on December 8. 1950, the tax being assessed at Rs. 8,737/15/ . On or about March 15. 1951, the Income Tax Officer lodged a claim in respect of this tax with the Official Liquidator. That claim was adjudged and allowed as an ordinary claim and certified as such on April 2 1952. in August, 1954, the Official Liquidator declared a dividend of 9 1/2 annas in a rupee and paid to the Income Tax Department a sum of Rs. 5,188/3/ against the claim made by the Income Tax Officer as an ordinary creditor. Thus a balance of Rs. 3,549/12 still remained payable to the Income Tax Department from the assets of the respondent. For the year 1955 56, the Department made a demand from the respondent on June 22, 1954, for a sum of Rs. 2,565/6/ as advance tax. This was paid by the Official Liquidator. On a 681 regular assessment being made for the said year, only Rs. 1,1 26/12/was assessed as payable by the respondent. After adjusting this sum against the advance payment of Rs. 2,565/6/ , Rs. 1,460/1/became refundable to the respondent, inclusive of interest. Instead refunding the said balance to the respondent, the Income Tax Officer set off the said amount against the balance of Rs. 3,549/12/which was still outstanding in respect of the Income tax demand for the year 1948 49. The respondent filed a revision petition to the Commissioner of Income tax, but the said petition was rejected by the Commissioner on September 21. holding that the action of the Income Tax Officer was perfectly justified under the provision of section 49E of the Income Tax Act. On November 25, 1959, the respondent filed a petition under article 226 of the Constitution and prayed for a writ, direction or order for setting aside the orders of the Income Tax Officer and the Income Tax Commissioner. He further prayed for any further writ, direction or order restraining the Department from setting off the refund against the tax dues and directing them to hand over the balance to the Official Liquidator. The High Court held that the demand of Rs. 8.737/12/ in respect of the assessment year 1948 49. being adjudged and certified, came to have all the incidents and character of an unsecured debt payable by the Official Liquidator to the Department. The High Court observed that "this claim thereafter was governed by the provisions of the Company law and could be paid to the creditor only in accordance with the provisions of the Company law. No other remedy nor any other method of obtaining satisfaction of this claim was available to the creditor thereafter. It was no longer the amount of tax remaining payable by a person to whom the refund was due within the meaning of Section 49E of the Income Tax Act. In our opinion, therefore. the provision of Section 49E was not available to the Department for setting off the amount of the excess towards the balance of its claim of Rs. 8,737/15/ which the department had proved in the insolvency of the company and was being dealt with in the Insolvency." The High Court accordingly set aside the orders passed by the Department in so far as they set off the amount of the refund towards the tax remaining payable, and directed the Income Tax Officer to deal with and dispose of the claim of the present respondent for the refund and pass appropriate orders in respect of the said amount of refund under the provisions of section 48 of the Income Tax Act. The learned Additional Solicitor General on behalf of the appellant. contends that s, 49E gives statutory power to the Income tax Officer. inter alia, to set off the amount to be refunded or any part of that amount against the tax remaining payable by the person to whom the refund is due, and this statutory power is not subject to any provision of any other law. He says that the Companies Act 682 does not take away this power. Section 49E is in the following terms: "Where under any of the provisions of this Act, a refund is found to be due to any person, the Income tax Officer, Appellate Assistant Commissioner or Commissioner, as the case may be, may, in lieu of payment of the refund, set off the amount to be refunded, or any part of that amount against the tax, interest or penalty, if any, remaining payable by the person to whom the refund is due. " On the face of this provision, there is no doubt that this section is not subject to any other provision of law. But it will be surprising if this power can be exercised in such a way as to defeat the provisions of the Indian Companies Act. It is not denied by the learned Additional Solicitor General that the State has no priority in respect of this claim. The question then arises whether section 49E is subject to the Insolvency Rules contained in the Companies Act. Section 228 of the Companies Act, 1913, provides: "228. Debts of all descriptions to be proved. In every winding up (subject in the case of insolvent companies to the application in accordance with the provisions of this Act of the law of insolvency) all debts payable on a contingency, and all claims against the company, present or future, certain or contingent, shall be admissible to proof against the company, a just estimate being made, so far as possible, of the value of such debts or claims as may be subject to any contingency or for some other reason do not bear a certain value. " Section 229 provides: "Application of insolvency rules in winding up of insolvent companies. In the winding up of an insolvent company the same rules shall prevail and be observed with regard to the respective rights of secured and unsecured creditors and to debate provable and to the valuation of annuities and future and contingent liabilities as are in force for the time being under the law of insolvency with respect to the estates of persons adjudged insolvent; and all persons who in any such case, would be entitled to prove for and receive dividends out of the assets of the company may come in under the winding up, and make such claims against the company as they respectively are entitled to by virtue of this section. " The effect of these statutory provisions is, inter alia, that an unsecured creditor must prove his debts and all unsecured debts 683 are to be paid pari passu. Therefore, once the claim of the Department has to be proved and is proved in the liquidation proceedings, the Department cannot by exercising the right under section 49E of the Income Tax Act get priority over the other unsecured creditors. If we were to read section 49E in the way suggested by the learned Additional Solicitor General, it would be defeating the very object underlying sections 228 and 229 of the Companies Act, 1913. If there is an apparent conflict between two independant provisions of law, the special provision must prevail. Section 49E is a general provision applicable to all assessees and in all circumstances; sections 228 and 229 deal with the proof of debts and their payment in liquidation. In our opinion, section 49E can be reconciled with sections 228 and 229 by holding that section 49E applies when insolvency rules do not apply. Accordingly, agreeing with the High Court, we hold that the Income Tax Officer was in error in applying section 49E and setting off the refund due. The Commissioner was equally in error in affirming this order. The learned Additional Solicitor General also urged that the application under article 226 was misconceived because the Income Tax Officer had jurisdiction. But if we interpret section 49E as we have done, it is a clear case of lack of jurisdiction. At any rate, there is an error apparent on the face of the orders and the High Court was quite right in exercising its jurisdiction under article 226. The appeal is accordingly dismissed with costs. Appeal dismissed.

IN-Abs

The respondent company was directed to be wound up and an official liquidator appointed by an order of the High Court in October, 1950. In December, 1950, the respondent was assessed to tax amounting to Rs. 3737/ for the year 1948 49. A claim made for this tax on the official liquidator was adjudged and allowed as an ordinary claim and certified as such in April, 1952. The Liquidator declared a dividend of 91/2 annas in the Rupee in August, 1954 and paid a sum of Rs. 5188 to the Department, leaving a balance of Rs. 3549. In June, 1954. the Department made a demand from the respondent and was paid Rs. 2565 as advance tax for the year 1955 56. On a regular assessment being made for that year, only Rs. 1126 was assessed as payable, so that a sum of Rs. 1460, inclusive of interest, became refundable to the respondent. However, the Income Tax Officer, purporting to exercise the power available to him under section 49E of the Income Tax Act, 1922, set off this amount against the balance of Rs. 3549 due for the year 194849. A revision petition filed by respondent in respect of this set off was rejected by the Commissioner of Income Tax. Thereafter, a petition under article 226 filed by the respondent to set aside the orders of the Income Tax Officer and the Commissioner was allowed by the High Court, mainly on the ground that the demand for Rs. 8737 in respect of 1948 49, being adjudged and certified came to have all the incidents and character of an unsecured debt payable by the liquidator to the Department; it was therefore governed by the provisions of Company Law and no other remedy or method to obtain satisfaction of the claim was available to the creditor. In the appeal to this Court it was contended on behalf of the appellant that section 49E gave statutory power to Income tax Officer to set off a refundable amount against any tax remaining payable and that this power was not subject to any provision of any other law. HELD:The Income Tax Officer was in error in applying section 49E and setting off the refund due to the respondent. [683C D] The effect of sections 228 and 229 of the Companies Act, 1913, is, inter alia, that an unsecured creditor must prove his debts and all unsecured debts are to be paid part passu. Once the claim of the Department has to be proved and is proved in liquidation proceedings, it 680 cannot, by exercising the right under section 49E get priority over the other unsecured creditors and thus defeat the very object of sections 228 and 229 of the Companies Act. Furthermore, if there is an apparent conflict between two independant provisions of law, the special provision must prevail. Section 49E is a general provision applicable to all assessees in all circumstances; sections 228 and 229 deal with proof of does and their payment in liquidation. Section 49E can be reconciled with sections 228 and 229 by holding that section 49E applies when insolpency rules do not apply. [682H 683D]

Civil Appeals Nos. 976 and 977 of 1964. Appeals from the judgment and decree dated March 26, 1964 of the Patna High Court in Election Appeals Nos. 8 and 10 of 1963. C.B. Agarwala, Jagdish Panday, Chinta Subbarao, M. Rajagopalan and B.P. Jha, for the appellant, (In both the appeals). K.P. Varma and D. Goburdhun, for the respondent (In both the appeals). The Judgment of the Court was delivered by Ramaswami, J. Both these appeals are brought by certificate against the judgment and decree of the High Court of Judicature at Patna dated March 26, 1964, pronounced in Election Appeals Nos. 8 and 10 of 1963. The appellant Kedar Pandey and the respondent Narain Bikram Sah '(hereinafter called Narain Raja) were the contesting candidates in the year 1962 on behalf of the Congress and Swatantra Party respectively for the election to Bihar Legislative Assembly from Ramnagar Constituency in the district of Champaran. The nomination papers of the appellant and the respondent and two others Parmeshwar Prasad Roy and Suleman Khan were accepted by the Returning Officer without any objection on January 22, 1962. Later on the two candidates Parmeshwar Prasad Roy and Suleman Khan withdrew their candidatures. After the poll the respondent, Narain Raja was declared elected as member of the Bihar Legislative Assembly by majority of valid votes. On April 11, 1962 Kedar Pandey filed an election petition challenging the election of the respondent. It was alleged by Kedar Pandey that the respondent was not duly qualified under article 173 of the Constitution of India to be a candidate for election as he was not a citizen of India. According to Kedar Pandey the respondent, his parents and grand parents were all born in Nepal and, therefore, on the date of the election, the respondent Narain Raja was not qualified to be chosen to fill the Assembly seat for which he had been declared to have been elected. According to Kedar Pandey the respondent was related to the royal family of Nepal and the father of the respondent Rama Raja owned about 43 bighas of land and a house at Barewa in Nepal in which the respondent had a share along with his three other brothers. The election petition was contested by the respondent who said that he was an Indian citizen and there was no disqualification incurred under article 173 of the Constitution. The further case of the respondent was that he had lived in India since his birth and that he was a resident of Ramnagar in the district of Champaran and not of Barewa in Nepal. The respondent claimed that he was born in Banaras and not at Barewa. 795 Upon these rival contentions it was held by the Tribunal that the respondent Narain Raja was not a citizen of India and, therefore, was not qualified under article 173 of the Constitution for being chosen to fill a seat in the Bihar Legislative Assembly. The Tribunal, therefore, declared that the election of the respondent was void. But the Tribunal refused to make a declaration that Kedar Pandey was entitled to be elected to Bihar Legislative Assembly for that Constituency. Both the appellant and the respondent preferred separate appeals against the judgment of the Election Tribunal to the High Court of Judicature at Patna. The High Court in appeal set aside the judgment of the Tribunal and upheld the election of the respondent Narain Raja. The High Court found, on examination of the evidence, that Narain Raja, the respondent before us, was born in Banaras on October 10, 1918 and that the respondent was living in India from 1939 right upto 1949 and even thereafter. The High Court further found that long before the year 1949 Narain Raja had acquired a domicile of choice, in Indian territory and, therefore, acquired the status of a citizen of India both under article 5(a) and (c) of the Constitution. On these findings the High Court took the view that Narain Raja was duly qualified for being elected to the Bihar Legislative Assembly and the election petition filed by the appellant Kedar Pandey should be dismissed. The main question arising for decision in this case is whether the High Court was right in its conclusion that the respondent Narain Raja was a citizen of India under article 5 of the Constitution of India on the material date. The history of the family of Narain Raja is closely connected with the history of Ramnagar estate. It appears that Ramnagar estate in the district of Champaran in Bihar originally belonged to. Shri Prahlad Sen after whose death the estate came into the possession of Shri Mohan Vikram Sah, popularly known as Mohan Raja. After the death of Mohan Raja the estate came into the possession of Rani Chhatra Kumari Devi, the vidow of Mohan Raja, and after the death of Rani Chhatra Kumari Devi, the estate came into the possession of Rama Raja alias Mohan Bikram Sah, the father of the respondent Narain Raja. It is in evidence that the daughter of Prahlad Sen was married to Shri Birendra Vikram Sah, the father of Mobart Raja. Mohan Raja died without any male issue but during his lifetime he had adopted Rama Raja, the father of the respondent and by virtue of a will executed by Mohan Raja in the year 1904 in favour of his wife Rani Chhatra Kumari Devi the Rani became entitled to the Ramnagar estate on the death of Mohan Raja (which took place in 1912), in preference to the adopted son Rama Raja since the properties belonged to Mohan Raja in his absolute right and not as ancestral properties. After the death of Rani L/P(D)5SCI 12 796 Chhatra Kumari Devi in 1937 Rama Raja came into the possession of the Ramnagar estate. In the year 1923, Rani Chhatra Kumari Devi had filed R.S. No. 4 of 1923 against Rama Raja the Court of Sub Judge, Motihari with regard to a village which Rama Raja held in Ramnagar estate on the basis of a Sadhwa Patwa lease. Rama Raja in turn filed T.S. No. 34 of 1924 in the Court of Subordinate Judge of Motihari against Rani Chhatra Kumari Devi and others claiming title to Ramnagar estate and for possession of the same on the basis of his adoption by Mohan Raja. The Title Suit and the Rent Suit were heard together by the Additional Sub Judge, Motihari who, by his judgment dated August 18, 1927 decreed the Title Suit filed by Rama Raja and dismissed the Rent Suit filed by Rani Chhatra Kumari Devi. There was an appeal to the High Court of Patna which dismissed the appeal. Against the judgment of the High Court appeals were taken to the Judicial Committee of the Privy Council. The appeal was decided in favour of Rani Chhatra Kumari Devi and the result was that the Title Suit filed by Rama Raja was dismissed and Rent Suit filed by Rani Chhatra Kumari Devi was decreed. In the course of judgment the Judicial Committee did not disturb the finding of the trial Court that Rama Raja was an adopted son of Shri Mohan Vikiram Sah alias Mohan Raja and accepted that finding as correct; but the Judicial Committee held that Ramnagar estate was not the ancestral property of Mohan Raja, but he got that property by inheritance, he being the daughter 's son of Prahlad Sen, the original proprietor of that estate. In view of this circumstance, the Judicial Committee held that though Rama Raja was the adopted son of Mohan Raja, Rama Raja was not entitled to the estate in view of the will executed by Mohan Raja in favour of Rani Chhatra Kumari Devi in the year 1904. It appears that in the year 1927 Rama Raja had taken possession of Ramnagar estate and got his name registered in Register D and remained in possession till the year 1931 when he lost the suit in Privy Council. After the decision of Privy Council, Rani Chhatra Kumari Devi again came into possession of Ramnagar estate and continued to remain in possession till she died in 1937. It is in evidence that after the death of Rani Chhatra Kumari Devi, Rama Raja obtained possession of Ramnagar estate and continued to remain in possession thereof from 1937 till 1947, the year of his death. There is evidence that Rama Raja died in Bombay and his dead body was cremated in Banaras. It is also in evidence that during the lifetime of Rama Raja there was a partition suit in the year 1942 No. 40 of 1942 for the partition of the properties of the Ramnagar estate among Rama Raja and his sons including the respondent. This suit was filed on September 29, 1942 in the Court of the Subordinate Judge at Motihari. A preliminary decree exhibit 1(2) was passed on April 16, 1943 on compromise and the final decree Ex 1(1) in the suit 797 was passed on May 22, 1944. From the two decrees it appears that Ramnagar. estate was comprised of extensive properties including zamindariinterest in a large number of villages and the. estate 'had an extensive area of Bakasht lands. By the said partition the estate was divided among the co sharers but certain properties including forests in the estate were left joint. On behalf of the appellant Mr. Aggarwala put forward the argument that the High Court was not justified in holding that Narain Raja was born in Banaras in the year 1918. According the case of the appellant Narain Raja was born at a place called Barewa in Nepal. In order to prove his case the appellant examined two witnesses Sheonath Tewari (P.W. 18) and N.D. Pathak (P.W. 15). The High Court held that their evidence was acceptable. There was also a plaint (exhibit 8) produced on behalf the appellant to show that Narain Raja was born at Barewa. This plaint was apparently filed in a suit brought by the respondent for the realisation of money advanced by the respondent 's mother to one Babulal Sah. The place of birth of the respondent is mentioned in this plaint as Barewa Durbar. The High Court did not attach importance to exhibit 8 because it took the view that the des cription of the place of birth given in the document was only for the purpose of litigation. It further appears from exhibit 8 that it was not signed by the respondent but by one Subhan Mian Joiaha described as 'Agent '. On behalf of the respondent R.W. 9 G. section Prasad was examined to prove that Narain Raja was born at Banaras. The High Court accepted the evidence of this witness and also of the respondent himself on this point. It was submitted by Mr. Aggarwala that there were two circumstances which indicate that the respondent could not have been born at Banaras: In the first place, it was pointed out, the municipal registers of Banaras for the year 1918 exhibit 2 series did not mention the birth of the respondent. It was explained on behalf of the respondent that house at Mamurganj in which the respondent was born was not included within the limits of the municipality in the year 1918, and that the omission of the birth of the respondent in the municipal registers was therefore, of no significance. It was contended behalf of the appellant that there was litigation with regard to properties of Ramnagar estate between the respondent 's father Rani Chhatra Kumari Devi and therefore the evidence of P.W. G.S. Prasad that Rama Raja was living with Rani Chhatra Kurnari Devi at Ramnagar even during her lifetime cannot be accepted as true. It was, therefore, suggested that it was highly improbable that Narain Raja should have been born at Banaras in the year 1918, as alleged, in the house belonging to Ramnagar estate. We do not, however, think it necessary to express any concluded opinion on this question of fact but proceed to decide the case the assumption that Narain Raja was not born in the territory ,of India, in the year 1918. The reason is that the place of birth 798 of Narain Raja has lost its importance in this case in view of the concurrent findings of both the High Court and the Tribunal that for a period of 5 years preceding the commencement of the Constitution Narain Raja was ordinarily resident in the territory of India. Therefore the requirement of article 5(c) of the Constitution is fulfilled. Mr. Aggarwala on behalf of the appellant did not challenge this finding of the High Court. It is. therefore, manifest that the requirement of article 5(c) of the Constitution has been established and the only question remaining for consideration is the question whether Narain Raja had his domicil in the territory of India at the material time. Upon this question it was argued before the High Court on behalf of the respondent that the domicil of origin of Mohan Raja may have been in Nepal but he had acquired a domicile of choice in India after inheriting Ramnagar Raj from his maternal grandfather Prahlad Sen. It was said that Mohan Raja had settled down in India and had married all his 4 Ranis in Ramnagar. It was argued, therefore, that at the time when Mohan Raja had adopted Rama Raja in 1903 Mohan Raja 's domicil of choice was India. It was said that by adoption in 1903 Rama Raja became Mohan Raja 's son and by fiction it must be taken that Rama Raja 's domicil was india as if he was Mohan Raja 's son. It was contended in the alternative that whatever may have been Rama Raja 's domicil before 1937 when Rani Chhatra Kumari Devi died, Rama Raja acquired a domicil of choice in India when he came to India on the death of Rani Chhatra Kumari Devi. It was also stated on behalf of the respondent that Rama Raja remained in possession of the Ramnagar estate until his death in 1947. The High Court, however. held, upon examination of the evidence, that there was no material on the record to decide the question of Mohan Raja 's domicil. It was also held by the High Court that it was not possible to ascertain from the evidence whether there was any intention of Rama Raja to settle down in India and make it his permanent home. In any event. Narain Raja was born in the year 1918 and unIess the domicil of Rama Raja in 1918 was ascertained the domicil of origin of Narain Raja will remain unknown. The High Court therefore, proceeded upon the assumption that Narain Raja had his domicil of origin in Nepal: and examined the evidence to find out whether Narain Raja had deliberately chosen the domicil of choice in India in substitution for the domicil of origin. The crucial question for determination in this case, therefore. is whether Narain Raja had acquired the domicil of choice in India. The law on the topic is well established but the difficulty is found in its application to varying combination of circumstances in each case. The law attributes to every person at birth a domicil 799 which is called a domicil of origin. This domicil may be changed and a new domicil, which is called a domicil of choice, acquired; but the two kinds of domicil differ in one respect. The domicil of origin is received by operation of law at birth; the domicile of choice is acquired later by the actual removal of an individual to another country accompanied by his animus manendi. The domicil of origin is determined by the domicil, at the time of the child 's birth, of that person upon whom he is legally dependent. A legitimate child born in a wedlock to a living father receives the domicil of the father at the time of the birth; a posthumous legitimate child receives that of the mother at that time. As regards change of domicil, any person not under disability may at any time change his existing domicil and acquire for himself a domicil of choice by the fact of residing in a country other than that of his domicil of origin with the intention of continuing tO reside there indefinitely. For this purpose residence is a mere physical fact, and means no more than personal presence in a locality, regarded apart from any of the circumstances attending it. If this physical fact is accompanied by the required state of mind, neither its character nor its duration is in any way material. The state of mind, or animus manendi, which is required demands that the person whose domicil is the object of the inquiry should have formed a fixed and settled purpose of making his principal or sole permanent home in the country of residence, or, in effect, he should have formed a deliberate intention to settle there. It is also well established that the onus of proving that a domicil has been chosen in substitution for the domicil of origin lies upon those who assert that the domicil of origin has been lost. The domicil of origin continues unless a fixed and settled intention of abandoning the first domicil and aquiring another as the sole domicil is clearly shown (see Winarts vs Attorney General. (1) In Munro vs Munro(2) Lord Cottonham states the rule as follows: "The domicil of origin must prevail until the party has not only acquired another, but has manifested and carried into execution an intention of abandoning his former domicil, and acquiring another as his sole domicil. To effect this abandonment of the domicil of origin, and substitute another in its place, it required animo et facto, that is, the choice of a place, actual residence in the place then chosen and that it Should be the principal and permanent residence, the spot where he had placed larem rerumque ac fortunarum suarum summam. In fact, there must be both residence and intention. Residence alone has no effect, per so, though it may be most important as a ground from which to infer intention. " (1) (2) 7 C.I. & Fin . 876. 800 In Aikman vs Aikman(1), Lord Campbell has discussed the question of the effect on domicil of an intention to return to the native country, where such intention is attributable to an undefined and remote contingency. He said: "If a man is settled in a foreign country, engaged in some permanent pursuit requiring his residence there, a mere intention to return to his native country on a doubtful contingency, will not prevent such a residence in a foreign country from putting an end to his domicil of origin. But a residence in a foreign country for pleasure, lawful or illicit, which residence may be changed at any moment, without the violation of any contract or any duty, and is accompanied by an intention of going back to reside in the place of birth, or the happening of an event which in the course of nature must speedily happen, cannot be considered as indicating the purpose to live and die abroad. " On behalf of the appellant Mr. Aggarwala relied on the decision. of the House of Lords in Moorhouse vs Lord(2) in which it was held that in order to lose a domicil of origin, and to acquire a new domicil, a man must intend quatenus in illo exuere patriam and there must be a change of nationality, that is natural allegiance R is not enough for him to take a house in the new country, even with the probability and the belief that he may remain there all the days of his life. But the principle laid down in this case was discussed in Udny vs Udny(3) which decision is the leading authority on what constitute a domicil of choice taking the place of a domicil of origin. It is there pointed out by Lord Westbury that the expressions used in Moorhouse vs Lord(2), as to the intent exuere patriam, are calculated to mislead, and go beyond the question of domicil. At page 458 Lord Westbury states: "Domicil of choice is a conclusion or inference which the law derives from the fact of a man fixing voluntarily his sole or chief residence in a particular place, with the intention of continuing to reside there for an unlimited time. This is description of the circumstances which create or constitute a domicil and not a definition of the term. There must be residence freely chosen and not prescribed or dictated by any external necessity, such as the duties of office, the demands of creditors, or the relief from illness, and it must be a residence fixed, not for a limited period or particular purpose, but general and indefinite in its future contemplation. It is true that residence, originally temporary or intended for a limited (1) 3 Mac Q., H.L.C. 854. (2) 10 H.L. Cas. 272. (3) L.R. 1 H.L. Sc. 801 period, may, afterwards become general and unlimited; and in such a case, so soon as the change of purpose, or animus manendi, can be inferred, the fact of domicil is established . " In the next case Doucet vs Geoghegan (1) the Court of Appeal decided that the testator had acquired an English domicil; and one of the main facts relied on was that he had twice married in England in a manner not conforming to the formalities which are required by the French Law for the legalisation of marriages of Frenchmen in a foreign country. James L. J. stated as follows: "Both his marriages were acts of unmitigated scoundrelism, if he was not a domiciled Englishman. He brought up his children in this country; he made his will in this country, professing to exercise testamentary rights which he would not have if he had not been an Englishman. Then with respect to his declarations, what do they amount to? He is reported to have said that when he had made his fortune he would go back to France. A man who says that, is like a man who expects to reach the horizon and finds it at last no nearer than it was at the beginning of his journey. Nothing can be imagined more indefinite than such declarations. They cannot outweigh the facts of the testator 's life. " In our opinion, the decisions of the English Courts in Udny vs Undy(3) and Doucet vs Geoghegan(1) represent the correct law with regard to change of domicil of origin. We are of the view that the, only intention required for a proof of a change of domicil is an intention of permanent residence. In other words, what is required to be established is that the person who is alleged to have changed his domicil of origin has voluntarily fixed the habitation of himself and his family in the new country, not for a mere special of temporary purpose, but with a present intention of making it his permanent home. Against this background of law we have to consider the facts in the present case for deciding whether Narain Raja had adopted India as his permanent residence with the intention of making a domicil of choice there. In other words, the test is whether Narain Raja had formed the fixed and settled purpose of making his home in India with the intention of establishing himself and his family in India. (1) 9 Ch. (2) L.R. 1 H.L. So. 802 The following facts have been either admitted by the parties found to be established in this case. Narain Raja was educated in Calcutta from 1934 to 1938. From the year 1938 onwards Narain Raja lived in Ramnagar. After Rama Raja 's death in 1947 Narain Raja continued to live in Ramnagar, being in possession of properties obtained by him under compromise in 1944. In the course of his statement Narain Raja deposed that his father had built a palace in Ramnagar between 1934 and 1941 and thereafter Narain Raja himself built a house at Ramnagar. Before he had built his house, Narain Raja lived in his father 's palace. There is the partition suit between Narain Raja and his brothers in the year 1942. Exhibits 1(2) and 1(1) are the preliminary and final decrees granted in that suit. After the partition Narain Raja was looking after the properties which were left joint and was the manager thereof. The extensive forests of Ramnagar estate were not partitioned and they had been left joint. Narain Raja used to make settlement of the forests on behalf of the Raj and pattas used to be executed by him. After partition, he and his wife acquired properties in the district of Champaran, in Patna and in other places. Narain Raja and his wife and children possessed 500 or 600 acres of land in the district of Champaran. Narain Raja managed these properties from Ramnagar. He had also his houses in Bettiah, Chapra, Patna and Benaras. The forest settlements are supported by Exhibits X series, commencing from 1943, and by exhibit W of the year 1947. Then, there are registered pattas excluded by Narain Raja of the year 1945, which are Exs. W/3, W/4, and W/5. There are documents which prove acquisition of properties in the name of Narain Raja 's wife F(D, F(2). F(3) and F(5). Exhibit F(4) shows the purchase of 11 bighas and odd land at Patna by Narain Raja. It is also important to notice that Narain Raja had obtained Indian Passport dated March 23, 1949 from Lucknow issued by the Governor General of India and he is described in that Passport as Indian by birth and nationality and his address is given as Ramnagar of Champaran district. In the course of his evidence Narain Raja said that he had been to Barewa for the first time with his father when he was 10 or 12 years old. He also said that he had not gone to Barewa for ten years before 1963. The High Court considered that for the determination of the question of domicil of a person at a particular time, the course of his conduct and the facts and circumstances before and after that time are relevant. We consider that the view taken by the High Court on this point is correct and for considering the domicil of Narain Raja on the date of coming into force of the Constitution of India his conduct and facts and circumstances subsequent to the time should also be taken into account. 'This view is borne 803 out by the decision of the Chancery Court in In re Grove Vaucher vs The Solicitor to the Treasury(1) in which the domicil of one Marc Thomegay in 1744 was at issue and various facts and circumstances after 1744 were considered to be relevant. At page 242 of the report Lopes, L.J. has stated: "The domicil of an independent person is constituted by the factum of residence in a country, and the animus manendi, that is, the intention to reside in that country for an indefinite period. During the argument it was con,ended that the conduct and acts of Marc Thomegay subsequently to February, 1744, at the time of the birth of Sarah were inadmissible as evidence of Marc Thomegay 's intention to permanently reside in this country at that time. It was said that we must not regard such conduct and acts in determining what the state of Marc Thomegay 's mind was in February, 1744. For myself I do not hesitate to say I was surprised at such a contention; it is opposed to all the rules of evidence, and all the authorities with which I am acquainted. I have always understood the law to be, that in order to determine a person 's intention at a given time, you may regard not only conduct and acts before and at the time, but also conduct and acts after the time, assigning to such conduct and acts their relative and proper weight of cogency. The law, I thought, was so well established on that subject that I should not have thought it necessary to allude to this contention, unless I had understood that the propriety of admitting this evidence was somewhat questioned by Lord Justice Fry, a view which I rather now gather from his judgment he has relinquished. " We are, therefore, of opinion that. the conduct and activities of Narain Raja subsequent to the year 1949 are relevant but we shall decide the question of his domicil in this case mainly in the light of his conduct and activities prior to the year 1949. Reverting to the history of Narain Raja 's life from 1950 onwards, it appears that he had married his wife in 1950. His wife belonged to Darkoti in Himachal Pradesh near Patiala. The marriage had taken place at Banaras. Narain Raja had a son and a daughter by that marriage and according to his evidence the daughter was born in Banaras and the son was born in Bettiah. The daughter prosecutes her studies in Dehradun. In 1950 or 1951 Narain Raja had established a Sanskrit Vidalya in Ramnagar in the name of his mother, called Prem Jananl Sanskrit Vidyalaya. The story of Narain Raja 's political activities is as follows: There was a Union Board in Ramnagar before Gram Panchayats had come into existence, of which Narain Raja was the Chairman or President. (1) (1889) 40 Oh. D. 216. 804 After Gram Panchayats were established, the Union Board was abolished. Narain Raja was a voter in the Gram Panchayat and he was elected as the Vice President of the Union called C.D.C.M. Union of Ramnagar. For the General Elections held in 1952 Narain Raja was a voter from Ramnagar Constituency. In the General Election of 1957 he stood as a candidate opposing Kedar Pandey. Thereafter, he became the President of the Bettiah Sub divisional Swatantra Party and then Vice President of Champaran District Swatantra Party. Taking all the events and circumstances of Narain Raja 's life into account we are satisfied that long before the end of 1949 which is the material time under article 5 of the Constitution, Narain Raja had acquired a domicil of choice in India. In other words, Narain Raja had formed the deliberate intention of making his home with the intention of permanently establishing himself his family in India. In our opinion, the requisite animus manendi has been proved and the finding of the High Court is correct. On behalf of the appellant Mr. Aggarwala suggested that there were two reasons to show that Narain Raja had no intention of making his domicil of choice in India. Reference was made, in this context, to exhibit 10(c) which is a khatian prepared in 1960. showing certain properties standing in the name of Narain Raja and his brothers in Nepal. It was argued that Narain Raja had property in Nepal and so he could not have any intention of living in India permanently. It is said by the respondent that the total area of land mentioned in the khatian was about 43 bighas. The case of Narain Raja is that the property had belonged to his natural grandmother named Kanchhi Maiya who had gifted the land to Rama Raja. The land was the exclusive property of Rama Raja, and after his death, the property devolved upon his sons. The case of Narain Raja on this point is proved by a Sanad (exhibit AA). In any event, we are not satisfied that the circumstance of Narain Raja owning the property covered by exhibit 10(c) can outweigh the fact that Narain Raja alone had extensive properties in India after the partition decree of the year 1944. It was also pointed out on behalf of the appellant that Narain Raja, and before him Rama Raja, had insisted upon designating themselves "Sri 5, ' indicating that they belonged to the royal family of Nepal It was argued on behalf of the appellant that Narain Raja had clung tenaciously to the title of "Sri 5", thereby indicating the intention of not relinquishing the claim to the throne of Nepal if at any future date succession to the throne falls to a junior member of the family of the King of Nepal. We do not think there is any substance in this argument. It is likely that Narain Raja and his father Rama Raja had prefixed the title of "Sri 5" to their names owing to the pride of their ancestry and sentimental 805 attachment to the traditional title and this circumstance has no bearing on the question of domicil. Succession to throne of Nepal is governed by the rule of primogeniture and it cannot be believed that as the second son of his father, Narain Raja could ever hope to ascend to the throne of Nepal, and we think it is unreasonable to suggest that he described himself as "Sri 5" with the intention of keeping alive his ties with Nepal. There was evidence in this ease that Narain Raja 's eider brother Shiv Bikram Sah has left male issues. For the reasons expressed, we hold that Narain Raja had acquired domicil of choice in India when article 5 of the Constitution came into force. We have already referred to the finding of the High Court that Narain Raja was ordinarily resident in India for 5 years immediately preceding the time when article 5 of the Constitution came into force. It is manifest that the requirements of article 5(c) of the Constitution are satisfied in this case and the High Court rightly reached the conclusion that Narain Raja was a citizen of India at the relevant time. We accordingly dismiss both these appeals with costs. One set Appeals dismissed.

IN-Abs

The appellant and respondent were contesting candidates for election to the State Legislative Assembly. The respondent was declared elected, and the appellant filed an election petition challenging the election on the ground that the respondent was not duly qualified under article 173 of the Constitution as he was a citizen of Nepal and not a citizen of India. The Tribunal held that the respondent was not a citizen of India, but the High Court in appeal set aside that order and upheld the election of the respondent. On the question whether the respondent was a citizen of India under article 5 of the Constitution, 0n the material date, HELD: Assuming that the respondent was not born in the territory of India, on a consideration of all the events and circumstances of his life, he had acquired a domicile of choice in India long before the end of 1949 which is the material time under article 5 of the Constitution. He had formed the deliberate intention of making India his home with the intention of permanently establishing himself and his family in India and therefore had the requisite animus manendi. He was ordinarily resident in India for 5 years immediately preceding the time when article 5 came into force. Since the requirements of article 5(c) were satisfied, the High Court rightly reached the conclusion, that he was a citizen of India at the relevant time. [805 C D] The only intention required for a proof of a change of domicile is an intention of permanent residence. What is required to be established is that the person who is alleged to have changed his domicile of origin has voluntarily fixed the habitation of himself and his family in, the, new country, not for a mere special. or temporary purpose, but with a present intention of making it his permanent home, On the question of domicile at a particular time the course of his conduct and the facts and. circumstances before and after that time are relevant. [801 F G; 803 F] Udny vs Udny,L.R. 1 H.L. Sc. 441 and, Doucet vs Geoghegan, 9Ch. 441, applied. 794

o. 296 of 1951. Appeal against the Judgment and Order dated the 16th January, 1951, of the High Court of Judicature for the State of Rajasthan at Jodhpur (Nawal Kishore and Kanwar Lal Bapna JJ.) in D. B. Civil Miscellaneous Case No. 15 of 1950. M. C. Setalvad, Attorney General for India (G. N. Joshi, with him) for the appellant. N.C. Chatterjee, Senior Advocate (G. L. Agarwal, with him) for the respondent. December 16. The Judgment of the Court was delivered by PATANJALI SASTRI C. J. This is an appeal from an order of the High Court of Rajasthan directing by writ issued under article 226 of the Constitution that the Union of India, appellant herein, should not levy income tax on the income of the respondent accruing, arising or received in Rajasthan (excluding the area of the former covenanting State of Bundi) prior to April 1, 1950. The respondent resides and carries on business in the District of Jodhpur in Rajasthan which is one of the States specified in Part B of the First Schedule to the Constitution (hereinafter referred to as Part B States). In May, 1950, the respondent was required to file a return of his income for the previous year, that is the year ending March 31, 1950, for assessment to income tax, and subsequently was also asked to produce the relevant account books before the Income tax Officer, Jodhpur, on August 11, 1950. Thereupon the respondent presented the petition, out of which this appeal arises, on August 23, 1950, invoking the, jurisdiction of the High Court under article 226 of the Constitution for the issue of "a writ of mandamus or certiorari or other appropriate writ"directing the appellant not to take a any action under the Indian Income tax Act, 1922, (hereinafter referred to as the Indian Act) as amended by the Indian Finance Act, 1950, for the assessment or levy 544 of income tax on the income which accrued or arose to the respondent or was received by him prior to April 1, 1950, on the ground that such income was not liable to be charged "under the provisions of any law validly in force in Rajasthan. " The petition was heard by a Division Bench of the High Court (Nawal Kishore and Kanwarlal Bapna JJ.) who accepted the petition and issued a writ as already stated, overruling sundry preliminary objections to which no reference need be made as they have not been raised by the appellant before us. As is well known, after the Indian Independence Act, 1947, came into force, various Indian States (as they were then known) which had been recognised, subject to certain restrictions and limitations not material here, as independent principalities were brought into the Dominion of India from, time to time under arrangements with their Rulers, and this process of accession and integration . resulted in the expansion of the territory of India in successive stages. So far as Rajasthan is concerned, the Rajaputana States, as they were then called, integrated their territories into the United State of Rajasthan, and the new State acceded to the Dominion of India by an Instrument of Accession executed by the head of the State (Rajpramukh) on April 15, 1949, and accepted by the Governor General of India on May 12, 1949. By clause (3) of the Instrument the Rajpramukh accepted "all matters enumerated in Lists I and III of the Seventh Schedule to the Act (the Government of India Act, 1935) as matters in respect of which the ]Dominion Legislature may make laws for the United State, provided that nothing contained in the said Lists or in any other provisions of the Act shall be deemed to empower the Dominion Legislature to impose any tax or duty in the territories of the United State or prohibit the imposition of any duty or tax by the Legislature of the United State in the said territories.": This limitation on the power of the Dominion Legislature thus imposed by agreement between the two States was given effect to as a 545 constitutional limitation by section 101 of the Government of India Act, 1935, as adapted by the Governor General in August, 1949, in exercise of the powers conferred on him by the Indian Independence Act, 1947. That section provided that "nothing in this Act shall be co nstrued as empowering the Dominion Legislature to make laws for an acceding State otherwise than in accordance with the Instrument of Accession of that State and any limitations contained therein. " The position thus was that the Dominion Legislature had no power to make any law imposing any tax or duty in the territories of the United State of Rajasthan. In July, 1949, however, the. Indian States Finances Enquiry Committee appointed by the Government of India submitted their report recommending, among other things, the financial integration of the acceding States and the imposition of the Indian income tax in their territories as from the first day of April, 1950. Meanwhile the framing of the Constitution of India by the Constituent Assembly, which also included duly appointed representatives of the acceding States, was Hearing completion, and in November, 1949, the Rajpramukh, in exercise of his powers as the duly constituted head of the State, issued a Proclamation whereby he declared and directed that the "Constitution of India shortly to be adopted by the Constituent Assembly of India shall be the Constitution for the Rajasthan State as for the other parts of India, and shall be enforced as such in accordance with the tenor of its provisions and that the provisions of the said Constitution shall, as from the date of its commencement, supersede and abrogate all other constitutional provisions inconsistent therewith which are at present in force in this State. " The Constitution of India then came into force on January 26, 1950. It repealed the Government of India Act, 1935, including section 101 thereof, and brought all the Part B States, including Rajasthan, within the Union of India, incorporating the territories of all those States in the "territory of India" as defined in article 1 (2). It created a new Central 546 Legislature for the Union called Parliament and empowered that Legislature by article 245 "to make laws for the whole or any part of the territory of India" subject to the provisions of the Constitution and, by article 246 (1) read with entry No. 82 of List 1, it conferred "exclusive power" to make laws with respect to"taxes on income other than agricultural income". In exercise of that power and pursuant to there commendation of the Indian States Finances Enquiry Committee referred to above, Parliament enacted the Finance Act, 1950 (Act XXV of 1950) providing by section 2 (1) that income tax and super tax shall be charged "for the year beginning on the first day of April, 1950," (i.e., 1950 51) at the rates specified in Parts I and 11 respectively of the First Schedule to that Act. Section 3 made certain amend ments in the Indian Act "with effect from the first day of April, 1950. " Among these was the substitution of the present clause (14 A) in section 2 in the place of clause (14 A) as it stood before. The new clause defines " taxable territories " as respects different periods so as to correspond to the successive stages of expansion of the territory of India after the Indian Independence Act, 1947. The material part of that clause as amended runs thus: (14 A) I taxable territories ' means . (a). . (b). . (c). (d)as respects any period after the 31st day of March, 1950, and before the 13th day of April, 1950, the territory of India excluding the State of Jammu and Kashmir and the Patiala and East Punjab States Union, and (e) as respect any period after the 12th day of April, 1950, the territory of India excluding the State of Jammu and Kashmir: Provided that the taxable territories shall be deem ed to include (a). 547 (b)the whole of the territory of India excluding the State of Jammu and Kashmir (i) as respects any period, for the purposes of sections4 A and 4 B, (ii) as respects any period after the 31st day of March, 1950, for any of the purposes of this Act, and (iii)as respects any period included in the previous yearfor the.purpose of making any assessment of the yearending on the 31st day of March, 1951, or for any subsequent year. " The definition, it may be observed in passing, is by no means a model of perspicuity. Parts of it seem redundant and even mutually contradictory. For instance, (leaving out the State of Jammu and Kashmir altogether in this discussion) whereas clause (d) excludes the Patiala and the East Punjab States Union from the taxable territories as respects the period from April 1, 1950, to April 12, 1950, subclause (ii) of clause (b) of the proviso would seem to include that State also within such territories as respects the same period, and while clauses (d) and (e) of the substantive part of the definition when read together seem apt by themselves to bring the territory of India within the taxable territories as respects the period after March 31, 1950, sub clause (ii) of clause (b) of the proviso apparently seeks to bring about the same result by means of a fiction. Now, the scheme of the Indian Act is to tax a person resident in the taxable territories during the previous year on all his income of the previous year whether accruing within or without the taxable territories, and to tax a person not resident in the taxable territories upon his income accruing within the taxable territories during the previous year. Residence in the taxable territories has to be determined in accordance with the provisions of section 4 A which, in the case of an individual, takes into account his having been in such territories within the five years preceding the year of assessment. If Rajasthan was a taxable territory in the year 1949 50, the respondent would be chargeable in 72 548 respect of his income whether derived within or without .Rajasthan. It is, however, argued on his behalf by Mr. Chatterjee that section 3 of the Finance Act, 1950, having substituted the amended clause .(14 A) " with effect from the first day of April, 1950," Rajasthan was not a taxable territory during the accounting year 1949 50, and that no income tax being admittedly leviable in that State on the income accruing there in that year, the new clause (14 A) should not be construed so as to impose liability to pay Indian incometax on such income. According to learned counsel the word "assessment" in sub clause (iii) of clause (b) of the proviso must be taken to mean only computation of income and not the imposition of liability. In support of the construction he relied on the decision of the Privy Council in Commissioner of Income tax, Bombay vs Khemchand Ramdas(1) where it was said that the word "assessment" was used in the Indian Income tax Act as meaning "sometimes the computation of income, sometimes the determination of tax payable and sometimes the whole procedure laid down in the Act for imposing liability on the taxpayer." Mr. Chatterjee reinforced the argument by referring to the repealing and saving provisions of section 13 which he read as keeping alive a State law of incometax in.force in any Part B State "for the purposes of levy, assessment and collection of tax" not only in respect of the income of the year 1948 49 but also on the income of,1949 50 which is the previous year for assessment for the year ending March 31, 1951 (i.e., 1950 51). The result, therefore, according to him, was that where any State law of income tax was in force in any Part B State before April 1, 1950, so as to make the income of 1949 50 chargeable to tax, the amended clause (14 A) authorised the computation of such income for the purpose of taxation as, for example, in the State of Bundi. But where, as in the rest of the territory of Rajasthan, no income tax was leviable on the income of the year 1949 50, the amendment by the Finance Act, 1950, which took effect only from April 1, 1950, did not, on its true construction, bring (1) I.L.R. 549 the income of the year 1949 50 into charge under the Indian Act. This argument found favour with the learned Judges in the High Court but we are unable to accept it. A short answer to it is provided by sub clause (i) of clause (b) of the proviso under which the whole of the territory of India including Rajasthan is to be deemed taxable territory for the purpose of section 4 A of the Indian Act "as respects any period. " The words "any period" cannot be taken to mean "any period after March 31, 1950," for the period referred to in the next clause is expressly limited in that sense. ' Those limiting words cannot be read into sub clause (i) which must, therefore, be understood as referring to any period before or after March 31, 1950. As already indicated, residence in the taxable territories within the meaning of section 4 A can, in some cases, relate back to as many as five years before the year of assessment, and that is obviously the reason why the period mentioned in sub claure (i) is not limited as in sub clause (iii) of clause (b) of the proviso. Indeed, if the words "any period" id sub clause (i) were intended to mean any period after March 31, 1950, that sub clause of the proviso which enacts a fiction, would be wholly unnecessary, for clauses (d) and (e) of the substantive part of the definition taken together clearly have the effect, as already stated, of making the territory of India a taxable territory , during that period. If Rajasthan was thus a part of the taxable territories during such period preceding the assessment year, 1950 51, as would be necessary to make the respondent "resident" in such territories within the meaning of section 4 A, then the income accruing or. arising, to him in Rajasthan during the year 1949 50 would be taxable though, Rajasthan was not part of the taxable territories in that year, for, in the case of a person resident in the taxable territories, income accruing or arising to him without the taxable territories is also chargeable to tax under section 4, sub section (1) clause @b) sub clause.(ii) of the Indian Act. This aspect of the matter does not appear to have been sufficiently 550 appreciated in the court below. The learned Judges say: "The first clause in proviso (b) means to say that the earlier residence in Part B States will be taken to be residence in taxable territories while taking account of the residence for a certain prior period." Having thus correctly construed the clause, they failed to realise its effect on the operation of section 4 (1) (b) (ii), for they proceeded to consider the construction of proviso (b) (iii) observing: "The next important question calling for determination is whether Rajasthan became taxable territory during the financial year in this case, i.e., 1949 50, for, if the answer is in the negative, the petitioner must be held to be ' Immune from liability to assessment on the income of that year. " This, as pointed out above, is a misconception. It may well be that proviso (b) (iii) was designed to bring the income,, profits and gains of the year 1949 50 into charge under section 4 (1) (a) and section 4(1) (c), in which cases receipt or accrual, as the case may be,, in the taxable territories is the test of chargeability. it may be mentioned here that the exemption from tax under section 14 (2) (c) of the Indian Act of income accruing within Part B States was abrogated, except as regards the State of Jammu and Kashmir, by the amendment of that provision with effect from the first day of April, 1950. Even assuming it were necessary for the Revenue to bring the case within proviso (b) (iii) in order to sustain the charge on the respondent 's income accruing in Rajasthan during the year 1949 50, we are of opinion that the construction, placed by the learned Judges on that clause cannot be supported. They assume that proviso (b) (iii) is a provision authorising assessment of income tax, and proceed to discuss what the word " 'assessment" in that context should be taken to mean. Charge of income to tax and its computation are matters governed by other provisions of the Indian Act. All that section 2 (14 A) does is to define what the expression "taxable territories" means in certain cases and for certain purposes wherever that expression is used in the various provisions of the Indian Act. 551 And as the expression is used in the charging section 4 in connection with the conditions which are to determine liability to tax, sub clause (iii) of clause (b) of the definition must, when read with section 4 of the Indian Act, have reference to chargeability of income. The result is that sections 3 and 4 of the Indian Act read in the light of the definition in proviso (b) to the amended section 2 (14 A) and section 2 of the Indian Finance Act, 1950, authorise the imposition of the Indian income tax and super tax on the income derived 'by the respondent in they are 1949 50 in the territory of Rajasthan. As already observed, the learned Judges below, in order to reinforce their construction of sub clause (iii) of clause (b) of the proviso, read section 13 of the Finance Act as keeping alive the law of income tax in force in any Part B State for purposes of levy, assessment, and collection of tax in respect of the income of 1949 50. This, in our opinion, is not the effect of section 13 on its true construction. After referring to the decision of the Privy Council to which reference has been made, the learned Judges say "There are three stages in connection with the imposition of a tax. The first is the declaration of liability, the second is the assessment and the third is the collection. This clause makes the territory a taxable territory for the purpose of making any assessment but not for the purpose of chargeability. The chargeability is left to arise by some other law and that law is the previous State law referred to in section 13, Finance Act, 1950. It arises in a twofold manner. In the first place, under section 6 of the General Clauses Act the repeal of the State law as from April 1, 1950 did not affect any liability incurred under the repealed enactment and secondly, though the language used in section 13 is very complicated, a careful perusal makes it clear that the State law is not only kept alive for the purpose of levy, assessment and collection of, incometax the income of the year 1949 50, but also for the above purposes in the subsequent year. The previous year. in relation to the, subsequent year 1951 52 is the 552 year 1950 51 and the period not included therein would be the year 1949 50 and the State law is directed to apply if the income remains untaxed under the Indian law. . Therefore if somebody is liable to income tax in any territory where such law was in force prior to April 1, 1950, but certain period has not been included while assessing him to income tax but the chargeability existed, the proviso (b) (iii) would become applicable for such period as he was not charged but the liability had accrued, and the territory would become taxable territory for the purpose of making any assessment of the year 1950 51. It will be seen that the basis on which this reasoning proceeds is that section 13 of the Finance Act, 1950, ,saves the operation of the States laws relating to income tax in Part B States in the year 1949 50 for the purpose of levy, assessment and collection, and it is those laws that imposed the liability to tax on the income accruing in those States during that, year. This is a misapprehension of the true meaning and effect of section l3. That section, so far as it is material here, runs thus: "Repeal and savings. (1) If immediately before the 1st day of April, 1950, there is in force in any Part B State other than Jammu and Kashmir or in Manipur, Tripura or Vindhya Pradesh or in the merged territory of Cooch Behar any law relating to income tax or supertax 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, for, the year ending on the 31st day of March, 1951, or, for any subsequent year. . .A close reading of that provision will show that it saves the operaton of the State law only in respect of 1948 49 or any earlier period 'which is the period not included in the previous year (1949 50) for the purposes of asessment for the year 1950 51. In other words, there remained no State law of income tax in operation, in any Part B State in the year 1949 50, No doubt, 553 there is the phrase "or for any subsequent year" immediately following the words "for the year ending on the 31st day of March, 1951. " Relying on that phrase, the learned Judges argue thus : Take the "subsequent year" 1951 52. The previous year for making an assessment for that year would 'be 1950 51. The year 1949 50 "is a period not included" in that previous year. Therefore, section 13 saves the operation of any law relating to income tax in force in any Part B State in 1949 50 "for the purposes of the levy, assessment and collection of income tax and super tax in respect of that period," that is to say, the income accruing in 1949 50 in a Part B State continues to be chargeable under the State law. But the learned Judges failed to see that, on this reasoning, the same thing could be said of the income of 1950 51, 1951 52, etc. if you take the "subsequent year" to be 1952 53, 1953 54, etc. and work backwards. On this construction of section 13, the State law of income tax would continue to operate for an indefinite period even after the commencement of the Constitution during which period the Indian income tax and super tax would be leviable. In other words, the State law of income tax in Part B States for the levy, assessment and collection would be in operation side by side with the Indian Act even after the financial integration of those States with the Indian Union a result manifestly repugnant to the policy underlying the Finance Act, 1950. No argument, therefore, could be logically based on the words "or for any subsequent period", which evidently were added with a view to catch the income of any broken. period prior to April 1, 1950, which might otherwise escape assessment both under the repealed. State law and the newly introduced Indian Act. Nor can section 6 of the General Clauses. Act, 1897, serve to keep alive the liability to pay tax on the income of the year 1949 50 assuming it to have accrued under the repealed State law, for a "different intention" clearly appears in sections 2 and 13 of the Finance Act read together as indicated above. In any case no question of keeping any such liability alive could arise in the present case as admittedly no State law of 554 income tax was in operation in the territory of Rajasthan, except the former State of Bundi. On this view the whole basis of the reasoning of the learned Judges below falls to the ground. Even so, it was contended, the Finance Act, 1950, in so far as it purports to authorise such levy is ultra vires and void as Parliament was not competent under the Constitution to make such a law. The argument was put in two ways. In the first place, it was said broadly that as the Constitution could not operate retrospectively as held by this court in Kesava Madhava Menon 's case(1), the power of legislation conferred by the Constitution upon Parliament could not extend so as to charge retrospectively the income accruing a prior to the commencement of the Constitu is a fallacy. While it is true that the tion. This Constitution has no retrospective operation, except where a different intention clearly appears, it is not correct 'to say that in bringing into existence new Legislatures and conferring on them, certain powers of legislation, the Constitution operated retrospectively. The legislative powers conferred upon Parliament under article 245 an article 246 read with List I of the Seventh Schedule could obviously be exercised only after the Constitution came into force and no retro spective operation of the Constitution is involved in the conferment of those powers. But it is a different thing to say that Parliament in exercising the powers thus acquired is precluded from making a retroactive law. The question must depend upon the scope of the powers conferred, and that must be determined with reference by which, affirmatively, to the "terms of the instrument the legislative powers were created and by which, negatively, ' they were restricted": [Queen vs Burah (2)]. Article 245 of the Constitution enacts that subject to its provisions Parliament may make laws for the whole or any part of the territory of India and article 246 proceeds to distribute legislative powers as between Parliament and the State Legislatures in the (1) ; (2) 51.A. 178, 555 country. Thus, these articles read with entry No. 82 of List I of the Seventh Schedule empower Parliament to make laws with respect to taxes on income for the whole of the territory of India, and no limitation or restriction is imposed in regard to retroactive legislation. It is, therefore, competent for Parliament to. make a law imposing a tax on the income of any year prior to the commencement of the Constitution. It was said, however, that the line of decisions like, Queen vs Burah(1), which defined the powers of legislatures created by the British Parliament, could have no application to the Union Parliament which came into life as a new legislature on the commencement of the Indian Constitution. It could not be assumed that such a legislature had the power of making a law having retrospective operation in relation to a perio prior to its birth unless the Constitution itself clearly and explicitly conferred such power. In support of this argument certain observations of one of the Judges in an Australian case [Exparte Walsh and Johnson ; In re Yates(2)] were relied on. We are unable to accept the argument. Our Constitution, as appears from the Preamble, derives its authority from the people of India, and learned counsel conceded that it was open to the people to confer on the legislatures established by the Constitution, which they framed through their representatives, power to make laws having operation in relation to periods prior to the commencement of the Constitution. But, it was insisted, such a power should be given in clearly expressed terms. There is, however, no question here of the Constitution operating retrospectively in bringing into existence the Union Parliament or the legislatures of the States. The only question is 'What powers have been conferred upon these legislatures by the representatives of the people who framed the Constitution and, in determining that issue, the principles laid down in cases. like Queen vs Burah (1) apply in full foree. The observations in the Australian case, to which reference has been made, seem to us (1) 5 I.A. 178. (2) ; , at pp 80, 81, 73 556 to go too far and cannot be accepted as sound constitutional doctrine. Nor can it be said, in strictness, that the Finance Act, 1950, is retroactive legislation. That Act, as already noticed, purports by section 2 to charge income tax and super tax at specified rates "for the year beginning on the last day of April, 1950". The case,is thus one where the statute purports to operate only prospectively, but such operation has, under the scheme of the Indian income tax law, to take into account income earned before the statute came into force. Such an enactment cannot, strictly speaking, be said to be retroactive legislation, though its operation may affect acts done in the past. Dealing with a statute authorising the removal of destitute widows from a parish, it was observed in an English case [Queen vs St. Mary, Whitechapel(1) 1: "It was said that the operation of the statute is confined to persons who have become widows after the Act was passed and that the presumption against a retrospective statute being intended supported this construction. But we have before shown that the statute is in its direct operation prospective as it relates to future removals only and that it is not properly called a retrospective statute because a part of the requisites for its action is drawn from time antecedent to its passing. " It is, however, unnessary to pursue this aspect of the matter further as we have held that Parliament has the power to make retroactive laws. Secondly, it was said that section 101 of the Government of India Act, 1935, which gave effect to the stipulation in the Instrument of Accession against the imposition by the Dominion Legislature. of any tax or duty in the territory of the United State of Rajasthan, was kept alive, notwithstanding its repeal by article 395 of the Constitution, by section 6 of the , [which is made applicable to the interpretation of the Constitution by article 367 (1)] as a " right" or "privilege" acquired under the repealed enactment, and so (1) (1848) i2 Q.B. 120,127; ii6 E.R. 8ii, 814. 557 continued to operate under article 372 (1) as a con stitutional limitation on the power of Parliament, with the result that Parliament had no power to impose tax contrary to section 101 of the Government of India Act, 1935. The argument is somewhat ingenious but there are obvious difficulties in the way of its acceptance. For one thing, section 101 of the Government of India Act, 1935, created no right or privilege in the subjects of the United State of Rajasthan which, notwithstanding the repeal of that section, could be regarded as still enuring for their benefit. Section 101 merely imposed a restriction upon the power of the Dominion Legislature to make laws for an acceding State inconsistent with the stipulations contained in the Instrument of Accession. When that section along with the rest of the Government of India Act, 1935, was repealed by the new Constitution, which has created new legislatures with power to make retroactive laws, it is idle to suggest that rights or privileges acquired while the old Constitution Act was in force are preserved for ever for that must be the result of the argument by section 6 of the General Clauses Act, which can have no application to such cases. Furthermore, it will be recalled that the Proclamation made by the Rajpramukh as Ruler of Rajasthan on 23rd November, 1949, declared and directed that the Constitution of India when brought into force "shall be the Constitution for the Rajasthan State" and it expressly "superseded and abrogated all other constitutional provisions inconsistent therewith" which were then in force. The competency of the Rajpramukh as the Ruler of the State to accept the Constitution of India as governing that State also was not challenged before us, and it is manifest that, after such declaration and direction, no I restriction imposed on the Dominion Legislature by the Instrument of Accession and enforced by section 101 of the Government of India Act could prevail against the legislative powers conferred on Parliament by the Constitution of India. The difference in the constitutional position which previously existed between the Provinces and the acceding: States has thus 558 disappeared except, of course, in regard to matters in which such distinction has been preserved by the Constitution itself, e.g., by article 238 and article 371. It follows that the amendment of section ' 2 clause (14 A) of the Indian Act, by the Finance Act, 1950, so as to authorise the levy of tax on income accruing in the territory of Rajasthan in the year 1949 50 is within the competence of Parliament and therefore valid. We accordingly allow the appeal, and set aside the judgment of the High Court. We make no order as to costs. Appeal allowed.

IN-Abs

Respondent was residing and carrying on business in the District of Jodhpur in Rajasthan, a Part B State,. His income arising therein during the accounting year 1949 50 was sought to assessed to income tax 'for the year 1950 51 under the Indian Income tax Act 'as amended by the Indian Finance Act. He presented ' a petition under article 226 to the High Court praying 542 for the issue of a writ directing the Union of India not to assess income tax on his income which had accrued to him prior to April 1, 1950, because no income tax was leviable in Rajasthan (except in the State of Bundi) under any provision of law in force there. The High Court having accepted his petition, the Union of India preferred the present appeal to the Supreme Court. Section 3 of the Finance Act 1950 (Act XXV of 1550) made certain amendments in the Indian Income tax Act with effect from the 1st day of April, 1950" and substituted therein the present el. (14 A) in section 2 in place of previous el. (14 A) defining "taxable territories". Held, that under sub el. (i) of el. (b) of the proviso, the whole of the territory of India including Rajasthan is to be deemed taxable territory for the purpose of section 4 A of the Indian Income tax Act "as respects any period" The words "any period" mean any period before or after March 31, 1950. Respondent was therefore resident in the taxable territories during the accounting year 1949 50 and his income, whetherderived within or without the taxable territories was taxable under section 4 sub section (I) cl. (b) sub el. (ii) of the Indian Income tax Act. Further, all that section 2 (14 A) does is to define what the ex pression "taxable territories" means in certain cases and for certain purposes. wherever that expression is used in the various provisions of the Indian Income tax Act, and as the expression is used in the charging section 4 in connection with the conditions which are to determine liability to tax, sub el. (iii) of cl. (b) of the definition must, when read with section 4 of the Indian Income tax Act, have reference to chargeabiiity of income and not merely to its computation, and therefore sections 3 and 4 of the Indian Income tax Act read in the light of the definition in proviso (b) to the amended section Y. (14 A) and section 2 of the I inance Act, 1950, authorise the imposition of Indian income tax and super tax on the income derived by the respondent in the year 1949 50 in the territory of Rajasthan. Held also, that while it is true that the Constitution has no restrospective operation except where a different intention clearly appears, it is not correct to say that in bringing into existence now legislatures and conferring on them certain powers of legislation, the Constitution operated retrospectively. Articles 245 and 246 reda with entry No. 82 of List I of the Seventh Schedule empower Parliament to make laws with to taxes on income for the whole territory of India and limitation or restriction is imposed in regard to retroactive legislation &ad it is, therefore competent for Parliament to make a law imposing a tax on the income of any year prior to the the amendment of section 2, cl (14 A) of the Indian income tax Act by the Finance act by the Finance act the Indian Income tax Act by the Finance ,1950, so as to the authorise the levy of the authorise the levy of tax on income accuring in the territory of Rajasthan in the year 1949 50 ie therefore valid.

Civil Appeal No. 76 of 1952. Appeal from the judgment and order dated September 22, 1959 of the Calcutta High Court in Appeal from original order No. 230/1958. A.N. Sinha and P.K. Mukherjee, for the appellant. D.N. Mukherjee, for the respondent. The following judgments were delivered: Sarkar, J. On May 1, 1947, a decree was passed in favour of the appellant bank against the respondents by consent of parties for payment of Rs. 31,000/ in the manner specified. The decree provided that if the respondents failed to pay any of the instalments mentioned in it within four months of the date of its becoming due, the appellant bank "shall deem all . instalments in default and shall be entitled to realise all the said amounts by execution". The amounts payable under the decree by May 30, 1947 were all duly paid. That left a sum of Rs. 21,000/ payable by six annual instalments, each payable on the 30th December of a year, the first instalment being payable in 1947 and the last in 1952. None of these instalments was paid and an application for realising them by execution was made on August 26, 1957. In the meantime a petition for winding up the appellant bank had been presented on May 11, 1948 and an order for winding up had been made on August 3, 1948. Since then the appellant bank has been in the course of winding up. The application for execution was made by the liquidator in the course of the winding up. Under article 182(7) of the First Schedule to the Limitation Act 1908 an application for execution is barred if not made within three years from the date on which the amount sought to be realised was payable under the decree. On December 30, 1953, section 45 O was introduced in the Banking Companies Act, 1949 by the Banking Companies (Amendment) Act, 1953. Sub section (1) of that section is in these terms: section 45 0. (1) Notwithstanding anything to the contrary contained in the Indian Limitation Act, 1908 or in any other law for the time being in force, in computing the period of limitation prescribed for a suit or application by a banking company which is being wound up, the period commencing from the date of the presentation of the petition for the winding up of the banking company shall be excluded. The appellant bank claims that this section saves its application for execution from the bar of limitation imposed by article 182(7). The respondents ' answer to this contention is first that section 45 O has no retrospective operation; it does not revive a debt which was already barred at the date of its enactment. Then they say that 713 all the instalments fell due on April 29, 1948 by the operation of the default clause and therefore, they were all barred under article 182(7) by December 30, 1953 when section 45 O was brought on the statute book. Thirdly they say that if it is held that the default clause gave the appellant bank an option which it had not exercised and the right to apply for execution in respect of the instalments arose on the dates they respectively fell due, the instalments which fell due on December 30 of the years 1947, 1948 and 1949 had become barred before the date of the enactment of section 45 0 and that section could not revive them and the instalments which fell due in the years 1948, 1949, 1950, 1951 and 1952 were not saved from the bar of limitation by section 45 0 as it provided for exclusion of a period commencing from the presentation of the petition for winding and was, therefore, confined to cases where the right had arisen before such presentation, which the right in regard to these instalments had not. First, as to the effect of the default clause, no real difficulty arises. It obviously gave an option to the appellant. As was said in Ram Culpo Bhattacharji vs Ram Chunder Shome(1), "The proviso by which the whole amount of the decree becomes due upon default in payment of any one instalment is a proviso which, look at it how you will, is put in for the benefit of the creditor, the decree holder, and his benefit alone; and when a proviso is put into a contract or security, and in 'security ' I include 'decree, ' for the benefit of one individual party, he can waive it, if he thinks fit. " There is not the least doubt that the default clause in the case in hand was intended for the benefit of the appellant bank; the clause had no operation till the appellant bank wanted to take advantage of it. The High Court took that view and with that I am in full agreement. The High Court further held that the appellant bank had not exercised the option to enforce that clause. Bachawat J. expressly said that the appellant "in fact has waived the benefit of that option." The learned Chief Justice held in view of the option, that "the starting point of limitation will be the dates On which each instalment became due. " He could have held this only in the view that the option had not been exercised. None of the parties appears to have contended to the contrary in the High Court. This being a question of fact it cannot be raised for the first time in this Court. On such a question of fact, the High Court 's finding is binding on us. Furthermore, undoubtedly if the respondents wished to contend that the option had been exercised, it was for them to have given evidence of such exercise but they did not do so. No such evidence has been brought to our notice from the records of the case. It has, therefore, to be held that the right to apply for execution in respect of the instalments under the decree arose on the dates on which they respectively fell due. The next question as to whether section 45 0 (1) has a retrospective operation is of real difficulty. Having. given the matter my (1) C.I 352, 354. 714 most anxious consideration, it seems to me that the better view would be to hold that it has such an operation. The general rule no doubt is, as was stated by Wright J. in In re. Athlumney,(1) "Perhaps no rule of construction is more firmly established than this that a retrospective operation is not to be given to a statute so as to impair an existing right or obligation, otherwise than as regards matter of procedure, unless that effect cannot be avoided without doing violence to the language of the enactment. If the enactment is expressed in language which is fairly capable of either interpretation, it ought to be construed as prospective only. " It can no doubt be argued with force that no violence will be done to the language used in sub section (1) of section 45 O if it is read as applying only to cases where the right to apply has not become barred at the date of its enactments. But there are other considerations. Two reasons have operated on my mind to lead me to the conclusion that the general rule should not be applied in the present case. First, it is recognised that the general rule is not invariable and that it is a sound principle in considering whether the intention was that the general rule should not be applied, to "look to the general scope and purview of the statute, and at the remedy sought to be applied, and consider what was the former state of the law and what it was that the Legislature contemplated.": see Pardo vs Bingharn(2). Again in Cries on Statute Law, 6th ed., it is stated at p. 395, "If a statute is passed for the purpose of protecting the public against some evil or abuse, it may be allowed to operate retrospectively, although by such operation it will deprive some person or persons of a vested right. " To the same effect is the observation in Halsbury 's Laws of England, 3rd ed., vol. 36 p. 425. This seems to me to be plain commonsense. In ascertaining the intention of the legislature it is certainly relevant to enquire what the Act aimed to achieve. In Pardo vs Bingham(2) a statute which took away the benefit of a longer period of limitation for a suit provided by an earlier Act was held to have retrospective operation as otherwise it would not have any operation for fifty years or more in the case of persons who were at the time of its passing residing beyond the seas. It was thought that such an extraordinary result could not have been intended. In R.v. Vine(3) the words "Every person convicted of felony shall for ever be disqualified from selling spirits by retail . and if any person shall, after having been so convicted, take out or have any licence to sell spirits by retail, the same shall be void to all intents and purposes" were applied to a person who had been convicted of felony before the Act was passed though by doing so vested rights were affected. Melior J. observed (pp. 200 201). "It appears to me to be the general object of this statute that there should be restraints as to the persons who should be (1) , 551 552. (2) , 740. (3) 715 qualified to hold licences, not as a punishment, but for the public good, upon the ground of character . A man convicted before the Act passed is quite as much tainted as a man convicted after; and it appears to me not only the possible but the natural interpretation of the section that any one convicted of felony shall be ipso facto disqualified, and the licences, if granted, void. " Now the object of the present Act is beyond doubt. It is well known that prior to 1949 in our country a large number of mushroom banks had come into existence and were in the control of persons not very scrupulous or competent. Many banks came to grief and failed with the result that the depositors largely lost their moneys. It was with the object of giving relief to these innocent depositors that the original Act of 1949 and the Acts amending it were passed. A few of the sections may be referred to by way of illustration. Section 43 of the Act provides that every depositor shall be deemed to have proved his claim for the amount shown in the books of the bank until the liquidator showed reasons for doubting the correctness of the entry. Section 43A gives a right to preferential payment upto a sum of Rs. 250/ to such depositors. Indeed in Joseph Kuruvilla Vellukunnel vs The Reserve Bank of India) it was observed by this Court at p. 656, "the whole intend (sic.) and purpose of that Act is to secure the interests of the depositors. " There need now be no doubt about the object of the Act. One of the methods by which that object can be achieved clearly is by extending the period of limitation for the enforcement of the claims of a bank in liquidation so that more money may be collected for payment to the depositors. That is why section 45 O and its predecessor section 45 F had been enacted. Both extended the existing period of limitation in regard to claims by a bank against its debtors. That being so, it would be natural to think that the largest extension which the language used is capable of giving was intended. Then I find no reason why a distinction should have been intended between debtors the claims against whom might have become barred before the section was enacted and those the claims against whom became barred thereafter. The object would be better achieved by applying the section to both classes. I, therefore, think that the Act was intended to have a retrospective operation. The other reason why I think that sub section (1) of section 45 0 has a retrospective operation is provided by the terms of sub section (3) of that section. Retrospective operation is of course a question of the intention of the legislature and that intention has to be gathered from the whole statute. The two sub sections have, therefore, to be considered together: see Barber vs Pigden(1) and Hutchinson vs Jauncey (3). How sub section (3) is in these terms: The provisions of this section, in, so far as they relate to banking companies being wound up, shall also apply to a banking company in respect of which a petition (1) [1962] Suppl. 3 section C.R. 622. (2) (1937)IK.B. 664. (3) (1950)IK.B. 574. (D)5SCI 7 716 for the winding up has been presented before the commencement of the Banking Companies (Amendment) Act, 1953. It expressly makes sub section (1) applicable to a banking company being wound up on a petition presented before the amending Act. That would indicate that the first sub section was intended to apply to suits and applications by a banking company in liquidation even where the winding up petition had been filed before the amending Act. It should, therefore, apply to all such suits or applications even when they had become barred before the amending Act. Again it is indubitable that as a result of the third subsection a period which had started to run before the amending Act is to be excluded under the first sub section. The third subsection gives no hint that such exclusion is to be confined to cases where the right had not become barred before that Act. 1t expressly gives the first sub section a retrospective operation by permitting exclusion of an antecedent period. All this is strong indication that sub section (1) is to have a retrospective operation. If that is not the intention, then it is clear to me that sub section (3) need not have been enacted at all for clearly the first sub .section would by its own terms have applied to cases of winding up on a petition presented before the amending Act. It applies to all banking companies being wound up and. therefore, also to such companies as are being wound up on a petition presented before that Act. It could be said that even then the first sub section not have a retrospective operation but would only apply prospectively to a banking company being wound up on a petition presented before the Act. This may be illustrated by two cases. In R.v. St. Mary, Whitechapel (Inhabitants)(1) Lord Denman C.J. said that a statute "is not properly called a retrospective statute because a part of the requisites for its action is drawn from time antecedent to its passing." Again in Master Ladies Tailors Organisation vs Minister of Labour and National Service(2) it was observed, "The fact that a prospective benefit is in certain cases to be measured by or depends on antecedent facts does not necessarily . make the provision retrospective. " Why then was sub section (3) enacted? It must have been to give sub section (1) full retrospective operation, to make it affect vested rights. If it were not so, sub section (3) would have been a mere surplusage or enacted ex abundanti cautela. A statute is not to be so read unless that reading is compelled by the words used. There are no such words and I do not think that reading is justified by the rule of presumption that a. statute is not intended to have a retrospective operation. In this case particularly because of the clear intention of the Act to protect a sizable section of the public consisting of the depositors, I feel that a reading of sub section (1) ; at. p. 127. (2) (1950) 2 All. F.R. 525, 527. 717 (3) as a surplusage or ex abundanti cautela would be unwarranted. Furthermore, if that sub Section was enacted merely ex abundanti cautela, then why did it not also say that the provisions of section 45 O would apply to a case where the winding up order had been made before the Act? Why was it not thought that caution was necessary to provide for such a case also? I am not saying that sub section (3) does not make the section apply to a case where the winding up order had been made before the amending Act. All that I am saying is that the omission of a reference to the case of a winding up under such an order shows that sub section (3) was not ex abundanti cautela. It must have been intended to give full retrospective effect to section 45 0 including sub section (1) of that section. It remains now to deal with the last point. It is said that ' since sub section (1) allows the period commencing from the date of the presentation of the petition for winding up to be excluded in the computation of the period of limitation, it can only apply to a case where the period of limitation had commenced to run before that date. The contention is, unless it did so, the whole of the period cannot be excluded and the section permits exclusion of the whole or none. It is, therefore, said that even if the first subsection had a retrospective operation, it could result in saving the bar of limitation only so far as the application concerned the instalment which fell due on December 30, 1947 for the petition for the winding up of the appellant bank had been presented on May 11, 1948 and, hence, before the other instalments became due and the period of limitation in respect of them commenced to run. I am not inclined to accept this contention. I see no reason why it should have been intended that debts which fell due before the winding up petition was presented but were not barred on that date could be recovered and not those which became due thereafter. It has to be remembered that a liquidator is not always appointed on the presentation of the petition for winding up and It does not infrequently happen that a long time elapses between the two. It has also to be remembered that liquidator would require quite some time after his appointment to get acquainted with the state of affairs of the company in liquidation and start taking steps for the recovery of its dues. Therefore, there is no reason to think that it was not intended to give the benefit of the Act to a debt accruing due to a banking company after the presentation of a petition for its winding up. No doubt if sub section (1) is applied to a case of a debt accruing due after the presentation of the petition for winding up, such a debt would be completely free from the bar of limitation. But, is there any reason to think that this was not intended? I find none apart from a rigid and somewhat technical reading of the words used and this I am unable to accept, as it, to my mind, manifestly defeats the object of the Act. I here wish to point out that the bar of limitation is completely lifted in the case of a debt accruing due before the presentation of the petition for winding up which had not become time barred 718 then, and it is natural to think that the intention must also have been to lift the bar completely in the case of debts accruing due subsequently. There is no reason to make a distinction between the two classes of debts. I may add that the complete lifting of the ban of limitation would not produce an astounding result or a great hardship. It has to be remembered that the Act is geared up to seeing that the winding up proceedings are concluded as quickly as possible. To ensure that, large powers have been given to the Reserve Bank of India. Therefore, the removal of the bar of limitation should not keep a debtor in suspense for an inordinately long time. It is true that the sub section does not expressly say that the bar of limitation is totally removed in certain cases. That however is no reason for saying that it has not that effect. It clearly has that effect in the case of debts which accrued due prior to the presentation of the winding up petition and had not become barred on that date, even though the sub section does not expressly say so. The absence of these words, therefore, is not a reason leading to the view that debts which became due after the presentation of the petition for winding up were not intended to be protected. In my view, the first sub section should be read as permitting the exclusion of the entire period commencing from the date of the presentation of the petition for winding up where the debts became due before that date and in cases where the debt became due subsequently, such part of that period as commences from the date of the accrual of the debt. I think such a reading has the support of authority. In Cortis vs The Kent Water works Company(1) it was held that a statute which enabled a rate to be made upon certain persons and permitted a person against whom the rate had been made to file an appeal against the order making it on his entering into a recognizance, allowed a corporation which could not enter into a recognizance, to prefer the appeal without doing so. It was said that any other reading of the Act would defeat the object of the statute which was to subject corporations to rates. Bailey J. observed, "But assuming that they cannot enter into a recognizance, yet if they are persons capable of being aggrieved by and appealing against a rate, I should say that part of the clause which gives the appeal applies to all persons capable of appealing, and that the other part of the clause which requires a recognizance to be entered into applies only to those persons who are capable of entering into a recognizance, but is inapplicable to those who are not." (p. 331). On the same principle I would hold that the section permitted the whole of the period commencing from the presentation of the petition for winding up to be excluded where it could in fact be so done and a part of that period only where the whole of it could not be excluded. Any other reading would, to my mind, defeat the object of the Act and should, therefore, be avoided. (1).7 B.& C. 314. 719 In the result 1 would allow the appeal, set aside the judgment of the appellate bench of the High Court, and hold that the decree was fully executable. The appellant will be entitled to take all steps for such execution as arc permitted to it in law. The appellant will get the costs here and below. Wanchoo, J. This appeal on a certificate granted by the Calcutta High Court raises a question as to the interpretation of section 45 0 of the Banking Companies Act, No. X of 1949, (hereinafter referred to as the Act). The section was enacted in the present form by the Banking Companies (Amendment) Act, No. LII of 1953. It is necessary to state certain facts which are not in dispute now in order to see how the question arises. The appellant bank (in liquidation) through its Midnapore branch got a compromise decree against the respondent on May 1, 1947, for the sum of Rs. 31,000/ of which Rs. 2,155 were paid by the respondent that very day. The decree provided that Rs. 6,885/ were to be paid by May 9, 1947 and the balance of Rs. 22,000/ in seven instalments as under: 1. Rs. 1,000/ on May 30, 1947. Rs. 2,000/ on December 30, 1947. Rs. 4,000/ on December 30, 1948. Rs. 4,000/ on December 30, 1949. Rs. 4,000/ on December 30, 1950. Rs. 4,000/ on December 30, 1951. Rs. 3,000/ on December 30, 1952. The sum of Rs. 6,885/ and the first instalment of Rs. 1,000/were duly paid, but the respondent did not pay the second instalment due on December 30, 1947, nor did he pay the subsequent instalments. On May 11, 1948, a winding up petition was presented in consequence of which the appellant bank was wound up by an order dated August 3, 1948. Paragraph 5 of the compromise, which was part of the decree provided that if the judgment debtor did not pay any instalment and committed default, then four months after such default, all the instalments shall be deemed to be in default and the decree holder would be entitled to recover the entire amount of the decree by execution proceedings. It appears that the appellant attempted by applications presented in 1948 and 1950 to execute decree. It is, however, unnecessary to set out the details of those proceedings at this stage. Suffice it to say that nothing was realised in those proceedings and that the proceedings started on the application presented in 1950 were subsequently transferred to the High Court in view of the relevant provisions of the Act, which had come into force meanwhile. On August 24, 1957, the appellant presented an application in tabular form for execution of the decree on the ordinary original 720 civil side of the Calcutta High Court, and the present appeal has arisen out of the proceedings following thereon. It was stated in the application that the respondent had failed to pay the amount of the decree under execution and that the appellant had been wound up by an order of the court dated August 3, 1948 on a petition for winding up presented to it on May 11, 1948. It was prayed therefore that the High Court liquidator who was the official receiver of the appellant be appointed receiver without security and without remuneration to collect and realise amounts payable to the respondent by the Executive Engineer, Works and Buildings Department, Midnapore Division up to a maximum limit of Rs. 35,000/ . A prayer was also made for the appointment of an interim receiver and an interim order for appointment of such receiver was made on August 26, 1957, which order was confirmed on June 2, 1958. The respondent thereupon appealed and the main question that was raised then on its behalf was that the execution of the decree was barred by limitation. The appellant the other hand contended that in view of the provisions contained in section 45 0 of the Act, the application was within time. The appeal court held on an interpretation of section 45 O that the execution was barred by limitation. It is against this order that the present appeal has been flied on a certificate granted by the High Court. The contention of the respondent was that the execution application flied in 1957 was a fresh application and was clearly barred by time. The appellant met this objection on the basis of the provisions of section 45 O of the Act which reads as under: "(1) Notwithstanding anything to the contrary contained in the Indian Limitation Act, 1908 or in any other law for the time being in force, in computing the period of limitation prescribed for a suit or application by a banking company, which is being wound up, the period commencing from the date of presentation of the petition for the winding up of the banking company shall be excluded. (2) . . (3) The provisions of this section, insofar as they relate to banking companies being wound up, shall also apply to a banking company in respect of which a petition for the winding up has been presented before the commencement of the Banking Companies (Amendment) Act, 1953. " I have already mentioned that the application for winding up the appellant was presented on May 11, 1948. The winding up order was made by the High Court on August 3, 1948. The Act came into force on March 16, 1949. On March 18, 1950, the Banking Companies (Amendment) Act, No. XX of 1950 721 came into force. On October 24, 1953 the Banking Companies (Amendment) Ordinance No. IV of 1953 was promulgated and lastly on December 30, 1953, the Banking Companies (Amendment) Act. No. LII of 1953 came into force. The case of the appellant throughout has been that the period from May 11, 1948 (when the winding up petition was made) to August 26, 1957 (when the execution application was made) had to be excluded in computing the period of limitation in view of sub sections (1) and (3) of section 45 O of the Act. This contention was rejected by the High Court. It was held that section 45 O did not have retrospective effect in the sense of reviving rights which had become barred on the date it came into force and in this view an application for execution of the entire amount was barred by time counting from the first default. In the alternative it was held that instalments 2, 3 and 4 had become time barred before the coming into force of section 45 O on December 30, 1953 and as there was nothing in section 45 O which could revive claims which had become time barred no execution could be taken out in respect of them. The High Court further held that section 45 O could not apply to instalments 5, 6 and 7 as the cause of action to execute the decree for realisation of amounts due under those instalments arose subsequent to the date on which the petition for winding up was presented and the language of sub section (1) of section 45 O indicated that its provisions were to apply only to cases where the period for the presentation of an application had commenced to run prior to presentation of the winding up application. The High Court consequently held the application for execution to be barred by time. It is well settled that provisions of an enactment operate prospectively. and that the right to sue or apply, which has become barred by lapse of time under the previous law, does not revive unless the new law, expressly or by necessary implication, so provides. The High Court held that there was nothing in section 45 0 which could lead to the conclusion that its provisions had retrospective effect in the sense that the right to apply which had become time barred on December 30, 1953 when the Amendment Act came into force, could revive, and consequently enable the appellant to apply for execution. The principal question therefore is whether the language of section 45 O (1) read with section 45 O (3) is retrospective in operation and revives claims that might have become barred by Limitation on the date when that section came into force i.e. December 30, 1953. Now so far as sub section (3) is concerned, that provision is certainly retrospective in the sense that it applies the provisions of section 45 O (1) to all banking companies which were being wound up on December 30, 1953, and thereafter, even though the application for winding up might have been made before December 30, 1953. The main purpose of sub section (3) obviously is to make it clear that section 45 O (D applies not only to those cases of banking companies where application for winding up is made on or after December 30, 1953 but also to those where the application for winding up had 722 been made before December 30, 1953 so long as the conditions for the application of section 45 0 (1) are fulfilled. The effect of this on the construction of sub section (1) will be considered presently. Section 45 O (1) begins with a non obstante clause and prescribes a special manner of computing the period of limitation in cases governed thereby notwithstanding anything to the contrary in the Indian Limitation Act, 1908. The first condition that is necessary for the application of section 45 O O) is that the suit or application should be by a banking company which is being wound up. Thus section 45 O (1) will not apply to a banking company which is not being wound up or where the winding up is over. It thus applies to a banking company between the date of the winding up petition and the conclusion of the winding up proceedings after a winding up order has been made. Where a suit or application is made by a banking company which is being wound up, the sub section provides for exclusion of a certain period in computing the period of limitation prescribed in the Indian Limitation Act, 1908. The exclusion is of the time commencing from the date of presentation of the petition for the winding up of a banking company to the date of suit or application. Thus where a banking company which is being wound up files a suit or makes an application on or after December 30, 1953, when section 45 O (1) came into force, the subsection directs that in such circumstances the period of limitation shall be calculated by excluding the period commencing from the date of presentation of the petition for winding up upto the date of the filing of the suit or application. These words in my opinion are categorical and lay down what period shall be excluded when a suit or application is filed by a banking company. which is being wound up. I cannot agree with the High Court that in applying section 45 O (1) the court has to consider whether the relief claimed in the suit or application by a banking company which is being wound up had become barred by limitation before December 30, 1953. when section 45 0 came into force. The condition necessary for the application of section 45 O (1) is that the suit or application should be filed by a banking company which is being wound up. Once it is clear that the suit or application is filed by a banking company which is being wound up, the court must exclude the period of limitation from the date of presentation of the petition for winding upto the date of the filing of the suit or application. In what manner the exclusion can be made will be considered later. But these words leave no scope to the court to consider whether the suit or application, if filed before December 30, 1953, would be barred by limitation or not. They imperatively lay down that where an application or suit is flied by a banking company (which is being wound up) on or after December 30, 1953, when section 45 O (1) came into force, the court must exclude the period commencing from the date of presentation of the petition for winding up to the date of the suit or application in computing the period of limitation. Further by virture of sub section (3), sub section (1) applies not only 723 to those banking companies which were being wound up on applications presented on or after section 45 O (1) came into force, but also to those banking companies where the application for winding up was made before December 30, 1953, provided the banking company was in the process of being wound up when the suit or application was filed. The Act was passed for the benefit of depositors and to give time to liquidators to familiarise themselves with the affairs of banks. That is why sub section (3) applied sub section (1) to all banking companies in liquidation even though the petition for winding up might have been made before the Act came into force. It follows that the legislature intended to help depositors in all banks in which liquidation proceedings were not over. Sub section (3) would lose a large part of its efficacy if sub section (1) and sub section (3) read together are not interpreted to provide for retrospective operation of the provisions of sub section It will be giving full effect to the intention of the legislature and advancing the remedy intended to be given to depositors if sub section (1) and sub section (3) are read together to be retrospective in the manner indicated above. The language of sub section (D on its plain reading necessarily implies that it was meant to be retrospective and that conclusion becomes inevitable when it is read with sub section (3) in the background of the remedy that the legislature intended to provide for the benefit of depositors. It may be mentioned that the Banking Companies (Amendment) Act, No. XX of 1950, had also provided a special period of limitation by section 45 F which was in these terms: "45 F. Special period of limitation Notwithstanding anything to the contrary contained in the Indian Limitation Act, 1908 (IX of 1908) or in any other law for the time being in force, in computing the period of limitation prescribed for any suit or application by a banking company, the period of one year immediately preceding the date of the order for the winding up of the banking company shall be excluded. " That provision however only excluded one year immediately preceding the date of the order for the winding up of the banking company. It seems thereafter the Banking Companies Liquidation Proceedings Committee 1952 was appointed and had recommended that "provisions may be made by the legislature to the effect that limitation will stop running against a banking company from the date of the winding up order." This recommendation appears to be the basis of section 45 0. Even so the words of section 45 O have to be interpreted as they stand whatever may have been the recommendation of the committee and on a plain construction of those words it is quite clear that sub section (1) of section 45 0 provides in the case of a suit or application filed by a banking company which is being wound up that the period commencing from the date of presentation of the petition for winding up of the banking company 724 to the date of suit or application shall be excluded. It will however be seen that though the committee recommended that limitation should stop running against a banking company from the date of the winding up order, the legislature made two changes when it proceeded to enact section 45 O (1) of the Act. In the first place it did not provide for stopping of the running of limitation; it provided for exclusion of a certain period. It further provided for exclusion of the period commencing from the presentation of a winding up petition and not from the winding up order as recommended by the committee. Now exclusion has been provided in sections 12 to 16 of the Limitation Act also. It is well settled that exclusion of time cannot take place where time has not begun to run before the date from which the exclusion begins or the time limited has already expired before such date. There can thus be no question of exclusion where the time has not begun to run and is not continuing to run. Therefore, though the committee might have recommended that limitation should stop running from the date of the winding up order, the legislature adopted the well known device of exclusion in order to help banking companies in realising their dues. I may add that in the earlier provision in Act XX of 1950 also. the legislature had only provided for exclusion and the same device was continued when section 45 O (1) was introduced by the Amendment Act of 1953. It is therefore clear that when the legislature enacted section 45 O (1) it made two changes already indicated in the recommendation of the committee and those changes are clear from the words of section 45 O. Therefore, in order that section 45 O (1) should apply, it is necessary firstly that the banking company should be in the process of being wound up when the suit or application is being filed, and secondly that the period of limitation for the suit or application should have begun to run before the date of the winding up petition but should not have run out before such date. Otherwise there can be no question of excluding the period beginning from the date of presentation of the petition for winding Up of the banking company. Further in view of sub section (3) of section 45 O, sub section (1) thereof will apply to all banking companies which are in the process of being wound up, even if the petition for winding up was made before section 45 0 (1) came into force and even if the winding up order was made in such case whether before or after the date on which section 45 O (1) came into force i.e. December 30, 1953. It is however urged that on this interpretation there may be some anomalies, particularly in the cases of instalment decrees. For example, it is said that where an instalment decree provides for six yearly instalments and does not provide for any default clause it may happen that some instalments may become due and may not be paid before a winding up petition while other instalments may become due after the winding up petition. In such a situation, the instalments which became due and were not paid before the winding up petition may be recoverable by execution 725 under section 45 0 (1) for the period of limitation having begun and not having run out the exclusion provided by section 45 O (1) comes into play, while in the case of instalments, which became due after the presentation of the winding up petition, the period of limitation not having begun exclusion could not come into play. It is said that it would be rather anomalous that earlier instalments should be recoverable but not later ones. It is submitted that if the subsection is interpreted to lay down stoppage of the period of limitation after the presentation of the winding up petition it will equally cover all instalments. It may be accepted that there would be this anomaly on the interpretation which I have accepted. But the language is clear and provides for exclusion which can only take place after the period of limitation has begun and before it has run out. Therefore, whatever the anomaly where the language is clear and unambiguous it has to receive the only construction of which it is capable. As against this I may point out that if the language of section 45 O (1) is interpreted as stopping of limitation in all cases after the presentation of the winding up petition it will result in equal anomalies. Take a case where a liquidator files a suit and gets a decree. Was it the intention of the legislature by this provision to lay down that there would be no limitation in such a case for the execution of the decree? That would be the result if the provision in section 45 0 (1) is interpreted as meaning stoppage of all limitation from the date of the presentation of winding up petition. But it could hardly be the intention of the legislature that the liquidator in such a case should not execute the decree which he gets within the period of limitation provided by the Indian Limitation Act. The reason for exclusion provided in section 45 0 (1) appears to be that after a winding up order the liquidator takes charge and he will naturally take time to familiarise himself with the affairs of the company. So in all cases where time has begun to run before the winding up petition and has not run out, the liquidator should get some breathing space and that is why the period from the date of the winding up petition is excluded. But where the time has not begun to run before the windings petition, the liquidator would have ample time within which to know the true state of affairs and in such a case the legislature did not intend that there should be no limitation as provided in the Indian Limitation Act. That is why one finds the language of exclusion in section 45 O (1). The benefit of that provision is meant for cases where time has begun to run but has not run out before the presentation of the winding up petition; it is not meant to provide that there would be no limitation in all cases where banking companies are in the process of liquidation. In any case if the legislature wanted to make such a sweeping provision I should have found appropriate language for that purpose in section 45 O (1). In the absence of such appropriate language, the provisions of section 45 O (D which appear to be clear and unambiguous, must receive their only proper construction already set out above. 726 Let me now see how this construction applies to the facts of the present case. The present case is governed by section 45 O (3) because the winding up petition was presented before section 45 O (1) came into force, but by virtue of sub section (3) of section 45 O, sub section (1) would apply to the present case. The question then is whether limitation had begun to run before May 11, 1948 on which date the winding up petition was presented and if so for which instalments or for the whole of the amount. If limitation had begun to run before May 11, 1948. the period from May 11, 1948 upto the date of the application for execution on August 26, 1957, would have to be excluded. Now the evidence is that there was default in payment of the instalment due on December 30. So the period of limitation for that instalment certainly began to run from that date. Further paragraph 5 of the compromise to which I have already referred lays down that if payment was not made of any instalment within after four months of the due date, the entire remaining decretal amount would also become due. These four months expired on April 30, 1948 and from May 1, 1948 the appellant bank was entitled to execute the entire decretal amount that remained due. Therefore the right to execute all the remaining instalments arose on May 1, 1948. Thus limitation for all the instalments from second to seventh began on May 1, 1948 while the application for winding up was made on May 11, 1948. In view of the interpretation of section 45 0 (1) which I have accepted, the appellant would be entitled to exclusion of the entire period from May 11, 1948 upto the 6ate of the execution application, and would thus be entitled to execute the decree for Rs. 12,000/which is the total of instalments 2 to 7 with interest. But it is said that the appellant cannot execute the whole decree as it had waived the first default. I have already indicated that the High Court had considered the matter both from the point of view of the whole amount and of each instalment. No question of waiver was raised by the respondent in his objection petition. On the other hand it seems to have been urged before the High Court that limitation started from the first default i.e., May 1, 1948 and so there was no question of considering the matter of later instalments at all. This was negatived by the High Court on the authority of Ranglal Aggarwalla vs Shyrnlal Tamuli(1) and that is how the High Court came to consider the question of instalments in the alternative. Besides it appears that two execution applications were made in this case one in February 1948 and the other in. July 1950. When the first execution application was made the default clause had not come into operation and the appellant only wanted execution of the second instalment of Rs. 2,000/ and prayed for attachment for Rs. 2,030/ , including interest. So there could be no waiver then. The second execution application was made not only after (1) 727 the first default but after two other defaults also of the instalments of Rs. 4,000/ each due on December 30, 1948 and December 30, 1949. The total of instalments then in default was only Rs. 10,000/ . Though a copy of the second execution application is not printed in the record, it is clear from the particulars in the present tabular form filed in 1957 that the relief sought at the second execution was by attachment for Rs. 26,070/ . Clearly therefore the appellant was executing the whole decree after the default and there can be no question of waiver in the circumstances: (see also the appellant 's statement of case paragraph 20). Bachawat J. (as he then was) who delivered a short separate judgment has certainly said that the present appellant could waive and had in fact waived the benefit of the default. But that with respect does not appear to be accurate. I am therefore of opinion that there was no waiver of the first default and so the appellant can take advantage of section 45 0 and execute the decree for the entire amount. I would therefore allow the appeal and set aside the order of the High Court, and order that execution should proceed according to law. The appellant will get its costs incurred before the appeal court and this court from the respondent. The remaining costs will abide the result. Raghubar Dayal, J. This appeal, by certificate under article 133(1)(a) of the Constitution, requires the construction of section 45 0 of the Banking Companies Act, 1949 (Act X of 1949), hereinafter called the Act. This section was enacted in its present form by the Banking Companies (Amendment) Act, 1953 (Act LII of 1953). hereinafter called the Amending Act. The question arises on these facts. The appellant bank, through its Midnapore Branch, obtained a compromise decree against the respondent in O.S. No. 25 of 1947 of the First Court of the Subordinate Judge, Midnapore, on May 1, 1947. The decree was for an amount of Rs. 31,000/ of which Rs. 2,115/were paid by the respondent that very day. The decree provided that Rs. 6,885/ were to be paid by May 9, 1947 and the balance of Rs. 22,000/ in seven instalments as under: 1. Rs. 1,000/ on May 30, 1947. Rs. 2,000/ on December 30, 1947. Rs. 4,000/ on December 30, 1948. Rs. 4,000/ on December 30, 1949 5. Rs. 4,000/ on December 30, 1950. Rs. 4,000/ on December 30, 1951. Rs. 3,000/ on December 30, 1952. The judgment debtor respondent did not pay the second and subsequent instalments. Paragraph 5 of the compromise which formed part of the decree provided that if the plaintiff decree holder 728 did not get the amount due to it on account of the instalments within 4 months from the time of default, it was to deem, on the expiry of the said 4 months, all the other instalments to be in default and would be entitled to realise the entire amount of the decree then due through execution proceedings. The appellant attempted, by applications presented in 1948 and in 1950, to execute the decree. The details relating to these applications and the proceedings thereon need not be set out here as they do not affect the question for consideration. Suffice it to say that nothing was realised in these proceedings and that the proceedings started on the application presented in 1950 were subsequently transferred to the High Court in view of the relevant provisions of the Act. On August 24, 1957, the appellant presented an application in a Tabular form for execution of the decree, on the ordinary original civil side of the Calcutta High Court. It was stated in column 10 meant for noting the mode in which the assistance of the Court was required that the defendant judgment debtor had failed to pay any portion of the decretal amount or interest, that the decree holder Bank was wound up by an order of the Court dated August 3, 1948 on a petition for winding up presented to it on May 11, 1948 and that the Court Liquidator, High Court, and the Official Liquidator of the decree holder Bank, be appointed receiver without security and without remuneration, to collect and realise the amount payable to the defendant firm and/or Sukumar Dutta. one of its partners, by the Executive Engineer, Works & Building Department, Midnapur Division, upto a maximum limit of Rs. 35,000/ . A further prayer was made that an interim receiver be appointed before issue of any notice of the application to the judgment debtor. On this application an interim order for the appointment of a receiver was made on August 26, 1957. This order was confirmed on June 2, 1958. The judgment debtor respondent appealed against this order contending that the execution of the decree was barred by limitation. The High Court agreed with the contention and dismissed the application and also set aside the order for appointment of receiver. It is against this order that this appeal has been presented under a certificate from the High Court. The contention for the judgment debtor is that the execution to realise intsalments number 2 to 7 had expired long before August 24, 1957 when the execution application in tabular form had been presented as the date for the payment of the last instalment was December 30, 1952. The period of 4 months after the expiry of December 30, 1952 within which the decree holder could execute the decree expired on May 1, 1953. The execution application was presented after the expiry of 3 years of this date. This 729 objection on the ground of limitation was met by the decree holder Bank on the basis of the provisions of section 45 O of the Act which reads: "(1) Notwithstanding anything to the contrary contained in the Indian Limitation Act, 1908 or in any other law for the time being in force, in computing the period of limitation prescribed for a suit or application by a banking company which is being wound up, the period commencing from the date of presentation of the petition for the winding up of the banking company shall be excluded. (2) Notwithstanding anything to the contrary contained in the Indian Limitation Act, 1908 or section 543 of the or in any other law for the time being in force, there shall be no period of limitation for the recovery of arrears of calls from any director of a banking company which is being wound up or for the enforcement by the banking company against any of its directors of any claim based on a contract, express or implied; and in respect of all other claims by the banking company against its directors, the period of limitation shall be twelve years from the date of the accrual of such claims or five years from the date of the first appointment of the liquidator, whichever is longer. (3) The provisions of this section, in so far as they relate to banking companies being wound up, shall also apply to a banking company in respect of which a petition for the winding up has been presented before the commencement of the Banking Companies. (Amendment) Act, 1953. " To appreciate the contention based on this section it is necessary to mention a few more facts. On May 11, 1948, a petition for winding up by the Bank was presented. The winding up order was made by the High Court on August 3, 1948. The Act came into force on March 16, 1949. On March 18, 1950, the Banking Companies (Amendment) Act, 1950 (Act XX of 1950) came into force. On October 24, 1953, the Banking Companies (Amendment) Ordinance IV of 1953 was promulgated and lastly, on December 30. 1953, the Amending Act came into force. The contention for the appellant before the High Court and in this Court is that the period between May 11, 1948 when the windings application was filed and August 1957 when the execution application was presented, is to be excluded from the computation of the period of limitation, in view of sub sections (I) and (3) of section 45 O of the Act. This contention was rejected by the High Court on the ground that instalments Nos. 2, 3 and 4 had become time barred before the coming into force of section 45 O on December 30, 730 1953 and that there was nothing in section 45 0 to revive the claims which could not be enforced due to the lapse of time under the provisions of the Limitation Act. Section 45 0 was not held to apply to the case of instalments 5, 6 and 7 as the cause of action to execute the decree for the realisation of the amounts due under these instalments arose subsequent to the date on which the petition for winding up was presented and the language of sub section (1) of section 45 O indicated that its provisions were to apply only in cases where the period for the presentation of an application had commenced to run prior to the presentation of the winding up application. The High Court, consequently, held the application for execution to be barred by time and dismissed it. The contentions urged before the High Court by the respective parties have been repeated before us. It is thus that the question of the construction of section 45 O of the Act has arisen. It is no doubt true that the provisions of an enactment operate prospectively and that the consensus of opinion is that unless they expressly or by necessary implication provide otherwise. the right to sue or apply which had become barred by lapse of time under a previous enactment is not revived by the succeeding enactment. The High Court was of opinion that there is nothing in section 45 0 which could lead to the conclusion that its provisions had retrospective effect in the sense that the right to apply which had become time barred on December 30, 1953, when the Amending Act came into force, could revive and consequently enable the Banking Company to apply for that relief. Lahiri, C.J. said: "On this point it is significant to note that sub section 3 of section 45 O makes the provisions of the section applicable only to a banking company in respect of which a petition for winding up has been presented before the commencement of the Banking Companies (Amendment) Act of 1953; but does not make the provisions of the section applicable to debts due to the banking company which had become barred by lapse of time before the date of such commencement. Then again sub section 1 of section 45 0 provides that the period commencing from the date of the presentation of the petition for winding up of the banking company shall be excluded and does not say that this period shall always be deemed to have been excluded. The use of the future tense in sub section (1) indicates that the Legislature did not intend its provisions to operate on decrees which had before the date of its commencement become unenforceable by lapse of time. There is therefore neither any express word nor any necessary implication in section 45 0 to indicate that its provisions were intended by the Legislature to have retrospective effect." 731 Bachawat J., practically took the same view and said that sub section (1) of section 45 0 did not provide that the period from the date of presentation of the petition for winding up of the banking company would be always deemed to have been excluded and that though sub section (3) of section 45 O specially provided for the retrospective application of the section to a banking company the Legislature deliberately had not provided that sub section (1) of section 45 O would have a larger retrospective operation. I am of opinion that sub section (1) and specially when read with sub section (3)of section 45 0.) operates retrospectively and that the appellant 's application for execution presented to the High Court in 1957 for executing the decree for the realisation of the instalments in the payment of which the respondent judgment debtor made default was maintainable and not barred by time. It is not necessary for the retrospective operation of the provision of an Act that it must be stated that its provisions would be deemed to have always existed. That is one mode and may be an effective mode of providing that the provisions would have retrospective effect. Retrospective effect of an enactment can also be gathered from its language and the object and intent of the legislature in enacting it. In The Queen vs Vine(1) an enactment which was penal in nature was construed to have retrospective effect despite the rule that when an enactment is penal in nature it is not to be construed retrospectively if the language is capable of having a prospective effect given to it and is not retrospective, as the object of the ' enactment was not to punish offenders but to protect the public against public houses in which spirits were retailed being kept by persons of doubtful character. Government had been making laws for exercising control over the Banks since 1936 upto which time the Indian , 19 13, governed the working of Banking Companies as well. In that year, was added to the Indian . Amendments were made to this Part subsequently and, ultimately, it was repealed by the Banking Companies Act, 1949. In this Act too, Part 3A was added by the Amending Act of 1950. The Amending Act of 1953 substituted the present Part 3A in the Act for the Part originally introduced in 1950. Section 45 F which was inserted in the Act by the Amending Act of 1950 may be quoted, as some reference to it would be made subsequently. It reads: "45F. Special period of limitation Notwithstanding anything to the contrary contained in the Indian Limitation Act, 1908 (IX of 1908), or in any other law for (1) L.R. 10 Q.B. 195. (D)5SCI 8 732 the time being in force, in computing the period of limitation prescribed for any suit or application by a banking company, the period of one year immediately preceding the date of the order for the winding up of the banking company shall be excluded. " A scrutiny of the provisions of the Act and especially of Part 3A clearly indicates that the object of the Legislature in enacting these measures was to protect the interests of the depositors of the banking company and to expedite winding up proceedings. We need not refer to the provisions which would indicate such a purpose of the Legislature. The expeditious disposal of the winding up proceedings is clear by the provisions by section 40 which provides that notwithstanding anything to the contrary contained in section 466 of the , the High Court shall not make any order staying the proceedings in relation to the winding up of a banking company, unless the High Court is satisfied that an arrangement has been made whereby the company can pay its depositors in full as their claims accrue. In Joseph Kuruvila Vellukunnel vs The Reserve Bank India(1), it was observed: "An examination of the Banking reveals two things prominently. The first is that the whole intent and purpose of that Act is to secure the interests of the depositors. " It can be presumed that companies which are wound up had been usually mismanaged. Mismanagement can also account for the failure of the banking company to sue the debtors for the recovery of the amounts due to the banking company within limitation. This injures the interests of the depositors and others concerned in the proper running of the banking company. It is again within the range of possibility, nay probability, that the liquidator appointed for the banking company when it is ordered to be wound up would require some substantial time to acquaint himself with the complete position about the affairs of the company and that during such period limitation for instituting suits or making applications in the interests of the banking company may expire. This aspect is fully explained in paragraph 57 of the Report of the Banking Companies Liquidation Proceedings Committee, 1952, which is set out below: "The Committee has also considered the question as to whether the law of limitation should be further relaxed in favour of the Liquidator. The Liquidator has already been granted a year 's grace by Section 45F of the: (1) [1962] Supp. 3 S.C.R. 632, 656. 733 Banking . Most of the witnesses examined by us were of opinion that the Liquidator 's year was inadequate. They urged that in many cases it takes the Liquidator a long time to ascertain who the debtors are and the amounts due from them, particularly where the records are distributed in different parts of India or are incomplete. Under the procedure envisaged above the debtor is liable to be arraigned in the winding up proceedings, and is entitled to claim relief in such proceedings. As regards creditors, it is settled law that 'the Limitation Act ceases to run as from the winding up order so that a creditor whose claim is not then barred will not be barred by subsequent delay '. We see no reason why limitation should not cease to run against the banking company from the date of the winding up order. If the procedure envisaged above is adopted, the necessity for the Liquidator to file suits against the debtors of the bank will rarely arise. Further, the Liquidator shall have no scope for unconscionable delay in proceeding against the debtor. He is required to bring the debtor before the Court within 6 months from the date of the winding up order unless further time is granted by the Court. We therefore recommend that provision may be made by the Legislature to the effect that limitation will stop running against a banking company from the date of the winding up order. " It appears that the Legislature mostly accepted this view of the Committee and enacted section 45 O providing mainly that there would be no running of limitation against the banking company subsequent to the date of the petition for winding up with the result that limitation would run in the ordinary course upto the winding up petition. There is much logic behind it. Non action upto the date of the petition for winding up was on account of the mismanagement of the banking company. The debtor of the banking company gets advantage of the negligence of the company to sue him or apply against him within the period of limitation. Since the presentation of the petition for winding up of the company, the Court gets control over the affairs of the company and supervises the acts of the liquidator, in accordance with the provisions of the Act which, to secure necessary action in all matters within a reasonable time, provide certain periods for certain actions to be taken by the liquidator of the Court. It is to be presumed therefore that any delay in the taking up of any legal action by the Banking Company would be for good reasons. The Legislature seems to have been of the opinion that the interests of the banking companies, especially of its depositors, should not suffer on account of the delay which could not be avoided even when the Court was in charge of the affairs of the banking company. Viewed in this 734 perspective, it should appear that the relevant date for considering whether action can be taken by the banking company by suit or application is the date of presentation of the winding up petition. If the banking company had a right to sue or to apply on the date the petition for winding up was presented, that right should not be lost to it. I may now consider how far the legislature succeeded in making section 45 0 of the Act, specially its sub sections (1) and (3) carry out this object and intention. For the application of sub section (1), two things are necessary: (i) that a company is being wound up and (ii) that a suit is instituted or an application is made by such a banking company. If these two things exist, the period commencing from the date of presentation of the petition for winding up is to be excluded in computing the limitation prescribed for such a suit or application. The first condition would be satisfied by all companies with respect to which winding up orders had been made either before the commencement of the Amending Act of 1953 or thereafter. There is nothing in the language of the sub section to limit the expression companies being wound up ' to those companies with respect to which winding up orders are made subsequent to December 30, 1953. There seems to be no good reason why such a limitation on this expression be imposed. The provision is not for the benefit of such companies only but is for the benefit of all the companies which would be in the process of winding up during the enforcement of the Act. The process might have commenced before or after the enforcement of the Act. Naturally, petitions for the winding up of companies with respect to which winding up orders had been made prior to December 30, 1953, must have been made before that date. The language of sub section (1) plainly applies to companies which were being wound up when the Act came into force. I may refer to certain cases in which expressions of general import have been so construed. In Weldon vs Winslow(1) the provision of law for construction was: "a married woman shall be capable . of suing and being sued either in contract or in tort, or otherwise, in all respects as if she were a feme sole, and her husband need not be joined with her as plaintiff or defendant, or be made a party to any action or other legal proceeding brought by or taken against her, and any damages or costs recovered by her in any such action or proceeding shall be her separate property . " Brett, M.R. said at p. 787 that the section dealt with an action for tort and that after the Act came into operation a married woman (1) I.R.13 Q.B.D. 784. 735 might bring such an action in her own name and the damages and costs recovered shall be her separate property. He continued: "It is said that this is a retrospective construction, because the cause of action arose before the statute came into operation; but the section does not say anything about cause of action; it deals with bringing the action. and there is nothing in it to limit its provisions to causes of action arising after the statute came into operation. I think, therefore, that an action brought after the statute came into operation is within the plain words of section 1, and it is necessary to distort the grammatical meaning of the words to arrive at the interpretation proposed by the defendant 's counsel. " These remarks can apply aptly to the construction of sub section (1) of section 45 O. That sub section deals with the computation of limitation with respect to suits and applications filed after the coming into force of the Amending Act of 1953 and do not apply to suits and applications which had been filed earlier. The provisions say nothing about the time when the petition for winding up be presented. There is nothing to limit the provisions to petitions for winding up which had been presented after the Amending Act came into force. In Bank of Athens Societe Anonyme vs Royal Exchange Assurance(1) an application under sub section (1) of section 3 of the Law Reform (Miscellaneous Provisions) Act, 1934, empowering the Court to award interest on the whole or any part of the debt or damages for the whole or any part of the period between the date when the cause of action arose and the date of the judgment, was construed not to be restricted to proceedings taken after the Act had come into force. It was said by Branson J., at p. 773: "I think that on the true construction of that section the court in any proceeding, whenever commenced, whether before or after the Act, has the discretion which the section gives it. The words as they stand are applicable in that sense. " The construction I put on the provisions of sub section (1) gets support from the provisions of sub section It is to be noticed that sub section (3) does not provide that the provisions of sub section (1) would apply to banking companies with respect to which winding up orders had been made prior to the commencement of the Amending Act of 1953. If it had said so, the question we are considering now would not have arisen as that would expressly apply the provisions of sub section (1) to the companies which were being wound up on December 30, 1953. Sub section (3) provides that the provisions of the section, viz., of sub sections (1) and (2), shall also apply in so far as they relate to banking companies being wound up to a banking (1) 736 company in respect of which a petition for winding up has been presented before the commencement of the Amending Act. Sub section (3) contemplates cases in which the petitions for winding up had been made prior to the enforcement of the Act but no orders for the winding up of the company had been made. If the provisions of sub section (1) can apply to the companies with respect to which proceedings on a winding up petition were pending on December 30, 1953, it would be very anomalous if they would not apply to the companies with respect to which winding up orders had been made prior to December 30, 1953. This leads to the inference that sub,S. (1) by its own language applies to banking companies which were being wound up on December 30, 1953. Further, this would be apparent if we combine the provisions of sub sections (1) and (3) together, which could be read thus: "Notwithstanding. in force, in computing the period of limitation prescribed for a suit or application by a banking company which is being wound up, or in respect of which a petition for the winding up has been presented before the commencement of the Banking " Companies (Amendment) Act, 1953, the period commencing from the date of the presentation of the petition for winding up of the banking company shall be excluded." So read, it becomes clear that the period of exclusion would be available in connection with suits or applications by a banking company which is being wound up or with respect to which a petition for winding up has been made prior to December 30, 1953. I am further of opinion that if a restricted construction be placed on the provisions of sub section (1) of section 45 O, the effect of sub section (3) would be very much reduced. In fact, it will probably have no utility. If the cause of action for a suit or application had lapsed by efflux of time prior to or on December 30, 1953, the advantage of sub section (1) will not be available to the banking company on account of the provisions of sub section Sub section (3) itself does not give any particular right to the banking company. It only provides that whatever advantage a banking company can derive from the provisions of sub section (1) when it is being wound up, would be available to it even if it be not being wound up, if a petition for its winding up had been presented prior to the enforcement of the Amending Act of 1953. The only case in which the banking company can take advantage of sub section (3) then would be when the cause of action for the suit or application has not lapsed by December 30, 1953 and the proceedings on a winding up application were pending on that date. Such cases would be covered by the language of sub section (1) if the cause of action was alive on December 30, 1953. The order for the winding up of the company would be made subsequent to the date and therefore suits or 737 applications covered by sub section (1) would get the advantage of the provisions of that Act. The expression 'the period commencing from the date of the presentation of the petition for the winding up of the banking company shall be excluded ' fixes the point of time from which the excluded period will commence, and cannot be limited to the dates of such petitions which be presented after December 30, 1953. It is true, as stated in Jwala Prasad vs Official Liquidator(1), that the only purpose which sub section (3) of section 45 0 serves is to make it clear that sub section (1) will apply even when the petition for the winding up of a company is presented prior to the commencement of the Amending Act of 1953. I do not think that a separate subsection was enacted merely for the clarification of the point that the provisions of sub section (1) of section 45 O would take in such cases firstly because such cases would be covered by the language of sub section (1) and, if not, it could have been stated in sub section (1) itself that those provisions would apply where the petition for winding up was presented before or after the commencement of the Act by simply adding the expression 'presented before or after the commencement of the Act ' between the words 'banking company ' and 'shall be excluded '. I am therefore of the view that the effect of sub section (1) of section 45 0 is that if suits or applications made by a ,banking company which is being wound up or for whose winding up a petition has been presented prior to December 30, 1953, the period of limitation is arrested on the date of the presentation of the petition for winding up of the company and that it is not material whether such a date is earlier than December 30, 1953, or not and that therefore suits can be instituted and applications made even in regard to matters with respect to which such action could be taken on the date of presentation of the application for winding up of the company but could not be taken on the date the Amending Act of 1953 came into force. I may now refer to the case law on the point which is so far quite meagre. In Punjab Commerce Bank vs Brij Lal(2) the suit was filed on March 31, 1952 under section 45 B of the Banking Companies Act, 1949, as amended by Act XX of 1950. The cause of action arose on October 9, 1946. The application for winding up was made on February 17, 1948 and the winding up order was made on October 11, 1952. The suit was dismissed on December 2, 1952 as barred by time and an appeal against the dismissal was pending in the High Court on December 30, 1953 when the Amending Act of 1953 came into force. The suit was certainly time barred as the law (1) A.I.R. 1962 All. 486. (2) A.I.R, 1955 Punj, 45. 738 stood on the date of its institution. It was urged for the appellant that the Amending Act was retrospective in effect, that it applied to all suits which were pending on the date it came into force and as the appeal was a re hearing of the case the suit would still be within time as the Amending Act would be applicable to the case on the date of its decision. This contention was repelled. Bishan Narain J., said at p. 46: "I have carefully read this section and in my opinion section 45 0 is not retrospective in effect expressly or by necessary implication and further there is nothing in this section so retrospective in effect as to revive a claim which before that date had become unenforceable by lapse of time. " These observations apparently go against the appellant. They were, however, made in connection with the provisions of section 45 O applying to a suit pending on the date the Amending Act came into force and their import is limited by the other observations made when dealing with the provisions of section 45 O. These observations, on pp. 46 and 47, are: "It will be noticed that neither sub section (D nor sub section (3) makes any mention of a pending suit at the time when the Amending Act of 1953 came into force although the legislature does provide under section 45 C provisions for transferring such a suit to the High Court. In the absence of any specific mention of pending suits it not possible to hold that the section would apply to them. Sub section (3) is to a certain extent retrospective in effect because it makes sub section (1) applicable to those cases in which a petition for winding up had been presented before the Amending Act, 1953 came into force, but this retrospective effect cannot be extended to claims or suits pending in the High Court at the time that the Amending Act came into force." "Applying this test I hold that section 45 O does not apply to pending suits. " Sub section (3) of section 45 O has been considered to be retrospective to a certain extent. It was not necessary for the purpose of this case to consider in what cases and in what manner its retrospective provisions could be used. In Suburban Bank Ltd., vs Nistaran(1) the plaintiff had claimed inter alia several sums advanced as loans to the defendant on June 27, 1945. Winding up application was made on May 12, 1948; the winding up order was passed on June 30, 1948 and the suit was instituted on December 3, 1949 when section 45 F of the , (1) A.I.R. 1955 Cal. 172. 739 Banking Companies Act, introduced by the Amending Act 23 of 1949, provided a special period of limitation. The suit was clearly time barred in view of article 59 of the Limitation Act and section 45 F of the Banking Companies Act. Consequently, the question arose as to whether section 45 O, in view of the alteration of the law during the pendency of the suit, could apply to that suit. It was held that the question whether the proceeding is barred by the law of limitation must depend on the law in force when the proceeding was instituted and that sub section (1) of section 45 O does not refer to pending proceedings either in express words or by necessary implication. When considering the effect of section 45 O, it was said at p. 175: "The general words 'a suit or application ' can be given full effect by limiting them to suits and applications commenced after the sub section came into force. " No occasion arose to consider the effect of the provisions of sub section (3) of section 45 O in proceedings instituted after it came into force. In M/s. Kesarichand vs S.B. Corporation(1) the period of limitation was to commence from December 29, 1950. Article 85 of the Limitation Act was held applicable to the case. The application for winding up of the company was made on February 26, 1953 and winding up order was made on May 26, 1953. An application under section 45 D of the Act was presented on June 28, 1954, more than three years from the commencement of the period of limitation but within 6 months from the commencement of the Amending Act of 1953. December 29, 1950, being the starting point for limitation, the period of limitation for the application expired before December 30, 1953, a day before the Amending Act came into force and the question did arise whether the applicant could be allowed to get the advantage of section 45 O. It was contended that even if the benefit of section 45 O was given to the plaintiff bank, the application would be barred by limitation as the period which was to be excluded in view of sub section (1) of section 45 O commenced from the date of the presentation of the petition for winding up and ended on the date on which the winding up order was made. This contention was negatived. It was held that section 45 O was retrospective in operation. In Jwala Prasad 's Case(2) the period of limitation for taking proceedings under section 235 of the Indian Companies Act, 1913, commenced on November 1, 1947. The period prescribed was 3 years from the date of the first appointment of the liquidator or from the arising of the cause of action. The application for winding up was made on February 17, 1950 and the liquidator was appointed the same day. The liquidator applied for action under section 235 on (1) A.I.R. 1959 Assam 162. (2) A.I.R. 1962 All. 740 September 30, 1953, before the enforcement of the Amending Act of 1953. It was not a case therefore where an application was made by the banking company subsequent to the enactment of section 45 O. The question about the application being made within ,time was to be decided on the law of limitation as it stood on September 30, 1953. The law of limitation as laid down in section 235 was to apply taking into consideration the provisions of section 45 F of the Act as it stood on September 30, 1953. The Court held that the application could not be held to be in time even if the advantage of the provisions of section 45 F be given. It however considered the effect of section 45 O and said at p. 494 that there was nothing in the section to show that it was intended to be retrospective in effect in the sense that it revived remedies which had already come to art end and reliance was placed on the earlier Calcutta, Punjab ,and Assam cases referred to above. I therefore hold that the provisions of sub section (1) of section 45 0 are retrospective in effect and are applicable to suits or applications by a banking company in respect of causes of action for the suit or an application about which suits could be instituted or applications made on the date of the presentation of the winding up petitions made before the commencement of the Amending Act of 1953, even though the specified period of limitation for such action had expired before the enforcement of the Amending Act. In the present case, judgment debtor respondent defaulted in payment of the second installment due on December 30, 1947. On May 1, 1948, the appellant 's right to execute the decree for the entire amount due under the decree arose. The petition for the winding up of the company was made on May 11, 1948. The appellant 's application for execution presented in 1957 for the entire decretal amount due to it would not be time barred if it had exercised its option to have realised the entire decretal amount in default of payment of the second instalment. The right to exercise such an option arose on May 1, 1948, earlier than the presentation of the winding up application, but the appellant decree holder, however, appeared to have waived its such right and to have sought execution for the realisation of the various installments. Bachawat J., said in his judgment: "The respondent could waive and in fact has waived the benefit of that option and became entitled to enforce payment of each installment as and when it fell due. " It was therefore that an objection was raised to the execution of the decree for the installments failing due after the presentation of the winding up application on May 11, 1948 on the ground that the provisions of sub section (1) of section 45 0 applied only to such suits or applications the causes of action for which accrued before the relevant date, i.e., the date of the presentation of the application for winding up. The contention is that the provision about the 741 exclusion of time in the period of limitation predicate that the period of limitation had commenced to run prior to the beginning of the period to be excluded and that therefore the provisions of sub section (1 ') of section 45 O would apply only to suits or applications with respect to such causes of action which had accrued prior to the date of the winding up petition. This contention for the respondent has been accepted by the High Court. In this the High Court was in error. It is clear that the object of the Legislature was that the running of time during the period when the winding up proceedings were pending in Court and when the Court supervised those proceedings be not included in the period of limitation prescribed under the ordinary law of limitation. The banking company is entitled for the exclusion of the period from the date on which the application for winding up had been presented up to the date of institution of the suit or filing of an application, from the period of limitation prescribed for any suit or application and it would be illogical to hold that it is not entitled to ask that a shorter period, as the case would be when cause of action arose subsequently to the presentation of the application for winding up, be also excluded from the period of limitation prescribed for any suit or application. It appears to me that the object and intention of the Legislature in enacting sub section (1) of section 45 O was that the period subsequent to the presentation of the petition for winding up be not taken into consideration in computing the period of limitation. The entire period will be excluded from consideration if the limitation had begun to run prior to the presentation of the petition for winding up and the relevant lesser period i.e., the period commencing from the accrual of the cause of action subsequent to the date of presentation of the petition for winding up of the company would be excluded from the period of limitation which also commences from the accrual of the cause of action. It may be said that this means that the entire period of limitation is abrogated with respect to causes of action arising subsequent to the date of presentation of the petition for winding up. Such may be the result, but that does not mean construing the provisions of sub section (1) of section 45 O in the context of the circumstances and reasons for the enactment of those provisions. It would be anomalous to hold that action can be taken with the help of the provisions of sub section (1) of section 45 O with respect to causes of action which had arisen much earlier than the date of the presentation of the petition for winding up but action cannot be taken with respect to causes of action arising subsequent to such a date if it had not been taken within the prescribed period of limitation. There is nothing in the language of the sub section, in my opinion, to accept the contention for the respondent whose acceptance would lead to results which would not have been contemplated by the Legislature. 742 I am therefore of opinion that the appellant 's application for execution presented in August 1957 was presented within limitation. I would accordingly allow the appeal with costs, set aside the order of the Division Bench of the High Court on Letters Patent Appeal and restore that of the Single Judge. ORDER This appeal is allowed. The appellant will get its costs in this Court and in the High Court.

IN-Abs

In 1949, the Banking Companies Act was passed with a view to protect and secure the interests of depositors. In 1953 section 45 O was enacted by the Banking Companies (Amendment) Act, in pursuance of the recommendations of the Banking Companies Liquidation Proceedings Committee. Section 45 O (1) provided that in computing the period of limitation prescribed for an application by a banking company which is being wound up, the period commencing from the date of the presentation of the winding up petition shall be excluded; and section 45 O (3) provided that sub section (1) shall also apply to a banking company in respect of which the winding up petition was presented before the commencement of the Amendment Act, that is, 30th December 1953. On 1st May 1947, a decree for a sum of money had been passed in favour of the appellant Bank, against the respondents. The decree provided that the amount which was due on 30th May should be paid in 6 annual instalments each payable on 30th December from 1947 to 1952. The decree also provided that if the respondents failed to pay any instalment within 4 months of its becoming due, the appellant shall be entitled to realise all the amounts then due, by execution. None of the instalments was paid. On May 11, 1948 a petition for winding up of the appellant was presented and it was ordered to be wound up on August 3, 1948. In August 1956 the liquidator filed an execution application on the original side of the High Court, for realising the amounts. The application was allowed, but the High Court, in Letters Patent Appeal, held that the application was barred by time. In appeal to this Court, the appellant contended that in view of section 45 O the application was within time: while the respondents contended that: (1) all the instalments fell due by 1st May 1948 by operation of the default clause, and therefore, the application was barred by article 182 (7) of the Limitation Act, 1908, by the time section 45 0 was brought on the statute book; (ii) the section has no retrospective operation so as to revive a debt which had become barred at the date of its enactment; and (iii) if the default clause gave only an option to the appellant so that it could apply for execution as and when an instalment fell due, then, the instalments which fell due in 1947, 1948 and 1949 had become barred before the enactment of the section; and the instalments which fell due during the years 1948 to 1952 were also not saved from the bar of limitation, as the section applied only to those cases where the right to execute had arisen before the presentation of the winding up petition. 709 HELD: (By full Court): Section 45 0 saved the execution application from the bar of limitation imposed by article 182(7) of the Limitation Act. [712H; 719A; 727D; 742A] (i) Per Sarkar, J: The right to apply for execution in respect of the instalments under the decree arose on the dates on which they respectively fell due. [713H] The default clause was only intended for the benefit of the appellant and gave an option to the appellant to sue for the entire amount or waive the benefit of the option, and the appellant had not taken advantage of it. [713D, E, H] Ram Culpo Bhattacharji vs Ram Chunder Shome, Cal. 352, referred to. (ii) Per Sarkar, J: There is no reason why a distinction should have been intended between debtors, the claims against whom might have become barred before the section was enacted and those, the claims against whom, became barred thereafter. In fact, the object of the section would be better achieved by applying it to both classes. [715 F G] One of the methods by which, the object of the Act which was to protect depositors, could be achieved is by extending the period of limitation for enforcement of the claims of a bank in liquidation, so that more money may be collected for payment to the depositors. That being so, the largest extension of the period, which the language used is capable of, must have been intended. [715E F] Besides, section 45 O(3) expressly makes sub section (1), applicable to a banking company being would up on a petition presented before 30th December 1953 Under section 45 0(1) and (3) a period which had started to run before that date could be excluded, and, there is no hint that such exclusion is confined to cases where the right had not become barred by that date. (3) must have been intended to give full retrospective effect to subs. (1), as otherwise, it need not have been enacted, because, sub section (1) would, by its own terms, apply to cases of winding up on a petition presented before the Amending Act, and, considering the intention of the Act, sub section (3) could not have been enacted as a surplusage or ex abundanti cautela. Therefore, section 45 0(1) applies to applications by the banking company, even when they had become barred before the Amending Act. [716 B E H; 717 C] Per Wanchoo, J: The appellant would be entitled to exclude the entire period from 11th May 1948 the date of presentation of the winding up application upto the date of the execution application and would thus be entitled to execute the decree for the total of the 6 instalments due. [726 E] The language of section 45 0(1) implies that it was meant to be retrospective and that conclusion becomes inevitable when it is read with sub section (3), in the background of the remedy that the legislature intended to provide for the benefit of depositors. Section 45 0(1) imperatively lava down that where an application is filed by a banking company which was being would up on or after 30th December 1953 the Court must exclude the period commencing from the date of presentation of the winding up petition to the date of the application in computing the period of limitation. Further by virtue of subs (3), subs. (1) applies not only to those banking companies which were being wound up on petitions presented on or after the section came into force, but also to those banking companies where the winding up petition was made before 30th December 1953 and whether the winding up order was made before or after that date provided the banking company was in the process of being wound up when the application was filed; and, there is no scope for the court to consider 710 whether the application, if filed before 30th December 1953, would barred by limitation or not. [722H; 723 A B, D E; 724 E] Per Raghubar Dayal J: The appellant 's application for execution is maintainable and not barred by time, because, the effect of section 45 0(1) is that, in applications made by a banking company which is being would up, or for whose winding up a petition has been presented before 30th December 1953, the period of limitation is arrested on the date of the presentation of the winding up petition, and it is not material whether such date is earlier than 30th December 1953 or net. Therefore, the sub section is retrospective, and an application can be made even in regard to matters with respect to which such action could be taken on the date of the presentation of the windup petition, but could not be taken, because of efflux of time, on 30th December 1953. [731C; 736G. 737E] One of the conditions for the application of the sub section is that a "banking company is being wound up", and this condition would be satisfied by all companies with respect to which winding up orders had been made either before 30th December 1953 or thereafter. There is nothing in the language of the sub section to limit the expression to those companies which respect to which winding up orders are made subsequent to that date. The provision is not for the benefit of such companies only, but, is for the benefit of all companies which would be in the process of winding up during the enforcement of the Act. This is also apparent when sub sections (1) and (3) are read together. So read, the period of exclusion would be available in connection with applications by a banking company which is being wound up or with respect to which a petition for winding up has keen made prior to 30th December 1953. If the provisions of sub section (1) can apply to the banking companies with respect to which proceedings on a winding petition were pending on 30th December 1953, there is no reason why they should not apply to banking companies with respect to which winding up orders had been made prior 'to that date. Further, if a restricted interpretation is given to sub section (1), by confining it to cases where the cause of action was not barred on 30th December 1953, then sub section (3) will have no utility, because, that sub section only provides that whatever advantage a banking company can derive from the provisions of sub section (1) when it is being wound up, would be available to it even if it is not being wound up, if a petition for its winding up had been presented prior to 30th December 1953. The only case in which the banking company can take advantage of sub section (3), then, would be vhen the cause of action for the application has not lapsed by that date and the proceedings on a winding up application were pending on that date. But, such cases would be covered by the language of sub section (1)itself, for, the cause of action would be alive on 30th December 1953 and the winding up order would be made subsequent to that date. [734 B E; 736B, E H] Case law referred to. (iii) Per Sarkar and Raghubar Dayal, JJ.: Section 45 0(1) should be read as permitting the exclusion of the entire period commencing from the date of the presentation of the winding up petition where the debts became due before that date, and, in cases There the debt became due subsequently such part of that period as commences from the date of the accrual of the debt. [718E; 741F] Per Sarkar, J.: There is no reason why it should have been intended that debts which fell due before the presentation of the winding up petition but were not barred by that date could be 711 recovered, and not those which became due thereafter. No doubt, if the sub section is applied to the case of a debt accruing due to a banking company after the presentation of a winding up petition, such a debt would be completely free from the bar of limitation, but since it has that effect in the case of debts which accrued due prior to the presentation of the petit,ion and had not become barred on that date, the section must be construed as permitting the whole of the period commencing from the presentation of the petition to be excluded where in fact it could be done, and a part of that period only where the whole of it could not be excluded. [717F, H; 718C, H] Cortis vs The Kent Water Works Company, ; , referred to. Per Raghubar Dayal, J: The appellant waived its right under the default clause of the decree and sought execution for the realisation of the various instalments. Even so the execution application was within time, because, a banking company is entitled to exclude, the period from the date on which the winding up petition was presented upto the date of the institution of the application, from the period of limitation prescribed, and it would be illogical to hold that it is not entitled to ask that a shorter period, as the case would be, when the cause of action arose subsequent to the presentation of the winding up petition, should be excluded. It may be that this means, the entire period of limitation is abrogated with respect to causes of action arising subsequent to the date of the winding up petition, but it would be anomalous to hold that action can be taken with the help of the sub section with respect to causes of action ' which had arisen much earlier than the date of the presentation of the winding up petition, but action cannot be taken with respect to causes of action arising subsequent to such a date if it had not been taken within the prescribed period of limitation. [740G, 741C, G H] Per Wanchoo J.: The present case is governed by section 45 0(3) ' because, the winding up petition was presented before section 45 0(1) came into force, but by virtue of sub section (3), sub section '(1) would apply. As there was default in the payment of the instalment due on 30th December 1947, the right to execute all the remaining instalments arose on ist May 1948 and since that right was not waived, limitation for all the instalments began even on ist May 1948, while the winding up application was filed on 11th May 1948, and so, the appellant could take advantage of the section and execute the decree for the entire amount. [726A E; 727C D] Exclusion of time cannot take place where time has not begun to run before the date from which the exclusion begins. Therefore, in order that section 45 0(1) should apply, it is necessary that the period of limitation for the application should have begun to run before the date of winding up petition, but should not have run out. [724 C] On this interpretation, in the case of instalment decrees without a default clause, the instalments which became due and were not paid before the winding up petition may be recoverable by execution, while in the case of instalments which became due after the presentation of the petition, the exclusion provided by the section would not come into play. But if the sub section is interpreted as stopping limitation in all cases, after the presentation of the winding up petition, it will result in another anomaly, that there would be no limitation at all in a case where the liquidator files a suit and gets a decree. [7241; 725A] 712

vil Appeal Nos. 150 and 160 of 1964. Appeals by special leave from the award dated September 20, 1962, of the Industrial Tribunal, Ernakulam in Industrial Dispute Nos. 11 and 10 of 1962 respectively. 761 G.B. Pai, J.B. Dadachanji, O.C. Mathur and Ravinder Narain, for the appellant. M.R.K. Pillai, for the respondents. The Judgment of the Court was delivered by Gajendragadkar, C.J. The short question of law which these two appeals raise for our decision relates to the construction of sections 3 and 11 of the Kerala Industrial Establishments (National and Festival Holidays) Act, 1958 (No. 47 of 1958) (hereinafter called the Act. That question arises in this way. Two complaints were filed against the appellant, the Tam Oil Mills Company Ltd., by the two groups of respondents, its workmen, respectively under section 33A of the . These applications alleged that the management of the appellant had contravened the provisions of section 33 of the said Act inasmuch as it had denied its employees leave with wages on Founder 's Day and Good Friday in 1962. According to the respondents, they were entitled to have holidays with pay on the said two days under the terms and cOnditions of service, and so, they claimed that the Tribunal should direct the appellant to give its employees holidays under the said existing arrangement and should pass other appropriate order 's for the payment of wages for the two holidays in question. The appellant disputed the correctness of the respondents ' contention. The Tribunal has rejected the appellant 's plea and has declared that the respondents are entitled to the privilege 'of paid holidays on Founder 's Day and Good Friday in 1962. It has also ordered that the appellant should pay the wages to the respondents for those two days and the proportionate salary of the staff members as soon as the award comes into force. It is against these orders passed by the Tribunal on the two complaints preferred before it by the respective respondents that the appellant has come to this Court by special leave; and on its behalf, Mr. Pai has contended that in making the award ', the Tribunal has misconstrued the effect of sections 3 and 11 of the Act. Standing Order 30 of the Standing Orders of the appellant company makes provision for leave of all categories. S.O. 30 (vi) provides for holidays. It lays down that the factory will be closed on the following days which will be considered as Company Holidays with pay, and will not be counted against the casual or privilege leave of an employee: 1. New Year Day (1st January). Founder 's 'Day (Saturday nearest to 3rd March) 3. Good 3 Friday 4. Onam 5. Christmas Day (25th December) There is a note appended to this:proVision which makes it clear that in the event 'of the Company being compelled to observe a holiday or holidays for reasons of State such day or days shall not be counted as against 'the privilege or casual leave of the employees but shall 762 be treated as a Company holiday or holidays. Thus, it is clear that under the relevant Standing Order, the respondents are entitled to 5 paid holidays every year. After the Standing Orders were framed and certified, there was an agreement between the appellant and the respondents ' Union as a result of which the appellant agreed to grant a further holiday, and ' this agreement raised the number of total paid holidays in a year to 6. The additional holiday which the appellant thus agreed to give to the respondents was to be given on the day when the respondents ' Union would celebrate its Union Day. Apparently, this holiday was analogous to the Founder 's Day, the idea underlying the agreement being that just as the appellant gave a paid holiday on the Founder 's Day, the respondents should be given a paid holiday on the Union Day. It appears that even after this agreement was reached, the respondents began to claim additional holidays; but the appellant was not prepared to make any addition to the list of holidays. It was prepared to leave the choice of the agreed holidays to the employees provided they submitted to the Company an agreed list of such holidays. In 1958, the Act was passed and it came into force on the 29th December, 1958. Section 3 of the Act provides "Grant of National and Festival Holidays Every employee shall be allowed in each calendar year a holiday of one whole day on the 26th January, the 15th August and the 1st May and four other holidays each of one whole day for such festivals as the Inspector may, in consultation with the employer and the employees specify in respect of any industrial establishment". The result of this provision was that every employer to whom the Act applied had to declare holidays on the 26th January, the 15th August and the 1st May and had to give four other holidays according to the decision of the Inspector, the requirement of the section being that the Inspector had to consult the employer and the employees before fixing such other holidays. In other words, section 3 statutorily fixed the number of paid holidays at 7; fixed three out of them and left the decision of the remaining four to the Inspector who had to consult the employer and the employees. In pursuance of this provision, the Inspector declared certain holidays for the year 1959. Not satisfied with the decision of the Inspector, one of the appellant 's employees Mr. Baskara Menon filed a writ petition in the Kerala High Court under article 226 of the Constitution challenging the validity of the Inspector 's decision. In that writ petition, the question about the construction of section 3 of the 763 Act was agitated. In the result, the High Court held that the complaint made by the petitioner against the validity of the decision of the Inspector was not well founded, and so, the writ petition was dismissed. In 1962, the appellant followed the same procedure and got a decision as to the festival holidays from the Inspector and declared that the said holidays would be observed as paid holidays in the year. At this time, certain industrial disputes were pending between the appellant and its employees belonging both to monthly and daily rated categories before the Industrial Tribunal at Ernakulam. The respondents felt that the declaration of the holidays made by the appellant for the year 1962 amounted to a contravention of section 33 of the , and so, they filed the two present complaints before the Industrial Tribunal under 33A of the said Act. That, in brief, is the genesis of the present complaints. We have already noticed the provisions of section 3 of the Act. The contention raised by the respondents before the Tribunal was that the statutory provision as to 7 paid holidays prescribes the minimum number of holidays which the employer has to give to his employees. This provision, according to the respondents, does not over ride or abrogate the existing arrangement as to paid holidays. In regard to paid holidays which are common to section 3 and the present arrangement they would, of course, have to be treated as paid holidays, but the four other festival holidays which the Inspector decides from year to year would be in addition to the holidays which the appellant is bound to give to the respondents under the existing arrangement, and since the appellant has limited the number of paid holidays to 7 for the year 1962, it has acted contrary to the terms of employment evidenced by the existing arrangement as to paid holidays and that constitutes the violation of section 33 of the . This contention has been upheld by the Tribunal; and Mr. Pai argues that the view taken by the Tribunal is plainly inconsistent with the true scope and effect of section 3 read with section 11 of the Act. That takes us to section 11 of the Act, because this section has to be read along with section 3 in determining the validity of the conclusion recorded by the Tribunal on the main point of dispute between the parties. section 11 reads thus: "Rights and privileges under other laws, etc., not affected Nothing contained in this Act shall adversely affect any rights or privileges which any employee is entitled to with respect to national and. festival holidays on the. date on which this Act comes into force under any other law, contract, custom or usage, if such rights or privileges are more favourable to him than those to which he would be entitled under this Act". D)5 SCI 10 764 This section gives an option to the employees, they can choose to have the paid ' holidays either as prescribed by section 3 or as are available to them under any other law, contract, custom or usage exercising this choice, it must, however, be borne in mind by the employees that the 26th January, the 15th August and the 1st May have to be taken as three holidays. That is the direction of section 3. In regard to the remaining 4. the Inspector decides which days should be paid holidays. In other words, the. statutory requirement is 7 paid holidays. If under the existing arrangement the employees are entitled to 'have more ,,than7 paid holidays, that right will not be defeated by section 3, because section 11 expressly provides that if the rights or privileges in respect of paid holidays enjoyed by the employees are more favourable than are prescribed by section 3, their existing rights and privileges as to the total number of holidays will not be prejudiced by section 3. The scheme of section 11 thus clearly shows that section 3 is not intended to prescribe a minimum number of paid holidays in addition to the existing ones, so that the respondents should be entitled to claim the seven holidays prescribed by section 3 plus the six holidays to which they are entitled under the existing arrangement. If in addition to the three holidays which are compulsory under section 3, the employees are getting, say 3 ' other paid holidays, then section 3 would step in and would require the employer to give his employees one more paid holiday, so as to make the number of paid holidays 7. In our opinion, if sections 3 and 11 are read together, there can be no doubt that the respondents ' claim that they should have 7 holidays as prescribed by section 3 plus 6 holidays as are available to them under the present arrangement is cleary untenable. In the present case, the respondents were having six paid holidayS. The statute has fixed the minimum number at 7 paid holidays, and so, since the existing arrangement was less favourable to the employees, the statutory provision will come to their help and they will be entitled to claim 7 paid holidays in a year, and that means that section 3 will be operative. If that be so, the procedure followed by the employer in consulting the Inspector and in fixing the list of 4 paid holidays for 1962 in addition to the three holidays fixed by the statute is perfectly consistent with the provisions of section 3 of the Act. The Tribunal was, therefore, in error in holding that the appellant had contravened section 33 of the . In the result, the appeals must be allowed, the orders passed by the Tribunal in the two respective complaints set aside, and the two complaints dismissed. There would be no order as to costs. Appeals allowed.

IN-Abs

Under the Standing Orders of the appellant company, its employees were entitled to five holidays with pay on specified dates during each year. Furthermore, by an agreement with the respondents ' union, the company had agreed to grant an additional day 's holiday with pay, thus raising the total number of paid annual holidays to six. In 1958 the Kerala Industrial Establishments (National and Festival Holidays) Act, 1958, was passed and section 3 of the Act required every employer to declare holidays on every 26th January, 15th August and 1st May, and to grant four additional festival holidays each year, on dates to be fixed by the Inspector after consulting the employer and the employees. The number of paid holidays was thus statutorily fixed at 7. In 1962, the company obtained the Inspector 's decision on the four festival holidays and declared the dates on which such holidays would be given. At that time, while an industrial dispute between the company and its employees was pending. the respondents filed applications under section 33A of the , before the Tribunal. It was contended in these applications that the statutory provision in section 3 for 7 paid holidays did not override or abrogate the existing arrangement as to paid holidays and that the holidays to be given under section 3 would be in addition, to the holidays which the appellant was bound to give the respondents under existing arrangements; and that the appellant 's attempt to limit the nUmber of paid holidays to 7 during 1962 was contrary to the terms of employment evidenced by the existing arrangement and therefore violative of section 33. This contention was upheld by the Tribunal. In appeal to this Court, HELD: Under section 3 the statutory requirement is 7 paid holidays each year. If under an existing arrangement the employees were entitled to more than 7 paid holidays, such more favourable right was protected by section 11. The scheme of section 11 clearly shows that section 3 is not intended to prescribe a minimum number of paid holidays in addition to the existing ones and, in the present case, would operate only to raise the total number of holidays from 6 under the existing arrangements to 7 paid holidays in accordance with section 3. [764 B E]

Appeal No. 531 of 1964. Appeal from the judgment and order dated September 24, 1963 of the Madhya Pradesh High Court in Misc. Petition No. 130 of 1962. G. section Pathok, Rameshwar Nath, section N. Andley, P. L. Vohra, for the appellant. M. Adhikari, Advocate Gencral for the State of Madhya Pradesh and 1. N. Shroff, for the respondents. G.S. Pathak, B. Dutta, J. B. Dadachanji, O. C. Mathur and Ravinder Narain, for interveners Nos. 1 and 2. V. M. Lmaye and section section Shukla, for intervener No. 3. G. section Pathak, B. Dutta, section N. Vakil, J. B. Dadachanji, O. C. Mathur and Ravinder Narain, for intervener No. 4. C. B. Agarwala and O. P. Rana, for intervener No. 5. The Judgment of the Court was delivered by Gajendragadker, C.J. The principal question of law which arises in this appeal is in regard to the validity of the Central Act 526 the (No. 38 of 1961) (hereinafter called 'the Act '). It arises in this way. The appellant, Jaora Sugar Mills (Pvt.) Ltd., is a Private Limited liability Company incorporated under the Indian Companies Act. Its registered office is it Jaora within the premises of the Sugar Mills owned by it. The appellant manufactures sugar and carries on the business, inter alia, of the production and sale of the said commodity since 1955 when it was incorporated. The sugarcane season for the manufacture of sugar generally covers the period December to March, and the sugarcane crushing season usually begins on the 1st of October and ends on the 30th June. Respondent No. 1, the State of Madhya Pradesh, enacted the Madhya Pradesh Sugarcane (Regulation of Supply and Purchase) Act, 195 8 (No. 1 of 1959) (hereinafter called 'the Madhya Pradesh Act '). Section 23 of the said Act made a sugarcane cess payable as prescribed by it. Rules 60 to 63 of the Madhya Pradesh Sugarcane (Regulation of Supply & Purchase) Rules, 1959, made under the said Act, provide for the method of collection of cess. Section 21 of the said Act prescribes for the payment of commission to the Cane Development Council which was proposed to be constituted under section 5. Rules 45 to 47 prescribe the quantum of commission payable to the said Council and refer to the manner in which the said payment has to be made. The validity of section 23 of the Madhya Pradesh Act was challenged before the Madhya Pradesh High Court under Article 226 of the Constitution in The Bhopal Sugar Industries vs State of Madhya Pradesh (Misc.Petition No. 27 of 1961). Before the writ petition challenging the validity of the said Act came to be heard before the said High Court, a similar provision in the U.P. Sugarcane Cess Act, 1956 (U.P. Act XXII of 1956) had already been struck down by this Court as unconstitutional in Diamond Sugar Mills Ltd. & Anr.vs The State of Uttar Pradesh and Anr.(1). The common feature of the charging sections in both the Madhya Pradesh and the U.P. Acts was that they authorised the respective State Governments to impose a cess on the entry of cane into the premises of a factory for use consumption or sale therein. It was urged before this Court in the case of Diamond Sugar Mills Ltd.(1) that the premises of a factory was not a 'local area ' within the meaning of Entry 52 in List II of the Seventh Schedule to the Constitution, and so the Act passed by the U.P. Legislature was beyond its competence. This argument was upheld. "We are of opinion", observed Das Gupta J., who spoke for the majority of the Court, "that the (1) ; at p. 256.527 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". Following this decision the Madhya Pradesh High Court struck down section 23 of the impugned Madhya Pradesh Act in the Bhopal Sugar Industries, and allowed the writ petition to that extent. This decision was pronounced on August 31, 1961. The validity of section 21 of the Madhya Pradesh Act prescribing the payment of commission to the Cane Development Council, was also challenged before the Madhya Pradesh High Court by the Bhopal Sugar Industries Ltd. by another writ petition (Misc.Petition No. 340 of 1961). The said High Court held that the: commission directed to be paid by the impugned section was a "fee" and the delegation to the State Government to implement the said provision by prescribing Rules thereunder amounted to valid delegation and as such, the impugned section was not open to any effective challenge. In the result, section 21 was upheld. This decision was pronounced on January 30, 1962. It appears that as a result of the decision of this Court in the case of Diamond Sugar Mills(1), the U.P. was passed by the Central Legislature on March 21, 1961 (No. IV of 1961), and it received the assent of the President the same day. It may be mentioned that the decision of this Court in the case of Diamond Sugar Mills(2) was pronounced on December 13, 1960, and Parliament thought that it was necessary to validate the imposition and collection of cesses made under the said Act and so, the U.P. was passed. Parliament, however, realized that there were several other State Acts which suffered from the same infirmity, and so, on September 11, 1961, the Act with which we are concerned in the present proceedings, was passed. It has also received the assent of the President the same day. This Act purports to validate the imposition and collection of ceases on sugarcane under ten different Acts passed by the Legislatures of seven different States. Section 3 of the Act is the main validating section. Section 5 purported to amend the, specified provisions in the U.P. The said section was brought into force at once, and the remaining provisions of the Act were to (1) ; 528 come into force in the respective States as from the dates which may be specified in that behalf by a notification issued by the Central Government and published in the Official Gazette. The relevant date, so far as the respondent State is concerned, is December 26, 1961. On March 17, 1962, respondent No. 2, the Collector of District Ratlam, issued a notice to the appellant demanding payment of sugarcane cess at the rate prescribed by the respondent State under the relevant Rules. The said notice also demanded payment of cane commission for the years 1959 60 and 1960 61, as prescribed by the relevant Rules. The appellant challenged the validity of these demands and addressed respondent No. 2 in that behalf. It alleged that both the demands were invalid, because the Act under the authority of which they purported to have been made, was itself ultra vires and unconstitutional. In respect of the demand for cane commission for the year 1959 60, the appellant fired an additional (,round that the Cane Development Council itself had come into existence on August 26, 1960, and so, it was not permissible for respondent No. 2 to make a demand for commission in respect of the year 1959 60. It was also alleged that the demand for cane commission at the flat rate of 3 nP, per maund was not related to the services proposed to be rendered by the said Council and as such, was invalid. These pleas were resisted by the respondents. It was urged on their behalf that the impugned Act was valid, and that the demands made by respondent No. 2 for the recovery of the cess and the commission were fully justified. On these the Madhya Pradesh High Court considered the, two broad issues which arose before it. It has held that the provisions of the impugned Act are constitutionally valid, and that the demand for cess made by respondent No. 2 could not be effectively challenged. In regard to the demand for cane commission, the High Court was not impressed by the plea made by the appellant, particularly in relation to the sugarcane season of 1959 60 and it hold that even though the Council may not have come into existence, a demand could be made with a view to provide for the constitution of the said Council and thus enable it to afford service and assistance to the mills like the appellant. That is why the High Court rejected the, appellant 's contentions in that behalf and dismissed its writ petition. This judgment was pronounced on September 24, 1963. The appellant then applied for and obtained a certificate from the High Court and it is with the said certificate that it has come 529 to this Court by appeal. That is how the principal question which arises for our decision is whether the High Court was right in holding that the Act is constitutionally valid. A subsidiary question also falls to be decided and that has relation to the demand for commission for the year 1959 60. The Constitutional position with regard to the legislative competence of the State Legislatures on the one hand, and the Central Legislature on the other in respect of the cess in question is not in doubt. We have already referred to the decision of this Court in Diamond Sugar Mills(1), and in view of the said decision, it is obvious that the cess in question was outside the legislative competence of the States. This very conclusion leads to the irresistible inference that Parliament would have legislative competence to deal with the subject matter in question having regard to article 248 read with Entry 97 in List I of the Seventh Schedule to the Constitution. Article 245(1) provides, inter alia, that subject to the provisions of this Constitution, Parliament may make laws for the whole or any part of the territory of India; and the relevant Entry relates to any other matter not enumerated in List 11 or List III including any tax not mentioned in either of those Lists. Article 248 provides : "(1) Parliament has exclusive power to make any law with respect to any matter not enumerated in the Concurrent List or State List. (2) Such power shall include the power of making any law imposing a tax not mentioned in either of those Lists." It is not disputed that if Parliament intended to make a law in regard to the levy of a cess such as has been prescribed by section 3 of the Act, its legislative competence is not open to doubt. Mr. Pathak for the appellant, however, contends that what the Act purports to do, and in fact and in substance has done, is to validate the invalid State Statutes: the Act, in other words, does not represent provisions enacted by Parliament as such, but it represents an attempt made by Parliament to validate laws which are invalid on the ground that the State Legislatures which enacted the said laws, had no legislative competence to do so. That is the main ground on which the validity of the Act has been challenged before us. This ground has, no doubt, been placed before us in two or three different forms. (1) ; 530 Before dealing with these contentions, it is necessary to refer to the provisions of the Act. The Act purports to have been passed to validate the imposition and collection of cesses on sugarcane under certain State Acts and to amend the U.P. Sugarcane cess (Validation) Act, 1961. Section 5 which has achieved this latter purpose has already been mentioned. With the said section we are not concerned in the present appeal. Section 1(2) provides for the date from which the provisions of the Act shall come into force in different States; and as we have already noticed, the relevant dates for the respective States would be the dates which would be the notification issued by the Central Government and published in the Official Gazette. Section 2 is a definition section; section 2(a) defines "cess" as meaning the cess payable under any State Act and includes any sum recoverable under any such Act by way of interest or penalty. Section 2(b) defines a "State Act" as meaning any of the ten Acts specified by it which were in force in the seven respective States from time to time, by way of amendment or adaptation. Then the ten State Acts are enumerated under this sub section. Section 3 is the validating section, and it is necessary to read it. Its heading is validation of imposition and collection of cesses under State Acts. It reads thus : "3.(1) Notwithstanding any judgment, decree or order of any Court, all cesses imposed, assessed or collected or purporting to have been imposed, assessed or collected under any State Act before the commencement of this Act shall be deemed to have been validly imposed, assessed or collected in accordance with law, as if the provisions of the State Acts and of all notifications, orders and rules issued or made thereunder, in so far as such provisions relate to the imposition, assessment and collection of such cess had been included in and formed part of this section and this section had been in force at all material times when such cess was imposed, assessed or collected; and accordingly, (a)no suit or other proceeding shall be maintained or continued in any Court for the refund of any cess paid under any State Act; (b) no Court shall enforce a decree or order directing the refund of any cess paid under any State Act; and (c) any cess imposed or assessed under any State Act before the commencement of this Act but not collected before such commencement may be recovered (after) 531 assessment of the cess, where necessary) in the manner provided under that Act. (2) For the removal of doubts it is hereby declared that nothing in sub section (1 ) shall be construed as preventing any person (a) from questioning in accordance with the provisions of any State Act and rules made thereunder the assessment of any cess for any period; or (b) from claiming refund of any cess paid by him in excess of the amount due from him under any State Act and the rules made thereunder." Section 4 provides that nothing in this Act shall be construed as validating section 1 1 of the Bombay Sugarcane Cess Act, 1948 (Bombay Act No. 82 of 1948) and accordingly the said section shall be omitted. Section 5 refers to the amendment of U.P. That, in brief, is the position with regard to the provisions of the Act. Mr. Pathak contends that what the Act has done is to attempt to cure the legislative incompetence of the State Legislatures by validating Acts which were invalid on the ground of absence of legislative competence in the respective State Legislatures. His case is that if an Act is invalid not because the Legislature enacting the impugned Act has no legislative competence, but because some of its provisions contravene the fundamental rights of citizens unjustifiably, it is possible to validate the said Act by removing the invalid provisions from its scope. Similarly, if an Act passed by the State Legislature is substantially valid, but is invalid in regard to a portion which trespasses in a field not within the legislative competence of the State Legislature, it would be possible to validate the Act by removing the invalid portion from its scope. In fact if the invalid provision is severable from the rest of the Act, courts dealing with the question of its validity may strike down the invalid portion alone and uphold the validity of the remaining part of the Statute. But where an impugned Act passed by a State Legislature is invalid on the ground that the State Legislature did not have legislative competence to deal with the topic covered by it, then even Parliament cannot validate such an Act, because the effect of such attempted validation, in substance, would be to confer legislative competence on the State Legislature in regard to a field or topic which, by the relevant provisions of the Schedules in the Constitution, is outside its jurisdiction. This position is not and cannot be disputed. If it is shown that the impugned 532 Act purports to do nothing more than validate the invalid State Statutes, then of course, such a validating Act would be outside the legislative competence of Parliament itself. Where a topic is not included within the relevant List dealing with the legislative competence of the State Legislatures, Parliament, by making a law, cannot attempt to confer such legislative competence on the State Legislatures. The difficulty in accepting Mr. Pathak 's argument, however, arises from the fact that the assumption on which the whole argument is founded, is not justified on a fair and reasonable construction of section 3.Section 3 does not purport to validate the invalid State Statutes. What Parliament has done by enacting the said section is notto validate the invalid State Statutes, but to make a law concerningthe cess covered by the said Statutes and to provide that the said law shall come into operation retrospectively. There is a radical difference between the two positions. Where the Legislature wants to validate an earner Act which has been declared to be invalid for one reason or another, it proceeds to remove the infirmity from the said Act and validates its provisions which are free from any infirmity. That is not what Parliament has done in enacting the present Act. Parliament knew that the relevant State Acts were invalid, because the State Legislatures did not possess legislative competence to enact them. Parliament also knew that it was fully competent to make an Act in respect of the subject matter covered by the said invalid State Statutes. Parliament, however, decided that rather than make elaborate and long provisions in respect of the recovery of cess, it would be more convenient to make a compendious provision such as is contained in section 3. The plain meaning of section 3 is that the material and relevant provisions of the State Acts as well as the provisions of notifications, orders and rules issued or made thereunder are included in section 3 and shall be deemed to have been included at all material times in it. In other words, what section 3 provides is that by its order and force, the respective cesses will be deemed to have been recovered, because the provisions in relation to the recovery of the said cesses have been incorporated in the Act itself. The command under which the cesses would be deemed to have been recovered would, therefore, be the command of Parliament, because all the relevant sections, notifications, orders, and rules have been adopted by the Parliamentary Statute itself. We are, therefore, satisfied that the sole basis on which Mr. Pathak 's argument rests is invalid, because the said basis is inconsistent with the plain and clear meaning of section 3. As we have already indicated, Mr. Pathak does not dispute and rightly that it is competent to Parliament 533 to make a law in respect of the cesses in question, to apply the provisions of such a law to the different States, and to make them retrospective in operation. His whole contention is based on what he records to be the true scope and effect of section 3. If the construction which he places on section 3 is rejected, the argument about the invalidity of the Act must likewise be rejected. The same contention has been placed before us by Mr. Pathak in another form. He suggests that the Act in question is a colourable piece of legislation. His case is that when Parliament realised that as a result of the invalidity of different State Statutes the respective States were faced with the problem of refunding very large amounts to the persons from whom the cesses were recovered, it has passed the present Act not for the purpose of levying a cess of its own, but for the purpose of enabling the respective States to retain the amounts which they have illegally collected. This aspect of the matter, says Mr. Pathak makes the Act a colourable piece of legislation. We are not impressed by this argument. The challenge to the validity of a Statute on the ground that it is a colourable piece of legislation is often made under a disconnection as to what colourable legislation really means. As observed by Mukherjea J., in K. C. Gajapati Narayan Deo and Others vs The State of Orissa(1) "the idea conveyed by the expression 'colourable legislation is that although apparently a Legislature in passing a statute purported to act within the limits of its powers, yet in substance and in reality it transgressed these powers, the transgression being veiled by what appears, on proper examination, to be a mere presence or disguise." This observation Succinctly and effectively brings out the true character of the contention that any legislation is colourable legislation. Where a challenge is made on this round, what has to be proved to the satisfaction of the Court is that though the Act ostensibly is within the legislative competence of the Legislature in question, in substance and in reality it covers a field which is outside its legislative competence. It would be noticed that as soon as this aspect of the matter is borne in mind, the argument that the Act is a colourable piece of legislation takes us back again to the true scope and effect of the provisions of section 3. If the true scope and effect of section 3 is as Mr. Pathak assumes it to be, then, of course, the Act would be void on the round that it is a colourable piece of legislation. But if the true scope and effect of section 3 is as we have already held it to be, then in passing the Act, Parliament has (1) ; at p. II.534 exercised its undoubted legislative competence to provide for the recovery of the specified cesses and commissions in the respective State areas from the dates and in the manner indicated by it. When demands were made for the recovery of the said cesses, they will be deemed to have been made not in pursuance of the State Acts but in pursuance of the provisions of the Act itself. Therefore, we do not think there is any substance in the argument that the Act is invalid on the ground that it is a colourable piece of legislation. Mr. Pathak has raised another contention against the validity of the Act. He argues that the Act has not been passed for the purposes of the Union of India, and the recoveries of cesses which are retrospectively authorised by it are not likely to go in the Consolidated Fund of India. He contends that the recoveries have already been made by the respective States and they have gone into their respective Consolidated Funds. In support of this argument, Mr. Pathak has referred to the general scheme of the devolution of revenues between the Union and the States which is provided for by the relevant Articles contained in Part XII of the Constitution and he has relied more particularly on the provisions of Act. Article 266, no doubt, provides for two different Consolidated Funds and Public Accounts, one in relation to India and the other in relation to the respective States. it reads thus: "266.(1) Subject to the provisions of article 267 and to the provisions of this Chapter with respect to the assignment of the whole or part of the net proceeds of ,certain taxes and duties to States, all revenues received by the Government of India, all loans raised by that Government by the issue of treasury bills, loans or ways and means advances and all moneys received by that Government in repayment of loans shall form one consolidated fund to be entitled "the Consolidated Fund of India", and all revenues received by the Government of a State, all loans raised by that Government by the issue of treasury bills, loans or ways and means advances and all moneys received by that government in repayment of loans shall form one consolidated fund to be entitled "the Consolidated Fund of the State". (2)All other public moneys received by or on behalf of the Government of India or the Government ,of a State shall be credited to the public account of 535 India or the public account of the State, as the case may be. (3)No moneys out of the Consolidated Fund of India or the Consolidated Fund of a State shall be appropriated except in accordance with law and for the purposes and in the manner provided in this Constitution". It will be noticed that the contention raised by Mr. Pathak on the basis of article 266 makes an assumption and that is that the cesses already recovered by the different States will not be transferred to the Consolidated Fund of India, but will remain with the respective States; and that such a position would invalidate the law itself. We are not prepared to accept this argument as well. What happens to the cesses already recovered by the respective States under their invalid laws after the enactment of the impugned Act, is a matter with which we are not concerned in the present proceedings. It is doubtful whether a plea can be raised by a citizen in support of his case that the Central Act is invalid because the moneys raised by it are not dealt with in accordance with the provisions of Part XII generally or particularly the provisions of article 266. We will, however, assume that such a plea can be raised by a citizen for the purpose of this appeal. Even so it is difficult to understand how the Act can be said to be invalid because the cesses recovered under it are not dealt with in the manner provided by the Constitution. The validity of the Act must be judged in the light of the legislative competence of the Legislature which passes the Act and may have to be examined in certain cases by reference to the question as to whether fundamental rights of citizens have been improperly contravened, or other considerations which may be relevant in that behalf. Normally it would be inappropriate and indeed illegitimate to hold an enquiry into the manner in which the funds raised by an Act would be dealt with when the Court is considering the question about the validity of the Act itself. As we have just indicated, if the taxes of cesses recovered under an Act are not dealt with in the manner prescribed by the Constitution, what remedy a citizen may have and how it can be enforced, are questions on which we express no opinion in this appeal. All we are consider ing at this stage is whether even on the assumption made by Mr. Pathak, it would be permissible for him to contend that the Act which is otherwise valid, is rendered invalid because the funds in question will not go into the Consolidated Fund of India. L7Sup.165 6 536 In truth, this argument again proceeds on the basis that Parliament has passed the Act not for the purpose of treating the recoveries made as those under its provisions retrospectively enacted, but for the purpose of validating the said recoveries as made under the invalid State Acts; and we have already pointed out that section 3 completely negatives such an assumption. Therefore, we do not think that Mr. Pathak is right in contending that the provisions of the Act are invalid in any manner. It would thus be seen that though Mr. Pathak presented his argument in three different forms, in substance his grievance is very simple. He says that section 3 of the Act does not purport to act prospectively; it acts merely retrospectively and its effect is just to validate collections illegally made in pursuance of invalid statutory provisions enacted by State Legislatures. the crucial question is: if collections are made under statutory provisions which are invalid because they deal with a topic outside the legislative competence of the State Legislatures, can Parliament, in exercise of its undoubted legislative competence, pass a law retrospectively validating the said collections by covering their character from collections made under the State Statutes to that of the collections made under its own Statute operating retros pectively ? In our opinion, the answer to this question has to be in the affirmative, because to hold otherwise would be to cut down the width and amplitude of the legislative competence conferred on Parliament by article 248 read with Entry 97 in List I of the Seventh Schedule. Whether or not retrospective operation of such a law is reasonable, may fall to be considered in certain cases; but that consideration has not been raised before us and in the circumstances of this case, it cannot validly be raised either. We must, therefore, hold that the High Court was right in rejecting the appellant 's case that the Act was invalid, and hence no demands could be made under its provisions either for a cess or for commission. There is, however, one subsidiary question which still remains to be considered and that has relation to the demand for cess commission for the year 1959 60. The appellant 's case is that this demand is invalid. The material facts in relation to this point are not in dispute. We have already noticed that the sugarcane crushing season is usually between 1st October and the 30th June, and that the Cane Development Council was constituted for the first time on August 26, 1960. In other words, the Council was not in existence throughout the period covered by the demand in question which relates to the year 1959 60. Section 21 of the 537 Madhya Pradesh Act provides for the payment of commission on purchase of cane; and Rules 45 to 47 prescribe the manner in which the said payment has to be made. It is true that the functions of the Cane Development Council as prescribed by section 6 of the said Act show that the Council is expected to render service to the mills like the appellant; and so, it can be safely assumed that the commission in question which was authorised to be recovered under section 21 of the Madhya Pradesh Act initially, and which will now be taken to have been recovered under section 3 of the Act is a "fee". Mr. Pathak contends that it is plainly illegal to recover such a fee for a period during which the council did not exist at all and could have rendered no service whatever. It is well settled that the imposition of a fee is generally supported on the basis of quid pro quo, and so, it is urged that the impugned recovery for the year 1959 60 is plainly without any quid pro quo and as such, cannot be enforced. The High Court did not accept this argument, because it held that the doctrine of quid pro quo did not require that actual service must be rendered first before a fee can be levied or demanded. In support of this view, the High Court has relied upon certain observations made by this Court in H. H. Sudhindra Thirtha Swamiar vs Commissioner for Hindu Religious and Charitable Endowments, Mysore(1), While rejecting the contention which was raised before this Court in that case that the levy prescribed by section 76(1) of the Madras Religious Endowments Act, 1951 (No. XIX of 1951) was invalid, Shah, J., who spoke for the Court observed: "A levy in the nature of a fee does not cease to be of that character merely because there is an element of compulsion or coerciveness present in it, nor is it a postulate of a fee that it must have direct relation to the actual services rendered by the authority to individual who obtains the benefit of the service. If with a view to provide a specific service, levy is imposed by law and expenses for maintaining the service are met out of the amounts collected, there being a reasonable relation between the levy and the expenses incurred for rendering the service, the levy would be in the nature of a fee and not in the nature of a tax". The High Court thought that these observations justified the view that a fee could be validly recovered from the appellant by way of commission to be paid to the Cane Development Council, even though the Council may not have come into existence during the whole of the period in question. In our opinion, the High Court has ignored the context in which the Said observations were made has misjudged their effect. It is not necessary for us decide (1) [1963] Supp. 2 S.C.R. 323.538 whether the service must be rendered for the whole of the period covered by the fee, or whether it is necessary that the service must be rendered first and the fee can be recovered thereafter. These fine and academic questions are not relevant in the present case, because it is not even suggested that during the whole of the period any service whatever was rendered by the Council at all. In this connection, it is necessary to bear in mind the fact that section 23(1) of the Madhya Pradesh Act required, inter alia, that the commission had to be paid to the Council at the rate and in the proportion prescribed by it. Other statutory provisions including the Rules further provided that the failure to pay the said commission on the occasion of the purchase, would entail the liability to pay interest and the, said commission along with the interest was made recoverable as arrears of land revenue. Having regard to these provisions, it seems to us very difficult to accept the view that the commission which had to be paid to the Council fell to be paid even though the Council was not in existence at all throughout the sugar crushing season in question. On the special facts of this case, therefore, we are satisfied that no amount could be validly claimed by way of commission for the year 1959 60. The notice of demand (Annexure D) which has been issued in that behalf shows that the cane commission 3 NP per maund which has been demanded from the appellant by respondent No. 2 for the years 1959 60 and 1960 61, amounts to Rs. 1,26,152/86 nP. It is common ground that out of this amount, Rs. 54,037.57P represents the commission for the year 1959 60. We must accordingly hold that the demand made by respondent No. 2 for the payment of cess commission for the year 1959 60 amounting to Rs. 54,037.57P is invalid and the notice to that extent must be cancelled. In the result, the appeal substantially fails and the order passed by the High Court is confirmed, subject to the modification in regard to the demand for the payment of cane commission for the year 1959 60. There would be no order as to costs. Appeal dismissed and Order modified.

IN-Abs

Under the Madhya Pradesh Sugarcane (Regulation of Supply and Purchase) Act 1958 (1 of 1959) a cess was levied on sugarcane and for this purpose a sugarcane factory was treated as a 'local area '.In the Diamond ' Sugar Mills case it was held by this Court that such a levy was not valid. Following this decision the Madhya Pradesh High Court struck down section 23, which was the charging section of the aforesaid Madhya Pradesh. Act No. 1 of 1959. There were Acts in several other States which suffered from the same infirmity and to meet the situation Parliament passed the (38 of 1961). The Act made valid, by section 3, all the assessments and collections made before its commencement under the various State Arts and laid down that all the provisions. of the State Acts as well as the relevant notifications, rules etc. made under the State Acts would be treated as part of section 3; further. the said section was to be deemed to have existed at all material times when the cess was imposed, assessed and collected under the State Acts. The, appellant, a sugar factory, was asked to pay the cess for the years 1959 60 and 1960 61. It however, challenged the levy in a writ petition before the High Court. The High Court having dismissed the petition, the. appellant came to this Court with certificate. The contentions urged on behalf of the appellant were : (1) What the validation of the Act had done was to attempt to cure the legislative incompetence of the State Legislatures by validating State Acts which were invalid on the ground of absence of legislative competence in the respective State Legislatures; (2) Parliament had passed the Act in question not for the purpose of levying a cess of its own, but for the purpose of enabling the respective states to retain the amounts which they had illegally collected. The Act was therefore a colourable piece of legislation; (3) The Act had not been passed for the purposes of the Union of India and the recoveries of cesses which were retrospectively authorised by it were not likely to go into the Consolidated Fund of India; (4) The sugarcane crushing season was between October 1, and June 30th. 'Me Cane Development Council which was constituted on August 26, 1960 was not in existence throughout the period covered by the demand for the year 1950 60. 'Me demand was a 'fee ' and it was illegal to recover such a wee for a period during which the council did not exist at all and could have rendered no service whatever. HELD:(i) In view of the decision of this Court in Diamond Sugar Mills it was obvious that the cess in question was outside the legislative competence of the States. This very conclusion led to the irresistible inference that Parliament would have legislative competence to deal with the subject matter in question, having regard to article 248 read with Entry 524 97 in List I of the Seventh Schedule to the Constitution. Thus the legislative competence of Parliament to levy a cess such as was imposed by section 3 of the (Central Act 38 of 1961) was not in doubt. Diamond Sugar Mills Ltd. & Anr. vs Slate of Uttar Pradesh & Anr. , referred to. (ii)When an Act passed by a State Legislature is invalid on the ground that the State Legislature did not have legislative competence to deal with the topics covered by it, then even Parliament cannot validate such an Act, because the effect of such attempted validation, in substance, would be to confer legislative competence on the State legislature in regard to a field or topic which, by the relevant provisions of the schedules to the Constitution, is outside its jurisdiction. Where a topic is not included within the relevant List dealing with the legislative competence of the Slate Legislatures, Parliament, by making a law cannot attempt to confer such legislative competence on the State Legislatures. [531 G] But section 3 of the impugned Act does not purport to validate the invalid State Statutes. What Parliament has done by enacting the said section is not to validate the invalid State statutes, but to make a law concerning the cess covered by the said Statutes and to provide that he said law shall come into operation retrospectively. Parliament knew that the relevant State Acts were invalid because the State Legislatures were not competent to enact them. Parliament also knew that it was fully competent to make an Act in respect of the subject matter covered by the said invalid State Statutes. Parliament however decided that rather than make elaborate and long provisions in respect of the recovery of cess, it would be more convenient to make a compendious provision such as is contained in section 3. The plain meaning of section 3 is that the material and relevant provisions of the State Act as well as the provisions of notifications, orders and rules issued or made thereunder are included in section 3 and shall be deemed to have been included at all material times in it. In other words what section 3 provides is that by its order and force the respective cesses will be deemed to have been recovered, because the provisions in relation to the recovery of the said cesses have been incorporated in the Act itself. The command under which the cesses would be deemed to have been recovered would, therefore, be the command of Parliament. [532 C H] (iii)Where a challenge to the validity of a legal enactment is made on the ground that it is a colourable piece of legislation, what has to be proved to the satisfaction of the court is that though the Act ostensibly is within the legislative competence of the legislature in question, in substance and in reality it covers field which is outside its legislative competence. In passing section 3 however Parliament exercised its undoubted legislative competence to provide for the recovery of the specific(] cesses and commissions in the respective State areas from the date and in the manner indicated by it. The Act could not therefore be attacked on the ground of being a colourable piece of legislation. [533 F H] K.C. Gajatpati Narayan Dea & Ors. vs State of Orissa, [1954] S.C.R.1 relied on. (iv)The validity of an Act must be judged in the light of the legislative competence of the legislature which passes the Act and may have to be examined in certain cases by reference to the question as to Whether fundamental right of citizens have been improperly contravened, or to other considerations which may be relevant in that behalf. But normally it would be inappropriate, indeed illegitimate, to hold an enquiry into the manner in which the funds raised by an Act would be dealt with when 525 the court is considering the question about the validity of the Act itself. Therefore it was impermissible to contend that the Act was invalid because the funds in question would not go into the Consolidated Fund of India. [535 E H] (v)If collections are made under statutory provisions which are invalid because they deal with a topic outside the legislative competence of the State Legislature, Parliament can in exercise of its undoubted legislative competence, pass a law retrospectively validating the said collections by converting their character from collections made tinder the State Statutes to that of collections made under its own statute operating retrospectively. To hold otherwise would be to cut down the width and amplitude of the legislative competence conferred on Parliament by article 248 read with Entry 97 in List I of the Seventh Schedule. [536 C E] (vi)The functions of the Cane Development Council as prescribed by section 6 of the Madhya Pradesh Act show that the Council is expected to render service to the mills like the appellant and so it can be safely assumed that the commission which was authorised to be recovered under section 21 of the Madha Pradesh Act is a 'fee '. The imposition of a fee is generally supported on the basis of quid pro quo. The Council was however constituted for the first time on August 26, 1960. In other words the Council was not in existence throughout the periods covered by the demand relating to the year 1959 60. It did not render any service at all during the said period. On the special facts of the case no amount could therefore be validly claimed by way of commission for the year 1959 60. [537 A B; 538 C D] H. H. Sudhindra Thirtha Swamiar vs Commissioner of Hindu Religious and Chtartible Endowments, Mysore, [1963] Supp. 2 S.C.R., referred to.

ivil Appeal No. 149 of 1965. Appeal by special leave from the judgment and order dated May 10, 1963 of the Punjab High Court (Circuit Bench) in S.A.O. No. 40 D of 1963. C.B. Agarwala, B.R.L. lyengar, P.N. Chaddha, S.K. Mehta and K.L. Mehta, for the appellant. S.T. Desai and Gopal Singh for Harbans Singh, for respon dents Nos. 1 & 2. Gurcharan Singh and Gopal Singh for Harbans Singh, for respondents Nos. 3 to 5. 831 Sarkar and Bachawat, JJ. delivered separate but concurring judgments. Mudholkar, J. delivered a dissenting Opinion. Sarkar, J. The respondents are the owners of certain premises in Connaught Circus in New Delhi, which were let out to Allen Berry & Co. (Calcutta) Ltd. Sometime in 1959 Allen Berry & Co. transferred the lease to the appellant and put the latter in possession. Alleging that the transfer had been made without their consent, the respondents made an application under el. (b) of the proviso to sub section (1) of section 14 of the Delhi Rent Control Act, 1958 to the Controller appointed under it against Allen Berry & Co. and the appellant for an order for recovery of possession of the premises from them. While the application was pending, Allen Berry & Co. went into liquidation and was in due course dissolved and its name was, thereupon, struck off from the records of the proceedings. The Controller later heard the application and made an order in favour of the respondents for recovery of possession of the premises from the appellant alone. An appeal by the appellant to the Rent Control Tribunal under the Act against this order was dismissed. The appellant then moved the High Court of Punjab for setting aside the order of the Tribunal, but there also it was unsuccessful. It has now come to this Court in further appeal. It was contended that the order for recovery of possession made against the appellant after Allen Berry & Co. had ceased to be a party to the proceedings, was incompetent. This contention was based on an interpretation of the terms of sub section (1) of section 14, the material part of which is set out below: section 14 (1) Notwithstanding anything to the contrary contained in any other law or contract, no order or decree for the recovery of possession of any premises shall be made by any court or Controller in favour of the landlord against a tenant: Provided that the Controller may, on an application made to him in the prescribed manner, make an order for the recovery of possession of the premises on one or more of the following grounds only, namely: (a) . . (b) that the tenant has, on or after the 9th day of June, 1952, sub let, assigned or otherwise parted with the possession of the whole or any part of the premises without obtaining the consent in writing of the landlord; The contention of the appellant was put in this way: The first part of sub section (1) of section 14 puts a complete ban on recovery of possession from all tenants. The proviso to it is only an excepting clause and it lifts that ban in the circumstances mentioned in it. It follows that the proviso. though it does not expressly mention 832 tenants, permits orders for recovery of possession against them alone. The tenant in cl. (b) of the proviso means only the tenant sought to be evicted under the proviso, such tenant having also to be by the express terms of the clause, a tenant who has assigned his tenancy. This follows from the use of the article "the" before the word "tenant" there. Therefore the only person against whom an order for recovery of possession can be made under cl. (b) of the proviso to sub section (1) of section 14 is the tenant who has assigned his tenancy. No such order can, hence, be made against the person to whom the tenancy has been assigned. As the appellant was such a person, no order for eviction could be made against it. I wish to observe at once that if this contention is correct which 1 do not think it is then the order could never be made against the appellant and the fact that Allen Berry & Co. ceased to be a party to the proceedings made no difference in this regard. The argument of the appellant is really based on the article "the" prefixed to the word "tenant" in cl. (b) of the proviso. It is paid that the article clearly indicates that the only person against whom an order for ejectment can be made under cl. (b) is the tenant who assigns or sub lets or parts with possession of the tenancy without the landlord 's consent. I am unable to accept this argument. The proviso expressly states that an order for ejectment can be made "on one or more of the following grounds" and then sets the grounds out in the different clauses that follow, one of which is cl. (b) with which we are concerned. The clauses, therefore, set out the circumstances in which the operative part of the proviso is set in motion, that is, the circumstances in which an order for recovery of possession may be made. If this is so, as I think it is, the clauses could not have been intended to indicate the person against whom an order for recovery of possession could be made. This purpose was entirely different. 1 am not suggesting that an order for recovery of possession against the assigning tenant cannot be made. All that I say is that the clauses do not intend to indicate the persons against whom an order for recovery of possession can be made and so it cannot be argued that the order cannot be made against any other person. Now the article "the" appears to me to have been used to show that the tenant assigning must be the tenant of the landlord seeking eviction. So read, the effect of the proviso in cl. (b) is that a landlord can recover possession if his tenant has assigned. sub let or transferred possession without his consent. This would be the natural reading of the provision and would carry out the intention of the Act. If this is not the correct reading of the provision, the situation would be anomalous. As the word "tenant" includes by virtue of its definition in section 2(1), a sub tenant. it would at least be arguable that el. (b) authorised a superior landlord to recover possession when the sub tenant assigned without his consent. That could not possibly have been intended for 833 the intermediate tenant would then have lost his tenancy for no fault of his. Therefore, 1 think the article "the" was used only to emphasize that the tenant assigning must be the tenant of the landlord seeking eviction. The article "the" does not, in my opinion, lead inevitably to the conclusion that the only person against whom an order for recovery of possession can be made on the ground mentioned in el. (b) is the tenant assigning or sub letting or parting with possession of his tenancy without the landlord 's consent. I think there are good reasons why it must be held that the Act contemplated orders for recovery of possession also against persons other than a tenant who has assigned or sub let without the landlord 's consent. The offending tenant must of course go for, as I have said, he is the immediate tenant of the landlord desiring to recover possession and if he remains he would be entitled to possession and the landlord cannot recover possession. But this does not mean that the order may not also direct the removal from possession of others along with the immediate tenant when there is one. The reason for this view I will presently state. If I am right in what I have said, it will follow that in a case like the present where the tenant becomes extinct without leaving any successor on whom the tenancy devolves, an order can be made against a person who took an assignment of the lease from the tenant before it became extinct. It is trite saying that the object of interpreting a statute is to ascertain the intention of the legislature enacting it. When I enquire about the intention behind this statute, 1 find that far from lending any support to the appellant 's contention it tends quite the other way. First, I observe that the object of the first part of sub section (1) of section 14 is to ban all recovery of possession of tenanted premises by a landlord and that of the proviso is to lift that ban in specified cases. The object of the proviso is then to enable the landlord to recover possession in any of the specified cases. Assume that the present is a case where the landlord became entitled to recover possession under cl. (b) of the proviso; clearly then the statute intended the landlord to recover possession. It would be our duty to give effect to that intention unless the language used made it plainly impossible. I have earlier said that the language used does not compel the view that the only person against whom an order for recovery of possession can be made is the tenant assigning or sub letting without the landlord 's consent. That being so, orders against all "persons in occupation" must have been contemplated so that the landlord might without further trouble recover possession. Further find it impossible to hold that the language used indicates an intention that when a right has accrued to a landlord to recover possession, that right would be taken away from him when the tenant assigning has become extinct without leaving a successor, an event which is only accidental and certainly rare. A court would be fully justified in holding that in such a case it was 834 intended that an order for recovery of possession can be made against the assignee alone for that would enable the object of the statute which was to enable the landlord to recover possession, to be achieved. An interpretation which defeats the object of a statute is, of course, not permissible. Then, looking at section 18 of the Act I find that it clearly contemplates an order for recovery of possession under section 14 against a sub tenant. It says, "Where an order for eviction in respect of any premises is made under section 14 against a tenant but not against a sub tenant referred to in section 17", then in the circumstances mentioned, the sub tenant shall be deemed to become a direct tenant under the landlord. This section plainly implies that an order for recovery of possession against a sub tenant is contemplated by cl. (b) of the proviso to sub section (1) of section 14. The appellant 's argument to the contrary cannot be sustained against the clear implication of the Act. If section 14 contemplates an eviction order against a sub tenant, it must equally contemplate such an order against assignees of tenants, for the section makes no distinction between sub tenants and assignees for the purpose of making such orders. I am not unmindful of the fact that where an order for recovery of possession of any premises is made under section 14 against a tenant assigning or sub letting without the landlord 's consent, that order would under section 25 of the Act be binding on all persons in occupation of the premises except those who leave independent title to them. This section does not however say that an order for recovery of possession against an assignee of a lessee cannot be made. It would not, therefore, support an argument that an order for recovery of possession could be made under section 14 against an assignee or a sub tenant. On the other hand, it seems to me that to an application under cl. (b) of the proviso to sub section (1) of section 14 an assignee or sub tenant, as the case may be, should be a proper party. Under this provision an ejectment order can be made only when the assignment or sub letting was without the consent of the landlord. If it was with such consent, the assignee or the sub tenant would be protected by the Act. An assignee or a sub tenant is, therefore, interested in showing that there was the requisite consent. They should hence be entitled to be made parties to the proceedings. Otherwise, if under section 25 an eviction order obtained against the direct tenant is binding on them, they would be liable to be condemned without a hearing. It is no argument against this view that the direct tenant would protect them, for they cannot be made to depend on him for the protection of their rights. The direct tenant may be negligent or incompetent in his defence; he may even collude with the landlord or he may just not bother. If the assignee or the sub tenant is thus entitled to be heard to oppose the order for eviction, that would be another reason for saying that an order eviction could be made against them also; if they could oppose the 835 making of the order, it would be unnatural to say that the order could not be made against them. In what 1 have said in this paragraph, I do not wish to be understood as holding that in view of ' section 25 an order for eviction against a tenant is in fact binding on his assignee or sub tenant. Such a decision is not necessary for this case. I wish, however, to point out that if section 25 does not make the ejectment order so binding, the appellant cannot resort to it for any assistance. I have now dealt with the first argument in support of the appeal and I find it unacceptable. The other argument was that the order for recovery of possession was unwarranted as in fact there had been a consent of the respondents to the assignment in favour of the appellant. It is said that the consent was given by a clause in the lease under which Allen Berry & Co. held which reads as follows: "That whenever such an interpretation would be necessary in order to give the fullest scope and effect legally ' possible to any covenant or contract herein contained, the expression "The Lessor" hereinbefore used shall include his heirs, executors, administrators and assigns. and the expression "THE LESSEE" hereinbefore used ' shall include their representatives and assigns. " I am unable to accept this contention also. I notice that the lease gave no express right to the lessee to assign with or without the consent of the lessor. The lessee no doubt had that right under the Transfer of Property Act. It may be that under the clause the lessee 's assignee would be included in the expression "lessee" as used in the lease; that is the entire effect of the clause. But this would be so whether the lessor had consented to the assignment or not. Therefore, this clause does not lead to the conclusion that the lessor had consented to the assignment. It is of no assistance in the present case. I am also ' inclined to the view that the consent contemplated by section 14(1): proviso (b) is a direct consent to a contemplated assignment to a particular assignee: see Regional Properties, Ltd. vs Frankenschwerth(1). Clearly the clause in the case relied upon could not be a consent of this kind. This point, therefore, also fails. For these reasons I would dismiss the appeal with costs. Mudholkar, J. In this appeal by certificate granted by the Pun jab High Court an unusual question arises for consideration. That question is whether an application made under section 14(1)(b) of the Delhi Rent Control Act, 1958 by a landlord of a building in Delhi against a tenant who happens to be a company incorporated under the Indian Companies Act, cannot be proceeded with and granted ' on the ground that before the making of any order thereon by the ' (1) 836 Rent Controller the Company is dissolved and is struck off the record of the case. According to the appellant who claims to be an assignee from the original tenant, that is, the Company, such an application cannot be proceeded with and granted while according to the respondent landlord the fact that the company is dissolved makes no difference. The facts which are not in dispute and which have been stated in the judgment of Bachawat J. need not be recapitulated because what I have already said is sufficient to enable me to deal with the point. The relevant part of section 14(1) reads thus: "Notwithstanding anything to the contrary contained in any other law or contract no order or decree for the recovery of possession of any premises shall be made by any Court or Controller in favour of the landlord against a tenant: Provided that the Controller may, on an application made to him in the prescribed manner, make an order for the recovery of possession of the premises on one or more of the following grounds only, namely: (b) that the tenant has, on or after the 9th day of June, 1952, sublet, assigned or otherwise parted with the possession of the whole or any part of the premises without obtaining the consent in writing of the landlord; It is not necessary to refer to cl. (a) or to the several clauses following el. (b) in this sub section or to any of the sub sections of section 14. Looking at sub section (1) what we find is that it enacts a bar to the making of an order or decree for the recovery of possession of any premises by any court or the controller against a tenant. In other words the jurisdiction of a civil court or even of the Rent Controller to make an order of eviction against the tenant is taken away. The proviso, however, lifts the ban against eviction in certain circumstances one of which is that set out in el. What is important to bear in mind is that sub section (1) is intended to protect the possession of the tenant. A proviso to a section or a sub section is subservient to the main provision. It would, therefore, follow that the ban against the eviction is lifted only with respect to the possession of the tenant and not of any other person. In so far as persons other than the tenant who may be in possession of the premises which pertain to the tenancy is concerned, the matter is dealt with by section 25 and we can leave that out at any rate for the present. Another thing to be noticed about section 14 is that 837 though under section 2(1)(b) of the Act the word "tenant" includes several other persons in addition to the one with whom there was a contract that expression must be regarded as relating to the same individual in the entire section or at least in sub section (1) of section 14 wherever it occurs. Thus, if in the first part of sub section (1) of section 14 "tenant" is regarded as meaning as "assignee" of the tenant then it would have to be given the same meaning in cl. (b) of sub section (1) of section 14. That is to say that if there is a sub letting or a further assignment or any other kind of parting with possession by an assignee of the original tenant (the assignment by the original tenant having been accepted or acquiesed in by the landlord) such assignee can be evicted by the landlord if the action of the assignee of the kind mentioned was taken by him without his written consent. Now, since sub section (1) is a bar to the jurisdiction of the Rent Controller to make an order or decree for recovery of possession against a tenant it must necessarily follow that the tenant must be a party to a proceeding before him right up to the date of the making of the decree or order. Thus, if the tenant dies during the pendency of the proceedings and his legal representative is not substituted on the record in his place, the proceeding will abate against him and the Rent Controller will have no jurisdiction to make an order in favour of the landlord. That is to say, the proviso will not be available to the landlord no matter what the tenant had done if the records of the proceeding became defective because neither the tenant nor his legal representative was any longer a party to those proceedings. The reason for this is that the ground upon which the landlord 's application is based can be availed of for lifting the ban on the eviction by the Rent Controller of the tenant alone. Unless an order is obtained against the tenant there would be no occasion for pressing in aid the provisions of section 25 of the Act. Where during the pendency of the proceedings before the Rent Controller the tenant dies or makes an assignment of whatever interest he may still have left in the demised premises no difficulty would arise because his legal representative or assignee could be brought on record in his place. But, it must be admitted, that an anomalous position results where the tenant happening to be a company is dissolved during the pendency of the proceedings and can, therefore, be not represented by any person. The Act does not contemplate this position nor even does the Code of Civil Procedure and so we have it that the defect in the record resulting from the dissolution of a company cannot be removed at all. The result, however, of this is that the jurisdiction of the Controller to proceed with the application of the landlord and therefore to make eventually an order or decree entitling the landlord to recover possession from the tenant ceases to be exercisable. Apparently this curious position arises because of a lacuna in the law. Such a lacuna cannot be removed by the Courts without assuming the power to legislate which obviously is beyond the 839 competence of any court. The duty of courts is merely to administer the law as they find it. The only way for remedying the defect is for the legislature to step in and amend the law. The result of what has happened in this case is that the right which the landlord possessed to evict the now defunct company from the premises through the intervention of the Rent Controller because the company had assigned the demised premises to an. other without his consent can no longer be availed of by him. The assignee, who is the appellant before us, can therefore continue to be in possession of the premises even though he may have been liable to be evicted with the aid of section 25 had the company not been dissolved in the meanwhile. Whether the landlord has now a right under the general law to evict the appellant is not a matter upon which I would express an opinion because it does not strictly arise at this stage. For these reasons I would allow the appeal, set aside the orders of the courts below and dismiss the application of the respondent landlord under section 14(1)(b) of the Act. In the particular circumstances of the case I would direct that costs throughout shall be borne by the parties as incurred. Bachawat, J. Originally one Amar Sarup owned the land and building at plot No. 5, Block 'M ', Connaught Circus, New Delhi. By a lease dated March 1, 1956, Amar Sarup leased the property to Allen Berry & Co. (Calcutta) Ltd., (hereinafter referred to as the tenant) for a period of five years on a monthly rent of Rs. 297/ . Sometime thereafter, Amar Sarup transferred the property to the respondents. In or about May, 1959, the tenant assigned the tenancy rights. and parted with possession of the whole of the premises to the appellant. On October 6, 1959, the respondents filed an application before the Rent Controller, Delhi praying for eviction of the tenant and the appellant. The tenant, a limited company, had gone into voluntary liquidation on September 26, 1959 and it was finally wound up and dissolved on October 29, 1960. On its dissolution, the tenant ceased to exist, and by order of the Rent Controller, its name was struck off from the array of parties in the pending application. By an order dated October 10, 1962, the Rent Controller passed an order of eviction against the appellant. An appeal by the appellant to the Rent Control Tribunal, Delhi was dismissed on January 23, 1963, and a second appeal to the Punjab High Court was dismissed on May 10, 1963. A Letters Patent Appeal from the order dated May 10, 1963 was dismissed on December 11, 1963 on the ground that the appeal was not maintainable, and an appeal to this Court from the last order was dismissed on January 18, 1965. The appellant has now preferred this appeal from the order dated May 10, 1963 by special leave granted by this Court. The respondents landlords instituted the proceeding for eviction of the tenant and its assignee relying on the provisions of section 14(1) of the Delhi Rent Control Act, 1958 (Act 59 of 1958), the relevant portion of which is as follows: "14(1). Notwithstanding anything to the contrary contained in any other law or contract, no order or decree for the recovery of possession of any premises shall be made by any court or Controller in favour of the landlord against a tenant: Provided that the Controller may, on an application made to him in the prescribed manner, make an order for the recovery of possession of the premises on one or more of the following grounds, namely: (b) that the tenant has, on or after the 9th day of June, 1962 sub let, assigned or otherwise parted with the possession of the whole or any part of the premises without obtaining the consent in writing of the landlord;" The case of the landlords is that "the tenant has . assigned. the whole of the premises without obtaining the consent in writing of the landlord", and, therefore, the Controller had jurisdiction to make an order for possession. The tenant is forbidden by section 16(3)(b) of the Act to make the assignment, for contravention of section 16(3)(b) he is punishable with fine under section 48(2), and the assignment is a ground for eviction under section 14(1), proviso, paragraph (b), and so, the landlords submit that the Controller had jurisdiction to make the order for possession against the tenant and its assignee, and on the dissolution of the tenant, against the assignee alone. Counsel for the appellant contended that the Controller had no jurisdiction to make the order for possession in the absence of the original tenant. I cannot accept this submission. Both the tenant and the assignee were properly parties to the proceedings for possession, and if the tenant company had not been dissolved, the Controller would have been competent to make the order for possession. The tenant has since been dissolved and ceased to exist, no one can be substituted in its place, and 1 do not see why the proceedings cannot now continue against the assignee alone. Paragraph (b) of the proviso to section 14(1) evidently contemplates proceedings for possession against both the tenant and the assignee, who as a result of the assignment has been put in possession of the premises. Counsel for the appellant made the alternative submission that paragraph (b) contemplates an assignment by the tenant against whom the order for eviction is made, and as the appellant was the assignee and not the assignor, there was no ground for its eviction under paragraph (b). It is true that other paragraphs of the proviso contemplate the eviction of the tenant on the ground of some act on the part of the tenant against whom 840 the proceeding for possession is brought, but under paragraph (b), the assignment is a ground of eviction of both the assigning tenant and the assignee, and in the event of an assignment without the consent in writing of the landlord, the Controller has jurisdiction to make an order for possession not only against the assigning tenant but also against the assignee. Counsel for the appellant next referred us to cl. 7 of the lease, which is in these terms: "That, whenever such an interpretation would be necessary in order to give the fullest scope and effect legally possible to any covenant or contract herein contained, the expression 'The Lessor ' hereinbefore used shall include his heirs, executors, administrators and assigns and the expression 'The Lessee ' hereinbefore used shall include their representatives and assigns. " Counsel for the appellant submitted that by cl. 7 of the lease, the landlords have given their consent in writing to the assignment. I cannot accept this submission. The consent in writing within the meaning of paragraph (b) of the proviso to section 14(1) may be either general or special, but no such consent was given by cl. 7. The effect of cl. 7 is that the assignee of the lease enjoys the benefits and is subject to the burden of the covenants in the lease, but the clause does not amount to a consent by the landlord to an assignment either expressly or by necessary implication. The assignment to the appellant was without the consent in writing of the respondents. The Controller rightly passed the order for possession of the premises. Counsel for the appellant contended that the contractual term of the lease not having expired on October 6, 1959. the proceeding before the Controller was not maintainable. We indicated in the course of the argument that this contention not having been raised in the Courts below, we are not inclined to allow the appellant to raise it here for the first time. In the result, the appeal is dismissed with costs. ORDER In accordance with the opinion of the majority, the appeal is dismissed with costs. The appellant will have a month 's time from today to vacate the premises.

IN-Abs

The respondents were the owners of certain premises in New Delhi. The lessee a company of these premises assigned the lease to the appellant. Alleging that the transfer was done without their consent, the respondents filed an application against the lessee and the appellant under section 14(1) proviso (b) of the Delhi Rent Control Act, 1958, for recovery of possession. Pending the proceedings, the lessee went into liquidation and its name was struck off from the record. The Controller thereafter, passed an order in favour of the respondents. Having moved unsuccessfully the Rent Control Tribunal and the High Court, the appellant, appealed to the Supreme Court contending that: (i) the order made against the appellant, after the lessee ceased to be a party, was incompetent, as the only person against whom an order for recovery of possession can be made under the clause, is the tenant who assigned the tenancy, and (ii) the clause in the lease by which the term "lessee" included the lessee 's assignee operated as a consent by the respondents, to assign. HELD: (i) (Per Sarkar, J.). The Act contemplates orders for recovery of possession also against persons other than a tenant who has assigned or sub let without the landlord 's consent, so that, where the tenant becomes extinct without leaving any successor, an order can be made against a person who took an assignment of the lease from the tenant before the lease became extinct. [833C, D E] The proviso expressly states when an order of ejectment can be made and the clauses of the proviso are not intended to indicate the persons against whom an order for recovery of possession could be made, but only the circumstances in which an order for recovery of possession may be made. [832E G] The expression "the tenant" in cl. (b) is used only to emphasise that the tenant assigning must be the tenant of the landord seeking eviction. So read, the effect of the clause is that a land lord can recover possession if his tenant assigns or sub lets without his consent. [832H, 833A B] Since the object of the proviso is to enable the landlord to recover possession in the specified cases, orders against all "persons in occupation" must have been contemplated so that the landlord might without further trouble recover possession. Section 18 plainly implies that an order for recovery of possession against a sub tenant is contemplated by the proviso. Further. the order for recovery of possession would, under section 25, be binding on the assignee or sub tenant, and therefore, they would be interested in showing that there was the requisite consent, and hence would be entitled to be made parties to the proceedings. If they are thus entitled to be heard to oppose the order of eviction, such an order could be made against them also. [833F G, H; 834C, E, H 835A] 830 Per Bachawat J.(i): Both the tenant and the assignee were properly parties to the proceedings for possession and if the tenant company had been dissolved, there is no reason why the proceedings could not continue against the assignee alone. [839G] It is true that other clauses of the proviso contemplate eviction of the tenant on the ground of some act on the part of the tenant against whom the proceeding for possession is brought, but under cl. (b), the assignment is a ground of eviction of both the assigning tenant and the assignee and the Controller has jurisdiction to make an order for possession not only against the assigning tenant but also against the assignee. [839H 840B] Per Mudholkar J. (Dissenting) The right which the respondents possessed to evict the defunct company from the premises, because the company had assigned the tenancy to the appellant without the respondents ' consent could not be availed of by them, and the appellant could therefore continue in possession. [838B C] The ban against eviction of a tenant in section 14(1) is lifted by the proviso only with respect to the tenant and not to any other person, because, a proviso is subservient to the main provision. Therefore, the tenant must be a party to the proceeding right up to the date of making of the order of eviction. Unless an order is obtained against the tenant there would be no occasion for pressing in aid section 25. Unlike the case of death of or assignment by, a tenant, an anomalous position results where the tenant happening to be a company is dissolved during the pendency of proceedings and cannot be represented by any one, because of a lacuna in the law: But such lacuna cannot be removed by the Courts without assuming a power to legislate. [836H, 837F H] (ii) Per Sarkar J.: The clause in the lease according to which "the lessee" includes his assignee, does not lead to the conclusion that the lessor consented to the assignment. Besides, the consent contemplated by the proviso is a direct consent to a contemplated assignment to a particular assignee. [835F G] Regional Properties Ltd. vs Frankenchwerth, , applied. Per Bachawat J: The consent contemplated by cl. (b) may be either general or special, but the clause in the lease would not amount to a consent by the landlord to an assignment either expressly or by necessary implication. [840D E]

Appeal No. 94 of 1954. Appeal from the judgment and order dated August 17, 1951 of the Calcutta High Court in Appeal from Original Order No. 81 of 1959. A.V. Viswanatha Sastri and P.K. Ghosh, for the appellant. P.K. Chatterjee and P.K. Bose, for the respondents. The Judgment of the Court was delivered by Subba Rao, J. This appeal on a certificate granted by the High Court of Calcutta raises the question of the interpretation of section 5(2)(a) (ii) of the Bengal Finance (Sales Tax) Act, 1941 (Bengal Act VI of 1941), hereinafter called the Act. The material facts are as follows: The appellant is a public limited ' company registered as a dealer under the Act, having its registered place of business at Calcutta. In respect of the accounting year ending with 31st December 1954, in the return for the year the assessee had shown its gross turnover at Rs. 70,99,928 10 0 and claimed exemption under two heads, namely, (i) under section 5(2)(a)(i) of the Act Rs. 1,33,730 6 6; and (ii) under section 5(2)(a)(ii) thereof Rs. 69,65,979 9 6. After deducting the said amounts from the gross turnover the assessee showed its taxable turnover at Rs. 218 9 0 and deposited the tax of Rs. 9 12 6 on the said amount in the treasury. The Commercial Tax Officer by notice dated April 22, 1955, fixed August 4, 1955, for hearing the assessee in respect of its return. Under section 5(2)(a)(ii), the appellant in order to claim exemption thereunder had to furnish declaration forms duly filled in and ' signed by registered dealers to whom the goods were sold by it. After taking some adjournments of the enquiry it appears that in the second week 'of January 1957 the assessee found that its file containing 147 declaration forms received ' from its dealers in respect of the goods received from it was missing. The assessee, it is said, made various attempts to get duplicate forms of declaration from the dealers, but, on account of circumstances over which it had no 628 control and because of the unhelpful and hostile attitude of the Commercial Tax Officer within whose jurisdiction the said dealers functioned, it was not able to furnish the duplicate forms for all the declarations that were lost. On August 8, 1957, the assessee applied to the Commercial Tax Officer under section 21A of the Act for summoning the dealers to produce the necessary documents in order to prove that they had issued the declaration forms to it, but the said ' officer did not issue the requisite summons to the parties concerned. The assessee then flied an application to the Commissioner of Commercial Taxes, West Bengal, for directions to issue duplicate declaration forms, but that application was rejected. The revision filed to the Revenue Board was also dismissed. On November 21, 1957, the Commercial Tax Officer made an order of assessment disallowing the assessee 's claim for exemption in respect of the said sales made to the purchasing registered dealers amounting to Rs. 22,46,006 0 6 and levied on it additional tax of Rs. 1,49,778 4 6. The assessee thereafter flied a petition under article 226 of the Constitution in the High Court of Calcutta for issuing an order directing the respondents, i.e., the Commercial Tax Officer and the Commissioner of Commercial Taxes. West Bengal, not to implement the said assessment order. The said application came up, at the first instance, before Sinha, J., who dismissed the same. On appeal, a Division Bench of the said High Court confirmed the order of Sinha, J. Hence the present appeal. At the outset we must make it clear that in the view we are taking on the construction of section 5 of the Act we do not propose to go into the question whether the department was responsible for preventing the assessee from furnishing duplicate forms of the declarations alleged to have been lost or on the question whether the department went wrong in not summoning the dealers to produce the relevant documents to establish that the declaration forms alleged to have been lost were in fact issued ' by them. The only question, therefore, that arises is whether under section 5(2)(a)(ii) of the Act the furnishing of the declaration forms issued by the purchasing dealers was a condition for claiming the exemption thereunder. In substance section 5(2)(a)(ii) exempts from taxable turnover all sales to a registered dealer of goods of the class or classes specified in the certificate of registration of the dealer as being intended for the purposes mentioned, therein. But the said exemption is made subject to a proviso. Under that proviso, in the case of such sales a declaration form duly filled up and signed by the registered dealer to whom the goods are sold and containing the prescribed particulars on a prescribed form obtainable from the prescribed authority has to be furnished ' in the prescribed manner by the dealer who sells the goods. Under r. 27A of the Bengal Sales Tax Rules, 1941, hereinafter called the Rules, a dealer who wishes to claim the said exemption shall on demand produce such a declaration in writing 629 signed by the purchasing dealer. Sub r. (2) thereof enjoins on a dealer not to accept and on the purchasing dealer not to give a declaration except in the form prescribed. The other rules make stringent provisions to prevent the misuse of the said forms. The argument of Mr. A.V. Viswanatha Sastri, learned counsel for the appellant, may be briefly stated thus: The substantive part of section 5(2)(a)(ii) of the Act provides for the exemption in respect of certain sales to a dealer if the sales are made to a registered dealer for the purposes mentioned thereunder. The proviso to the said subclause prescribes in effect that the declaration form in the manner prescribed is the best evidence to prove that the sales were for the said purposes. The proviso cannot be construed as laying down a condition for giving the exemption, but only as a directory provision to subserve the substantive provision in a reasonable way. If so construed, a dealer is not precluded in a case where the proviso cannot be strictly complied with from producing other relevant evidence to prove that the sales to the registered dealers were for the purposes mentioned in the said sub clause. This conclusion is sought to be supported on the basis of the expression "on demand" in r. 27A which, according to the learned counsel, indicates that the production of the prescribed declaration is not obligatory but only to be made if a demand is made by the authority concerned. The learned Solicitor General, on the other hand, contends on behalf of the respondents that a dealer can claim exemption under the said sub clause, but if he seeks exemption he must comply strictly with the conditions under which the exemption can be granted. He argues that the clear terms of the clause, read with the proviso, impose a condition on a dealer for claiming exemption. Section 5(2)(a)(ii) of the Act in effect exempts a specified turnover of a dealer from sales tax. The provision prescribing the exemption shall, therefore, be strictly construed. The substantive clause gives the exemption and the proviso qualifies the substantive clause. In effect the proviso says that part of the turnover of the selling dealer covered by the terms of sub cl. (ii) will be exempted provided a declaration in the form prescribed is furnished. To put it in other words, a dealer cannot get the exemption unless he furnishes the declaration in the prescribed form. It is well settled that "the effect of an excepting or qualifying proviso, according to the ordinary rules of construction, is to except out of the preceding portion of the enactment, or to qualify something enacted therein, which but for the proviso would be within it": see "Craies on Statute Law", 6th Edn., p. 217. If the intention of the Legislature was to give exemption if the terms of the substantive part of sub cl. (ii) alone are complied ' with, the proviso becomes redundant and otiose. To accept the argument of the learned counsel for the appellant is to ignore the proviso altogether, for if his contention be correct it will lead to the position that if the declaration form is furnished, well and good; but, if not furnished, other evidence can be 630 produced. That is to rewrite the clause and to omit the proviso. That will defeat the express intention of the Legislature. Nor does r. 27A support the contrary construction. The expression "on demand" ' only fixes the point of time when the declaration forms are to be produced; otherwise the rule would be inconsistent with the section. Section 5(2)(a)(ii) says that the declaration form is to be furnished by the dealer and r. 27A says that it shall be furnished on demand, that is to say it fixes the time when the form is to be furnished. This reconciles the provisions of r. 27A with those of section 5 (2)(a)(ii) of the Act, whereas the construction suggested by the learned ' counsel introduces an incongruity which shall be avoided. Section 21A on which reliance is placed has no bearing on the question to be decided. It only empowers the Commissioner or any person appointed to assist him under sub s (1) of section 3 to take evidence on oath etc. It can be invoked only in a case where the authority concerned is empowered to take evidence in respect of any particular matter; but that does not enable him to ignore a statutory condition to claim exemption. Sub rules (3) and (4) of r. 27A are not helpful to the appellant. They provide only safeguards against abuse of the declaration forms by the purchasing dealers; they do not enable the selling dealer to either directly apply or to compel the purchasing dealers to apply for duplicate forms; nor do they enjoin on the appropriate authority to give the selling dealer a duplicate form to replace lost one. We realise that the section and the rules as they stand may conceivably cause unmerited hardship to an honest dealer. He may have lost the declaration forms by a pure accident, such as fire, theft etc., and yet he will be penalised for something for which he is not responsible. But it is for the Legislature or for the rule making authority to intervene to soften the rigour of the provisions and it is not for this Court to do so where the provisions are clear and unambiguous. There is an understandable reason for the stringency of the provisions. The object of section 5(2)(a)(ii) of the Act and the rules made thereunder is self evident. While they are obviously intended to give exemption to a dealer in respect of sales to registered dealers of specified classes of goods, it seeks also to prevent fraud and ' collusion in an attempt to evade tax. In the nature of things, in view of innumerable transactions that may be entered into between dealers. it will wellnigh be impossible for the taxing authorities to ascertain in each case whether a dealer has sold the specified goods to another for the purposes mentioned in the section. Therefore, presumably to achieve the twofold object, namely, prevention of fraud and ' facilitating administrative efficiency, the exemption given is made subject to a condition that the person claiming the exemption shall furnish a declaration form in the manner prescribed under the section. The liberal construction suggested will facilitate the commission of fraud and introduce administrative inconveniences, both of which the provisions of the said clause seek to avoid. 631 The decision of this Court in The State of Orissa vs M.A. Tulloch and Co. Ltd.(1) does not help the appellant. That decision was concerned with section 5(2)(a)(ii) of the Orissa Sales Tax Act, 1947. That section was similar in terms to section 5(2)(a)(ii) of the Act in question, but there was no proviso to that section in the Orissa Act similar to the one found in the present section. That makes all the difference, for it is the proviso that imposes the condition. But under r. 27(2) made under the Orissa Act "a dealer shall produce a true declaration in writing by the purchasing dealer or by such responsible person as may be authorized in writing in this behalf by such dealer that the goods in question are specified in the purchasing dealer 's certificate of registration as being required for resale by him or in the execution of any contract." This Court held that the said mandatory provision was inconsistent with section 5(2) (a)(ii) of the Orissa Sales Tax Act; and to avoid that conflict it reconciled both the provisions by holding that the rule was only directory and, therefore, it would be enough and if it was substantially compiled with. The said provisions may afford a guide for amending the relevant provisions of the Act and the rules made thereunder, but do not furnish any help for construing them. Before parting with the case we must make it clear that we are not expressing any opinion on the bona fides of the appellant or the appropriate sales tax authorities, for we have not scrutinized the evidence in that regard. In the result, the appeal fails and is dismissed with costs. Appeal dismissed. [1964] 7S.C.R.810.

IN-Abs

The appellant a public limited company sought exemption under section 5(2)(a)(ii) of the Bengal Finance (S.ales Tax) Act, 1941 in respect of certain sales. However, it could not produce before the commercial tax officer the declaration forms from the purchasing dealers required to be produced under the proviso to that sub clause because the said forms were lost. The appellant tried to set duplicate forms from the purchasing dealers but without success. His application under section 21A to summon the dealers with the relevant documents was rejected by the Commercial Tax Officer and the higher authorities also refused to issue directions for the issue of duplicate declaration forms. The Commercial Tax Officer thereafter passed an assessment order without allowing. the said exemption. Against that order the appellant filed a writ petition under article 226 and thereafter a Letters Patent appeal but failed to get redress. It then appealed to this Court with certificate. It was contended on behalf of the appellant that the exemption granted under the substantive sub clause (ii) could be claimed by the production of other relevant evidence if the declaration forms could not be produced; the proviso to that sub clause requiring the production of the said forms was only directory as was also proved by the use of the words "on demand" in section 27A. HELD: The exemption could be claimed only by the production the declaration forms as laid down in the proviso. (i) The effect of an excepting proviso is to except from the main clause something. which but for the proviso would be within it. Craies on Statute Law quoted: If the intention of the Legislature was to give exemption if the terms of the substantive part of sub clause (ii) above are complied with, the proviso. becomes redundant and otiose. If the proviso is treated as merely directory it will lead to the position that if the declaration form is furnished well and good; but if not furnished other evidence can be produced. That is to rewrite the clause and to omit the proviso. That will defeat the express intention of the legislature. [622H 630A] There is an understandable reason for the stringency of the provisions. The object of section 5(2)(a)(ii) of the Act and the rules made thereunder is self evident. While they are obviously intended to give exemption to a dealer in respect of sales to registered dealers of specified classes of goods, it seeks also to prevent fraud and collusion in an attempt to evade tax. [630G] 627 State of Orissa vs M.A. Tulloch & Co. Ltd. (1964) 15 S.T.C. 641, distinguished. (ii) The words "on demand" in r. 27A only fix the time when the declaration forms are to be produced; they do not mean that their production is not obligatory. [630A B] (iii) Section 21A only empowers the Commissioner or any person appointed by him to take evidence on oath etc. It can be invoked only in a case where the authority concerned is empowered to take evidence in respect of a particular matter, but that does not enable him to ignore a statutory condition to claim exemption. [630C D] (iv) Sub rules (3) and (4) of section 27A do not enable the selling dealer to either directly apply or to compel the purchasing dealers to apply for duplicate forms nor do they enjoin on the appropriate authority to give the selling dealer a duplicate form to replace the lost one. This may cause hardship but the remedy lies with the Legislature only. [630E, F]

Criminal Appeal No. 43 of 1965. Appeal by special leave from the judgment and order dated November 10, 1964 of the Allahabad High Court in Criminal Revision No. 2097 of 1963. B.C. Misra, for the appellant. O.P. Rana, for the respondent. The Judgment of the Court was delivered by Sarkar, J. This appeal raises a question of construction of sub section (1) of section 16 of the . The sub section in providing for punishment for breaches of the Act states, "for a second offence, with imprisonment for a term which may extend to two years and with fine". In respect of the first offence it provides for a smaller sentence. The question is whether the appellant was liable to punishment for a second offence. The order of this Court granting leave to appeal confined it only to that question. It appears that on an earlier occasion the appellant kept fonds tuff for sate in a container without covering it as required by sub r. (3) of r. 49 of the rules made under the Act and was thereupon convicted under section 16 and sentenced to a fine of Rs. 40/ as tot a first offence. This time he has been convicted for selling foodstuff which had been coloured with a dye the use of which was prohibited by r. 28 of the same rules. Learned counsel for the appellant stated that the present was not a second offence. If we have understood his arguments correctly, and we confess to some difficulty in understanding them, he said that the second offence contemplated is an offence constituted by the same kind or type of act for which he had been convicted under the Act on an earlier occasion. According to him, if the present conviction was for keeping foodstuff intended for sale in a container not covered as required by sub r. (3) of r. 49, then only it would have been for a second offence, but as the conviction in the present case was for selling foodstuff coloured with prohibited dye, it was not for a second offence. This contention does not seem to us to be acceptable. This real question is, What do the words 'second offence ' mean? Learned 808 counsel for the appellant referred us to Webster 's New World Dictionary where one of the meanings of the word 'second ' has been stated to be 'of the same kind as another '. That meaning cannot be attributed to that word in the sub section. It increases the penalties as the offences are 'first ', 'second ' or 'third '. Thus it states, "for a third and subsequent offences, with imprisonment for a term,, which may extend to four years and with fine". The word 'subsequent ' makes it clear that the words 'first ', 'second ' and 'third ' were intended to indicate things happening one after another in point of time. Sub section (2) of section 16 also leads to the same conclusion. It says, "If any person convicted of an offence under this Act commits a like offence afterwards", the subsequent conviction and the penalty imposed with his name and address may be published in a newspaper at his expense. The word "afterwards" clearly indicates that the statute was contemplating offences committed subsequently and was indicating a sequence of time. In the dictionary to which learned counsel referred, the meaning on which he relies is illustrated by the following sentence, "There has been no second Shakespeare". It seems plain to us that the meaning conveyed by the word 'second ' in this sentence cannot be attributed to the word 'second ' as used in the sub section. Then as regards the word "offence" in the expression "second offence", we find no justification for confining it to an offence constituted by the same type or kind of conduct as the previous offence. The sub section does not say "second offence" of the same type; the latter words are not there. The object of the sub section clearly is to prevent repetition of offences. That is why for the offence subsequently committed a heavier sentence is provided. We cannot imagine what object would have been served by seeking to stop the repetition of the same type of conduct only. The Act no doubt intends to prevent the doing of various acts by punishing them. That object is better served by imposing a heavier penalty when a person repeats any of such offensive acts. The gravamen of the charge of a second offence is the repetition of any offence under the Act and not the repetition of one of the various types of offences mentioned in it. Any interpretation which would not carry out the object of the Act would be unnatural. We, therefore, think that the words "second offence" mean any offence under the Act committed by a person after his conviction earlier for any one of the offences punishable under the Act. It was said that it would be strange if the Act intended to impose a heavier punishment for a second offence which might be 'of a trivial nature while the first offence which might have been of a serious nature entailed a lighter punishment. This contention is fallacious. There is no foundation in the Act for distinguishing between trivial and serious offences, for the Act provides the same punishment for each offence under it. If the punishment is 809 the same, it would follow that the statute considered them to be of the same seriousness. The weakness of this argument will further appear if we consider a case where the first offence was of what is called a trivial nature and the second, of a serious nature though constituted by different acts. It would be equally strange if the Act in such a case contemplated the same punishment for the subsequent and serious offence as would be the case if the subsequent offence was not a "second offence" . This contention lends no support to the interpretation suggested by learned counsel for the appellant. Learned counsel then said that the word "offence" has to be understood as defined in section 2(38) of the , and therefore means any act or omission made punishable by any law for the time being in force. If we substitute this definition for word "offence" in the provision now under consideration, it will mean an act made punishable by the law. That law must be the present Act. This does not assist learned counsel 's contention at all; it really goes against him. The word "offence" no doubt refers to an offence under the Act. It cannot possibly mean any offence under any other Act. This view has invariably been taken in all the cases which have been cited to us: see City Board, Saharanpur vs Abdul Wahid(1) and Chuttan vs State.(2) In In re Authers(3) it was said, "where the legislature passes a statute and imposes a penalty of 501. for a first offence, it must mean, in the absence of express words to the contrary, that the conviction for the first offence must be under that Act, and the second conviction under the same Act; if it were otherwise, it would be idle to introduce the warning of a lower penalty for the first offence, and to impose a higher penalty for the second. " This case supports our interpretation of the words "second offence" based on the object of the Act. Learned counsel for the appellant no doubt agrees that the second offence must refer to an offence under the Act but he says that since it would amount to adding the words "under the Act", it would justify the addition of further words implying that the second offence had to be of the same type as the first. This is a wholly unfounded contention. the offence contemplated in the expression "second offence" has to be under the Act because that arises from the object of the Act and. as we shall later show, from the necessary implication of the structure of the sub section. There is no such reason to confine the second offence to an offence of the same type. We have so far been dealing only with that portion of sub section (1) of section 16 which concerns the penalty for the second offence. Considering the sub section as a whole we find that it supports the (1) A.I.R. 1959 All. (2) A.I.R. 1960 All. 629. (3) , 349. 810 interpretation of the expression "second offence" which has appealed to us. It says that if any person does any of the acts mentioned in cls. (a) to (g) in it, he shall be punishable for the first offence with a certain penalty, for the second offence with a higher penalty and for the third a still higher penalty. It is clear that the acts or omissions mentioned in the different clauses constitute offences for which the penalties are provided. From this structure of the subsection the implication necessarily arises that the penalties were imposed for offences under the Act only. Now cl. (a) deals with a person importing, manufacturing for sale, storing, selling, or distributing any article of food in contravention of the provisions of the Act or of any rule made thereunder. This clause contemplates the breaches of various provisions of the Act and the rules, which are numerous. It covers various types of conduct, act or omission, each of which is punishable and each of which is, therefore, an offence. Turning next to that part of the sub section which prescribes penalties, we find it provides increasing degrees of punishment for the second offence and the third and subsequent offences. It follows that an offence contemplated in this part of the statute and with it we are now directly concerned would be constituted by any of the acts which would come within el. (a) and likewise within all the other clauses following it. We have pointed out that the acts and omissions contemplated there are of diverse kinds. The words "second offence" must, therefore, mean any act which is an offence under any of the clauses in the sub section which has been done later in point of time after a conviction for an offence under the Act, no matter whether the acts or omissions constituting the two offences are of the same type or not. The appellant must, therefore, be held to have committed the second offence within the meaning of the sub section on the present occasion and was liable to have the heavier punishment awarded to him. The sentence awarding such punishment is unexceptionable. The appeal fails and it is hereby dismissed. Appeal dismissed.

IN-Abs

The appellant having been once convicted under the for keeping foodstuff for sale in a container without covering it, was for a second time convicted for selling foodstuff which had been coloured with a prohibited dye. Treating the latter conviction as a "second offence" under section 16(1) of the Act the Trial Court sentenced the appellant to two years imprisonment. Having failed to get redress in the High Court he appealed to this Court by special leave. It was contended on behalf of the appellant that the "second offence" contemplated by section 16(1) was an offence of the same kind as the first and not any offence under the Act. HELD: (i) The word second in the expression "second offence" in section 16(1) means second in time and not second of the same type. The section does not say "second offence" of the same type; the latter words are not there. On the other hand from the phrase 'subsequent offences ' used in the section in respect of offences subsequent to the third one, it is clear that the words 'first ', 'second ' and 'third ' were intended to indicate things happening one after another in point of time. [808 B] The object of the sub section is clearly to prevent repetition of offences. That is why for the offence subsequently committed a heavier sentence is provided. No object could have been served by seeking to stop the repetition of the same type of conduct only. [808 E F] (ii) There is no foundation in the Act for distinguishing between trivial and serious offences and then arguing that the Act could not have intended to impose a heavier punishment for a second offence which might be of a less serious nature than the first. The Act provides the same punishment for each offence under it. If the punishment is the same, it would follow that the statute considered them to be of the same seriousness. [808 H] (iii) The second offence must be an offence under the Act although it is not specifically so stated. Section 16(1) says that if any person does any of the acts mentioned in cls. (a) to (g) in it, he shall be punishable for the first offence with a certain penalty, for the second offence with a higher penalty, and for the third a still higher penalty. It is clear that the acts or omissions mentioned 807 in the different clauses constitute the offences for which the penalties are provided. From this structure of the sub section the implication necessarily arises that the penalties were imposed for offences under the Act only. [809 E F] City Board, Saharanpur vs Abdul Wahid, A.I.R. (1959) All. 695, Chuttan vs State, A.I.R. (1950) All. 629 and In re Authers, , referred to.

il Appeals Nos. 144 145 of 1964. Appeals from the order dated November 16, 1960 of the Mysore High Court in Income tax Reference No. 3/1959. N.D. Karkhanis and R.N. Sachthey, for the appellant (in both the appeals). K. Ganapathy lyer, for the respondent (in both the appeals). 772 The Judgment of the Court was delivered by Sikri, J. These two appeals pursuant to a certificate granted by the High Court of Mysore under section 66 A(2) of the Income tax Act, 1922, are directed against its judgment answering the question referred to it in favour of the respondent assessee. The question referred to is: "Whether the assessee, Mohandas Sadhuram, can be granted registration under Section 26 A of the Indian Income Tax Act on the basis of the partnership deed made on 1 4 1952 for the assessment year 1953 54 and on the basis of the said deed read with the supplementary deed on 1 4 1953 for the assessment year 1954 55". The respondent, M/s Shah Mohandas Sadhuram, hereinafter referred to as the assessee, is a firm. The assessee claimed registration under section 26 A of the Indian Income Tax Act on the strength of a Partnership Deed executed on 'April 1, 1952. As the answer to the question in part turns on the construction of the deed, the relevant Clauses may be set out here. The Partnership Deed first describes the parties and then recites: "Whereof the above four members were till this day members of a Joint Family, whereof yesterday that is on 31 3 1952 the said four members have become divided not only in interest but also by metes and bounds, each of the said members taking to his share one fourth (1/4) of the said joint family assets and liabilities as detailed in the books of account as maintained by the firm known as Seth Mohandas Sadhuram and whereof we the first and second members have decided to constitute all the said four members as a partnership admitting the third and fourth members thereof to the benefits of the said partnership but not to the liabilities thereunder". The first and second members referred to in the recital are Atmaram and Doulatram, both majors. The other relevant clauses are as follows: "(4) The said firm is agreed to do business of Banking and Commerce (which term includes all that is usually and customarily is understood to be done thereunder) and also to deal in Automobiles business. The Automobiles business having been started by the said first and second members under the name and style of Vijaya Automobiles, Mysore, when they were members of the said joint family as a partnership venture apart from the said family, it is agreed between us now that the said Automobiles business shall hereafter be continued to be done under the name and style of Vijaya Automobiles as part of the said firm. 773 (7) It is agreed that the capital contribution of each member will be equal and the accounts to be maintained to. indicate the said capital contribution. will show what each member has so contributed in the personal capital ledger account. (8) It is further agreed that after debiting all working expenses inclusive of those referred to in para 6 supra. the profits of the firm less six pies per every rupee of ' profits which will be reserved for Charity Fund will be distributed pro rata according to the proportion of capital investment as detailed of each member. all to be paid to his account in the books of account. from where each member can draw. The losses are agreed to be shared by the members in the like manner. The share of profits for the 3rd and 4th member will be. paid to them. the said profits to be credited to theft accounts, and from there their maintenance charges and other expenses of necessities if any may be drawn by the said Guardian from the said accounts. (10) It is agreed that the duration of this partnership will be for a period of one year, i.e. from 1st of April, 1952 to 31st March, 1953, and the members might agree to continue the said partnership even thereafter under these terms or on terms to be determined then. (11) It is agreed that the profits and losses of the Bombay branch and other branches if any outside the State of ' Mysore will be credited or debited separately in the books of account of these branches and final allocation made in those books of account, as distinct from the profits and losses of the firm in State of Mysore. (12) It is agreed that the first and the second members do maintain proper accounts as is customarily to be maintained". For the assessment year 1953 54. the Income Tax Officer rejected the application for registration on the ground that "in the case of the assessee. the minors are made parties to a contract by the eldest brother acting on their behalf. The minor has actually been debited with a share of loss. Taking these facts into account. I hold that the partnership is not entitled to the benefits of registration". For the assessment year 1954 55, he also rejected the application but added this further ground that "a supplementary deed of partnership extending the life of the partnership beyond 1 4 1953 for a further period at the will of the partners is filed. This is on 10 annas stamp paper. (The supplementary deed rests on clause. 10 of the original deed.) I have already held that the original deed is not registerable. The supplementary deed cannot confer any fresh rights in the matter". 774 The Appellate Assistant Commissioner, on appeal, upheld the orders of the Income Tax Officer in respect of both the assessment years. On further appeal, the Appellate Tribunal, following the decision of the Madras High Court in Jakka Devayya and Sons vs Commissioner of Income tax, Madras(1) construed the deed as having admitted the minors only to the benefits of the partnership. It accordingly held that the assessee was entitled to be registered for both the years. At the instance of the Commissioner of Income Tax, the Tribunal referred the question already set out above to the High Court. The High Court, following its judgment in Income Tax Reference No. 2 of 1959, which is the subject matter of appeal before us in The Commissioner of Income Tax Madras vs M/s Shah Jethaji Phulchand(2) answered the question in favour of the assessee. The main reason given in that judgment of the High Court is "that an instrument of partnership entered into between persons, some of whom are by law incompetent to contract, as might happen if one of them is a minor, is not necessarily null and void, and in a case like the present one, where the execution of the instrument of partnership on behalf of a minor by his guardian was for the purpose of admitting the minor to the benefits of partnership, no question of the invalidity of the instrument can properly arise". Mr. Karkhanis, the learned counsel for the appellant contends that on a proper construction of the deed it is clear that the minors have been made partners, and therefore the deed is not valid. He relies on clauses 4, 7, 8, 10, 11 and 12 of the Partnership deed, set out above, to establish that the minors were admitted as full partners. He further urges that a guardian is not entitled to contract on behalf of a minor and the deed is consequently void. This Court held in Commissioner of Income Tax, Bombay vs Dwarkadas Khetan & Co.(3) that the income tax officer was only empowered to register a partnership which was specified in the instrument of partnership and it was not open to the Department to register a partnership different from that which was formed by the instrument. It further held that section 30 of the Indian Partnership Act was designed to confer equal benefits upon the minor by treating him as a partner, but it did not render a minor a competent and full partner, and any document which made a minor full partner could not be regarded as valid for the purpose of registration. But the facts in that case were that in the instrument of partnership Kantilal Kasherdeo was described as a full partner entitled not only to a share in the profits but also liable to bear all the lossess including loss of capital. It was also provided that "all the four partners (1) 22 I.T.R. 26t (2) Civil Appeals Nos. 146 147 of 1964; judgment delivered on April 15, 1965. (3) (+ ) 775 were to attend to the business, and if consent was needed, all the partners including the minor had to give theft 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". As Hidayatullah J. observed, "in short, no distinction was made between the adult partner 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". Does this deed then make the minors full partners or does it only confer benefits of partnership on them? Is any clause of the deed void? Before we discuss these questions it is necessary to consider what are the incidents and true nature of 'benefits of partnership ' and what is a guardian of a minor competent to do on behalf of a minor to secure the full benefits of partnership tO a minor. First it is clear from sub s.(2) of section 30 of the Partnership Act that a minor cannot be made liable for losses. Secondly, section 30, sub. s (4) enables a minor to sever his connection with the firm and if he does so, the amount of his share has to be determined by evaluation made, as far as possible, in accordance with the rules contained in section 48, which section visualises capital having been contributed by partners. There is no difficulty in holding that this severance may be effected on behalf of a minor by his guardian. Therefore, sub s.(4) contemplates that capital may have been contributed on behalf of a minor and that a guardian may on behalf of a minor sever his connection with the firm. If the guardian is entitled to sever the minor 's connection with the firm, he must also be held to be entitled to refuse to accept the benefits of partnership or agree to accept the benefits of partnership for a further period on terms which are in accordance with law. Sub Section (5) proceeds on the basis that the minor may or may not know that he has been admitted to the benefits of partnership. This sub section enables him to elect, on attaining majority, either to remain a partner or not to become a partner in the firm. Thus it contemplates that a guardian may have accepted the benefits of a partnership on behalf of a minor without his knowledge. If a guardian can accept benefits of partnership on behalf of a minor he must have the power to scrutinise the terms on which such benefits are received by the minor. He must also have the power to accept the conditions on which the benefits of partnership are being conferred. It appears to us that the guardian can do all that is necessary to effectuate the conferment and receipt of the benefits of partnership. It follows from the above discussion that as long as a partnership deed does not make a minor full partner a partnership deed cannot be regarded as invalid on the ground that a guardian has purported to contract on behalf of a minor if the contract is for the purposes mentioned above. 776 Let us then examine the partnership deed in the light of these principles. It need hardly be stated that the partnership deed must be construed reasonably. The recital set out above expressly states that it is the major members who had decided ' to constitute the partnership and admit the minors to the benefits of the said partnership, The rest of the clauses must be construed in the light of this recital. Clause 4 only states the business to be carried on and the name of the business. It seems to us that the expression 'it has been agreed between us ' has reference to the agreement mentioned in the recital. Regarding clause 7, which deals with capital contribution, it is urged that a guardian is not entitled to agree to contribute capital. We are unable to agree. If it is one of the terms on which benefits of partnership are being conferred either the guardian must refuse to accept the benefits or he must accept this term. In some cases such an agreement by a guardian may be avoided by the minor, if it was not entered into for his benefit, but the agreement will remain valid as long as it is not avoided by the minor. Regarding clause 10, Mr. Karkhanis submits that this embodies a clear agreement enabling the minor to continue the said partnership even thereafter under these terms or on terms to be determined then, and therefore this clause is void. We can find no defect in this clause. The duration of a partnership has to be fixed between the major members, and the guardian on behalf of a minor may agree to accept the benefits of the partnership only if the duration is to the benefit of the minor. Clause 10 enables the guardian to accept the benefits of partnership under these terms or under such other terms as may be determined. If the terms determined in future are similar, no objection can be taken; if on the other hand the terms determined later are in contravention of law, the partnership deed will be held to be bad. Clause 11 has reference to the manner of keeping accounts and a guardian is entitled to assent to the mode of keeping accounts. In our opinion, the partnership deed, reasonably construed, only confers benefits of partnership on the two minors and does not make them full partners. The guardian has agreed to certain clauses in order to effectuate the decision of the major members to confer the benefits of the said partnership to the minors. Accordingly we hold that the Income Tax authorities should not have declined to register the firm. We may mention that the supplementary deed dated April 1, 1953, has not been included in the statement of the case, but it is common ground that nothing turns on any of the clauses in the supplementary deed. Accordingly, agreeing with the High Court, we hold that the firm is entitled to be registered under section 26 A of the Income Tax Act, and the answer to the question referred is in the affirmative. The appeals are dismissed with costs, one set of hearing fees. Appeals dismissed.

IN-Abs

The assessee firm claimed registration under section 26A of the Indian Income Tax Act on the strength of a partnership deed executed between four partners of which two were minors. The Income Tax Officer refused registration on the ground that the minors were made parties to a contract by the eldest brother acting on their behalf and the minor had actually been debited with a share of loss. This was upheld by the Appellate Assistant Commissioner, but the Appellate Tribunal, on a further appeal. construed the deed as having admitted the minors only to the benefits of the partnership, and accordingly held that the assessee was entitled to be registered. In reference, the High Court answered the question in favour of the assessee. In appeal by certificate to this Court, the Revenue contended that (i) a guardian is not entitled to contract on behalf of a minor and the deed was consequently void, and (ii) the partnership deed made the minors as full partners. HELD: The assessee firm was entitled to be registered under the Income tax Act. [776 H] (i) As long as a partnership deed does not make a minor full partner a partnership deed cannot be regarded as invalid on the ground that a guardian has purported to contract on behalf of a minor. A guardian can do all that is necessary to effect the conferment and receipt of the benefits of partnership. So he must have the power to scrutinse the terms on which such benefits are received by the minor. He must also have the power to accept the conditions on which the benefits of partnership are being conferred. [775 G H] (ii) The Partnership deed reasonably construed. only conferred benefits of partnership on the two minors and did not make them full partners. Case law referred to.

ppeal No. 150 of 1964. Appeal from the judgment and order dated March 22, 1960, of the Assam High Court in Income tax Reference No. 7 of 1959. N.D. Karkhanis and R.N. Sachthey, for the appellant. Sampat Ayyangar and J.P. Goyal, for the respondent. The Judgment of the Court was delivered by Subba Rao, J. By a registered lease deed dated March 31, 1950, the assessee company, respondent herein, leased out two tea estates named "Panbari Tea Estate" and "Barchola Tea Estate", along with machinery and buildings owned and held by it, in Darrang, in the State of Assam, to a firm named Messrs. Hiralal Ramdas for a period of ten years commencing from January 1, 1950. The lease was executed in consideration of a sum of Rs. 2,25,000/as and by way of premium and an annual rent of Rs. 54,000/ to be paid by the lessee to the lessor. The premium was made payable as follows: Rs. 45,000/ to be paid in one lump sum at the time of the execution of the lease deed ' and the balance of Rs. 1,80,000/in 16 half yearly instalments of Rs. 11,250/ on or before January 31 and July 31 of each year. The annual rent of Rs. 54,000/ was payable as follows: Rs. 1,000/ per month to be paid on or before the last day of each month, making in all Rs. 12,000/ per year, and the balance of Rs. 42,000/ on or before December 31 of each year. On February 25, 1957, for the assessment year 1952 53, the Income tax Officer made the assessment treating the instalment of Rs. 11,250/ paid towards the premium in the relevant accounting year as a revenue receipt of the assessee. On appeal, the Appellate Assistant Commissioner confirmed the order of the Income tax Officer. On further appeal, the Income tax Appellate Tribunal also held that the premium was really the rent payable under the lease deed and, therefore, it was chargeable to income tax. At the instance of the assessee, the Tribunal referred the following question to the High Court under section 66(1) of the Income tax Act, 1922, herein after called the Act: "Whether on the facts and in the circumstances of the case and upon the construction of the terms of the lease, dated 31st March 1950, the sum of Rs. 11,250/ received by the assessee during the year of account is revenue or capital receipt". 813 The High Court held that the said sum of Rs. 11,250/ received by the assessee during the year of account was a capital receipt and answered the question accordingly. On a certificate issued by the High Court, this appeal has been filed by the Revenue in his Court. The short question that arises in this appeal is whether the amount described as premium in the lease deed is really rent and, therefore, a revenue receipt. Before we look at the lease deed it will be convenient to notice briefly the law pertaining to the concept of premium, which is also described as salami. The distinction between premium and rent was brought out by the Judicial Committee in Raja Bahadur Kamakshya Narain Singh of Ramgarh vs Commissioner of Income tax, Bihar & Orissa (1) thus: "It (salami) is a single payment made for the acquisition of the right of the lessee 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 It is true that in that case the leases were granted for 999 years; but, though it was one of the circumstances, it was not a decisive factor ,in the Judicial Committee coming to the conclusion that the salami paid under the leases was a capital asset. This Court in Member for the Board of Agriculture Income tax, Assam vs Sindhurani Chaudhurani (2) defined "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. " It is true that in that case the payment was paid in a single lump sum, but that was not a conclusive test, for salami can be paid in a single payment or by instalments. The real test is whether the said amount paid in a lump sum or in instalments is the consideration paid by the tenant for being let into possession. This Court again in Chintamani Saran Nath Sah Deo vs Commissioner of Income tax, Bihar & Orissa(1) considered all the relevant decisions on the subject in the context of licences granted to the assessee to (1) , 519. (2) 814 prospect for bauxite in some cases for 6 months and in others for a year or two and observed: "The definition of salami was a general one, in that it was a consideration paid by a tenant for being let into possession for the purpose of creating a new tenancy. " Applying that test this Court held in that case that under the said licences there was a grant of a right to a portion of the capital of the licensor in the shape of a general right to the capital asset. In view of these three decisions it is not necessary to multiply citations. Under section 105 of the Transfer of Property Act, a lease of immovable property is a transfer of a right to enjoy the property made for a certain time, express or implied or in perpetuity, in consideration of a price paid or promised, or of money, a share of crops, service or any other thing of value, to be rendered periodically or on specified occasions to the transferor by the transferee, who accepts the transfer on such terms. The transferor is called the lessor, the transferee is called the lessee, the price is called the premium, and the money, share service or other thing to be so rendered is called the rent. The section, therefore, brings out the distinction between a price paid for a transfer of a right to enjoy the property and the rent to be paid periodically to the lessor. When the interest of the lessor is parted with for a price, the price paid is premium or salami. But the periodical payments made for the continuous enjoyment of the benefits under the lease are in the nature of rent. The former is a capital income and the latter a revenue receipt. There may be circumstances where the parties may camouflage the real nature of transaction by using clever phraseology. In some cases, the so called premium is in fact advance rent and in others rent is deferred price. It is not the form but the substance of the transaction that matters. The nomenclature used may not be decisive or conclusive but it helps the Court, having regard to the other circumstances, to ascertain the intention of the parties. Bearing the said principles in mind let us scrutinize the lease deed dated March 31, 1950. Under that document interest in two large tea estates comprising 320 acres and 305 acres respectively under tea, along with the bungalows, factory buildings, houses, godowns, cooly lines and other erections and structures, was parted by the lessor to the lessee for a period of 10 years; and during that period the lessee could enjoy the said tea estates in the manner prescribed in the document. Under the document, therefore, there was a transfer of substantive interest of the lessor in the estates to the lessee and a conferment of a right on the lessee to use the said estates by exploiting the same. Under cl. 4 of the lease deed for the transfer of the right a premium of Rs. 2,25,000/ had to be 815 paid to the lessor and for using the estates the lessee had to pay. an annual rent of Rs. 54,000/ . Both the premium and the rent were payable in instalments in the manner provided in the document. The parties were businessmen presumably well versed in the working of tea estates. They must be assumed to have known the difference between the two expressions "premium" and "rent"; and they had designedly used those two expressions to connote two different payments. The annual rent fixed was a considerable sum of Rs. 54,000/ and the premium, when spread over 10 years, would work out to Rs. 22,500/ a year. There is no reason, therefore, to assume that the parties camouflaged their real intention and fixed a part of the rent in the shape of premium. The mere fact that the premium was made payable in instalments cannot obviously be decisive of the question, for that might have been to accommodate the lessee. Nor is cl. 8 of the lease deed, on which strong reliance is placed by the learned counsel for the Revenue, a pointer to the contrary. It reads: "(1) If any of the aforesaid instalments towards the premium or annual rent shall remain unpaid for two months after becoming payable (whether formally demanded or not) or if the lessee shall make default in payment to the Lessor any other sum or any part thereof in due dates or in observing or performing any of the covenants, conditions or stipulations hereinbefore contained and on the part of the Lessee to be paid, observed and performed or if the Lessee 's firm is dissolved except for reconstruction or if any of the partners of the Lessee is adjudicated insolvent then and in any such cases it shall be lawful for the Lessor immediately or at any time or times thereafter upon the demised Tea EStates and premises or any part thereof in the name of the whole to re enter and thereupon this demise shall absolutely determine but without prejudice to the rights of the Lessor to damages or compensation in respect of any breach of Lessee covenants herein contained and all other rights and remedies including the right to recover the balance of the instalment unpaid premium or rent payable in that particular year. " The argument is that in the case of default contemplated in this clause it shall be lawful for the lessor to re enter and in that event in terms of cl. 8 he will be entitled only to recover the balance of the instalment of unpaid premium and not the entire balance of the premium. This construction, though it appears to be plausible at first sight, really ignores the main terms of the lease. The default clause is pressed into service to destroy the main term of the lease. Under el. 1 of the lease deed the sum of Rs. 2,25,000/ is the consideration by way of premium to be paid by the lessee to the lessor. Under cl. 4 thereof the said entire premium has to be 816 paid in instalments; under cl. 8 the lessor has the option to terminate the lease and re enter the premises in the circumstances mentioned therein without prejudice to all his rights under the document. One of his rights is to recover the premium in instalments. The fact that one of the rights saved is his right to recover the balance of the instalment of unpaid premium cannot possibly deprive him of all his _other rights which are also expressly saved thereunder. The drafting of the clause is not artistic and is rather confused; but in the context of the other clauses it cannot be so construed as to override. or come into conflict with, the main terms of the lease deed. Thirdly, it was contended that the income the lessor was getting under the lease after 1950, i.e., after the execution of the lease deed, viz., the total of the instalments of premium and rent, was not higher than the profits he was getting before the lease and that was an indication that what was rent really was split up into premium and rent for ulterior purposes. This argument is based upon the following data collected from the published accounts of the assessee company: Year ended Profit Deprecia Net Divided tion Profit (tax free) (1) (2) (3) (4) (5) Rs. Rs. Rs. % 31st March 1947 . 60,186 8,665 51,521 9 31st March 1948 . 33,118 7,872 23,246 9 31st March 1949 . 31,581 7,475 24,106 6 31st March 1950 . 47,734 17,868 29,866 12 31st March 1951 . 71,888 17,726 54,162 6 31st March 1952 . 33,213 15,527 17,686 6 31st March 1953 . 69,550 15,410 54,140 6 In the accounts of the year to 31st March 1952 there are the following three items of expenditure: Rs. Transit charges . . 10,605 Legal Expenses . . 7,518 Gratuity to Managing Director . 10,000 28,123 Before comparing the figures given for the two periods, i.e., the period before March 1950 and the period thereafter, it is necessary to add back the said three items of expenditure totalling 817 Rs. 28,123/ to the net profit of the year ended with 31st March, 1952; if they were added, instead of Rs. 17,585/ , the profit would be Rs. 45,809/ . A comparative study of the said figures discloses a higher return in the second period than during the earlier period. But an attempt is made to show that the figures of the later period include other items and if they are deducted the net profit would be comparable with that in the earlier period, but there is no agreed data for this attempt and it is not possible on the material placed before us to scrutinize the figures. In the absence of the relevant material it is not possible to accept the argument built upon the said figures. The result is that there is no material placed before us, either direct or circumstantial, to displace the description given in the lease deed to the said amounts as premium and to hold that they are not in fact premium but only rent. Indeed, the circumstances mentioned supra confirm the said description. In the result we hold that the High Court has given a correct answer to the question submitted to it by the Income tax Appellate Tribunal. The appeal is dismissed with costs. Appeal dismissed.

IN-Abs

The assessee leased out its tea estates for a period of ten years in consideration of a sum as and by way of premium and an annual rent to be paid by the lessor to the assessee. As premium a part the sum was paid at the time of the execution of the lease and the balance was spread over in ten annual instalments; and the annual rent was payable in monthly instalments. The annual instalment paid as premium was taxed by the Income Tax authorities as revenue receipt of the assessee. On reference, the High Court held to be capital gains. In appeal by certificate. HELD: The annual instalment paid as premium was capital gains. When the interest of the lessor is parted for a price the price paid is premium or salami. But the periodical payments made for the continuous enjoyment of the benefits under the lease are in the nature of rent. The former is a capital income and the latter a revenue receipt. There may be circumstances where the parties may camouflage the real nature of the transaction by using clever phraseology. In some cases, the so called premium is in fact advance rent and in others rent is a deferred price. It is not the form but the substance of the transaction that matters. The nomenclature used may not be decisive or conclusive but it helps the court, having regard to the other circumstances, to ascertain the intention of the parties. Premium can be paid in a single payment or by instalments. The real test is whether the said amount paid in a lump sum or in instalments is the consideration paid by the tenant for being let into possession. [813 H; 814 E G] Raja Bahadar Kamakshya Narain Singh of Ramgarb vs Commissioner of Income tax, Bihar and Orissa, , Member for the Board of Agriculture Income tax Assam vs Sindhurani Chaudhurani, , and Chintamani Saran Nath Sah Deo vs Commissioner of Income tax, Bihar and Orissa, (1961)41 I.T.R. 506, applied. The parties, who were businessmen well versed in their trade, must be assumed to have ,known the difference between the two expressions "premium" and 'rent , and they had designedly used those two expressions to connote two different payments. The annual rent fixed was a considerable sum of Rs. 54,500/ and the premium, when spread over 10 years would work out to Rs. 22,500/ a year. There was no reason, therefore, to assume that the parties camouflaged their real intention and fixed a part of the rent in the shape of premium. The L/P(D)5SCII 13 812 mere fact that the premium was made payable in instalments could not obviously be decisive of the question, for that might have been to accommodate the lessee. [815 B, C] The construction based on the clause in the lease deed that on the de.fault in the payments of the instalments of the premium or rent, the lessor shall be entitled to recover the balance of the unpaid premium and not the entire balance of the premium, really ignores the main terms of the lease. In the context of the other clauses, this clause could not be so construed as to override or come into conflict with the main terms of the lease deed. [815 H, 816B]

vil Appeals Nos. 633 and 634 of 1964. Appeals from the judgement and order dated July 23 and 24, 1962 of the Bombay High Court in Income tax Reference No. 61 of 1961. A. V. Viswanatha Sastri, S.N. Vakil, T.A. Ramachandran, 1. B. Dadachanji, O.C. Mathur and Ravinder Narain, for the appellant (in both the appeals). Niren De, Additional Solicitor General, R. Ganapathy lyer and R.N. Sachthey, for respondent (in both the appeals). A.V. Vishwanatha Sastri, M.N. Shroff and 1. N. Shroff, for the Intervener (in all the appeals). The Judgment of the Court was delivered by Subba Rao, J. The appellant, the Poona Electric Supply Co., Ltd., hereinafter called the Company, carried on the business of distribution of electricity in the city of Poona under a licence issued by the Government. Under the relevant provisions of the , (Act 54 of 1948), hereinafter called the Act, the Company 's "clear profit" in any year should not, as far as possible, exceed the amount of "reasonable return" as defined under the Act. The excess, if any, after making some deductions, the Company has to distribute to its consumers in the form of rebate. During the assessment years 1953 54 and 1954 55 the Company claimed deduction of two amounts of Rs. 42,148/ and Rs. 77,138/ for the said two years from its taxable income as they were credited to "Consumers Benefit Reserve Account". The Income tax Officer disallowed the claim; and on appeal the Appellate Assistant Commissioner agreed with the Income tax Officer. On a further appeal, the Income tax Appellate Tribunal accepted the contention of the appellant and allowed the deductions. At the instance of the Revenue, the Tribunal submitted the following question of law to the High Court of Judicature at Bombay for its opinion: "Whether the two sums of Rs. 42,1481 in the assessment year 1953 54 and Rs. 77,138/ in the assessment year 1954 55 were deductible in computing income, profits and gains from the assessee 's business assessable to tax. " 820 A Division Bench of the said High Court answered the question in the negative and against the appellant. The present appeals have been filed by the Company after obtaining the requisite certificate from the High Court. The argument of Mr. A.V. Viswanatha Sastri, learned counsel for the appellant, may be summarised thus: (1) There is a distinction between commercial profit of a company and "clear profit" under the Act one is arrived at on commercial principles and the other is regulated by the statute; the real profit of a company under section 10(1) of the Indian Income tax Act can be determined only after excluding the amount statutorily transferred to the "Consumers Benefit Reserve Account", for that amount represents a rebate to the customers of the excess amount collected from them. (2) As the reservation of a part of the said excess is a statutory condition subject to which the Company carries on its business, it is an expenditure wholly and exclusively incurred for the purpose of the Company 's business and, therefore, it is an allowance deductible under section 10(2)(xv) of the Income tax Act for computing the profit of the Appellant 's business. (3) The Company follows the mercantile system of accounting and, therefore, the amount of rebate so reserved is deductible for arriving at the commercial profit of the Company in the year when the statutory liability arises and not when the amount is actually paid; and in the present case the statutory liability for the said two amounts arose in the accounting years of 1952 and 1953. Learned Additional Solicitor General contended that (1) under the relevant provisions of the Act the transference of a part of the said excess to the consumers benefit reserve account would only amount to apportionment or distribution of the profit after it has been earned and, therefore, it is not a deductible item for ascertaining the profit of the Company under section 10(1) of the Income tax Act; (2) the said amounts could not be said to be an expenditure wholly and exclusively incurred for the purpose of the business, as the expenditure was not incurred either during the course of the business or for the purpose of earning the profits of the business, but was only apportioned or distributed from and out of the profits already earned. To appreciate the rival contentions and to arrive at a satisfactory solution it will be necessary to notice the relevant provisions of the Act and of the Income tax Act. The gist of the relevant provisions may be stated thus: No person can supply electric energy in any area unless he has obtained a licence from the State Government under section 3(1) of the (9 of 1910). The Act, i.e., The , provides for the rationalization of the production and supply of electricity and generally for taking 821 measures conducive to electrical development. One of its main objects is to prevent such licensees from charging unreasonable rates to the detriment of the consumers. Under section 57(1) of the Act the provisions of the Sixth Schedule and the table appended to the Seventh Schedule thereto are deemed to be incorporated in the licence of every licensee. Paragraph I of the Sixth Schedule imposes a duty on every such licensee to so adjust his rates for the sale of electricity by periodical revision that his clear profit in any year shall not, as far as possible, exceed the amount of "reasonable return". The expressions "clear profit" and "reasonable return" are defined. Under Para. II thereof if the clear profit of a licence in any year of account is in excess of the amount of reasonable return, one third of such excess, not exceeding 7 1/2% of the amount of reasonable return, shall be at the disposal of the undertaking; one half of the said excess shall either be distributed in the form of a proportional rebate on the amounts collected from the sale of electricity and meter rentals or carried forward in the accounts of the licensee for distribution to the consumers in future in such manner as the State Government may direct. It is, therefore, clear from these provisions that for the purpose of rationalization of rates and keeping them under control the licence is directed to adjust his rates in such a way that his clear profit in any year shall not, as far as possible, exceed the amount of reasonable profit; but if an excess is collected, the licensee shall distribute half of that excess in the form of a proportional rebate to the consumers or carry forward the same in his accounts for future distribution to the consumers. Briefly stated, the scheme of the provisions is that a part of the excess collected is returned to the consumers by way of a rebate. The question is whether the amount so returned or returnable by the licensee to his consumers is deductible for ascertaining his taxable income from his business under section 10(1) or section 10(2)(xv) of the Income tax Act. Learned Additional Solicitor General took us though the various paragraphs of the Sixth Schedule to the Act and argued that under them the licensee 's clear profit was arrived at after all the deductions were made, including the appropriations for all taxes on income and profits and, therefore, the distribution of a part of the excess was only a distribution out of the profits. There is plausibility in this argument and at the first blush it appears to be attractive. But there is an obvious fallacy underlying the argument and that arises from the fact that the argument equates the expression "clear profit" with that of commercial profits. The object of the Act and that of the Sixth Schedule thereto, as aforesaid, is to statutorily rationalize and regulate the rates chargeable for the energy supplied in the interest of the public and for electrical development. The rules embodied in the Sixth Schedule to the Act are intended only to achieve that object. Under the said rules certain appropriations and certain deductions have to be made to. arrive at the clear profit; otherwise the items may be manipulated 822 to sustain a demand for abnormal rates. The rules have no concern with income tax; though for the purpose of arriving at the clear profit the taxes paid are also deductible. If this distinction is borne in mind, the problem presented is easily and readily solved. Under section 10 (1) of the Income tax Act, tax shall be payable by an assessee under the head "profits and gains of business" in respect of profits and gains of any business carried on by him. The said profits and gains are not profits regulated by any statute, but profits in a business computed on business principles. They are business profits and not statutory profits. They are real profits and not notional profits. The real profit of a businessman under section 10(1)of the Income tax Act cannot obviously include the amounts returned by him by way of rebate to the consumers under statutory compulsion. It is as if he received only from the consumers the original amount minus the amount he returned to them. In substance there cannot be any difference between a businessman collecting from his constituents a sum of Rs. Y in addition to Rs. X by mistake and returning Rs. Y to them and another businessman collecting Rs. X alone. The amount returned is not a part of the profits at all. In this context some of the decisions cited at the Bar may be of some help. In Pondicherry Railway Co., Ltd. vs Commissioner of Income tax, Madras(1). under an agreement with the French Colonial Government the railway company had to pay to the said Government half of its net profits calculated as provided thereunder. One of the questions that arose in the appeal was whether the appellant company was entitled to deduct the payments made under the agreement with the said Government as being expenditure incurred solely for the purpose of earning such profits within section 10(9) of the Income tax Act. In dealing with the question, Lord Macmillan observed: "A payment out of profits and conditional on profits being earned cannot accurately be described as a payment made to earn profits. It assumes that profits have first come into existence. But profits on their coming into existence attract tax at that point, and the revenue is not concerned with the subsequent application of the profits. " The learned Lord, after citing with approval the principle laid down by Lord Chancellor Halsbury in Gresham Life Assurance .Society vs Styles(2), proceeded to observe: "The word 'profits ' I think is to be understood in its natural and proper sense. in a sense which no commercial man would misunderstand. But once an individual or (1) , 251 252, 252. (2) 823 a company has in that proper sense ascertained what are the profits of his business or his trade, the destination of those profits or the charge which has been made on those profits by previous agreement or otherwise is perfectly immaterial. The tax is payable upon the profits realized, and the meaning to my mind is rendered plain by the words 'payable out of profits. " The distinction between payment out of profits and a payment to earn profits is unexceptionable. The difficulty is to ascertain in each case whether a particular payment falls under one or other of the two categories. The statement in the aforesaid observations that a payment conditional on profits being earned cannot be a payment made to earn profits has been modified and explained by the Privy Council in The Indian Radio and Cable Communications Cornpony, Ltd., vs The Commissioner of Income tax, Bombay Presidency & AdenC). There, their Lordships were dealing with a case of a joint venture by two companies; and Lord Maugham pointed out thus: "It may be admitted that, as Mr. Latter contended, it is not universally true to say that a payment the making of which is conditional on profits being earned cannot properly be described as an expenditure incurred for the purpose of earning such profits. The typical exception is that of a payment to a director or a manager of a commission on the profits of a company. " To that extent the principle laid down by Lord Macmillan in the case of Pondicherry Railway Co.(2) has been modified. Lord Macmillan himself in a later decision in The Union Cold Storage Co. Ltd., vs Adamson (H. M. Inspector of Taxes)(3) explained his observations in the Pondicherry Railway Co. 's case (2). There, the appellant company leased lands and premises abroad under a deed reserving a particular rent per annum. The deed provided that if at the end of any financial year it was found that after providing for this rent the result of the Company 's operations was insufficient to pay both interest on its charges and debentures and dividends at fixed rates on its preference shares and also at least 10 per cent, on its ordinary shares, the rent for the year was to be abated to the extent of the deficiency, repayment of rent already paid being made if necessary. The question raised in that case was whether such repayments made were allowable as deductions in assessing the Company 's income to income tax. The House of Lords held that they were allowable deductions. When the observations of Lord Macmillan in the Pondicherry Railway Co. 's case(2) were pressed upon the House in support of the contention (1) , 277. (2) L.R. 58 A.C. 239. (3) , 331. 824 on behalf of the Revenue, Lord Macmillan explained his earlier observations thus: "When, therefore, in the passage referred to by the Attorney General in the Pondicherry case I said that "a payment out of profits and conditional on profits being earned cannot accurately be described as a payment made to earn profits", I was dealing with a case in which the obligation was, first of all, to ascertain the profits in a prescribed manner, after providing for all outlays incurred in earning them, and then to divide them. Here the question is whether or not a deduction for rent has to be made in ascertaining the profits, and the question is not one of the distribution of profits at all. " Though a contractual term of payment of rent operated after the profits were ascertained and on the insufficiency to meet certain obligations was discovered, the House of Lords did not find any difficulty in holding that the deductions for rent were made only for ascertaining the profits and not for distributing the same. The decision of the Court of Appeal in British Sugar Manufacturers, Ltd. vs Harris (Inspector of Taxes(1) is rather instructive. There, a company carrying on a manufacturing business agreed with two other companies to pay them a stated percentage of its "net profits" in consideration of their giving to the company the full benefit of their technical and financial knowledge and experience, and giving to the company and its directors advice to the best of their ability. The question arose whether in computing the profits of the company for the purpose of income tax, the company was entitled to deduct the sums so paid as being money wholly and exclusively laid out or expended for the purposes of the trade within Rule 3(a) of Cases I and II. Greene, M.R., pithily observed thus: "Once you realise that as a matter of construction the word "profits" may be used in one sense for one purpose and in another sense for another purpose, I think you have the real solution of the difficulties that have arisen in this case. " Applying that test, the Master of the Rolls held that: "In the present case there are two funds of so called profits which come into the picture. The first one is the fund which has to be ascertained for the purposes of calculating the 20 per cent . . . . Now when that amount has been ascertained, that fund has ceased to have any usefulness at all, and it then becomes necessary to ascertain what are the divisible profits, and for that purpose, to take another account, which not only would bring in depreciation, but would also take into (1) , 105, 106, 108 109. 829 account the sum that had been paid out to the Skoda works, and the Corporation upon the taking of the first account. " Romer, L.J., put the test in a different way when he said: "Is the payment that has to be made by the trader under the contract in question a mere division of profits with another party or is it a payment to the other party, the amount of which is ascertained by reference to the profits?" MacKinnon, L.J. stated much to the same effect thus: "The whole question in this, as in other cases, is whether this, which is an annual payment, is an annual payment to be taken into account in order to ascertain the profits, or is it an annual payment payable out of the profits after they have been ascertained? I think the true facts of this case are that it is of the former character. The difficulty in the case arises largely because of the necessary ambiguity in the word "prof its" and the fact that in this agreement "profits" as a word does appear; but "profits", as I think, quite clearly of a different description from the annual profits or gains with which one is concerned in assessing the income tax. " This decision accepts the principle that a contract or a statute may provide for the ascertainment of two profits for different purposes and the question to be decided in each case is whether the amount claimed as deduction is payable out of the real profits. The Judicial Committee again in Raja Bejoy Singh Dudhuria vs Commissioner of Income tax, Calcutta(1) emphasized the concept of real income in the context of payment of income tax. Lord Macmillan, speaking for the Board, after adverting to the Imperial System of income tax legislation, proceeded to observe: "The correlative of the obligation to return as income sums which are really charges upon the taxpayer 's income is the right to reimbursement of the tax on such charges. The Indian Income tax Act makes no similar provision for the deduction of tax at the source and the consequent reimbursement of the taxpayer in the case of such a charge as that to which the revenues of the appellant are subject . . . . . that the omission from the Indian Act of any such provision points rather to an intention to tax, in Lord Davey 's Phrase, only "the real income" of. the taxpayer, than to an intention to impose, without right of reimbursement, a tax on what is a charge upon his income." (1) L.R. (1933) 60 I.A. 196, 202. 826 The concept of "real income" is also expounded in the decision of the Bombay High Court in H.M. Kashiparekh & Ca. Ltd. vs Commissioner of Income tax, Bombay North (1). There, under the managing agency agreement the managing agent was under a duty to forgo up to one third of its commission where the profits of the managed company were not sufficient to pay a dividend of 6 per cent. The contention of the Revenue that such a surrender of the commission under the provisions mentioned in the agreement was not deductible for the purpose of income tax was negatived. The principle has been succinctly stated in the head note thus: "The principle of real income is not to be subordinated as to amount virtually to a negation of it when a surrender or concession or rebate in respect of managing agency commission is made, agreed to or given on grounds of commercial expediency, simply because it takes place some time after the dose of an accounting year. In examining any transaction and situation of this nature the court would have more regard to the reality and speciality of the situation rather than the purely theoretical or doctrinaire aspect of it. It will lay greater emphasis on the business aspect of the matter viewed as a whole when that can be done without disregarding statutory language. " Now let us look at two of the cases on which strong reliance is placed on behalf of the Revenue. In Mersey Docks and Harbour Board vs Lucas(3) the harbour board was empowered by Act of Parliament to levy dock dues to be applied in maintaining the concern and in paying interest on moneys borrowed; any surplus income remaining after meeting these charges was directed to be applied in forming a sinking fund to extinguish the debt incurred in the construction of the docks. It went to reduce the capital liability. The question was whether the sum carried to the sinking fund, and the surplus carried to the following year 's accounts, were "profits" within the meaning of the Income tax Acts. The House of Lords held that the surplus was profit assessable to the incometax. In this case the surplus income formed the sinking fund and was utilised to pay off the debts of the harbour board; therefore, the Court rightly held that the said amount was utilised by the board from and out of its profits and, therefore, the said surplus could not be an allowable deduction. The decision of the Queen 's Bench Division in Paddington Burial Board vs Commissioners of Inland Revenue(3) was also based on the same principle. Under a public Act of Parliament a burial ground was provided out of the poor rates, and fees were charged to persons using it; any (1) , 707. (2) (3) 827 surplus of income over expenditure was applied in aid of the poor rates as required by the Act. It was held that the surplus was a profit assessable to income tax. It will be seen that the burial ground was managed on behalf of the Parish of Paddington and the surplus was applied for the benefit of the parishners. In the words of Day, J., it was a business carried on for the benefit of the rate payers of the parish of Paddington. This case also, therefore, dealt with payments out of profits utilised for the benefit of those on whose behalf the business was conducted. In Young (H. M. Inspector of Taxes) vs Racecourse Betting Control Board(1) the question that arose was whether the Racecourse Betting Control Board was entitled in computing the profits of the trade of totalisatot operator for the years 1953 54 and 1954 55 to deduct certain payments. The Board would be entitled, under the appropriate statutes, to deduct payment of moneys wholly and exclusively laid out or expended for the purpose of trade. It was held in that case that the said payments were all voluntary payments and were not made for the purpose of the trade. This decision has no bearing on the question raised before us. The said decisions lead to the following results: Income tax is a tax on the real income, i.e., the profits arrived at on commercial principles subject to the provisions of the Income tax Act. The real profits can be ascertained only by making the permissible deductions. There is a clear cut distinction between deductions made for ascertaining the profits and distributions made out of profits. In a given case whether the outgoings fall in one or the other of the heads is a question of fact to be found on the relevant circumstances, having regard to business principles. Another distinction that shall be borne in mind is that between the real and the statutory profits, i.e., between the commercial profits and statutory profits. The latter are statutorily fixed for a specified purpose. If we bear in mind these two principles there will be no difficulty in answering the question raised. The appellant company is a commercial undertaking. It does business of the supply of electricity subject to the provisions of the Act. As a business concern its real profit has to be ascertained on the principles of commercial accountancy. As a licensee governed by the statute its clear profit is ascertained in terms of the statute and the schedule annexed thereto. The two profits are for different purposes one is for commercial and tax purposes and the other is for statutory purposes in order to maintain a reasonable level of rates. For the purposes of the Act, during the accounting years the assessee credited the said amounts to the "Consumers Benefit Reserve Account". They were part of the excess amount paid to it and reserved to be returned to the consumers. They did not form part of the asessee 's real profits. So, to arrive at the taxable income of the assessee from the business (1) (D)5SCI 14 828 under section 10(1) of the Act, the said amounts have to be deducted from its total income. In this view it is not necessary to express our opinion on the question whether the said amounts would be allowable deductions under section 10(2)(xv) of the Act. The next question is whether the amounts so reserved for future payment were deductible in computing the income, profits or gains from the assessee 's business for the assessment years 1953 54 and 1954 55. It is not disputed that the assessee adopts the mercantile system of accounting. The liability to return the amounts was incurred by the assessee during the relevant accounting years. This Court held in Calcutta Co. Ltd., vs Commissioner Income tax, West Bengal(1) that where an assessee maintained his accounts on mercantile basis, the accrued liability and the estimated expenditure which it would incur in discharging the same could be deducted from the income of the accounting year in which the said liability accrued. Indeed, this legal position was not contested on behalf of the Revenue. In the result we answer the question referred to the High Court in the affirmative and in favour of the assessee. The order of the High Court is set aside. The appeals are allowed with costs. Appeals allowed.

IN-Abs

The appellant company was a commercial undertaking, doing the business of supply of electricity subject to the provisions of . For the purpose of rationalization of rates and keeping them under control, the licensee was directed by the Act to adjust the rates in such a way that the clear profit in any year did not exceed the amount of reasonable return as defined in the Act; but that if an excess was collected, the licensee should distribute half of that excess by way of rebate to the consumers, or carry the amount forward in the accounts for distribution to the consumers. For the purposes of the Act, during the accounting years, the assessee credited certain amounts which formed part of the excess collected to the "Consumers Benefit Reserve Account", and claimed deduction of those amounts from the taxable income. The Income Tax Officer and the Appellate Assistant Commissioner disallowed the claim, but the Tribunal allowed the deductions. The High Court, on a reference, held against the assessee. In it appeal to this Court the appellant contended that there was a distinction between commercial accurancy,. As a ' profit" under the and that the real or commercial profit under section 10(1) of the Income Tax Act, 1922, could be determined only after excluding the amounts statutorily transferred to the "Consumers Benefit Reserve Account", for, that amount represented a rebate to the consumers, of the excess amount: collected from them. HELD: As a business concern the real profit of the appellant had to be ascertained on the principles of commercial accountancy. As a licensee governed by the statute its "clear profit" was ascertained in terms of the statute and the schedule annexed thereto. The two profits are for different purposes one for commercial and tax purposes and the other for statutory purposes in order to maintain a reasonable level of rates. The amounts for which deduction was claimed were a part of the excess amount paid to the assessee and reserved to be returned to the consumers. They did not form part of the assessee 's real profits, and therefore, to arrive at the taxable income of the assessee from the business, under section 10(1) of the Income tax Act the said amounts had to be deducted from its total income. [827G 828A] The income tax is a tax on the real income, that is the real profits arrived at on commercial principles subject to the provisions of the Income tax Act. The real profit can be ascertained only by making the permissible deductions. There is a clear cut distinction between deductions made for ascertaining the profits and distributions made out of profits. It is a question of fact to be found on the relevant circumstances, having regard to business principles. Another 819 distinction that should be borne in mind is that between the real and the statutory profits, that is between the commercial profits and statutory profits. The latter are statutorily fixed for a specified purpose. The real profit of a businessman under section 10(1) of the Incometax Act, cannot ,obviously include the amounts returned by him by way of rebate to the consumers, under statutory compulsion, from the statutory profits. [822C, 827E, F] Case law referred to.

minal Appeal No. 118 of 1964. Appeal from the judgment and order dated March 2, 1964 of the Allahabad High Court in Criminal Appeal No. 2531 of 1963 referred No. 160 of 1963. K. L. Sharma and Harbans Singh for the appellant. O. P Rana, for the respondent. LS5SCI 19(a) 266 The Judgment Of SARKAR, C.J. and MUDHOLKAR, J. was delivered by MUDHOLKAR, J. BACHAWAT, J. delivered a separate Opinion. Mudholkar, J. The Additional Sessions Judge, Kumaon, after convicting the appellant Sita Ram of an offence under section 302, Indian Penal Code for the murder of his wife Sindura Rani, has sentenced him to death. The High Court of Allahabad affirmed his conviction but reduced the sentence to one of imprisonment for life. The fact that Sindura Rani met with a homicidal death is not in dispute. What is, however, contended on behalf of the appellant is that there is no evidence on the basis of which his conviction could be based. Admittedly there are no eye witnesses to the occurrence. The prosecution case against him rests on the following material: (1) motive; (2) opportunity; (3) subsequent conduct; (4) false explanation and (5) confessional statements. There is ample evidence on record to show that the relations between the appellant and his wife were very much strained, that the two were living apart and that this was because the appellant suspected that his wife was a woman of loose character. This evidence consists of the testimony of some near relatives and also of several letters written by the appellant to his wife Sindura Rani, to his mother in law Inder Kaur (P.W. 2) and to his brother in law Tilak Raj (P.W. 1). The appellant had denied that the letters were in his hand writing but it has been found by both the courts below that they were in fact written by him. The finding of each of the two courts below that the relations between the appellant and his wife were strained because the appellant not merely suspected the fidelity of his wife but also charged her with unchastised being one of fact cannot be lightly permitted to be questioned in an appeal by special leave. No ground has been made out by learned counsel which would justify our looking into the evidence for ourselves. Similarly, on the question of opportunity, Sindura Rani who had gone to stay with her people had been asked by the appellant to return home on the pretext that one of their children was ill and accordingly she arrived at Kashipur where the appellant lived only 5 or 6 days prior to the incident. Since her return she and the appellant were the only two adult persons living in the house of the appellant. The only other person living with them was their daughter about two years old. When the Sub Inspector of Police arrived on the morning of September 15, 1962 after receiving a report that the appellant 's house was locked from outside and the cry of a child from inside could be heard, found the outer door of the house locked. After breaking it open he found a lantern burning by the side of the dead body of Sindura Rani. From these facts the courts below were justified in coming to the conclusion that the appellant had an 267 opportunity to commit the murder of his wife Sindura Rani. The appellant 's defence that he had gone to Punjab along with one Pritam Singh on September 13, 1962 and could return from there on September 19, has not been accepted by the two courts below in the absence of any material to substantiate it. In addition to these there is the fact that the appellant could not be found till September 19, on which date he surrendered him. self before the court. It would be reasonable to infer from this that he was absconding till this date. The explanation which the appellant gave concerning his absence has been rightly rejected as false. In the circumstances there was adequate material before the courts below upon which his conviction could be based. In addition to this circumstantial evidence the prosecution placed reliance upon exhibit Ka 9. This is a letter dated September 14, 1962 addressed to the 'Sub Inspector ' and bears the signature of the appellant in Urdu. It reads thus: "I have myself committed the murder of my wife Smt. Sindura Rani. Nobody else perpetrated this crime. I would appear myself after 20 or 25 days and then will state everything. One day the law will extend its hands and will get me arrested. I would surrender myself. in Urdu).Sita Ram Naroola, 14th September, 1962. " On the back of this letter is written the following: "It is the first and the last offence of my life. I have not done any illegal act nor I had the courage to do that, but this woman compelled me to do so and I bad to break the law. This letter was found on a table near the dead body of Sindura Rani. It was noticed by the Sub Inspector Jagbir Singh, P.W. 16 and seized in the presence of three persons who attested the seize memo and were later examined as witnesses in the case. The prosecution has established satisfactorily that the letter is in the had writing of the appellant and that the signature it bears is, also that of the appellant. Learned counsel for the appellant has challenged, the admissibility of this letter on the ground that it amounts to a confession to a police officer and that, therefore, section 25 of the Evidence Act renders it inadmissible in evidence. We, do not think that the objection is well founded. No doubt, the letter contains a confession and is also addressed to a police, officer, The at cannot make it a confession made to a police officer which is within the bay created by section 25 of the Evidence Act, The police officer was not nearby when the letter was written or knew that it was being written. In such circumstance quite obviously the letter would not,, 268 have been a confession to the police officer if the words "SubInspector" had not been written. Nor do we think it can become one in similar circumstances only because the words "Sub Inspector" had been written there. It would still have not been a confession made to a police officer for the simple reason that it was not so made from any point of view. We agree with the High Court, therefore, that the confession contained in exhibit Ka 9 is admissible and that it is an additional circumstance which can be pressed in aid in support of the charge against the appellant. However, as already stated, even without this confessional statement there was sufficient material before the courts below on the basis of which the appellant 's conviction could be sustained. The appeal is without any merit and is accordingly dismissed. Bachawat, J Section 25 of the reads: "No confession made to a police officer shall be proved as against a person accused of any offence. " In my opinion, the letter, exhibit Ka 9, is a confession made to a police officer, and is not admissible in evidence against the appellant. The letter contained a confession, and was addressed to the Sub Inspector. The appellant wrote the letter with the intention that it should be received by the Sub Inspector, kept it on a table near the dead body of his wife and left the, house after locking it. The lock wag broken open and the letter was recovered by the Sub Inspector, Kasipur, to whom the letter was written. The Sub Inspector received the letter as effectively 'as if it was sent to him by post or by a peon. It is said that the appellant made no confession to the sub Inspector, inasmuch as the officer was 'not present near the appellant when he wrote the letter. I do not see why a confession cannot be made to a police officer unless he is present in the immediate vicinity of the accused. A confession can be made to a police officer by an oral message to him over the telephone or the radio as also by a written message Communicated to him through post, messenger or otherwise. The presence or absence 'of the police officer near the accused is not decisive on the question whether the confession is hit by section 25. A confession to a stranger though made in the presence of a police officer is not hit by section 25. On the other handful confession to a police officer is within the ban of section 25, though it was not made in his presence. A confessional letter written to a police officer and sent to him by post, messenger or otherwise is not outside the ban of section 25. because the police officer ignorant of the letter at the moment when it was being written. 269 In R.V. Hurribole(1) Garth,C.J. Said that s.25 is an enact Ment to which the Court should give 'the fullest effect. He added: "I think it better in construing a section such as the 25th, which was intended as a wholesome protection to the accused, to construe it in its widest and most popular signification." In its widest and most popular signification, the phrase " confession Made to a police officer" includes a confession made to a police officer in a letter written to him and subsequently received by him. We should not cut down the wholesome protection of section 25 by refined arguments. I am,, therefore, of the opinion that the Courts below were in error in admitting exhibit Ka 9 against the appellant. I however, agree that, apart from exhibit Ka 9 there are sufficient materials on the record establishing the guilt of the appellant. The appeal must, therefore, fail. The appeal is dismissed. Appeal dismissed. (1) [1876] I.L.R. I cal. 207 215 216.

IN-Abs

The appellant was convicted for under under section 302 Indian Penal Code. The prosecution relied on amongst other materials, a letter. The letter contained a confession and was addressed to the Sub Inspector. The appellant wrote the letter with the intention that it should be received by the Sub Inspector, kept it near the dead body and left the house after locking it. The lock was broken open and the letter was recovered by the Sub Inspector. In appeal to this Court the admissibility of this letter was challenged. HELD: (Per Curium) There was sufficient material on the record, apart from this letter, establishing the guilt of the appellant. Per Sarkar, C.J. and Mudholkar, J: The letter was admissible in evidence. No doubt, the letter contained a confession and was addressed to a police officer. That could not make it a confession made to the Police officer which is within the bar created by section 25 of the Evidence Act. The Police Officer was not nearby when the letter was written or knew that it was being written. In such circumstances quite obviously the letter would not have been a confession to the police officer if the words "Sub Inspector" had not been written. Nor it can become one in similar circumstances only because the words "Sub Inspector" has been written there. It would still have not been a confession made to a police officer for the simple reason that it was not so made from any point of view. [267 H 268 B] Per Bachawat J., The letter was inadmissible in evidence and was a confession made to a police officer. [268 D E] A confession to a police officer was within the bar of section 25, though it was not made in his presence. A confessional letter written to a Police officer and sent to him by post, messenger or otherwise is not outside the ban of section 2,5 because the police officer was ignorant of the letter at the moment when it was being written. [268 G]. R. V. Hurribole, Cal. 207, approved.

Appeals Nos. 209 and 210 of 1953. Appeals by special leave against the Judgment and Orders dated 4th April, 1953, of the High Court of Judicature of Mysore at Bangalore (Medapa C. J. and Vasudevamurthy J.) in Civil Petitions Nos, 20 and 21 of 1953, 538 M.Ramaswamy, Senior Advorate, (B. Neelakanta, with him) for the appellant. M. C. Setalvad, Attorney General for India, (Porus A. Mehta, with him) for the respondent. 1953 . December 16. The Judgment of the Court was delivered by PATANJALI SASTRI C. J. These two connected appeals arise out of applications made to the High Court of Judicature at Bangalore under article 226 of the Constitution challenging the jurisdiction of the Income tax Officer, Special Survey Circle, Bangalore, to assess the appellant to income tax and super tax on his income accruing prior to April 1, 1950, in the State of Mysore and praying for the issue of appropriate writs in that behalf. The applications were dismissed by the court and leave to appeal having been refused, the appellant has brought these appeals by special leave of this court. It is a matter of admission that the officer making the assessments was an officer Appointed under the Indian Income tax Act,, 1922, and that in making such assessments he was applying the income tax law in force in the State of Mysore down to the end of the year of account 1948 49. The officer was exercising jurisdiction in the State by virtue of the proviso to section 13 of the Indian Finance Act, 1950, which reads as follows: Repeals and Savings. (1) If immediately before the 1st day of April, 1950, there is in force in any Part B State other than Jammu and Kashmir or in Manipur, Tripura or Vindhya Pradesh or in the merged territory of Cooch Behar 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, for the year ending on the 31st day of March, 1951, or for any subsequent year or, as the case may be, the levy, assessment and 539 collection of the tax on profits of business for any chargeable accounting period ending on or before the 31st day of March, 1949: Provided that any reference in any such law to an officer, authority, tribunal or court shall be construed as a reference to the corresponding officer, authority, tribunal or court appointed or constituted under the said Act, and if any question arises as to who such corresponding officer, authority, tribunal or court is, the decision of the Central Government thereon shall be final. It is contended that the proviso is ultra vires and void as the Union Parliament had no power to make a law authorising any officer or authority or Tribunal or Court appointed or constituted under the Indian Inconm tax Act, 1922, to levy, assess and collect incometax and super tax payable under the Mysore law prior to the commencement of the Constitution of India. The contention is based on two grounds: namely, firstly, on general constitutional principles the Union Parliament had no power to make a law, having retrospective operation with reference to the pre Constitution period; and secondly, the Union Parliament is prohibited by article 277 of the Constitution by necessary implication from making a law grafting on the Mysore income tax law the machinery for assessment and collection provided under the Indian Income tax Act, 1922, for purposes of assessment thereunder. So far as the first ground is concerned, the case is governed by the judgment just delivered in the Rajasthan case [Union of India vs Madan Gopal Kabra (1) ]. It remains only to deal with the second ground based on article 277. That article reads thus : "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 (1) Infra p. 541. 71 540 those 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. " It was urged that, inasmuch as the article authorises, among others, the income tax and super tax, which was being lawfully levied by the Government of Mysore prior to the commencement of the Constitution to be levied and to be applied to the same purposes even after the commencement of the Constitution until provision to the contrary is made by Parliament by law, and no such law was made by Parliament till April 1, 1950, when the Indian Finance Act, 1950, was enacted, it followed by necessary implication, the Mysore law of income tax must be applied for the levy, assessment and collection of such taxes and, as the legislative power conferred on Parliament by article 245 is subject to the provisions of the Constitution including article 277, Parliament had no power to legislate, grafting officers and authorities. appointed under the Indian Income tax Act, on the Mysore State, for the levy, assessment and collection of the tax under the State law. We see no force in this argu ment. While article 277 undoubtedly authorises the continued levy of taxes lawfully levied by the Government of the State before the commencement of the Constitution and their application to the same purposes as before, even after the Constitution came into force, there is nothing in the article to warrant any implication that such taxes should continue to be levied, assessed and collected by the same State authorities as before the Constitution. As the High Court rightly pointed out, it would obviously have been inconvenient and unnecessary to have officers appointed under the Mysore Income tax Act continuing to function only in respect of the earlier assessment years side by side with officers appointed under the Indian Income tax Act also functioning in the State for assessments subsequent to April 1, 1950. Both as a measure. of economy and with a view to smooth and efficient management, it 541 was obviously necessary and desirable that the changeover from the Mysore income tax law to the Indian Income tax Act should be in the way provided by section 13 of the Indian Finance Act, 1950. We find nothing in article 277 of the Constitution to preclude Parliament making a law providing for the levy and collection of income tax and super tax under the Mysore Act through authorities appointed under the Indian Income tax Act. Accordingly, we hold that the Income tax Officer, Special Survey Circle, Bangalore, had jurisdiction to assess the appellant to income tax and super tax in respect of the income of the period prior to the commencement of the Constitution. The appeals fail and are dismissed with costs. Appeals dismissed.

IN-Abs

The assessee challenged the jurisdiction of the Income tax Officer, Special Survey Circle, Bangalore, to assess income tax and super tax on his income accruing prior to April 1, 1950, in the State of Mysore, on the ground that the proviso to section 13 of the Indian Finance Act, 1950, by virtue of which he was exercising his power was ultra vires and void as the Parliament had no pow or to make a law authorising any officer appointed under the Indian Income tax Act to levy tax under the Mysore law prior to the Constitution. It was contended (i) that on general constitutional principles the Union Parliament had no power to make a law having retrospective effect with reference to pre Constitution period, (ii) that the Parliament was also prohibited by article 277 from making a law authorising such officers as in the present case to mot in the State of Mysore: Held, (repelling the contentions) (i) that the Parliament had such power vide the judgment delivered in Case No. 296 of 1951, (ii) that while article 277 authorises the continued levy of taxes lawfully levied by the Government of the State before the commencement of the Constitution and their application to the same purposes as before, even after the Constitution came into force, there is nothing in the article to warrant any implication that such taxes should continue to be levied, assessed and collected by the same State authorities as before the Constitution and there is nothing in article 277 to preclude Parliament making a law providing for the levy and collection of income tax and super tax under the Mysore Act 'through authorities appointed under the Indian Income tax Act.

Appeal No. 356 of 1965. Appeal by special leave from the judgment and decree dated October 27, 1964, of the Madhya Pradesh High Court in Second Appeal No. 240 of 1964. B. Sen and M. section Gupta, for the appellants. section T. Desai and A. G. Ratnaparkhi, for the respondents. The Judgment of the Court was delivered by Sarkar, J. The first respondent Tikam Das had let out a house in the city of Jabalpur to the second respondent Surya Kant Naidoo. Sometime in 1961 Tikam Das, herein referred to as the landlord, served a notice on Surya Kant, herein referred to as the tenant, terminating the tenancy and later in the same year filed a suit in a civil court against the latter for ejectment. On June 23, 1962, by consent of parties, a decree for ejectment was passed in that suit in favour of the landlord against the tenant. The appellants who were occupying the premises as sub tenants under the tenant had not been made parties to the suit. On June 25 and 26, 1962, the appellants served notices on the landlord under section 15(2) of the Madhya Pradesh Accommo dation Control Act, 1961 which had come into force on Decem ber 30, 1961, claiming that as the tenant had sub let the premises to them before the Act had come into force with the consent of the landlord, they had become his direct tenants under section 16(2) of the Act and on June 28, 1962, the appellants filed a suit against both the landlord and the tenant in a civil court claiming a declaration that they had in the circumstances become direct tenants of the premises under the landlord. On June 30, 1962, the landlord sent a reply to the notices sent by the appellants in which he denied that the sub letting by the tenant had been with his consent or was lawful. It does not appear that the landlord had put his decree in execution for evicting the appellants. One of the points canvassed in the High Court was whether in view of section 45(1) of the Act a civil court was competent to entertain the appellants ' suit and it held that it was not and in that view of the matter dismissed the suit. The question is whet her the High Court was right. The Act established certain authorities called Rent Controlling Authorities and gave them power to decide various matters. Sub 130 ,section (1) of section 45 states that "no civil court shall entertain any suit or proceeding in so far as it relates. to any. . matter which the Rent Controlling Authority is empowered by ,or under this Act to decide". If, therefore, the suit related to a matter which a Rent Controlling Authority had jurisdiction to decide, the civil court would have no jurisdiction to entertain it. Now the appellant 's suit was for a declaration that they had .become direct tenants under the landlord by virtue of section 16(2) of the Act. That provision is in these terms section 16. (1) (2) Where, before the commencement of this Act, the interest of a tenant in respect of any accommodation has been determined without determining the interest of any sub tenant to whom the accommodation either in whole or in part had been lawfully sub let, the subtenant shall, with effect from the date of the commencement of this Act be deemed to have become a tenant holding directly under the landlord on the same terms and conditions on which the tenant would have held from the landlord, if the tenancy had continued. Clearly the appellants would not be entitled to the benefit of this provision unless the sub letting to them was lawful. This is where their difficulty arises. Sub section (2) of section 15 deals with the case of a sub letting before the Act and provides for a notice of the sub letting being given to the landlord by the tenant and the sub tenant. There is no dispute that the sub letting to the appellants was before the Act and they had given the notice. The subletting, therefore, comes within sub section (2) of section 15. Then we come to sub section (3) of section 15 which provides, "Where in any case mentioned in sub section (2), the landlord contests that the accommodation was not lawfully sub let and an application is made to the Rent Controlling Authority in this behalf, either by the landlord or by the sub tenant, within two months of the date of the receipt of the notice of sub letting by the landlord or the issue of the notice by the tenant or the sub tenant, as the case may be, the Rent Controlling Authority shall decide the dispute. " This sub section empowers a Rent Controlling Authority to decide whether a sub letting was lawful where the landlord disputes that the subletting was lawful, on an application made to it by either party within the period mentioned. When the Rent Controlling Authorities have the power to decide the lawfulness of the subletting, a civil court is plainly debarred from deciding that question by section 45(1). In the present case the landlord did contend 131 that the sub letting was not lawful. The appellants 's suit was filed within the period mentioned in sub section (3) of section 15. So the Rent Controlling Authorities had the power to decide the question on which the appellants ' suit depended. It follows that the suit related to a matter which the Rent Controlling Authorities had power to decide and no civil court was, therefore, competent to entertain it. Hence we think that the High Court was right in deciding that the suit had been filed in a court incompetent to entertain it, and in dismissing it. It was said that a Rent Controlling Authority would have no power to decide a dispute as to whether a sub letting was lawful where the notice mentioned in section 15(2) had not been served, orafter the period mentioned in sub section (3) of that section had expired if it had not been moved earlier. Another question mooted was that the two months mentioned in sub section (3) only provided a special period of limitation for the application mentioned in it and the provision of the period did not mean that a Rent Controlling Authority had power to decide the matter only if an application had been made within that period, so that if no such application had been made, after the expiry of the period a civil court would have jurisdiction to decide a dispute as to whether a sub letting was lawful. The point is that the real effect of section 15(3) was to deprive the civil court of the jurisdiction to decide that dispute for all time. We do not feel called upon to decide these questions. They do not arise in the present case and it was not said that these questions affect the question of the competence of the civil court to try the present suit. They clearly do not. The suit was filed within the period of two months during which admittedly the Rent Controlling Authorities had jurisdiction to decide the dispute on which it was based. Whatever may be the jurisdiction of a civil court on other facts, in the present case it clearly had no jurisdiction to entertain the appellants ' suit. It was said on behalf of the appellants that section 15(3) had no application to the present case as the landlord had before the appellants ' suit was filed, obtained a decree against the tenant for eviction. We are unable to accept this contention. There is nothing in sub section (3) of section 15 to indicate that it does not apply to a case where a landlord has obtained such a decree. If in spite of the decree the appellants had a right under the Act to a direct tenancy under the landlord, they had a right to move the Rent Controlling Authority within the period mentioned (now expired) for a decision of the question that the sub letting to them 132 was lawful. If the Rent Controlling Authority had the power to decide that question, a civil court would not be competent to decide the dispute in a suit brought within that period. So the decree does not make a civil court, a court competent to entertain the suit. It was also said that as the landlord had not applied under sub section (3) of section 15 and this is not disputed by the landlord that provision is put out of the way and it must now be held that the appellants had become direct tenants under him. The words of the sub section lend no support to this contention. The appellants can claim the direct tenancy only when they establish that the sub letting to them was lawful. As they claim that right, they must establish it and they do not do so by the failure of the landlord to move for a decision that the sub letting was not lawful. This contention of the appellants seems to us to be untenable. In any case it is difficult to appreciate how the failure of the landlord to apply under section 15(3) would affect the question of the competence of a civil court to entertain the appellants ' suit which had been filed before the time limited by the sub section for the landlord to apply to a Rent Controlling Authority had expired. We now come to sub section (2) of section 45 of the Act which is in these terms : S.45. (1) (2)Nothing in sub section (1) shall be construed as preventing a civil court from entertaining any suit or proceeding for the decision of any question of title to any accommodation to which this Act applies or any question as to the person or persons who are entitled to receive the rent of such accommodation. It is said by the appellants that their suit raises a question of title to the tenanted premises within the meaning of that word as used in the subsection. This contention does not seem to us to be well founded. "Accommodation" has been defined in the Act as a building, garden, ground, out house, or garage appurtenant to it, its fixtures and furniture supplied for use there and also land not used for agricultural purpose. The word, therefore, refers to property of certain varieties and in our opinion the words "title to any accommodation" in the sub section mean a right to or interest in property existing otherwise than under the Act and not those created by it. It does not include a subtenant 's right created by the Act to be treated under certain cir 133. cumstances as the direct tenant of the landlord. This seems to, us to be clear from the whole scheme of the Act, which is to create certain rights and to leave them in certain cases to be decided by the Rent Controlling Authority established under it, quickly, inexpensively and summarily and with restricted rights of appeal from their decision. The object of the Act as disclosed by its scheme would be defeated if civil courts were to adjudicate upon the rights which it was intended the Rent Controlling Authorities would decide, with all the consequent delay, expense and series of appeals. Again if the civil courts had the power to decide such rights, section 15 (3) would be meaningless, for the decision of the dispute as to whether sub letting was lawful was necessary only for establishing a sub tenant 's right to a direct tenancy under the landlord under section 16 (2). Sub section (2) of section 45 was clearly intended only to protect a right to resort to a civil court for the decision of a question as to an interest in property existing apart from the Act concerning which an adjudication may have been incidentally made by a Rent Controlling Authority in deciding a question which it had been expressly empowered by the Act to decide. We, therefore, think that sub section (2) of section 45 does not authorise a civil court to decide the dispute as to the lawfulness of the sub letting and does not therefore make it competent to entertain the appellants ' suit. For these reasons, in our view, no civil court had jurisdiction to try the appellants ' suit and it was rightly dismissed as having been filed in an incompetent tribunal. The result is that the appeal fails and is dismissed with costs. Appeal dismissed.

IN-Abs

Respondent No. 1 who was the landlord of the accommodation in dispute obtained a decree of ejectment against respondent No. 2, his tenant. The appellants who were sub tenants under respondent No. 2 gave a notice to the landlord under section 15(2) of the Madhya Pradesh Accommodation Control Order, 1961, and thereafter filed a suit against him claiming a declaration that being lawful sub tenants they had become direct tenants of the landlord under s, 16(2) of the Act. The High Court held that the suit was barred by section 45(1) of the Act according to which no civil court could enter Lain any suit or proceeding in so far as it related to any matter which the Rent Controlling Authority under the Act was empowered to decide. In appeal to the Supreme Court. HELD : (1) For section 16(2) to come into operation the sub tenancy has to be lawful. The question of lawfulness of a sub tenancy was one which under section 15(3), the Rent Controlling Authority was empowered to decide. Under section 45(1) of the Act no civil court could entertain a suit or proceeding which the Rent Controlling Authority was empowered to decide. 'Me High Court was therefore right in holding that the suit had been filed in a court incompetent to try it and in dismissing it. [13OH 131B] (ii)There is nothing in section 15(3) of the Act to indicate that it does not apply to a case where a, landlord has already obtained a decree against a tenant. If in spite of the decree the appellants had a right under the Act to a direct tenancy under the landlord, they had a right to move the Rent Controlling Authority within the prescribed period for a decision of the question that the subletting to them was lawful. If the Rent Controlling Authority had the power to decide that question, a civil court would not be competent to decide the dispute in a suit brought within that period. The suit by the appellants had been filed within that period. [131G 132B] (iii)The fact that the landlord had not applied under section 15(3) did not affect the issue as it was for the appellants as sub tenants to prove that the sub letting to them was lawful. , [132C] (iv)Section 45(2) also did not help the appellants. That provision was clearly intended only to protect a right to resort to a civil court for the decision of a question as to an interest in property existing apart from the Act concerning which an adjudication may have been incidentally made by a Rent Controlling Authority in deciding a question which it had been empowered by the Act to decide. It does not authorise a civil court to decide a dispute as to the lawfulness of sub letting for the purpose of section 16(2). [133 C E] 129

Appeal No. 124 of 1963. Appeal by special leave from the judgment and order dated January 22, 1962, of the Deputy Custodian General of India, New Delhi No. 472/R/UP/1961. section section Shukla, for the appellant. Gopal Singh and R. N. Sachthey, for the respondent. From time to time execution applications were filed by the decree holder against the Zamindar, but nothing was recovered. Rani Manraj Koer died on October 1, 1941 and the appellant was brought on the record as her heir and legal representative. Nawab Mohammad Ali Khan Qazilbash also died and five persons amongst whom was one Nawab Ali Raza Khan were impleaded as legal representatives in the execution proceedings. In January 1950 Nawab Ali Raza Khan (Talukdar of Aliabad Estate) who was substantially the only judgment debtor from whose estate the amounts due were liable to be recovered migrated to Pakistan and he was declared an evacuee under the provisions of the Administration of Evacuee Property Ordinance 27 of 1949 which was later replaced by the 31 of 1950. The Custodian of Evacuee Property took possession of the estate of the evacuee and applied to the Civil Judge, Lucknow for removal of attachment levied on the estate by the Civil Judge, Bahraich in execution of the decrees at the instance of the appellant. The Civil Judge, Lucknow, by order dated July 22, 1950 directed that the "transfer certificates" issued in the two decrees be recalled and the papers be consigned to the record. Against the order passed by the Civil Judge, Lucknow appeals were preferred by the appellant to the High Court at Allahabad. By order dated February 22, 1960 the High Court held that after the Custodian entered upon the management of the properties of the evacuee by virtue of section 17 of the Administration 306 of Evacuee Property Act, so long as the property remained vested in the Custodian under the provisions of that Act it was not liable to be proceeded against in any manner whatsoever in execution of any decree or order of any court or other authority. On September 27, 1960 the appellant applied to the Custodian for an order under section 10(2) (n) of the , directing that his claim for Rs. 1,27,638/2/under the two decrees in suits Nos. 9 of 1932 and 42 of 1932 be satisfied out of the assets belonging to the estate of Nawab Ali Raza Khan. The Assistant Custodian General, Evacuee Property, U.P. Lucknow, exercising the powers of the Custodian rejected the application holding that he had no power to grant relief to the appellant of the nature claimed. In exercise of his revisional jurisdiction, the Custodian General Evacuee Property, New Delhi, confirmed the order, and the appellant has, with special leave, appealed against that order. The question which falls to be determined in this appeal is, whether the Custodian is entitled to entertain the claim of the holder of a money decree against the evacuee for satisfaction of his dues out of the assets vested in the Custodian by section 7 of the . The Custodian held that he had no such power, and the Custodian General agreed with him. Section 10 of the Act deals with the powers and duties of the Custodian generally. By sub section (1) it is provided : "Subject to the provisions of any rules that may be made in this behalf, the Custodian may take such measures as he considers necessary or expedient for the purposes of securing, administering, preserving and managing any evacuee property and generally for the purpose of enabling him satisfactorily to discharge any of the duties imposed on him by or under this Act and may, for any such purpose as aforesaid, do all acts and incur all expenses necessary or incidental thereto." Sub section (2) provides : "Without prejudice to the generality of the provisions contained in sub section (1), the Custodian may, for any of the purposes aforesaid, (n)pay to the evacuee, or to any member of his family or to any other person as in the opinion of the Custodian is entitled thereto, any sums of money out of the funds in his possession." 307 By Subs. (2) of section 10 specific powers and duties of the Custodian are set out. It illustrates the general powers and duties under sub section The argument that the expression "any other person" in cl. (n) must be construed ejusdem generis with "evacuee" or ,.any member of his family" has, in our judgment, no force. The rule of interpretation ejusdem generis applies where a general word follows particular and specific words of the same nature as it self : it has no application where there is no genus or category indicated by the Legislature. The clause is intended to confer upon the Custodian power coupled with a duty to pay to the evacuee or to any member of his family or to any other person who in the opinion of the Custodian is entitled to any sum of money out of the estate of the evacuee. The powers of the Custodian and the duties are undoubtedly to be exercised under sub section (2) for the purposes mentioned in sub section (1) i.e. for securing, administering, preserving and managing any evacuee property and generally for the purpose of enabling him satisfactorily to discharge any of the duties imposed on him. To ascertain the limits upon and extent of those purposes, the position of the Custodian qua the estate of the evacuee vested in him must first be determined. Section 7(1) allies the Custodian to declare after enquiry any property as evacuee property within the meaning of the Act, and the property so declared is deemed to vest in the Custodian from the date specified in section 8. But the vesting of the property in the Custodian is for the purposes of the Act i.e. for administration and management. By the vesting for purposes of the Act the Custodian does not become the owner of the property : he holds it for the evacuee and is bound to administer it in the manner provided by the Act. The appropriation of the property must depend upon statutory provisions enacted by the Parliament. By section 17(1) of the Act as amended by Act 22 of 1951 with retrospective operation it was provided that : "Save as otherwise provided in this Act no evacuee property which has vested or is deemed to have vested in the Custodian under the provisions of this Act shall, so long as it remains so vested, be liable to be proceeded against in any manner whatsoever in execution of any decree or order of any court or other authority, and any attachment or injunction or order for the appointment of a receiver in respect of any such property subsisting on the commencement of the Administration of Evacuee property (Amendment) Act, 1951, shall cease to have effect on such commencement and shall be deemed to be 308 The second part of the sub section deals with avoidance of attachment, or injunction or order for the appointment of a receiver in respect of any evacuee property subsisting on the date of the commencement of the Act of 1951, and the first part interdicts recourse to the evacuee property so long as it remains vested in the Custodian, by process of any court or authority for obtaining satisfaction of any claim against the property. It is clear from the language of the, section that whether the claim be against the evacuee or it is against the Custodian arising out of any acts of administration done by him, the evacuee property cannot be attached in execution of any decree or order of any court or other authority. The Legislature has thereby completely excluded the jurisdiction of courts and authorities to execute decrees or orders passed against the Custodian or the evacuee to proceed against the property vested in the Custodian. The intention clearly is that the administration shall continue for the purposes of the Act without any interference by the process in execution of the decrees or orders of courts or other authorities. But it does not appear to be the intention of the Legislature that the Custodian should be entitled to collect the property of the evacuee and not be under an obligation to satisfy his debts and obligations. The argument of counsel for the Custodian that the Custodian is merely to manage the property and is not invested with power to pay the debts due by the evacuee or to discharge liabilities of the evacuee is not borne out by the terms and the scheme of section 10. The powers conferred and the duties imposed by section 10(1) are for the purposes of securing, administering, preserving and managing the evacuee property, and there is no reason to attribute to the Legislature an attempt at tautology by assuming that "administering" is used in the same sense as the expression "managing". Again sub section (2) makes it abundantly clear that the powers conferred and the duties imposed are not merely incidental to management as a statutory agent of the evacuee. For instance, upon the Custodian is conferred the power to carry on the business of the evacuee with all the discretion which the carrying on of the business of the evacuee may necessitate : he is entitled to complete buildings which are required to be completed, to keep evacuee property in good repair, and to take action as may be necessary for the recovery of any debt due to the evacuee : see cls. (d), (e) and (i) of sub section (2) of section 10. Power is also conferred upon the Custodian by cl. (j) to institute, defend or continue any legal proceeding in any civil or revenue court on behalf of the evacuee : he is given the power to refer disputes between the evacuee and any other person to arbitration or to compromise any claims, debts or liabilities on 309 behalf of the evacuee. Clause (j) implies the power and its concomitant duty to satisfy the claim which may be determined in any legal proceeding instituted, defended or continued in any civil or revenue court, or awarded against the evacuee, or admitted or undertaken by virtue of the compromise. The argument of the Custodian, if accepted, would lead to the somewhat startling result that a decree or an award made in favour of the evacuee in a proceeding commenced or continued by or against the Custodian may be enforced by the Custodian, but the property of the evacuee remains free from all claims, obligations and liabilities of the evacuee, even if decreed by a competent court or undertaken and accepted by him. There is nothing in the statute which compels us to lend countenance to this inequity. The words used in cl. (n) empowering the Custodian to pay to "any other person" any sums of money out of the funds in his possession are not restricted to persons who are members of the family of the evacuee; they include other persons as well who are entitled to receive money from the evacuee. The decree of a civil or revenue court or an order of any other authority is, it must be observed, not decisive of the validity or admissibility of the claim against the evacuee property. It is for the Custodian to be satisfied about the genuineness of the claim. The Custodian must determine whether a person making a claim against the evacuee is entitled to the right claimed, and if he is satisfied, the claim may be discharged out of the funds in his posession . But by the use of the expression "in the opinion of the Custodian" it was not intended to invest the Custodian with arbitrary authority. It is for the Custodian to determine when a claim is made by the evacuee, or a member of his family or any other person for payment of a sum of money, having regard to all the circumstances, whether it is genuine and to satisfy it if in the opinion of the Custodian such a person is entitled to the payment. Where a claim is made by a person who claims to be a creditor of the evacuee and he satisfies the Custodian that he is entitled to any sum of money, then normally the Custodian would be justified in discharging the obligations of the evacuee out of the funds in his possession. But counsel for the Custodian relies upon the terms of 3. 10 (2) (m) as they originally stood before they were amended by Act 91 of 1956 and the deletion of Rule 22 framed under the Act, in support of the contention that the Parliament has deliberately taken away the power to entertain a claim for satisfaction of debts due by the evacuee. Section 10 (2) (m), as it originally stood, provided: 310 .lm15 "incur any expenditure, including the payment of taxes, duties, cesses and rates to Government or to any local authority; or of any amounts due to any employee of the evacuee or of any debt due by the evacuee to any person." Under Rule 22 made in exercise of the powers under section 56 of the Act, provision was made for registration of claims by persons claiming to receive payment from any evacuee or from any property of such evacuee, whether in re payment of any loan advanced or otherwise, by presenting a petition to the Custodian. Tim Custodian was entitled to register a claim under cl. (2) where in was supported by a decree of a competent court or a registered deed executed and registered before 14 8 1947 or by a registered deed executed and registered on or after 14 8 1947, and the transaction in respect of which the deed was so executed and registered had been confirmed by the Custodian, or where an acknowledgment in writing was executed by the evacuee himself before the 1st March 1947 or where such claim was of the nature referred to in the Explanation to sub rule (1) and the transfer of property in respect of which the claim was made was a bona fide transaction. If the claim did not fall under sub rule (2) the Custodian had to direct the claimant to establish his claim in a civil court Sub rules (3) & (4) provided : "(3) The mere registration of a claim shall not entitle the claimant to payment and the Custodian may for reasons to be recorded refuse payment. (4)No debt incurred by the evacuee before the property vested in the Custodian shall be paid without the sanction of the Central Government or Custodian General. " The Explanation to sub rule (4) set out cases in which the sanction of the Central Government was not necessary. The was amend ed by Act 91 of 1956 and the words "or of any amounts duly to any employee of the evacuee or of any debt due by the evacue to any person" in section 10(2) (m) were deleted. The Central Government thereafter issued on February 20, 1957 an order deleting Rule 22. Relying upon this legislative development, it was con tended, that an express power to entertain a claim for satisfaction of debts due by the evacuee was conferred upon the Custodian by section 10(2) (m) and machinery was provided for effectuating the 311 exercise of that power in Rule 22, and the Legislature having deleted the clause which authorised the Custodian to exercise the power to pay debts and the machinery in that behalf, no such power remained vested in the Custodian. We are, however, unable to agree that because of the amend ment made in section 10(2) (m) and the deletion of Rule 22 the power which is vested in the Custodian under section 10(2) (n) must be held restricted. Sub section (1) of section 10 sets out the powers of the Custodian generally, and the diverse clauses in sub section (2) illustrate the specific purposes for which the powers may be exercised, and there is no reason to think that the clauses in sub section (2) are mutually exclusive. If power to pay the debts was derived both under cls. (m) & (n) as it appears it was, deletion of the provision which authorised the Custodian to pay debts due by the evacuee to any person from cl. (m) and of Rule 22 setting up the machi nery for registration of debts did not, in our judgment, affect the power which is conferred by cl. (n) by sub section (2) and also by section 10(1). In our judgment, the power to administer is not merely a power to manage on behalf of the evacuee so as to authorise the Custodian merely to recover and collect the assets of the evacuee, but to discharge his obligations as well. The power to administer for purposes mentioned, having regard to the diverse clauses in sub section (2), includes the power to pay such debts which in the opinion of the Custodian are binding upon the evacuee. Specific enunciation of that power in cl. (n) authorising the Custodian to pay to any other person who in the opinion of the Custodian is entitled to any sum of money supports that conclusion. As already observed, the decree of the civil court is not decisive of the question whether a person making a claim is entitled to the sum of money claimed by him. It is for the Custodian to determine whet her the claimant is entitled to receive the sum of money claimed by him out of the funds in his possession. He has to form his "opinion" on this question : of course, in forming his opinion he must act judicially and not arbitrarily. As the Tribunals below have determined the claim raised before them only on the question of jurisdiction to entertain it and not on the merits, we are unable to pass any effective order in favour of the appellant. The orders passed by the Custodian and the Cus todian General must therefore be set aside and the proceeding remanded to the Custodian to determine the question whether in the opinion of the Custodian the appellant is entitled to any sum of money out of the funds in his possession and whether for the purpose of administration and management of the evacuee property 312 or for enabling him to satisfactorily discharge his duties under the Act the amount claimed should be paid. The appeal is therefore allowed. The appellant would be entitled to his costs in this appeal from the Custodian. Appeal allowed.

IN-Abs

The appellant was the holder of a money decree against an evacuee whose property had vested in the Custodian. Under section 17 of the , the property was not liable to be proceeded against in execution so long as it remained vested in the Custodian, and the appellant could not take steps to execute the decree. He therefore applied to the Custodian under section 10(2)(n) of the Act, for satisfaction of his claim out of the assets of the evacuee. The application was rejected on the ground that the Custodian had no power to grant the relief and the order was confirmed by the Custodian General, in revision. In his appeal to this Court the appellant contended that the Custodian should have entertained his claim. HELD : The orders passed by the Custodian and the Custodian General must be set aside and the proceeding remanded to the Custodian to determine the questions, whether in the opinion of the Custodian, the appellant was entitled to any sum of money out of the funds in the Custodian 's ion and whether, for the purpose of administration and management of the evacuee property or for enabling him satisfactorily to dis charge his duties under the Act the Custodian should pay the amount claimed. [311 H; 312 A] Section 10(1) of the Act, sets out the powers of the Custodian generally, and the diverse clauses of section 10(2) illustrate the specific purposes for which the powers may be exercised, These clauses are not mutually exclusive. Under cl. (in), before its amendment by Act 91 of 1956, express power to entertain a claim for satisfaction of debts due by the evacuee was conferred upon the Custodian. Clause (n) confers upon the Custodian power, coupled with a duty, to pay to the evacuee or to any member of his family or to any other person, who in the opinion of the Custodian is entitled, any sum of money out of the estate of the evacuee. 'Me words "any other person" are not restricted to persons who are members of the evacuee 's family, but include other persons as well who are entitled to receive money from the evacuee. Thus, the power to pay the evacuee 's debts was derived both under cls. (in) and (n) of section 10(2) Therefore, the deletion from cl. (in) of the Custodian 's power to pay the debts, by the Amending Act of 1956, and the consequential deletion of r. 22 of the rules framed under the Act, by which a machinery was provided for exercising that power, did not affect the power which is conferred by section 10(2)(n) and by section 10(1). The power to administer, under section 10(1), is not merely a power to manage on behalf of the evacuee so as to authorise the Custodian only to recover and collect the assets of the evacuee; it includes power to discharge his obligations as well, to pay such debts which, in the opinion of the Custodian, are binding upon the evacuee. [307 C; 309 C D; 311 C E] 305 A decree of the civil court is not decisive of the question whether a Person making a claim is entitled to the money claimed by him; it is for the Custodian to determine whether he is so entitled. The Custodian has to form his "opinion" on this question, and in forming his opinion, he must act judicially and not arbitrably. [311 F G]

Appeal No. 180 of 1963. Appeal by special leave from the judgment and decree dated February 19, 1958 of the Patna High Court in Appeal from Appellate Decree No. 919 of 1954. Sarjoo Prasad and B. P. tha, for the appellants, 159 A. V. Viswanatha Sastri, B. K. P. Sinha and A. G. Ratna parkhi, for the respondent. The Judgment of the Court was delivered by Bachawat, J. The plaintiffs appellants instituted Title Suit No. 91 of 1950, out of which this appeal arises, for redemption of two usufructuary mortgages created by plaintiff No. 1 and ancestors of plaintiffs Nos. 2 to 6 dated July 5, 1927 and April 15, 1928 in favour of the defendant for Rs. 1,000 and Rs. 1,300 respectively. The mortgage dated July 5, 1927 was in respect of 7.20 acres of occupancy raiyati lands, consisting of four plots Nos. 149, 155, 955 and 957, in village Hichapur under the Tikari Raj. The mortgaged lands were part of a larger holding of 23.69 acres under khata No. 59, and the annual rent of the entire holding was Rs. 153 3 0. The mortgage deed provided that the mortgagee would pay Rs. 33 14 9 out of the total rent payable to the landlord and the mortgagors would pay the balance rent. There was default in payment of rent for several years. The landlord obtained a, decree for arrears of rent, and at the rent sale held on June 18, 1934, the mortgagee defendant purchased the Hichapur lands in the farzi name of Dwarkalal. The mortgage dated April 15, 1928 was in respect of 7.20 acres of lands in village Utrain tinder kahas mahal. The mortgaged lands were part of a larger holding of 1988 1/2 acres in khata No. 269. The, rent of the entire holding was Rs. 155 4 0. The mortgage deed provided that the mortgagee would pay Rs. 68 10 9 out of the total rent and the balance rent would be payable by the mortgagors. There was default in payment of rent for several years. Certificate proceedings were started for the recovery of the arrears of rent, and at a certificate sale held on January 22, 1934, the Utrain lands were purchased by the defendant in the farzi name of Deonarain. It appears that out of the sum of Rs. 33 14 9 pay able by the mortgagee annually on account of the rent of the Hichapur lands, the mortgagee consistently paid Rs. 33 annually, but did not pay the balance sum of 14 annas 9 pies, whereas the mortgagors consistently defaulted in payment of the sum of Rs. 119 4 3 payable by them annually on account of the total rent. It also appears that out of the sum of Rs. 68 10 9 payable by the mortgagee annually on account of the rent of the Utrain lands, the mortgagee consistently paid Rs. 68 annually but did not pay the balance sum of 10 annas 9 pies, whereas the mortgagors consistently defaulted 160 in payment of the sum of Rs. 86 9 3 payable by them annually on account of the total rent. The trial Court decreed the suit. The first appellate Court allowed the appeal in part, passed a decree for redemption of 3.93 acres of plot No. 955 only on the ground that this portion of the land was not sold at the rent sale and gave leave to the defendant to withdraw Rs. 1,000 deposited by the plaintiff in respect of the mortgage dated July 5, 1927. The High Court dismissed a second appeal preferred by the plaintiffs. The plaintiffs now appeal to this Court by special leave. The plaintiffs contend that the purchases at the rent sale and the certificate sale were made by the mortgagee by availing himself of his position as such and having regard to section 90 of the and Illustration (c) to it, the purchases enured for the benefit of the plaintiffs and they are entitled to redeem the entire mortgaged lands. The defendant mortgagee disputes this contention, and claims that the aforesaid sales extinguished the equity of redemption. Section 90 of the and Illustration (c) to it are as follows : "Where a tenant for life, co owner mortgagee or other qualified owner of any property, by availing himself of his position as such, gains an advantage in derogation of the rights of the other persons interested in the property, or where any such owner, as representing all persons interested in such property, gains any advantage, he must hold, for the benefit of all persons so interested, the advantage so gained, but subject to repayment by such persons of their due share of the expenses properly incurred, and to an indemnity by the same persons against liabilities properly contracted, in gaining such advantage. (c) A mortgages land to B, who enters into possession. B allows the Government revenue to fall into arrears with a view to the land being put up for sale and his becoming himself the purchaser of it. The land is accordingly sold to B. Subject to the repayment of the amount due on the mortgage and of his expenses properly incurred as mortgagee, B holds the land for the benefit of A." 161 In Basmat Devi vs Chamru Sao(1), a part of one entire hold ing was mortgaged, both the mortgagor and the mortgagee were liable to pay the rent of the holding, both of them defaulted in payment of the rent, the default of both contributed to the passing of a rent decree and the sale of the holding in execution of, the decree, the default of the mortgagee being substantial, and the mortgagee purchased the holding at the execution sale. On these facts, this Court held that the mortgagee clearly gained an advantage by availing himself of his position as such, and having regard to section 90 of the his purchase must inure for the benefit of the mortgagor, and the mortgagor was entitled to redeem the mortcaged property. In that case, Das Gupta, J. observed "Whether this would be true even where the portion which the mortgagee is liable to pay is so very small that the property is not ordinarily likely to be brought to sale for that amount, it is unnecessary for us to decide in the present case. " The question left open by Das Gupta, J. arises for decision in the present case. This is a case where the mortgaged property is part of a larger holding, the mortgagee agreed to pay a portion of the rent of the entire holding, and the mortgagors agreed to pay the balance rent payable in respect of it. The mortgagors defaulted in payment of the rent payable by them. The mortgagee paid almost the entire amount of the rent payable by him but defaulted in payment of a trifling sum. The portion of the rent which the mortgagee failed to pay is so small that it is impossible to say that the property was brought to sale for it or that his default was in any real sense a contributory cause of the sale of the property. it is not shown that non payment of the trifling sums by the mortgagee was made mala fide or with the ulterior object of the property being put up for sale and his becoming the purchaser of it. The mortgagee did not gain any advantage by availing himself of his position as such or of a situation brought about by his own default. The real effective cause of the sale was the default of the mortgagors alone. In the circumstances, section 90 of the and Illustration (c) to it are not attracted, and the purchase by the mortgagee does not inure for the benefit of the mortgagors. The rent sale and the certificate sale extinguished the right of redemption. Consequently, the suit by the mortgagors for redemption of the mortgaged property is liable to be dismissed. The first appellate Court, however, gave a decree for redemption of 3.93 acres of plot No. 955 in Hichapur village and gave (1) ; 162 liberty to the mortgagee to withdraw the entire sum of Rs. 1,000 deposited by the plaintiffs in respect of the mortgage of the Hichapur lands. Before the High Court the plaintiffs contended, relying upon the last paragraph of section 60 of the , that they were entitled to redeem the aforesaid 3.93 acres of Utrain lands on payment of the proportionate amount of the mortgage money payable under the mortgage dated July 5, 1927. The High Court negatived this contention. The Courts below observed that 3.93 acres of plot No. 955 of the Hichapur lands were not sold at all at the sale held on June 18, 1934, but quite inconsistently, the Courts below also observed that the aforesaid sale held on June 18, 1934 was a rent sale and was made in execution of a rent decree. Learned counsel on behalf of both parties conceded before us that there could be no rent sale in respect of a portion of the holding. It may be that there was a rent sale, and by mistake, the sale certificate omitted to mention the 3.93 acres of plot No. 955. The relevant documents are not printed in the paper book. Having regard to the value of the subject matter in dispute, it is not worthwhile to call for a fresh finding on this point. We, therefore, indicated to counsel on both sides in course of the argument that we shall decide this appeal on the footing that the sale held on June 18, 1934 was a rent sale and the entire Utrain lands were purchased by the defendant at the rent sale. On this footing the last paragraph of section 60 of the can have no application. The plaintiffs appellants do not now own the equity of redemption in any portion of the Hichapur lands. The Courts below, therefore, should have dismissed the entire suit for redemption, and the question of redemption of a portion of the property on payment of a proportionate amount of the mortgage money does not properly arise in this case. However, the first appellate Court gave a decree for redemption of the aforesaid 3.93 acres of land. The High Court affirmed this decree, and there is no cross appeal by the defendant respondent. In the circumstances, the decree passed by the Court below must be maintained. In the result, the appeal is dismissed with costs. Appeal dismissed.

IN-Abs

The ancestors of the appellants created usufructuary mortgages in favour of the respondent. The mortgaged property was a part of a larger holding. The mortgagee respondent had agreed to pay a portion of the rent of the entire holding and the mortgagors agreed to pay The balance rent payable in respect of it. The mortgagors defaulted for several years in payment of the rent. The mortgagee paid almost the entire amount of the rent but defaulted in the payment of a trifling sum. The landlord obtained a decree for arrears of rent, and at rent sales the mortgagee pur chased the lands. The appellant s mortgagors filed a suit for redemption of the mortgage, which was decreed by the trial court. The mortgagee appealed, which was allowed in part passing a decree for redemption of a small plot only on the ground that this portion of land was not sold at the rent sale. The mortgagors ' appeal to the High Court was dismissed. In appeal by special leave, the mortgagors contended that the purchases at the rent sale and the certificate sale were made by the mortgagee by availing himself of his position as such as having regard to section 90 of the and Illustration (c) to it. the purchases enured for the benefit of the mortgaors and they were entitled to redeem the entire mortgaged lands. HELD : The portion of the rent which the mortgagee failed to pay was so small that it was impossible to say that the property was brought to sale for it or that his default was in any real sense a contributory cause of the site of the property. It was not shown that non payment of the titling sum by the mortgagee was made mala fide or with the ulterior object of the property being put up for sale and his becoming the purchaser of it. The mortgagee did not gain any advantage by availing himself of his position as such or of a situation brought about by his default. The real effective cause of the sale was the default of the mortgagor& alone. L161 E G] In the circumstances, section 90 of the and Illustration (c) to it were not attracted, and the purchase by the mortgagee did not enure for the benefit of the mortgagors. The rent sale and the certificate sale extinguished the right of redemption. [161 G H] Basmat Devi vs Chamru Sao, ; , referred to.

iminal Appeal No. 26 of 1965. Appeal by special leave from the judgment and order dated August 10, 1964 of the Patna High Court in Criminal Appeal No. 66 of 1962. R.K. Garg, section C. Agarwala and D. P. Singh, for the appel lants. D. Goburdhun, for the respondent. The Judgment of the Court was delivered by Hidayatullah, J. B in order pronounced on May 7, 1965, we ordered the dismissal of this appeal but reserved our reasons which we now proceed to give. The five appellants were tried on a complaint by the respon dent Janardan Prasad before the Honorary Magistrate. First Class, Jehanabad for offences under sections 420, 468, 406, 465/471, Indian Penal Code. They were acquitted on August 31, 1962. The complainant obtained special leave of the High Court at Patna under section 417(3) of the Code of Criminal Procedure and filed an appeal against their acquittal. The High Court set aside the acquittal and remanded the case to the District Magistrate of Gaya with a direction that the case be inquired into under Chapter XVIII of the Code from the stage of taking evidence under section 208, with a view to their committal to the Court of Session. The appellants now appeal by special leave against the judgment and order of the High Court. The facts of the prosecution case may now be stated briefly. Janardban Prasad and his brother Jangal Prasad were separate, having, prior to the present occurrence, partitioned their lands by metes and bounds. Plots Nos. 1810 and 1811 in village Kalpa Kalan fell to the share of Jangal and plot No. 1699 in the same village fell to the share of Janardan. Jangal Prasad 's plots lie close to the dalan of Matukdhari and his brothers Rameshwar Singh and Dhanukdhari Singh (the first three appellants) and they coveted them. Janardhan alleged that they forged a sale deed in respect of half the area of those two plots and presented the documents for registration. Janardhan was aggrieved but on the intercession of Deoki Lal and Chhedi Lal (appellants 4 and 5) 257 the dispute was compromised and it was agreed that Janardhan would execute a sale deed for plot No. 1699 and half of another plot No. 1491 while Matukdhari and his brother Dhanukdhari Singh agreed to sell in return O.10 acre in one of their plots (No. 1797) to him. The complainant executed two sale deeds in respect of the two said plots and Dhanukdhari Singh executed a sale deed in respect of plot No. 1797 as it was in his name. The latter sale deed was taken in favour of Janardhan 's son. All documents were scribed by Deokilal with the help of Chhedi Lal and were presented for registration. The receipts obtained from the Registration Office were left with Deokilal till the result of the first registration case (which was fixed for February 8, 1960) was known. When Janardhan asked for the receipts he was put off. He found later that the two documents had already been withdrawn by forging his signature. Matukdhari had withdrawn the deed executed by Janardhan and Dhanukdhari the sale dead executed by himself. The complainant was assured by Deokilal and Chhedilal that the deed executed in favour of his son would be returned by Rameshwar Singh with whom, it was said to be lying, but Rameshwar Singh refused to do so. The complaint was, therefore, filed. The Sub Divisional Officer, Jehanabad took cognizance under sections 468, 406 and 420, Indian Penal Code and sent the case to the Hony. Magistrate for disposal. The Hony. Magistrate drew up charges against all the accused under section 420, Indian Penal Code. In addition, Chhedilal and Deokilal were charged under section 468, Indian Penal Code and section 406, Indian Penal Code respectively. Matukdhari was charged under sections 465/471, Indian Penal Code. These charges could be tried by the Honorary Magistrate. No charge under section 467, Indian Penal Code was framed against any of the appellants. If it had been framed the case had to be committed to the Court of Session. On March 29, 1962 the complainant, by a written application, asked that action under Chapter XVIII of the Code be taken but the Magistrate declined to commit the accused. Another application dated June 28, 1962, for the same purpose was also rejected. The learned Magistrate held that the evidence of entrustment of the receipts from the office of the Registrar was not satisfactory and Deokilal could not be convicted under section 406, Indian Penal Code. He further held, mainly on the ground that no handwriting expert was examined, that it was not possible to say that there was forgery of the signatures or that Matukdhari had used the receipts knowing them to, be forged. On these findings the appellants were acquitted. 258 In his appeal before the High Court the complainant con tended that the trial before the Magistrate was without jurisdiction as the Magistrate should have acted under Chapter XVIII with a view to committing the accused to the Court of Session for trial as the facts disclosed an offence under section 467, Indian Penal Code, which is triable exclusively by the Court of Session. He contended that the offence was made out on his evidence and as registration receipts were valuable securities under section 30 of the Indian Penal Code a charge under section 467, Indian Penal Code should have been framed. This argument found favour with the High Court and it was held that although section 467, Indian Penal Code was not mentioned in the complaint, a charge under that section ought to have been framed. The High Court pointed out that it was the duty of the Magistrate to apply the correct law and if the facts disclosed an offence exclusively triable by the Court of Session he ought to have framed that charge and not assumed jurisdiction over the case by omitting it. In the opinion of the High Court a prima facie case existed for framing a charge under section 467, Indian Penal Code, which meant that the case ought to have been committed to the Court of Session. The acquittal was, accordingly, set aside and retrial ordered. In this appeal the judgment is assailed as erroneous and against the principles laid down by this Court for dealing with appeals against acquittals. Mr. Garg relies strongly upon two cases of this Court. They are Abinash Chandra Bose vs Bimal Krishna Sen and Anr.(1) and Ukha Kolhe vs State of Maharashtra(1). He contends that the trial before the Magistrate, in so far as it went, was with jurisdiction and it could not be set aside merely because the High Court thought that a charge under section 467, Indian Penal Code might have been framed. He contends that such a proceeding is not contemplated under section 423(1)(a). Criminal Procedure Code as explained by this Court in the two cases cited above. He further refers to Barhamdeo Rai and others vs King Emperor(3), Balgobind Thakur and others vs King Emperor (4 ) and K. E. V. Razya Bhagawanta(5) as instances where, the trial being with jurisdiction, no retrial was ordered even though it was submitted to the High Court that some other offences triable exclusively by the Court of Session with which accused could be charged, were also disclosed. These cases need not detain us. They do not deny the power of the High Court to order a retrial. The High Courts in those cases (1) ; (2) ; (3) A.I.R. 1926 Pat. (4) A.I.R. 1926 Pat. 393. (5) 259 did not order a retrial because the accused were convicted of lesser offences and the sentences imposed were considered adequate in all the circumstances of those cases. The two cases of this Court were considered by us in Rajeshwair Prasad Misra vs State of West Bengal(1). We have pointed out there that a retrial may be ordered for a variety of reasons which it is hardly necessary or desirable to state in a set formula and the observations of this Court are illustrative but not exhaustive. The Code gives a wide discretion and deliberately does not specify the circumstances for the exercise of the discretion because the facts of cases that come before the courts are extremely dissimilar. We pointed out that it would not be right to read the observations of this Court (intended to illustrate the meaning of the Code) as indicating in advance the rigid limits of a discretion which the Code obviously intended should be developed in answer to problems as they arise. We gave some illustrations of our own which fell outside those observations but which might furnish grounds, in suitable cases, for an order of retrial. This case also furnishes an example which may be added to that list. The High Court pointed out that there was evidence that the endorsements on the receipts were not made by Janardhan. Janardhan denied on oath that he had written them and stated that they were written by one of the respondents, with whose handwriting he claimed to be familiar. There was prima facie evidence to show that the two deeds which were presented for registration were taken out on the strength of forged receipts. No suggestion was made to Janardhan in cross examination that he had endorsed the receipts in favour of Matukdhari or Dhanukdhari. If he had not written the endorsements, some one else must have done so. No doubt handwriting experts could have been examined. The Magistrate could have taken action under section 73 of the Indian Evidence Act but this was not done. If the Magistrate had applied his mind to the problem he would have seen easily that a prima facie case of forgery was made out. He should then have considered whether the receipts were valuable security or not. If he had done that he would have seen that the main offence would prima facie be one under section 467, Indian Penal Code read with section 471 and the other offences were subsidiary. It was thus not proper for him to choose for trial only such offences over which he had jurisdiction and to ignore other offences over which he had none. His duty clearly was to frame a charge under section 467, Indian Penal Code (1)[1966] 1 S.C.R. 178. 260 and to commit the appellants to stand their trial before the Court of Session. It was open to the High Court, while hearing an appeal under section 417(3) of the Code to direct the Magistrate to frame a charge for an offence which was prima facie established by the evidence for the prosecution and also to order that the accused be committed to the Court of Session. It is wrong to contend that the High Court had no jurisdiction in the matter because the trial before the Honorary Magistrate (in so far as it went) was with jurisdiction. If it were so there would be no remedy whenever a Magistrate dropped serious charges ousting him of his jurisdiction and tried only those within his jurisdiction. The High Court followed a case of the Sind Chief Court reported in Dr. Sanmukh Singh Teja Singh Yogi vs Emperor(1) where retrial was ordered in very similar circumstances. We were referred to that ruling and on reading it we do not think the High Court was wrong in accepting it as a correct precedent. For, however hesitant the High Court may be to set aside an order of acquittal and to order retrial, it has jurisdiction under the Code to do so, if the justice of the case clearly demands it and a case of omission from the charge of a serious offence prima facie disclosed by evidence, is one of those circumstances in which the power can properly be exercised particularly when the charge for the offence, if framed, would have ousted the court of trial of its own jurisdiction. Mr. Garg submitted finally that acquittals are not set aside in other jurisdictions and cited the example of English Criminal Law. He submitted further that the setting aside of an acquittal with a view to holding a second trial robs the accused "of the reinforcement of the presumption of innocence which is the result of the acquittal". As to the first submission it is sufficient to say that in our criminal jurisdiction a retrial is possible and we need not be guided by other jurisdictions. No doubt the High Court must act with great care and caution and use the power sparingly and only in cases requiring interference. As to the second it is not necessary to consider how the presumption of innocence is reinforced by an acquittal and to what extent. The phrase in any event is hardly apt to describe a case where the accused is acquitted perversely, or without jurisdiction. All that can be said is that these appellants were presumed to be innocent at their first trial (1) 261 and will not be thought less so at their second trial till their guilt is established legally and beyond all reasonable doubt. In our judgment the High Court acted within its jurisdiction when it set aside the acquittal of the appellants and made an order for their retrial in the terms it did.

IN-Abs

The appellants were tried on a complaint by the respondent before an Honorary Magistrate for offences under sections 420, 468, 406 and 465/471 Indian Penal Code and acquitted. The Magistrate rejected the complainant 's request to frame a charge under section 467 Indian Penal Code, and commmit the accused to the Court of Sessions. The complainant appealed to the High Court against the acquittal. The High Court held that the evidence prima facie disclosed an offence under section 467 and even though the complaint did not mention that section it was the duty of the Magistrate to commit the case to sessions. It accordingly set aside the acquittal, and ordered a retrial. The appellants came to this Court by special leave. It was contended on behalf of the appellants that the trial before the Magistrate, in so far as it went, was with jurisdiction and it could not be set aside merely because the High Court thought that a charge under section 467 might be framed, and that such a proceeding is not contemplated. by section 423(1) of the Code of Criminal Procedure. HELD: (i) If the Magistrate had applied his mind to the relevant evidence he would have seen that the main offence was under section 467 read with section 471and the other offences were subsidiary. It was thus not proper for him tochoose for trial only such offences over which he had jurisdiction andto ignore the other offence over which he had none. His duty clearly wasto frame a charge under section 467 and to commit the appellants to stand their trial before the Court of Sessions. [259 G] (ii)It is wrong to contend that the High Court had no jurisdiction in the matter because the trial before the Honorary Magistrate (in so far as it went) was with jurisdiction. If it were so there would be no remedy whenever a Magistrate dropped serious charges ousting him of his jurisdiction and tried only those within his jurisdiction. [260 B C] Dr. Sanmukh Singh Teja Singh Yogi vs Emperor, , approved. However hesitant the High Court may be to set aside an order of acquittal and to order retrial, it has jurisdiction under the code to do so if the justice of the case clearly demands it and a case of omission from the charge of a serious offence prima facie disclosed by the evidence, is one of those circumstances in which the power can properly be exercised particularly when the charge for the offence it framed would have ousted the jurisdiction of the trial court. [260 D E] Abinash Chandra Bose vs Bimal Krishna Sen, A.I.R. 1963 S.C. 316, Ukha Kolhe vs State of Maharashtra, A.I.R. 1963 S.C. 1531, Barhamdeo 256 Rai and others vs King Emperor, A.I.R. 1926 Pat. 36 Balgobind Thakur and others vs King Emperor, A.I.R. 1926 Pat 393 and K.E.V. Razya Bhagwanta, , referred to.

Appeal No. 167 of 1964. Appeal by special leave from the judgment and decree dated April 11, 1962 of the Orissa High Court in First Appeal No. 61 of 1959. A. V. Viswanatha Sastri and T. V. R. Tatachari, for the, appellant. A. N. Sinha and B. P. Jha, for respondents Nos. 1 and 2. The Judgment of the Court was delivered by Raghubar Dayal, J. This appeal, by special leave, is against the decree of the High Court of Orissa reversing the decree of 346 the Court of the Subordinate Judge, Berhampur and dismissing the plaintiff 's suit for recovery of Rs. 8,216 due on a promissory note executed by Kontaru Naiko, defendant No. 1 for Rs. 6,000. The plaintiff money lender obtained a registration certificate under section 5(4) and r. 5, of the Orissa Money Lenders Act, 1939 (Act III of 1939), hereinafter called the Act, and the rules thereunder, on March 31, 1952. He obtained another registration certificate in 1955 which said that the maximum capital for which the certificate is granted is Rs. 8,000. The plaintiff advanced the loan to defendant No. 1 on May 19, 1954 and sued for the recovery of the amount due on this loan. It was contended for the defendant that the suit was not maintainable as the maximum capital for which the plaintiff had required the registration certificate in 1952 was Rs. 2,000 and under the provisions of the Act. and the rules framed thereunder, he could not have advanced loan in excess of that amount and that his doing so made the registration of the appellant as a money lender void and therefore the suit for recovery of Rs. 2,000 even was not maintainable. These contentions were not accepted by the trial Court which decreed the suit against the defendants with 'the direction that defendants Nos. 2 and 3 sons of defendant No. 1, were not personally liable and were liable to the extent of the assets of their father in their hands. The High Court, however, took a different view, accepted the aforesaid contentions of the defendants and dismissed the suit. The sole contention for the appellant is that the High Court was in error in holding that the registration of the appellant as a registered money lender in March 1952 became void when he advanced a loan in suit in excess of Rs. 2,000 in 1954 and that the High Court was also in error in holding that he could not have advanced the loan in excess of the maximum capital for which the registration certificate was wanted. The relevant provisions of the Act may now be set out. 'Capital ', is defined in section 2(c), to mean that which a moneylender invests in the business of money lending whether in money or in kind. 'Registered money lender ', according to section 2(m), means a person to whom a registration certificate has been granted under section section Section 5 provides for the registration of moneylenders and a registration fee. Sub section (1) thereof requires the applicant for registration to mention in the application particulars mentioned in ' that sub section and 'such other particulars as may be Sub section (3) empowers the Provincial Government 3 47 to prescribe by rules for different classes of money lenders and for different areas a registration fee not exceeding Rs. 25 to be paid by an applicant for registration. Sub section (4) empowers the Sub Registrar to grant a registration in the prescribed form to the applicant except where the certificate previously granted to him has beencancelled under section 18 and the order of cancellation is in force. Section 6 enacts that the registration certificate granted willbe in force for 5 years from the date on which it is granted. Section 7 provides for the registered money lender to maintain accounts and to give receipts. Section 8 which provides for suits for recovery of loans by registered money lenders reads : "Suit for recovery of loan maintainable by registered money lenders only: A money lender shall not be entitled to institute a suit for the recovery of a loan advanced by him after the date on which this section comes into force unless he was registered under this Act at the time when such loan was advanced : Provided that a money lender shall be entitled to institute a suit to recover a loan advanced by him at any time in the course of two years after the date on which the section comes into force, if he is granted a certificate of registration under section 5 at any time before the expiration of the said years. " Section 9 provides for the maximum rates at which interest may be decreed. Various other sections deal with other matters which the legislature thought fit to provide for in order to achieve the object of the Act which, according to the preamble, is to regulate money lending transactions and to grant relief to debtors in the State of Orissa. Rule 1, clause (c), of the Orissa Money Lenders Rules, 1939, defines 'maximum capital ' to mean the highest total amount of the capital sums which may remain invested in a money lending business on any day during the period of the registration certificate. Rule 3, cl. (iii), requires every application for the registration of a money lender to mention the maximum capital for which the certificate is wanted. Rule, 4 lays down the registration fees payable and fixes the fees according to the maximum capital in respect of which an application for such certificate is made. Rule 5 provides that registration certificate would be in Form in and that during the currency of a registration certificate application may be made for a registration certificate of a higher 348 denomination and the provisions of rr. 3 to 5 shall, as far as may be, apply to it, credit being given to the registration fee already paid by the applicant. The question for decision in this case is practically the same as came up for decision before this Court in Sant Saranlal vs Parsuram Sahu(1) judgment. in which has been delivered today. The relevant provisions of the Bihar Money Lenders Act, 1938 and the Bihar Money Lenders (Regulation of Transactions) Act, Act mentioned above. What we have said in that case appropriately covers the contentions of the panics in this case. We do not therefore consider it necessary to repeat the discussion of the various contentions in this case. We hold that in the absence of any specific provision in the Act in this case providing for the fixing of the maximum capital which a money lender can invest in money lending business, it was not open to the State Government to frame a rule in that regard and that the rules framed by it about mentioning, in the application, the maximum capital for which the registration certificate was wanted and the mention in the certificate of the amount of the maximum capital for which the certificate is granted, do not lead to the conclusion that the registration of the money lender will become void if he exceeds the limit of the maximum capital laid down in the registration certificate. We do not consider it necessary now to decide the other point raised with respect to the retrospective operation of the registration certificates of higher denomination obtained during the currency of a registration certificate. We accordingly allow the appeal, set aside the decree of the Court below and restore the decree of the trial Court. We direct the respondents to pay the costs of the appellant in the High Court and this Court. Appeal allowed. (1) [1966] S.C.R.335.

IN-Abs

The appellant filed a suit against the respondents for the recovery of Rs. 8216 due on a promissory note executed by respondent No. 1 for a sum of Rs. 6000. The plea taken in defence was that the suit was not. maintainable because the registration of the appellant under section 5(4) and r. 5 of the Orissa Money Lenders Act 1939 had become void on account of the money lent being in excess of the maximum amount of Rs. 2,000 which the appellant was authorised to invest in the business by his registration certificate. The contention was not accepted by the trial court but the High Court. accepting it, dismissed the suit. In appeal, before this Court, by special leave, it was urged on behalf of the appellant that the main Act did not provide for any restriction on the amount of capital that could be invested and that the rules went beyond the Act in making such a provision. HELD : In the absence of any specific provision in the Act providing for the fixing of the maximum capital which a money lender can invest in money lending business, it was not open to the State Government to frame a rule in that regard and the rules framed by it about mentioning, in the application, the maximum capital for which the registration certificate was wanted and the mention in the certificate of the amount of the maximum capital for which the certificate is granted, do not lead to the conclusion that the registration of the money lender will become void if be exceeds the limit of the maximum capital laid down in the registration certificate. [348 D] Sant Saranlal vs Parsuram Sahu , relied on.

Appeal No. 437 of 1965. 479 Appeal from the judgment and order dated April 15, 1964 of the Madhya Pradesh High Court in Misc. Petition No. 90 of 1964. M. section Gupta, for the appellant. G. section Pathak, Y. section Dharmadhikari and A. G. Ratnaparkhi, for respondent No. 1. The Judgment of the Court was delivered by Hidayatullah, J. This appeal arises from an election petition filed after the last General Election to the Madhya Pradesh Legislative Assembly, in respect of the election from the Kasdol Legislative Assembly constituency held on May 4, 1963. The first respondent was declared elected and the appellant challenged his election alleging several acts of corrupt practices, publication of false statements, filing of false accounts etc. The election petition was supported by an affidavit sworn before K. section Moghe, Officer for Administering Oaths on Affidavits, Jabalpur. Moghe was the Clerk of Court in the District Court, Jabalpur. The first respondent objected that the affidavit was not sworn before the proper authority as required by rule 94 A of the Conduct of Election Rules, 1961, and it was, therefore, prayed that the election petition should be dismissed or the allegations about corrupt practices should be struck out. The Election Tribunal, by an order dated October 31, 1963 accepted the objection but allowed the filing of a proper affidavit and a fresh affidavit was taken on record. No action was taken against that order. It appears that the Election Tribunal had framed two issues for determination. They were: "Issue No. 18 : Whether the affidavit filed by the petitioner in support of his petition is bad in law, as not properly sworn before a competent Officer duly authorised to attest and authenticate an affidavit and does not also comply with the provisions of Section 83 of the Representation of the People Act and the Rules made thereunder. If so, whether the petition is liable to be dismissed on this ground." "Issue No. 20 : Whether the various alleged acts of corrupt practices mentioned in the petition are duly supported by an affidavit as required under Section 81(3) of the Representation of People Act ? If not, what is its effect on this petition?" 480 On February 14, 1964 the first respondent filed an application drawing attention to the latter part of issue No. 20 and asked inter alia for a finding whether the election petition was not liable to be dismissed when the affidavit was not proper The Tribunal by an order passed on February 24, 1964 rejected the last contention and held that as a fresh affidavit was filed the petition could proceed to trial. On March 2, 1964 the first respondent filed a petition under Articles 226 and 227 of the Constitution in the High Court of Madhya Pradesh challenging both the orders and asked that they be quashed. The High Court, by its order now under appeal by certificate, quashed the two orders and the Tribunal was directed to deal further with the petition in the light of the order of the High Court. The High Court in an elaborate order has considered whether the provisions of rule 94 A were mandatory or directory but it did not address itself to the question whether the first affidavit was proper or not. This was, perhaps, due to the fact that the appellant seems to have conceded before the Tribunal that the first affidavit was not proper. This concession was sought to be withdrawn in this appeal by the appellant and on looking into the record we were satisfied that the concession was wrongly made and should be allowed to be withdrawn. We accordingly heard arguments on the question whether the original affidavit did not satisfy the Conduct of Election Rules and the Representation of the People Act. We are satisfied that the first affidavit was proper and the second affidavit was not necessary. Before we give our decision on this point we shall first set down the relevant provisions. Section 83 of the Representation of People Act provided that "83 (1) an election petition (a) Shall contain a concise statement of the material facts on which the petitioner relies; (b) Shall set forth full particulars of any corrupt practice that the petitioner alleges, including as full a statement as possible of the names of the parties alleged to have committed such corrupt practice and the date and place of the commission of such practice; and 481 (c) Shall be signed by the petitioner and verified in the manner laid down in the Code of Civil Procedure, 1908 (5 of 1908) for the verification of pleadings. "Provided that where the petitioner alleges any corrupt practice, the petition shall also be accompanied by an affidavit in the prescribed form in support of the allegation of such corrupt practice and the particulars thereof. (2) Any schedule or annexure to the petition shall also be signed by the petitioner and verified in the same manner as the petition. " Rule 94 A of the Conduct of Election Rules, 1961 next provides: "94 A. The affidavit referred to in the, proviso to Sub section (1) of Section 83 shall be sworn before a Magistrate of the First Class or a Notary or a Commissioner of Oaths and shall be in Form 25. " Form 25 need not be reproduced but the endorsement of the officer before whom the affidavit is sworn may be reproduced "Form 25. Solemnly affirmed/sworn by Shri/Shrimati . . at. thisday. of 196 Before me. .Magistrate. .of. First Class Notary/Commissioner of Oaths". The relevant rules of the High Court and the notifications issued by the Government have been placed in our hands. 'Me High Court has framed Rules relating to the Civil Procedure Code and rule 20 dealing with affidavits reads : "20. All Courts dealing with affidavits should make calls for affidavits at I I a.m. and 2 p.m. every day. If ,the Clerk of Court or other ministerial officer is appointed a Commissioner for administering oath of affidavits, he will discharge that function at such time as may be fixed by the District Judge in this behalf." 482 Rule 34 says : "34. The Officer administering the oath shall make the following endorsement on every affidavit sworn before him and shall date, sign and seal the same. "Sworn before me on the day of . . 19 by son of . . who is personally known to me (or) who has been identified by whose signature is/signatures are hereto appended. SEAL Signature Designation". The affidavit which was sworn before Moghe bore the above endorsement and Moghe described himself as "Officer for Administering Oaths on Affidavits, Jabalpur, Madhya Pradesh". On February 16, 1959 the Government of Madhya Pradesh had issued a notification under District Judges were empowered under section 139(c) of the Code of Civil Procedure to appoint Commissioners to administer oaths on affidavits made under the said Code and the District Judge, Jabalpur in exercise of the powers so conferred appointed, among others, the Clerk of Court attached to his office to be ex Officio Commissioner for the purpose of administration of oaths on affidavits made under the Code of Civil Procedure. It may be pointed out that subsequently in May 1960 the first notification was amended and in place of the words in the first notification "empowers all the District Judges to appoint Commissioners to administer oaths on affidavit made the words "generally empowers the Court of District Judges to appoint officers to administer oaths to deponents in cases of affidavits" where substituted. This change does not affect the present matter because the appointment of Moghe was tinder the first notification and not under the second. The contention of the first respondent is that the affidavit did not comply with the requirements of rule 94 A because Moghe was not a Commissioner of Oaths but was an officer for Administration of Oaths for the purpose of section 139(c) of the Code. We shall refer to that provision presently. The rule does not state before which Commissioner the affi davit must be sworn. It must, therefore, be read as including all Commissioners of Oaths duly appointed. The election petition is verified as a plaint but the affidavit is needed additionally 483 when allegations of a particular type are made. The rule really requires an affidavit so that action for perjury may be based on it if the allegation is found to be false. We enquired whether, in the State of Madhya Pradesh, there was any other provision under which Commissioners of Oaths could be appointed but none was shown. The Indian Oaths Act, no doubt, consolidates the law relating to judicial oaths and for other purposes. Section 4 of that Act gives authority to "all courts and persons having by law or consent of parties authority to receive evidence", "to administer, by themselves or by an officer empowered by them in this behalf, oaths and affirmations in discharge of the duties or in exercise of the powers imposed or conferred upon them respectively by law. " This is a general provision and it mentions generally persons having by law authority to receive evidence. It is difficult to say that the Clerk of Court answers this description. But there are other provisions of law under which oaths may be administered for purposes of affidavits. Section 139 of the Code of Civil Procedure, under which the Clerk of Court was given this jurisdiction, provides : "139. Oath on affidavit by whom to be administered. In the case of any affidavit under this Code (a) any Court or Magistrate, or (b) any officer or other person whom a High Court may appoint in this behalf, or (c) any officer appointed by any other Court which the Provincial Government has generally or specially empowered in this behalf, may administer the oath to the deponent". Similarly, section 539 of the Code of Criminal Procedure provides. Courts and persons before whom affidavits may be sworn. Affidavits and affirmations to be used before any High Court or any officer of such Court may be sworn and affirmed before such Court or the Clerk of the State, or any Commissioner or other person appointed by such Court for that purpose, or any Judge, or any Commissioner for taking affidavits in any Court of Record in India, or any Commissioner to administer oaths in England or Ireland, or any Magistrate authorized to take affidavits or affirmations in Scotland. " 484 It is therefore not necessary that an appointment with reference to the Oaths Act had to be made. The Clerk of Court was appointed a Commissioner of Oaths under section 139(c) quoted above. It is contended that the powers of such a Commissioner were to administer oaths for purposes of affidavits under the Code of Civil Procedure and this meant Or. XIX of the Code. It is pointed out that none of the conditions under which the affidavit is required under that Order applies here. It is argued that Commissioners appointed under one statute cannot swear affidavits prescribed under another statute, and section 539 of the Code of Criminal Procedure is also cited as an instance. This may be so. It may be that an affidavit sworn by a District Clerk of Court may not be good for the purposes of the Code of Criminal Procedure and vice versa but that is because the restriction is to be found in section 139 of the one ,Code and section 539 of the other. Rule 94 A makes no such condition and makes receivable an affidavit sworn before a Commissioner of Oaths without specifying of what kind. In this view of the matter the affidavit sworn before the District Clerk of Court, who undoubtedly is a Commissioner of Oaths can only be excluded by taking an extreme and technical view which, in our ,opinion, is not justified. The appeal must therefore succeed on this short ground and it is not necessary to discuss whether the rule is mandatory or directory for, in any event, its requirements have been met. The appeal is allowed but as the appellant had earlier conceded the point on which the appeal succeeds, there shall be no order about costs. The case will now go back to Tribunal for decision on merits. Appeal allowed.

IN-Abs

An election petition was filed by the appellant against the first respondent challenging his election on May 4, 1963 to the Madhya Pradesh Legislative Assembly. A number of allegations including those of corrupt practice were made against the first respondent in the petition. The affidavit filed in support of the allegations of corrupt practice as required by Rule 94A of the Conduct of Election Rules, 1961, was sworn by the petitioner before the Clerk of Court in the District Court of Jabalpur. The first respondent in his objections before the Election Tribunal raised the question whether the affidavit under Rule 94A was sworn before a proper authority. The Election Tribunal accepted the objection but allowed the appellant to file a second affidavit sworn before a proper authority. The orders of the Tribunal were challenged by the first respondent before the High Court under article 226 and article 227 of the Constitution and the High Court, holding that the fresh affidavit could not be called and that there was no proper affidavit, quashed the orders of the Tribunal and directed the Tribunal to pass an order according to law. The appellant appealed to this Court on certificate of fitness granted by the High Court. Although the appellant had conceded before the High Court that his first affidavit was not proper he was allowed to withdraw his concession in this Court. It was contended on behalf of the appellant that the clerk of Court before whom his first affidavit bad been sworn had been duly appointed ex officio Commissioner of Oaths under section 139(c) of the Code of Civil Procedure and an affidavit sworn before him complied with r. 94A. The respondent however contended that a Commissioner of Oaths appointed under section 139(c) was for the purpose of affidavits under the Civil Procedure Code only, just as a Commissioner appointed under section 539 of the Criminal Procedure Code could swear affidavit under that Code only. HELD : There is no analogy between an affidavit sworn under section 539 Cr. P. C. and the affidavit sworn here. An affidavit sworn by a district Clerk of Court may not be good for the purpose of the Code of Criminal Procedure and vice versa but that is because the restriction is to be formed in section 139 of the one Code and section 539 of the other. Rule 94A makes no such condition and makes receivable an affidavit before a Commissioner of Oaths without specifying of what kind. In this view of the matter the affidavit sworn before the District Clerk of Court who undoubtedly was a Commissioner of Oath could only be excluded by taking an extreme and technical view which was not justified. [484 B D]

Appeal No. 616 of 1963. Appeal from the judgment and order dated September 21, 1961 of the Bombay High Court (Nagpur Bench) at Nagpur in Special Civil Application No. 2 of 1961. section G. Patwardhan, G. L. Sanghi, J. B. Dadabhanji, O. C. Mathur and Ravinder Narain, for the appellant. A. G. Ratnaparkhi, for the respondents. The Judgment of the Court was delivered by Shah, J. The first respondent Tukaram was a protected lessee within the meaning of that expression in the Berar Regulation of Agricultural Leases Act 24 of 1951 hereinafter called "the Berar Act" in respect of certain land at Monza Karwand in the Vidarbha Region (now in the State of Maharashtra). The appellant who is the owner of the land served a notice under section 9(1) of the Berar Act terminating the tenancy on the ground that he required the land for personal cultivation, and submitted an application to the Revenue Officer under section 8(1)(g) of the Berar Act for an order determining the tenancy. The Revenue Officer determined the tenancy by order dated July 2, 1957 and made it effective from April 1, 1958. In the meantime the Governor of the State of Bombay (the Vidarbha region having been incorporated within the State of Bombay by the ) issued Ordinance 4 of 1957 which was later replaced by Act 9 of 1958 known as the Bombay Vidarbha Region Agricultural Tenants (Prosection from Eviction and Amendment of Tenancy Laws) Act, 1957. By section 3 of Act 9 of 1958 a ban was imposed against eviction of tenants, and by section 4 all proceedings pending at the date of the commencement of the Act, or which may be instituted during the period the Act remained in force, for termination of any tenancy and for eviction of tenants were to be stayed on certain conditions set out in that section. Bombay Act 9 of 1958 and the Berar Act 24 of 1951 were repealed by the Bombay Tenancy and Agricultural Lands (Vidarbha Region and Kutch Area) Act, 99 of 1958, which may hereinafter be referred to as "the Tenancy Act". The appellant applied on May 15, 1958 to the Naib Tahsildar, Chikhli for an order for "restoration of possession" of the land. By order dated August 2, 1960 the Naib Tahsildar ordered "restoration of possession of the land" to the appellant. 597 In appeal the Sub Divisional Officer, Buldana set aside the order of the Naib Tahsildar because in his view the application was not maintainable in that the appellant had failed to comply with the requirements of section 38 of the Tenancy Act. The Revenue Tribunal confirmed the order of the Sub Divisional Officer. The appellant then moved the High Court of Judicature at Bombay praying for a writ or direction quashing the order of the Sub Divisional Officer, Buldana and of the Revenue Tribunal and for an order for restoration of possession of the land in pursuance of the order of Naib Tahsildar. The High Court set aside the order of the Naib Tahsildar, the Sub Divisional Officer and the Revenue Tribunal and remanded the case to the Tahsildar for dealing with the application made by the appellant in the light of the directions given in the judgment. The appellant appeals to this Court, with certificate under article 133 (1)(c) of the Constitution ranted by the High Court. The contention urged on behalf of the appellant is that the High Court should have restored the order passed by the Naib Tahsildar and should not have reopened the inquiry as directed in its judgment. It is necessary in the first instance to make a brief survey of the diverse statutory provisions in their relation to the progress of the dispute, which have a bearing on the question which falls to be determined. The land was originally in the Vidharbha region which before the Bombay Reorganisation, Act, 1956 was a part of the State of Madhya Pradesh, and the tenancy of the land was governed by the Berar Act. The first respondent was a protected lessee in respect of the land under section 3 of the Berar Act. Section 8 of the Act imposed restrictions. on termination of protected leases. It was provided that notwithstanding any agreement, usage, decree or order of a court of law, the lease of any land held by a protected lessee shall not be terminated except under orders of a Revenue Officer made on any of the grounds contained therein. Even if the landlord desired to obtain possession of the land for bona fide personal cultivation, he had to obtain an order in that behalf under section 8(1)(g). Section 9 enabled the landlord to terminate the lease of a protected lessee if he required the land for personal cultivation by giving notice of the prescribed duration and setting out the reasons for determination of the tenancy. A tenant served with the notice under sub section (1) could under sub section (3) apply to the Revenue Officer for a declaration that the notice shall have no effect or for permission to give up some other land of the same landholder in lieu of the land mentioned in the notice. Sub sections (4), (5), (6), (7) and (8) dealt with the proce 598 dure and powers of the Revenue Officer. The landlord had, after serving a notice under section 9 (1), to obtain an order under section 8 (1) (g) that possession was required by him bonafide for personal cultivation. Section 1 9 of the Berar Act prescribed the procedure for ejectment of a protected lessee. Sub section (1) provided: " A landholder may apply to the Revenue Officer to eject a protected lessee against whom an order for the termination of the lease has been passed under sections 8 or 9." Sub section (2) enabled a tenant dispossessed of land otherwise than in accordance with the provisions of the Act to apply to the Revenue Officer for restoration of the possession. By sub section (3) it was provided : "On receipt of an application under sub section (1) or (2), the Revenue Officer may, after making such summary enquiry as he deems fit, pass an order for restoring possession of the land to the landholder or the protected lessee as the case may be and may take such steps as may be necessary to give effect to his order." The appellant had obtained from the Revenue Officer concerned an order tinder section 8 ( 1) (g) determining the tenancy effective from April 1, 1958. But before that date Ordinance 4 of 1957 was promulgated. This Ordinance was later replaced by Bombay Act 9 of 1958. By section 4 of Bombay Act 9 of 1958 all proceedings either pending at the date of commencement of the Act or which may be instituted (during the period the Act remained in force) for termination of the tenancies were Stayed. The Tenancy Act (Bombay Act 99 of 1958) which was brought into force on December 30, 1958 repealed Bombay Act 9 of 1958 and the Berar Act and made diverse provisions with regard to protection of tenants. By section 9 of the Tenancy Act it was provided that no tenancy of any land shall be terminated merely on the round that the period fixed for its duration whether by agreement or otherwise had expired, and by section 19 it was provided that notwithstanding any agreement, usage, decree or order of a court of law, the tenancy of any land held by a tenant shall not be terminated unless certain conditions specified therein were fulfilled. Section 36 of the Tenancy Act set up the procedure to be followed, inter alia, for obtaining possession from a tenant after determination of the tenancy, and sub section (2) enacted that no landlord shall obtain possession of any ]an(], dwelling house 599 or site used for any allied pursuit held by a tenant except under an order of the Tahsildar. By sub section (3) it was provided that on receipt of an application under sub section (1) the Tahsildar shall, after holding an inquiry, pass such order thereon as he deems fit provided that where an application under sub section (2) is made by a landlord in pursuance of the right conferred on him under section 38, the Tahsildar may first decide as preliminary issue, whether the conditions specified in cls. (c) and (d) of sub section (3), and cls. (b), (c) and (d) of sub section (4) of that section are satisfied. That takes us to section 38. By the first sub section, as it was originally enacted, it was provided : " Notwithstanding anything contained in section 9 or 19 but subject to the provisions of sub sections (2) to (5), a landlord may after giving to the tenant one year 's notice in writing at any time within two years from the commencement of this Act and making an application for possession under sub section (2) of section 36, terminate the tenancy of the land held by a tenant other than an occupancy tenant if he bona fide requires the land for cultivating it personally :" (Amendment of this sub section by Maharashtra Act 5 of 1961 is not material for the purpose of this appeal.) By sub section (3) it was provided that the right of a landlord to terminate a tenancy under sub section (1) shall be subject to the conditions contained in cls. (a) to (e) (which need not, for the purpose of this appeal, be set out). Sub section (4) imposed on the right of the landlord certain restrictions in terminating the tenancy. A landlord may not terminate a tenancy (a) so as to reduce the area with the tenant below a certain limit, or (b) contravene the provisions of the Bombay Prevention of Fragmentation Act, or (c) where the tenant is a member of a co operative farming society, or (d) where the tenant is a co operative farming society. Sub section (4A) dealt with the special case of a member of armed forces ceasing to be a member of the serving force. Sub sections (5), (6) and (7) made certain incidental provisions. By sub section (1) of section 132, amongst others, the Berar Act and Bombay Act 9 of 1958 were repealed. By sub section (2) it was provided that nothing in sub section (1) shall, save as expressly provided in the Act, affect or be deemed to affect (i) any right, title, interest, obligation or liability already acquired, accrued before the commencement of the Act or (ii) any legal proceeding or remedy in respect of any, such right, title, interest, obligation or liability or anything done or suffered before the commencement of the Act, and any such 7Sup./65 10 600 proceedings shall be instituted, continued and disposed of, as if Act 99 of 1958 had not been passed. Sub section (3) provided : "Notwithstanding anything contained in sub section (1) (a) all proceedings for the termination of the tenancy and ejectment of a tenant or for the recovery or restoration of the possession of the land under the provisions of the enactments so repealed, pending on the date of the commencement of this Act before a Revenue Officer or in appeal or revision before any appellate or revising authority shall be deemed to have been instituted and pending before the corresponding authority under this Act and shall be disposed of in accordance with the provisions of this Act, and (b). . . . As from December 30, 1958 the Berar Act ceased to be in operation. But by sub section (2) of section 132 any right, title, interest, obligation or liability already acquired before the commencement of the Tenancy Act remained enforceable and any legal proceedings in respect of such right, title, interest, obligation or liability could be instituted, continued and disposed of as if Bombay Act 99 of 1958 had not been passed. But to this reservation an exception was made by sub section (3) that a proceeding for termination of tenancy and ejectment of the tenant or for recovery or restoration of possession of the land under any repealed provisions, pending on the date of the commencement of Act 99 of 1958 before a Revenue Officer. was to be deemed to have been instituted and pending before the corresponding authority under the Tenancy Act and was to be disposed of in accordance with the provisions of that Act. Therefore when a proceeding was pending for termination 'of the tenancy and ejectment of a tenant the proceeding had to be disposed of in accordance with the provisions of the Tenancy Act, notwithstanding anything contained in sub section If the expression "proceedings pending on the date of commencement of this Act" in section 132(3)(a) be literally interpreted, a somewhat anomalous situation may result. An application under section 19 of the Berar Act pursuant to an order under sections 8 and 9, instituted before the Tenancy Act was enacted, will have to be disposed of in accordance with the provisions of the Tenancy Act, but if no proceeding under section 19 be commenced the proceeding would not be governed in terms by sub section (3) and would by the operation of sub section (2) be instituted and continued as if the Tenancy Act was not passed. This problem engaged 601 the attention of the Bombay High Court in Jayantraj Kanakmal Zambad and Another vs Hari Dagdu and Others(1), in which the facts were closely parallel to the facts in the present case. An order determining the lease under sections 8 & 9 of the Berar Act was obtained by the landlord before the Tenancy Act was enacted, and at a time when Bombay Act 9 of 1958 was in force, and proceedings were started by the landlord for obtaining possession from the tenant, after the Tenancy Act was brought into force. The High Court held that the application by the landlord for possession against the tenant whose tenancy was determined by an order under the Berar Act has, if instituted after the Tenancy Act was brought into force, to be decided according to the provi sions of the latter Act by virtue of section 132(3) and not under the Berar Act, and that an order for termination of the lease under section 8 does not come to an end until an order is made under sub s.(3) of section 19. The Court therefore in that case avoided the anomaly arising from the words of sub section (3) by holding that an order made under section 8 or under section 9 of the Berar Act relating to termination of a lease does not terminate the proceeding, and it comes to an end when an order under section 19 of the Act is made. The High Court in the judgment under appeal, following the decision in Jayantroj Kanakmal Zambad 's case(1) held that the application filed by the appellant purporting to be under section 36(7) of the Tenancy Act must be regarded as an application under section 19 of the Berar Act and therefore be deemed to 'be a continuation of the application under sections 8 & 9 of the Berar Act. which was pending at the date when the Tenancy Act was brought into force, and to such an application section 38 (1) did not apply, but by virtue of sub section (3) cl. (a) of section 132 the application had to be disposed of in accordance with the provisions of the Tenancy Act, thereby making the provisions of section 38(3) and section 38(4) applicable thereto. Mr. Patwardhan for the appellant has, for the purpose of this appeal, not sought to canvass the correctness of the view of the judgment in Jayantraj Kanakmal Zambad 's case, but has submitted that the High Court has not correctly interpreted section 132(3) of the Tenancy Act. The appellant had acquired a right to obtain possession of the land on determination made by the Revenue Officer by order dated July 2, 1957 and a legal proceeding in respect thereof could be instituted or continued by virtue of sub section (2) of section 132 as if the Tenancy Act had not been passed. The exception made (1) I.L.R. F.B. 602 by sub section (3) of section 132 in respect of proceedings for termination of the tenancy and ejectment of a tenant which are pending on the date of the commencement of the Tenancy Act is limited in its content. Proceedings which are pending are to be deemed to have been instituted and pending before the corresponding authority under the Act and must be disposed of in accordance with the provisions of the Tenancy Act. By the use of the expression " shall be disposed of in accordance with the provisions of this Act" apparently the Legislature intended to attract the procedural provisions of the Tenancy Act, and not the conditions precedent to the institution of fresh proceedings. To hold otherwise would be to make a large inroad upon sub section (2) of section 132 which made the right, title or interest already acquired by virtue of any previous order passed by competent authority unenforceable, even though it was expressly declared enforceable as if the Tenancy Act had not been passed. The High Court was, in our judgment, right in holding that the application filed by the appellant for obtaining an order for possession against the first respondent must be treated as one under section 19 of the Berar Act, and must be tried before the corresponding authority. Being a pending proceeding in respect of a right acquired before the Act, it had to be continued and disposed of as if the Tenancy Act had not been passed [sub section (2)], subject to the reservation in respect of two matters relating to the competence of the officers to try the proceeding and to the procedure in respect of the trial. The appellant had obtained an order determining the tenancy of the first respondent. That order had to be enforced in the manner provided by section 19(1) i.e. the Revenue Officer had to make such summary inquiry as be deemed fit, and had to pass an order for restoring possession of the land to the landholder and to take such steps as may be necessary to give effect to his order. Since the repeal of the Berar Act the proceeding pending before the Revenue Officer would stand transferred to the Tahsildar. The Tahsildar was bound to give effect to the rights already acquired before the Tenancy Act was enacted, and in giving effect to those rights he had to follow the procedure prescribed by the Tenancy Act. Between sections 19(3) of the Berar Act and 36(3) of the Tenancy Act in the matter of procedure there does not appear to us any substantial difference. Under the Berar Act a summary inquiry has to be made by the Revenue Officer, whereas under the Tenancy Act the Tahsildar must hold an inquiry and pass such order (consistently with the rights of the parties) as he deems fit. But to the trial of the application for enforcement of the right acquired under the 603 Berar Act, section 38 of the Tenancy Act could not be attracted. Section 38 authorises the landlord to obtain possession of the land from a tenant, if the landlord bona fide required the land for cultivating it personally. In order to effectuate that right, the landlord must give a notice of one year 's duration in writing and make an application for possession under section 36 within the prescribed period. The section is in terms prospective and does not purport to affect rights acquired before the date on which the Tenancy Act was brought into force. The High Court was therefore also right in observing "The notice referred to in sub section (1) of section 38 could not obviously have been given in respect of proceedings which were pending or which are deemed to have been pending on the date of the commencement of this Act. It does not also appear that it was the intention of the Legislature that such proceedings should be kept pending for a further period until a fresh notice as required by sub section (1) of section 38 had been given. For the same reasons, the proviso to sub section (2) of section 36 will not apply in such cases. " But we are unable to agree with the High Court that sub sections (3) and (4) of section 38 apply to an application filed or deemed to be filed under section 19 of the Berar Act. The High Court appears to be of the view that by the use of the expression "shall be disposed of in accordance with the provisions of this Act" it was intended that "all the provisions of the Act, which would apply to an application made under sub section (2) of section 36, would also apply to application which are deemed to have been made under this section", and therefore it followed that sub sections (3) and (4) of section 38 applied to all applications for obtaining possession of the land for personal cultivation made under section 19 of the Berar Act which were pending or which were deemed to have been pending on the date of the commencement of the Tenancy Act. It may be noticed that sub section (3) of section 38 in terms makes the right of the landlord to terminate a tenancy under sub section (1), subject to conditions mentioned therein. If there be no determination of the tenancy by notice in writing under sub section (1), sub section (3) could have no application. The words of sub section (4) are undoubtedly general. But the setting in which the sub section occurs clearly indicates that it is intended to apply to tenancies determined under section 38(1). Large protection which was granted by section 19 of the Tenancy Act 604 has been withdrawn from tenants who may be regarded as con tumacious. By section 38(1) a landlord desiring to cultivate the land personally is given the right to terminate the tenancy, but the right is made subject to the conditions prescribed in sub section (3) and the legislature has by sub section (4) (a) sought to make an equitable adjustments between the claims of the landlord and the tenant. If sub section (4) be read as imposing a restriction on the determination of all tenancies, it would imply grant of projection to a contumacious tenant as well. The Legislature could not have intended that in making equitable adjustments between the rights of landlords and tenants contumacious tenants who have disentitled themselves otherwise to the protection of section 19 should still be benefited. Again if sub section (4) be read as applying to determination of every agricultural tenancy, its proper place would have been in sub section (3) of section 36, and the proviso thereto would riot have been drafted in the manner it is found in the Act. By cls. (c) & (d) of sub section (4) tenants who are cooperative societies or members of cooperative societies are not liable to be evicted, and if the opening words of sub section (4) are intended to be read as applicable to termination of all tenancies, whatever the reason, we would have expected some indication to that effect in section 19 of the tenancy Act. Again inclusion of sub sections (2) to (5) in the non obstante clause in sub section (1) supports the view that the expression "In no case a tenancy shall be terminated" being. part, of an integrated scheme means that a tenancy determined "or reasons and in the manner set out in sub section (1) of section 38 must be determined consistently with sub section (4), but where the determination of the tenancy is not under sub section (1) of section 38, sub section (4) has no application. The application made by the appellant is undoubtedly one for ejectment of the tenant and for recovery of possession. The Naib Tahsildar was competent to entertain the application. It is true that the application was orginally filed under sections 8 & 9 of the Berar Act on the ground that the, landlord required the land bona fide for his personal cultivation, but once an order was passed under section 8 (1) (g) by the Revenue Officer, the only inquiry contemplated to be made on an application under section 19 was a summary inquiry before an order for possession was made in favour of the landlord. At that stage, there was no scope for the application of the conditions and restrictions prescribed by sub sections (3) & (4) of section 38, for, in our view, those provisions do not apply to proceedings to enforce rights acquired when the Berar Act was in operation. 605 We therefore modify the order passed by the High Court and direct that the orders passed by the Tahsildar and the Revenue Tribunal will be set aside and the matter will be remanded to the Tahsildar for dealing with the application on the footing that it is an application to enforce the right conferred by sections 8 & 9 of the Berar Regulation of Agricultural Leases Act, 1951 and the provisions of section 38 of the Bombay Act 99 of 1958 have no application thereto. There will be no order as to costs in this appeal. Order modified and case remanded.

IN-Abs

The land in dispute as in the Vidarbha region originally forming part of the State of Madhya Pradesh, to which the Berar Regulation of Agricultural Leases Act, 1951 (Berar Act) applied. Under the Act, a landlord requiring land for personal cultivation, could terminate a lease by issuing a notice to the lessee under section 9, and obtaining an order in that behalf from the Revenue Officer under section 8(1)(g) and then, applying to the Revenue Officer for ejectment of the lessee. On the landlord 's application, the Officer, after making such summary enquiry as he deems fit, may pass an order restoring possession to the landlord. After the merger of the Vidarbha region with the State of Bombay, the Bombay Tenancy and Agricultural Lands (Vidarbha region and Kutch Area) Act (Tenancy Act) was passed on December 30, 1958 repealing, the Berar Act. Section 36 of the Tenancy Act set up a procedure for obtaining possession from a tenant and provided that the landlord may apply to the Tahsildar who, after holding an enquiry, may pass such order as he deems fit. Section 38(1) authorised the landlord to obtain possession of land from a tenant, if the landlord, bona fide required the land for personal cultivation and in order to efecetuate that right, the landlord must give a notice of one year 's duration in writing and make an application for possession under section 36, within the prescribed period. By section 38(3) it was provided that the right of a landlord to terminate a tenancy under section 38(1) shall be subject to the conditions contained in cls. (a) to (e) of sub section (3) and sub ,section (4) imposed certain restrictions on the right of the landlord to terminate a tenancy. By section 132(2) any right already acquired before 30th December 1958 remained enforceable. and any legal proceeding in respect of such right, could be instituted, continued and disposed of as if the Tenancy Act had not been passed. But to this reservation an exception was made by section 132(3) that a proceeding pending on 30th December 1958, was to be deemed to have been instituted and pending before the corresponding authority tinder the Tenancy Act, and was to be disposed of in accordance with its provisions. The appellant had obtained from the Revenue Officer concerned an order, determining the tenancy of the respondent under section 8(1)(g) of the Berar Act. effective from 1st April 1958. On 15th May 1959 after the Tenancy Act had come into force the appellant applied to the Tahsildar under section 36 for an order for restoration of possession. The Tahsildar ordered restoration of possession. but on appeal the Sub Divisional Officer set aside the order on the ground that the appellant failed to comply with the requirements of section 38 of the Tenancy Act. and the Revenue Tribunal confirmed the order of the Sub Divisional Officer. In a petition for the issue of a writ, the High Court set aside all the orders of the subordinate tribunals and remanded the case to the Tahsildar for dealing with the application in the light of directions given in its judgment. The High Court 595 held that though section 36(1) of the Tenancy Act did not apply to the appellant 's application, by vitrue of section 132(3) the provision of section 38(3) and (4) were applicable to it. In his appeal to the Supreme Court, the appellant contended that the High Court had not correctly interpreted section 132(3) and that it should have restored the order passed by the Tahsildar Direct should not have reopened the enquiry. HELD : The Tahsildar was competent to entertain the appellant 's application for recovery of possession. Once an order was passed under section 8(1)(g) of the Berar Act by the Revenue Officer, the only enquiry contemplated to be made on an application under section 19 of the Act, was a summary enquiry before an order for possession was made in favour of the landlord. At that stage there was no scope for the application of the conditions and restrictions prescribed by section 38(3) and (4), for those provisions do not apply to proceedings to enforce rights acquired when the Berar Act was in operation. Therefore the Tahsildar should deal with the application on the footing that it was an application to enforce right conferred by sections 8 and of the Berar Act and that the provisions of section 38 of the Tenancy Act have no application thereto. [604 F H; 605 A B] The appellant had acquired a right to obtain possession of the land on the determination made by the Revenue Officer under section 8(1)(g) of the Berar Act. An order made under section 8 or section 9 of the Berar Act relating to termination of a lease does not terminate the proceeding it comes to an end only when an order under section 19 of the Act is made. Therefore, the application filed by the appellant purporting to be under section 36(2) of the Tenancy Act must be regarded its an application under section 19 of the Berar Act, and deemed to be a Continuation of the application under sections 8 and 9 of the Berar Act and pending at the date when the Tenancy Act was brought into force. Since the repeal of the Berar Act the proceeding would stand transferred to the Tahsildar, who was bound to give effect to the rights already acquired before the Tenancy Act was enacted under section 132(2), and in doing so, under section 132(3) he bad to follow the procedure prescribed by the Tenancy Act, But the exception made in section 132(3) is limited in its content. By the use of the expression 'shall be disposed of in accordance with the provisions of this Act '. the legislature intended to attract the procedural provisions of the Tenancy Act and not the conditions precedent to the institution of fresh proceedings. Therefore, a pending proceeding in respect of a right acquired before the Act, had to be continued and disposed of as if the Tenancy Act had not been passed, subject to the reservation in respect of two matters relating to the competence of the officers to try the proceedings and to the procedure in respect of the trial. Between section 19(3) of the Berar Act and section 36(3) of the Tenancy Act in the matter of procedure there is no substantial difference. But to the trial of the application for enforcement of the right acquired trader the Berar Act, section 38 of the Tenancy Act could not be attracted. Section 38(1) is in terms prospective and does not purport to affect rights acquired before the Tenancy Act was brought into force. Section 38(3) and (4) do not apply to an application filed or deemed to be filed under section 19 of the Berar Act. Section 38(3) in term makes the right of the landlord to terminate a tenancy under sub section subject to conditions mentioned therein. The words of section 38(4). are undoubtedly general, but the setting in which the sub section occurs indicating that it is also intended to apply to tenancies determined under section 38(1). Therefore where the determination of the tenancy is not under 38(1), sub sections (3) and (4) have no application. D, E, 60 A, B. F. G H, 603 B, E, F H] 596 Jayantraj Kanakanial Zambad vs Hari Dagdu, I.L.R. , approved.

Appeals Nos. 601 and 602 of 1963. Appeals from the judgment and decree dated December 9, 1958, of the Allahabad High Court in First Appeals Nos. 373 of 1945 and 92 of 1946. 582 Civil Appeal No. 603 of 1963. Appeal by special leave from the judgment and decree dated December 9, 1958 of the Allahabad High Court in First Appeal No. 374 of 1945. N. D. Karkhanis and R. N. Sachthey, for the appellant (in all the three appeals). G. section Pathak, Rameswar Nath, section N. Andley and P. I. Vohra, for the respondents (in all the three appeals). Wanchoo, J. These three appeals raise common questions and will be dealt with together. They arise out of two suits filed against the Government of India claiming damages for loss of goods which were destroyed by fire on the railway platform at Morar Road Railway Station. One of the suits was filed by Birla Cotton Factory Limited, now represented by the West Punjab Factories Limited (hereinafter referred to as the Factory). It related to six consignments of cotton bales booked from six stations on various dates in February and March 1943 by the Factory to Morar Road Railway Station. In five of the cases, the consignment was con Signed to J. C. Mills while in one it was consigned to self. The consignments arrived at Morar Road Railway Station or. various dates in March Delivery was given of a part of one consignment on March 7, 1943 while the remaining goods were still in the custody and possession of the railway. On March 8, 1943, a fire broke out at the Morar Road Railway Station and these goods were involved in the fire and severe damage was caused to them. It is not necessary to refer to the details of the damage for that matter is not in dispute between the parties. The case of the Factory was that the damage and loss was caused while the goods were in the custody and control of the railway administration and it was due to misconduct, negligence and carelessness on the part of the railway administration. Consequently, the suit was filed for Rs. 77,000 and odd along with interest upto the date of the suit and interest pendente lite and future interest. In the other suit there was one consignment of 45 bales of cotton yarn. This consignment was booked from Belangunj to Morar Road Railway Station on February 22, 1943 and the railway receipt relating to this consignment was endorsed in favour of Ishwara Nand Sarswat who filed the suit. This consignment arrived at 583 Morar Road Railway Station on February 23, 1943. Ishwara Nand Sarswat went to take delivery of this consignment on March 10, 1943, his case being that be had received the railway receipt on March 9, 1943. He then came to know that the consignment was involved in a fire which had taken place on March 8, 1943 and severe damage had been done to the consignment. Ishwara Nand Sarswat therefore filed the suit on the ground that damage and loss was due entirely to the gross negligence of the railway administration. He claimed Rs. 72,000,/ and odd as damages and also claimed interest upto the date of the suit and pendente lite and future interest. The suits were resisted by the Government of India. In the first suit by the Factory, it was pleaded that the Factory could not sue as , the goods in five of the receipts had been consigned to the J. C. Mills; secondly, it was pleaded that delivery had been given of atleast five of the consignments to the J.C. Mills before the fire broke out and the railway administration was not therefore responsible for the damage done by the fire, for it was the fault of the J. C. Mills not to have removed the goods immediately after the delivery; thirdly, it was pleaded that damages should have been granted at the rate of Rs. 38/ per bale, which was the price contracted for between the buyer and the seller and not at the market rate on the date of the damage as was done by the courts below , fourthly, it was pleaded that no interest should have been allowed for the period before the suit; and lastly, it was pleaded that the conduct of the railway administration was not negligent and there fore the railway was not bound to make good the loss. On these pleas, five main issues relating to each of them were framed by the trial court. The trial court found that the Factory could maintain the suit and decided accordingly. It also found that in the case of five consignments by the Factory, delivery had been given before the fire broke Out and therefore the railway was not responsible; in the case of the sixth consignment it held that there was no proof that delivery bad been given before the fire broke out and that the railway would be responsible if negligence was proved. On the quantum of damages, the trial court held that the damages had to be calculated at the market price on the date of the fire and not at the contract price between the buyer and seller. On the question of interest, the trial court held that interest before the date of the suit should be allowed on equitable , rounds. Finally, on the question of negligence, the trial court held that there was negligence by the railway and it was therefore liable for loss and damage caused by the fire which broke out on L7Sup./65 9 584 March 8, 1943. As however, the trial court had held that delivery had been given in the case of five consignments, though the goods had not been removed, the railway was not responsible for the loss. It therefore decreed the suit in part with respect to the sixth consignment about which it had found that there had been no delivery. The same issues were raised in the suit by Ishwara Nand Saraswat. But there was one additional issue in that suit based on the contention of the Government of India that it had given notice to Ishwara Nand that the consignment had arrived on February 23, 1943, Ishwara Nand however did not come to remove the goods till March 8, 1943 when the fire broke out; therefore it was urged that the liability of the railway administration as carrier had ceased after the lapse of reasonable time after arrival of the consignment at the railway station. This reasonable time could not be beyond three days in any case and therefore the railway administration was not bound to make good the loss even if it had been occasioned on account of the negligence of the administration. As Ishwara Nand should have removed the consignment within three days of February 23, it was his failure to do so which resulted in the damage and loss. The issues which were common to this suit and the suit by the Factory were decided on the same lines by the trial court as in the suit by the Factory. On the further issue which arose in this suit as to the delay in the removal of goods after notice to Ishwara Nand, the trial court held after reference to certain rules made by the railway administration that even if the railway administration 's responsibility as carrier had ceased after the lapse of reasonable time, it was still liable as a bailee either as a warehouseman or as a gratuitous bailee. It therefore gave a decree for Rs. 76,000 and odd to Ishwara Nand. Then followed three appeals to the High Court two in the suit by the Factory and one in the suit of Ishwara Nand. The appeal in the suit by Ishwara Nand was by the Government of India; one appeal in the suit by the Factory was by the factory with respect to that part of the claim which had been dismissed, and the case of the Factory was that in fact no delivery had been made to it and it was entitled to the entire sum claimed as damages. The other appeal was by the Government of India with respect to the amount decreed by the trial court and it raised all the contentions which had been raised before the trial court. The High Court dealt with the three appeals together. In all appeals the High Court confirmed the finding of the trial court that there had been negligence on the part of the railway which 585 resulted in damage to the goods. On the question whether the suit could be maintained by the plaintiffs, the High Court affirmed the finding of the trial court that both the suits were maintainable. The High Court also affirmed the finding of the trial court with respect to the rate at which damages should be calculated and on the question of interest before the date of the suit. Further in the suit by Ishwara Nand, the High Court held that even if the railway administration ceased to be responsible as a carrier after a reasonable time had elapsed after the arrival of the goods at Morar Road Railway Station, it was still responsible as a warehouseman. The appeal therefore of the Government of India in Ishwara Nand 's suit was dismissed. On the question of delivery in the Factory '& suit the High Court disagreed with the finding of the trial court that there had been delivery of five consignments. It held that there was no effective delivery even of these five consignments. In consequence, the appeal of the Factory was allowed while that of the Government of India was dismissed. Then followed applications to the High Court for leave to appeal to this Court in the Factory 's suit. 'Me High Court granted the certificate as the judgment was one of variance and the amount involved was over rupees twenty thousand. However, in the suit of Ishwara Nand, the High Court refused to grant a certificate as the judgment was one of affirmance and no substantial question of law arose. Thereupon the Government of India applied to this Court for special leave in Ishwara Nand 's suit and that was granted. The three appeals have been consolidated in this Court for as will be seen from what we have said above, the principal points in volved in them are common. Learned counsel for the appellant has not and could not challenge the concurrent finding of the trial court and of the High Court that the fire which caused the damage was due to the negligence of the railway administration. But the learned counsel has pressed the other four points which were raised in the courts below. He contends (i) that the suits as filed were not maintainable, (ii) that the High Court was in error in reversing the finding of the trial court that the delivery had been given with respect to five of the consignments in the Factory 's suit, (iii) that damages should have been awarded at Rs. 38/ per bale which was the contract price between the buyer and seller and not at the market price on the date on which the damage took place, and (iv) that interest could not be awarded for the period before the suit on the amount of damages decreed. 586 Re. The contention of the appellant with respect to five of the consignments in the suit of the Factory was that as the consignee of the five railway receipts was the J.C. Mills, the consignor (namely, the Factory) could not bring the suit with respect thereto and only the J.C. Mills could maintain the suit. Ordinarily, it is the consignor who can sue if there is damage to the consignment, for the contract of carriage is between the consignor and the railway administration. Where the property in the goods carried has passed from the consignor to some one else, that other person may be able to sue. Whether in such a case the consignor can also sue does not arise on the facts in the present case and as to that we say nothing. The argument on behalf of the appellant is that the railway receipt is a document of title to goods [see section 2(4)] of the Indian Sale of Goods Act, No. 3 of 1930), and as such it is the consignee who has title to the goods where the consignor and consignee are different. It is true that a railway receipt is a document of title to goods covered by it, but from that alone it does not follow, where the consignor and consignee are different, that the consignee is necessarily the owner of goods and the consignor in such circumstances can never be the owner of the goods. The mere fact that the consignee is different from the consignor does not necessarily pass title to the goods from the consignor to the consignee, and the question whether title to goods has passed to the consignee will have to be decided on other evidence. It is quite possible for the consignor to retain title in the goods, himself while the consignment is booked in the name of another person. Take a simple case where a consignment is booked by the owner and the consignee is the owner 's servant, the intention being that the servant will take delivery at the place of destination. In such a case the title to the goods would not pass from the owner to the consignee and would still remain. with the owner, the consignee being merely a servant or agent of the owner or consignor for purposes of taking delivery at the place of destination. It cannot therefore be accepted simply because a consignee in a railway receipt is different from a consignor that the consignee must be held to be the owner of the goods and he alone can sue and not the consignor. As we have said already, ordinarily, the consignor is the person who has contracted with the railway for the carriage of goods and he can sue; and it is only where title to the goods has passed that the consignee may be able to sue. Whether title to goods has passed from the consignor to the consignee will depend upon the facts of each case and so we have to look at the evidence produced in this case to decide whether in the case of five con 587 signments booked to the J.C. Mills, the title to the goods had passed to the Mills before the fire broke out on March 8, 1943. We may add that both the courts have found that title to the goods had not passed to the J. C. Mills by that date and that it was still in the consignor and therefore the Factory was entitled to sue. We may in this connection refer briefly to the evidence on this point. The contract between the Factory and the J. C. Mills was that delivery would be made by the seller at the godowns of the J. C. Mills. The contract also provided that the goods would be dispatched by railway on the seller 's risk up to the point named above (namely, the godowns of the J. C. Mills). Therefore the property in the goods would only pass to the J. C. Mills when delivery was made at the godown and till then the consignor would be the owner of the goods and the goods would be at its risk. Ordinarily, the consignments would have been booked in the name of "self" but it seems that there was some legal difficulty in booking the consignments in the name of self and therefore the J. C. Mills agreed that the consignments might be booked in the Mills ' name as consignee; but it was made clear by the J. C. Mills that the contract would stand unaffected by this method of consignment and all risk, responsibility and liability regarding these cotton consignments would be of the Factory till they were delivered to the J. C. Mills in its godowns as already agreed upon under the contract and all losses arising from whatever cause to the cotton thus consigned would be borne by the Factory till its delivery as indicated above. This being, the nature of the contract between the consignor and the consignee in the present case we have no hesitation in agreeing with the courts below that the property in the goods was still with the Factory when the fire broke out on March 8, 1943. Therefore the ordinary rule that it is the consignor who can sue will prevail here because it is not proved that the consignor had parted with the property in the goods, even though the consignments were booked in the name of the J. C. Mills. We are therefore of opinion that the suit of the Factory was in view of these circumstances maintainable. As to the suit by Ishwara Nand, he relies on two circumstances in support of his right to maintain the suit. In the first place, he contended that he was the owner of the goods and that was why the railway receipt was endorsed in his favour by the consignor though it was booked to "self". In the second place, it was contended that as an endorse to a document of title he was in any case entitled to maintain the suit. The trial court found on the evidence that it had been proved satisfactorily that Ishwara Nand 588 was the owner of the goods. It also held that as an endorse of a document of title he was entitled to sue. These findings of the trial court on the evidence were accepted by the High Court in these words : "It was not contended before us that the finding arrived at by the learned court below that the plaintiff had the right to sue was wrong, nor could, in view of the overwhelming evidence, such an issue be raised. The evidence on the point has already been carefully analysed by the court below. We accept the finding and confirm it. It was also pointed out that Ishwara Nand was the endorsed consignee and in that capacity he had in any case a right to bring the suit. The correctness of this statement was not challenged before us. " Thus there are concurrent findings of the two courts below that Ishwara Nand was the owner of the goods and that was why the railway receipt was endorsed in his favour. In these circumstances he is certainly entitled to maintain the suit. The contention that the plaintiffs in the two suits could not maintain them. must therefore be rejected. The contention under this head is that five of the consignments had been delivered to the J. C. Mills before March 8, 1943 and therefore the railway was not responsible for any loss caused by the fire which broke out after the consignments had been delivered on March 6 and 7, 1943. It was urged that it was the fault of the J. C. Mills that it did not remove the consignments from the railway station by March 7 and the liability for the loss due to fire on March 8 must remain on the J. C. Mills. The trial court had held in favour of the appellant with respect to these five consignments. But the High Court reversed that finding holding that there was no real delivery on March 6 and 7, though the delivery book had been signed on behalf of the J. C. Mills and the railway receipts had been handed over to the railway in token of delivery having been taken. It was not disputed that the delivery book had been signed and the railway receipts had been delivered to the railway; but the evidence was that it was the practice at that railway station, so far as the J. C. Mills was concerned, to sign the delivery book and hand over the railway receipts and give credit vouchers in respect of the freight of the consignment even before the goods had been unloaded from wagons. It appeared from the evidence that what used to happen was that as soon the wagons 589 arrived and they were identified as being wagons containing consignments in favour of the J. C. Mills, the consignee, namely, the J. C. Mills, used to surrender the railway receipts. , sign the delivery book and give credit vouchers in respect of the receipt of freight due even before the goods were unloaded from wagons. This practice was proved from the evidence of Har Prashad (D.W. 6) who was the Assistant Goods Clerk at Morar Road at the relevant time. He was in charge of making delivery of such goods, there being no Goods Clerk there. He admitted that signature of Ishwara Nand as agent of the J. C. Mills was taken as soon as the consignments were received and identified by Ishwara Nand without being unloaded. He further admitted that there had been no actual delivery to Ishwara Nand of the consignments and this happened with respect to all the five consignments. Ishwara Nand signed the delivery book in token of having received the delivery and surrendered the railway receipts though when he did so the wagons were not even unloaded. On this evidence the High Court held that it could not be said that there was any effective delivery of the goods to the J. C. Mills through Ishwara Nand, though token delivery was made inasmuch as the delivery book had been signed and the railway receipts surrendered. It also appears from the evidence of Har Prashad that before the goods were actually removed, Ishwara Nand used to take the permission of Har Prashad to remove them. This shows that though there might be token delivery in the form of signing the delivery book and surrendering the railway receipts, actual delivery used to take place later and the removal of goods took place with the permission of Har Prashad. On this state of evidence the High Court was of the view that the so called delivery by signing delivery book and sur rendering the railway receipts was no delivery at all for till then the goods had not been unloaded. The unloading of goods is the duty of the railway and there can be no delivery by the railway till the railway has unloaded the goods. It is also clear from the evidence that even after token delivery had been made in the manner indicated above, the consignee was not authorised to remove the goods from the wagons and that it was the railway which unloaded the wagons and it was thereafter that the consignee was permitted to remove such goods with his permission as stated by Har Prashad in his evidence. The High Court therefore held that there was no clear evidence that delivery of goods had been made over to the consignee in these cases. Further there was no evidence to show that the consignee could remove the goods from the wagons without further reference to the railway, on the other hand it appeared that after such token delivery permission 590 of Har Prashad was taken for actual removal of goods. There fore, the High Court came to the conclusion that real delivery had not been made when the fire took place on March 8, for the goods were till then in wagons and the railway was the only authority entitled to unload the same. Till they were unloaded by the railway, they must be in the custody of the railway and no delivery could be said to have taken place merely by signing the delivery book and surrendering the railway receipts. We are of opinion that on the evidence the view taken by the High Court is correct. Though there was a token delivery as appears from the fact that railway receipts had been surrendered and the delivery book had been signed, there was no real delivery by the railway to the consignee, for the goods had not been unloaded and were still under the control and custody of the railway and Har Prashad 's evidence is that his permission had still to be taken before the goods could be actually removed by the consignee. The contention that the delivery had been made to the consignee before March 8, 1943 must therefore in the peculiar circumstances of this case fail. (iii). It is next contended that damages should have been awarded at the rate of Rs. 38/ per bale which was tile contract price between the factory and the J. C. Mills. This contract was made in November 1942. The contract price is in our opinion no measure of damages to be awarded in a case like the present. It is well settled that it is the market price at the time the damage occurred which is the measure of damages to be awarded. It is not in dispute that the trial court has calculated damages on the basis of the market price prevalent on March 8. In these circumstances this contention must also be rejected. The next contention is that no interest could be awarded for the period before the suit on the amount of damages decreed. Legal position with respect to this is well settled : (see Bengal Nagpur Railway Co. Limited vs Ruttanki Ramji and Others) (1). That decision of the Judicial Committee was relied upon by this Court in Seth Thawardas Pherumal vs The Union of India(2). The same view was expressed by this Court in Union of India vs A. L. Rallia Ram(3). In the absence of any usage or contract, express or implied, or of any provision of law to justify the award of interest, it is not possible to award interest by way of damages. Also see (1) 65 I.A. 66. (2) (3) ; 591 recent decision of this Court in Union of India vs Watkins Mayer & Company(1). In view of these decisions no interest could be awarded for the period upto the date of the suit and the decretal amount in the two suits will have to be reduced by the amount of such interest awarded. We now come to the additional point raised in Ishwara Nand 's suit. It is urged that Ishwara Nand 's consignment had reached Morar Road Railway Station on February 23, 1943 and Ishwara Nand should have taken delivery within three days which is the period during which under the rules no wharfage is charged. The responsibility of the railway is Linder section 72 of the Indian Railways Act (No. 9 of 1890) and that responsibility cannot be cut down by any rule. It may be that the railway may not charge wharfage for three days and it is expected that a consignee would take away the goods within three days. It is however urged that the railway is a carrier and its responsibility as a carrier must come to an end within a reasonable time after the arrival of goods at the destination, and thereafter there can be no responsibility whatsoever of the railway. It is further urged that three days during which the railway keeps goods without charging wharfage should be taken as reasonable time when its responsibility as a carrier ends; thereafter it has no responsibility whatsoever. Under section 7 2 of the Indian Railways Act, the responsibility of the railway administra tion for the loss, destruction or deterioration of animals or goods delivered to the administration to be carried by railway is, subject to the other provisions of the Act, that of a bailee under sections 151, 152 and 161 of the Indian Contract Act, (No. 9 of 1872). This responsibility in our opinion continues until terminated in accordance with sections 55 and 56 of the Railways Act. The railway has framed rules in this connection which lay down that unclaimed goods are kept at the railway station to which they are booked for a period of not less than one month during which time the notice prescribed under section 56 of the Railways Act is issued if the owner of the goods or person entitled thereto is known. If delivery is not taken within this period, the unclaimed goods are sent to the unclaimed goods office where if they are not of dangerous, perishable or offensive character they are retained in the possession of the railway. Thereafter public sales by auction can be held of unclaimed goods which remain with the railway for over six months. This being the position under the rules so far as the application of sections 55 and 56 is concerned, it follows that even though the res ponsibility of the railway as a carrier may come to an end within (1) C. As. 43 & 44 of 1963 decided on March 10, 1965. 592 a reasonable time after the goods have reached the destinationstation, its responsibility as a warehouseman continues and that responsibility is also the same as that of a bailee. Reference in this connection is made to Chapman vs The Great Western Railway Company(1). In that case what had happened was that certain goods had arrived on March 24 and 25. On the morning of March 27, a fire accidentally broke out and the goods were consumed by the fire. The consignor then sued the railway as common carrier on the ground that liability still subsisted when the goods were destroyed. The question in that case was whether the liability of the railways was still as common carrier, on March 27 or was that of warehousemen. The question was of importance in English law, for a common carrier under the English law is an insurer and is liable for the loss even though not arising from any default on his part while a warehouseman was only liable where there was want of proper care. It was held that the liability as a common carrier would come to end not immediately on the arrival of the goods at the destination but sometime must elapse between the arrival of goods and its delivery. This interval how ever must be reasonable and it was held in that case that reasonable time had elapsed when the fire broke out on March 27 and therefore the railway 's responsibility was not that of a carrier but only as warehouseman. The position of law in India is slightly different from that in England, for here the railway is only a bailee in the absence of any special contract and it is only when it is proved that the railway did not take such care of the goods as a man of ordinary prudence would under similar circumstance take of his own goods of the same bulk, quality and value as the goods bailed, that the railway 's responsibility arises. A warehouseman is also a bailee and therefore the railway will continue to be a warehouseman under the bailment, even if its responsibility as a carrier after the lapse of a reasonable time after arrival of goods at the destination comes to an end. But in both cases the responsibility in India is the same, namely, that of a bailee, and negligence has to be proved. In view of the rules to which we have already referred it is clear that the railway 's responsibility as a warehouseman continues even if its responsibility as a carrier comes to end after the lapse of a reasonable time after the arrival of goods at the destination. The responsibility as a warehouseman can only come to end in the manner provided by sections 55 and 56 of the Railways Act and the Rules which have been framed and to which we have already referred as to the disposal of unclaimed goods. In the present case under the Rules the goods had to remain at Morar (1) (1880) 5Q.B.D.278. 593 Road Railway Station for a period of one month after their arrival there and Ishwara Nand came to take delivery of them on March 10 well within that period. It may be that as he did not come within three days he has to pay wharfage or what is called demurrage in railway parlance, but the responsibility of the railway as a warehouseman certainly continued till March 10 when Ishwara Nand went to take delivery of the goods. As it has been found that there had been negligence within the meaning of sections 151 and 152 of the Indian Contract Act, the railway would be liable to make good the loss caused by the fire. The appeals therefore fail with this modification that the decretal amount would be reduced by the amount of interest awarded for the period before the date of each suit. The rest of the decree will stand. The appellant will pay the respondents ' costs one set of hearing fee. In CA 603/63 interest will be calculated from 6 8 62 in accordance with that order. Appeal dismissed and decree modified.

IN-Abs

There was a fire at a railway station in which certain goods& were destroyed. Two suits were filed claiming damage for loss of goods by 'the said fire. The first suit was filed by a factory which claimed to be owner of the goods as consignor. The other suit was filed by a consignee in whose favour the relevant documents were endorsed. The Union of India resisted both the suits. The trial court and the High Court concurrently held that the loss was due to the negligence of the Railways. The1 Union of India appealed to this Court. It was contended on behalf of the appellant : (1) The suits, as filed, were not maintainable. (2) In the first suit delivery of the goods had been made to the consignee and the High Court 's finding to the contrary was wrong. (3) Damages should have been awarded at the contract rat . and not the market rate (4) Interest could not be awarded for the period before the suit on the amount of damages decreed. (5) In the second suit notice had been given to the consignee that the consignment had arrived on February 23, 1943. The consignee did not come to remove the goods till March 8, 1943 when the fire broke out, and the liability of the railway administration ceased after the lapse of reasonable time after arrival of the consignment at the railway administration. HELD: (i) A railway receipt is a document of title to goods covered by it, but from that alone it does not follow, where the consignor and consignee are different, that the consignee is necessarily the owner of the goods and the consignor in such circumstances can never he the owner of the goods. It is quite possible for the consignor to retain title in the goods himself while the consignment is booked in the name of another person. In the first of the present suits the risk remained with the consignor according to the agreement of the parties, and it had not been proved that the consignor had parted with the property in the goods. Therefore the suit by he consignor was maintainable. [586 D H] In the second suit the railway receipt was endorsed in the consignees favour and the courts below had concurrently found that the consignee was the owner of the goods. There could therefore be no dispute about the maintainability of the second suit also. [588 D] (ii) Though there was a token delivery to the consignee in the first suit as appeared from the fact that the railway receipt had been sur 581 rendered and the delivery book had been signed, there was no redelivery by the railway to the consignee. The goods had not been unloaded and were still under the control and custody of the railway and the evidence of the Assistant Goods Clerk was that his permission had still to be taken before the goods could be actually removed by the consignee. The contention in the first suit that the delivery had been made to the consignee before March 8, 1943 therefore, in the peculiar circumstances of the case had to fail. [590 C D] (iii) The High Court rightly calculated the damages on the basis of the on March 8 as it is well settled that it is the market price at lest be damage occurred which is the measure of the damages to be awarded. [590 E F] (iv) In the absence of any usage or contract, express or implied, or of any provision of law to justify the award of interest it is not possible to award interest by way of damages and therefore no interest should have been awarded in the present two suits up to the date of filing of either suit. [591 A] Bengal Nagpur Railway Co. Ltd. vs Ruttanji Rant, & Ors. 65 I.A. 66, Seth Thawardas Pherumal vs Union of India , Union of India v, A. L. Rallia Ram; , and Union of India V. Watkins Mayer & Co. C. As. Nos. 43 and 44 of 1963 dt. 10 3 65, relied on. (v) Under section 72 of the Indian Railways Act, the responsibility of the railway administration for the loss, destruction or deterioration of animals or goods delivered to the administration to be carried by railway is, subject to the other provisions of the Act, that of a bailee under sections 151, 152 and 161 of the Indian Contract Act. The responsibility continues until terminated in accordance with sq. 55 and 56 of the Railways Act. [591 E] It may be that under the Rules framed by the Railways goods are kept at the railway station of destination only for one month, and that demurrage has to be paid after three days of reaching the destination. But the responsibility of the railway is under section 72 of the Indian Railways Act and it cannot be cut down by any rule. Even if owing to the said Rules the responsibility of the railway as a carrier ends within a reasonable time after the goods have reached their destination station, its responsibility as a warehouseman continues and that responsibility L. the same at that of a bailee. [592 E H] Chapman vs The Great Western Railway Company, (1880)5 Q.B.D. 278, distinguished. In the present case the consignee (in the second suit) claimed the goods well within the period of one month mentioned in the rules. The fact that he was liable to pay demurrage because he did not take delivery of the goods within three days did not relieve the railway of its respon sibility as warehouseman. As it had been concurrently found by the courts below that there had been negligence by the railway within the meaning of sections 151 and 152 of the Indian Contract Act, the railway war, liable to make good the loss caused by the fire. [593 A B]

Appeal No. 577 of 1963. Appeal from the judgment and order dated March 8, 1961 of the Bombay High Court in Special Civil Application No. 1120 of 1960. section G. Patwardhan and M. section Gupta, for the appellant. N. D. Karkhanis J. B. Dadachanji and A. G. Ratnaparkhi or respondent No. 1. 620 The Judgment of the Court was delivered by Wanchoo, J. The appellant took on lease two survey numbers from the respondent, Sholapur Borough Municipality on April 1, 1946 for a period of three years. The land is situate within the municipal limits. About November 8, 1946, the Bombay Tenancy Act, No. 29 of 1939 (hereinafter referred to as the 1939 Act) was applied to this area and section 3 A of that Act provided that every tenant shall on the expiry of one year from the date of the coming into force of the Bombay Tenancy (Amendment) Act, (No. XXVI of 1946) be deemed to be a protected tenant unless his landlord has within the said period made an application to the Mamlatdar for a declaration that the tenant was not a protected one. The respondent did not file a suit within one year and therefore the appellant claimed to have become a protected tenant under the 1939 Act. The 1939 Act was repeated in 1948 by the Bombay Tenancy and Agricultural Lands Act, No. LXVII of 1948 (hereinafter referred to as the 1948 Act). Section 31 of the 1948 Act provided that for the purposes of this Act, a person shall be recognised to be a protected tenant if such person had been deemed to be a protected tenant under section 3, 3 A or 4 of the 1939 Act. Ordinarily, therefore, the appellant would have become a protected tenant under this section of the 1948 Act, if he had become a protected tenant under the 1939Act. But section 88 of the 1948 Act inter alia provided that nothing in the foregoing provisions of the 1948 Act shall apply to lands held on lease from a local authority. Therefore if section 88 prevailed over section 31, the appellant would not be entitled to the benefit of section 31 and could not claim to be a protected tenant under this section. The appellant however relied on section 89(2) of the 1948 Act which provided for the repeal of the 1939 Act except for sections 3, 3 A and 4 which continued as modified in Sch. 1 of the 1948 Act. That sub section provided that nothing in the 1948 Act or any repeal effected thereby shall save as expressly provided in this Act affect or be deemed to affect any right, title, interest, obligation or liability already acquired, accrued or incurred before the commencement of the 1948 Act. In the present case the respondent gave notice to the appel lant on May 2, 1955 terminating his tenancy with effect from March 31, 1956. Subsequently the respondent filed suit No. 42 of 1957 for obtaining possession of the lands and for certain other reliefs. It was held in that suit that the respondent could not get possession of the lands as the appellant was entitled to the benefit of the 1948 Act and consequently the respondent 's suit for pos 621 session was dismissed. The respondent then appealed to the, District Court. During the pendency of that appeal the appellant made an application on September 8, 1958 for a declaration that he was a protected tenant of the lands and also for fixig rent under the provisions of the Tenancy Act. Further in the appeal filed in the District Court a compromise was arrived at by which the order dismissing the respondent 's suit for possession was set aside and the suit was remanded to the trial court with the direction that the suit be stayed and disposed of after the decision by the Mamlatdar. The compromise provided that if the appellant was finally held to be tenant by the authorities under the 1948Act the suit for possession would be dismissed. It also provided that if the decision in the proceedings under the, Tenancy Act went against the appellant, the suit for possession would be decreed. The Mamlatdar held that the appellant was a tenant and gave him a declaration under section 70 (b) of the 1948 Act. The respondent then went in appeal to the Collector, and the Collector decided that the Mamlatdar had no jurisdiction to decide whether the appellant was a tenant. The appellant then went in revision to the Bombay Revenue Tribunal. The tribunal held, in view of the amendments that had been made in the 1948 Act by the Amendment Act of 1956 by which section 88 B was introduced in the 1948 Act, that the revenue court had jurisdiction to decide whether the appellant was a tenant. Finally it remanded the matter to the Collector for decision on the question whether the appellant was a tenant or a protected tenant on the merits. The respondent had contended before the Revenue Tribunal that the appellant could not have the status of a tenant or protected tenant in view of the provisions of the 1948 Act and therefore the respondent filed a petition under article 227 of the Constitution of India before the Bombay High Court. Its contention before the High Court was that in view of section 88 of the 1948 Act the appellant could not claim to be a protected tenant within the meaning of section 31 of that Act and therefore the order of the Collector was right. It was also contended that section 88 B would not apply to the case of the appellant as it came into force on April 1, 1956 after the determination of the tenancy of the appellant by notice. Both these contention were accepted by the High Court and the order of the Revenue Tribunal was set aside and in its place the order of the Collector dismissing the appellant 's application was restored. Thereupon there was an application to the High Court under article 133 (1) (c) of the Constitution and 622. the High Court certified the case as a fit one for appeal to this Court; and that is how the matter has come up before us. This appeal was first heard by a Division Bench of this Court and has been referred to a larger Bench in view of certain difficulties relating to the interpretation and inter relation of sections 31, 88 and 89 of the 1948 Act and in view of two decisions of this Court in Sakharam vs Manikchand(1) and Mohanlal Chunilal Kothari vs Tribhovan Haribhai Tamboli (2). It has been contended on behalf of the appellant that Sakharam 's case(1) fully covers the present case and on the basis of that case the appeal should be allowed. On the other hand, learned counsel for the respondent contends that on the ratio of Mohanlal Chunilal Kothari 's case, (2 ) the appellant should be held to be not a protected tenant and that considerations which applied to the interpretation of section 8 8 ( 1 ) (d) equally applied to the interpretation of section 88 (1) (a), (b) and (c). It is further urged on behalf of the respondent that in view of the latter decision, the decision in Sakharam 's case(1) no longer holds the field. Before we refer to the two decisions on which reliance has been placed on either side, we may refer to the various provisions of the 1948 Act as they were before the amendments of 1956 to decide the inter relation of sections 31, 88 and 89 of the said Act. It may be mentioned at the outset that section 89 which repealed the 1939 Act did not repeal sections 3, 3 A and 4 of that Act. These three sections continued as modified in Sch. 1 of the 1948 Act. A perusal of the modified sections in Sch. I shows that protected tenants were only those tenants who satisfied these three sections in the Schedule and that no new protected tenants could come into existence under the 1948 Act after it came into force from December 28, 1948. Further it seems to us obvious that sections 3, 3 A and 4 of the 1939 Act were not repealed and were continued as modified in Sch. 1 of the 1948 Act for the purpose of section 31 of the 1948 Act. That section provided as follows: "For the purposes of this Act, a person shall be recognised to be a protected tenant if such person has been deemed to be a protected tenant under section 3, 3 A or 4 of the Bombay Tenancy Act, 1939. " These sections (sections 3, 3 A and 4) which were continued in a modified form in Sch. 1 of the 1948 Act were so continued only for the purpose of section 31 of the Act and it was not possible for (1) ; (2) ; 623 any tenant to be a protected tenant under the 1948 Act unless he was a protected tenant under the 1939 Act. The 1948 Act thus recogaised such tenants as protected tenants who were protected tenants under the 1939 Act and even though sections 3, 3 A and 4 of the, 1939 Act were continued as modified by Sch. 1 of the 1948Act The modifications were such as showed that only those tenants would remain protected tenants under the 1948 Act who were protected under the 1939 Act. Then we come to section 88 of the 1948 Act which is in these terms : " (1). Nothing in the foregoing provisions of this Act shall apply . (a) to lands held on lease from the Crown, a local authority or a co operative society; (b). . . . . . " Section 8 8 lays down that nothing in the foregoing provisions of the 1948 Act shall apply inter alia to lands held on lease from a local authority, like a municipality. As section 31 is one of the foregoing sections it will not apply to lands held on lease from a local authority. In other words, so far as lands held on lease from a local authority are concerned, there will be no provision in the 1948 Act for recognising a protected tenant even if a person was a protected tenant under the 1939 Act. It is only section 31 which gave recognition to the status of a protected tenant under the 1948 Act and if that provision is in effect omitted so far as lands held on lease from a local authority are concerned, no such lessee can claim to be a protected tenant. In effect therefore the legislature which had conferred by the 1939 Act the status of a protected tenant on certain persons was taking away that status by enacting section 88 in the 1948 Act so far as inter alia aessees from a local authority were concerned. If matters had stood only on sq. 31 and 88 there would have been no difficulty in holding that the status of protected tenant conferred by the 1939 Act was taken away from certain lessees including lessees from a local authority under section 88 of the 1948Act. But the appellant relies on section 89(2)(b) and contends that provision saved his rights as a protected tenant. We have already mentioned that section 89(1) repealed inter alia the 1939 Act except for sections 3, 3 A and 4 which continued in a modified form 624 in Sch. 1 of Section 89 (2) (b) on which reliance is placed by the appellant is in these terms : "But nothing in this Act or any repeal effected thereby (a) (b) shall, save as expressly provided in this Act, affect or be deemed to affect. (i) any right, title, interest, obligation or liability already acquired, accrued or incurred before the commencement of this Act, or (ii) The argument is that the interest acquired as a protected tenant under the 1939 Act would thus not be affected in view of this provision in the 1948 Act; and it is this argument which we have to examine. Now we have already mentioned that sections 3, 3 A and 4 relating to protected tenants in the 1939 Act were not repealed by the 1948 Act. Therefore that Part of section 89 (2) (b) which says that any repeal effected thereby shall not affect or be deemed to affect any high title, interest etc. will not apply. But learned counsel for the appellant relies on the words "nothing in this Act shall affect or be deemed to affect any right, title or interest. " and his argument is that even though there might not have been a repeal of sections 3, 3 A and 4 of the 1939 Act by the 1948 Act section 89 (2) would still protect him because it provides that nothing in the 1948 Act shall affect or be deemed to affect any right title, interest etc. acquired before its commencement. But the clause "nothing in this Act shall affect or be deemed to affect" is qualified by the words "save as expressly provided in this Act". Therefore, if there is an express provision in the 1948 Act, that will prevail over any right, title or interest etc. acquired before its commencement. Further the words "save as expressly provided in this Act" also qualify the words "any repeal affected thereby" and even in the case of repe al of the provisions of the 1939 Act if there is an express provisi on which affects any title, right or interest acquired before the commencement of the 1948 Act that will also not be saved. The narrow question then is whether there is anything express in the 1948 Act which takes away the interest of a protected tenant acquired before its commencement. If there is any such express provision then section 89(2) (b) would be of no help to the appellant. The contention of the respondent is that section 88 is an 625 express provision and in the face of this express provision the interest acquired as a protected tenant under the 1939 Act cannot prevail. On the other hand, it is urged on behalf of the appellant that section 88 does not in express terms lay down that the interest acquired by a protected tenant under the 1939 Act is being taken away and therefore it should not be treated as an express provision. Now there is no doubt that section 88 when it lays down inter alia that nothing in the foregoing provisions of the 1948 Act shall apply to lands held on lease from a 'local authority, it is an express provision which takes out such leases from the purview of sections 1 to 87 of the 1948 Act. One of the provisions therefore which must be treated as non existent where lands are given on lease by a local authority is in section 31. The only provision in the 1948 Act which recognised protected tenants is section 31 and if that section is to be treated as non existent so far as lands held on lease from a local authority are concerned, it follows that there can be no protected tenants of lands held on lease from a local authority under the 1948 Act. It is true that section 88 does not in so many words say that the interest of a protected tenant acquired under the 1939 Act is being taken away so, far as lands held on lease from a local authority are concerned; but the effect of the express provision contained in section 88 (1 ) (a) clearly is that section 31 must be treated as non existent so far as lands held on lease from a local authority are concerned and in effect therefore section 8 8 (1) (a) must be hold to say that there will be no protection under the 1948 Act for protected tenants under the 1939 Act so far as lands held on lease from a local authority are concerned. It was not necessary that the express provision should in so many words say that there will be no protected tenants after the 1948 Act came into force with respect to lands held on lease from a local authority. The intention from the express words of section 88(1) is clearly the same and therefore there is no difficulty in holding that there is an express provision in the 1948 Act which lays down that there will be no protected tenant of lands held on lease from a local authority. In view of this express provision contained in section 88(1) (a), the appellant cannot claim the benefit of section 31 ; nor can it be said that his interest as protected tenant is saved by section 89 (2) (b). This in our opinion is the plain effect of the provisions contained in section 31, section 88 and section 89(2)(b) of the 1948 Act. It now remains to refer to Sakharam 's case(1) which certainly supports the contention raised on behalf of the appellant. With respect, it seems to us that more has been read in that case in section 89 (2) (b) than is justified under the terms of that provision. It was (1) ; 626 also observed in that case that the provisions of section 88 were entirely prospective and were not intended in any sense to be of confiscatory character, and that section 89(2) (b) showed clearly an intention to conserve such rights as were acquired before the commencement of 1948 Act. It seems to us, with respect, that in that case full effect was not given to the words "save as expressly provided in this Act" appearing in section 89(2) (b), and it was also not noticed that there could be no new protected tenants after the 1948 Act came into force and that section 88(1) in its application to leases from local authorities will have no meaning unless it affected the rights contained in section 3 1. It may very well be that the legislature thought that the status of a protected tenant should not be given to lessees of lands from a local authority, in the interest of the general, public and therefore took away that interest by the express enactment of section 8 8 ( 1 ) (a). The status was after all conferred by the 1939 Act and we can see no difficulty in its being taken away by the 1948Act. It may be mentioned that section 8 8 (1) (a) applies not only to lands held on lease from a local authority but also to lands held on lease from the State, and one can visualise situations where the State may need to get back lands leased by it in public interest. It must therefore have been in the interest of the public that a provision like section 88 (1) (a) was made with respect to lessees from a local authority or the State who had become protected tenants under the 1939 Act. We are supported in the view we have taken by the decision of this Court in Mohanlal Chunilal Kothari 's case(1) where it was held that section 88 (1)(d) would be rendered completely ineffective if it was not to be applied retrospectively, though it was added in that case that it did not affect the rights acquired under the earlier Act of 1939. The latter observation, with respect, does not seem to be correct for their could be no new protected tenants under the 1948 Act to whom even section 88 (1) (d) could have applied. Further if a notification under section 88 (1) (d) could be retrospective upto the date of the 1948 Act we can see no reason on the language of this section to hold that it was retrospective only upto 1948 and would not affect the rights acquired tinder the 1939 Act. We may also mention that by an oversight 'it was stated in Mohanlal Chunilal Kothari 's case(1) that clauses (a), (b) and (c) of section 88(1) apply to things as they were at the date of the enactment. It is however clear that clauses (a), (b) and (c) of section 88 (1) also apply in the future. For example cl. (a) lays down that nothing in the foregoing provisions of this Act shall apply to lands (1) ; 6 2 7 held on lease from Government, a local authority or co operative society. The words "held on lease" in this clause are only descriptive of the lands and are not confined to lands held on lease on the date the Act came into force; they equally apply to lands ceased before or after the Act became law and the distinction that was drawn in Mohanlal Chunilal Kothari 's case(1) that cls. (a), (b) and (c) applied to things as they were at the date of the enactment whereas cl. (d) was with respect to future, with respect, does not appear to be correct. In this view of the matter, the view taken by the High Court in the judgment under appeal that section 88 (1) (a) is an express provision which takes away the interest of protected tenants under the 1939 Act must be held to be correct. So far as the argument based on section 88 B is concerned, it IS enough to say that we agree with the High Court that section will not protect the appellant for his lease had already been determined before the section came into force on April 1, 1956. Besides it may be observed that section 4 A which takes the place of section 31 after the amendment of 1956 still does not apply to a case of lands held on lease from a local authority and therefore what we have said with respect to section 31 will equally apply to section 4 A and the appellant cannot claim the benefit of that section and contend that he is a protected tenant under the 1939 Act and therefore cannot be ejected. In the result we dismiss the appeal but in the circumstances of this case we order the parties to bear their own costs. Appeal dismissed.

IN-Abs

In 1946, the Bombay Tenancy Act, 1939 was applied to the respondent Muncipality. Section 3A of the Act provided that every tenant shall, on the expiry of one year from the date of the coming into force of the Amendment Act of 1946, be deemed to be a protected tenant, unless the landlord had within that period, applied to the Mamlatdar for a declaration that the tenant was not protected. The appellant had taken on lease lands from the respondent, and since the respondents had not applied lo the Mamltdar, the appellant became a protected tenant. 'Me 1939 Act was repealed by the Bombay Tenancy and Agricultural Lands Act, 1948, Section 31 of the 1948 Act provided that a person shall be recognised to be a protected tenant, if such person had been deemed to be a protected tenant under section 3, 3A or 4 of the 1939 Act. But section 88 of the same Act provided that nothing in the foregoing provisions of the 1948 Act shall apply to lands held on lease from a local authority, while section 89(2) provided for the repeal of the 1939 Act except for sections 3, 3A and 4 which continued, is modified in Schedule 1 of the 1948 Act, and also provided. that nothing in the 1948 Act, or any repeal effected thereby shall save as expressly provided in the 1948 Act, affect or be deemed to affect any right, title, interest, obligation or liability, acquired, accrued or incurred before the commencement of the 1948 Act. In 1955 the respondent gave notice to the appellant terminating his tenancy and subsequently filed a suit for possession. Pending proceedings arising from the suit, the appellant applied to the Mamlatdar for a declaration that he was a protected tenant of the lads, and the Mamlatdar gave the declaration. On appeal, the Collector held that the Mamlatdar had no jurisdiction to decide the question. The Bombay Revenue Tribunal, in revision, set aside the Collector 's order, and the High Court, in application under article 227, restored Collector 's order. In his appeal to this Court , the appellant contended that (i) the interest acquired by him as a protected tenant under the 1939 Act would not be affected in view of the provisions of section 89(2) in the 1948 Act; and (ii) the Mamlatdar had jurisdiction to decide the question under section 88B. HELD : (i) The plain effect of the provisions contained in sections 31, 88 and 89(2) (b), is that, in view of the express provision contained in section 88 (1) (a). the appellant could not claim the benefit of section 31, nor could it be said that his interest as protected tenant was saved by section 89(2) (b), [625 G] Sections 3, 3A and 4 of the 1939 Act were continued in a modified form in Schedule 1 of the 1949 Act only for the purpose of a. 11 of the 1948 Act and a perusal of those shows that protected tenants were only those tenants who satisfied these three sections and that no 619 new protected tenants could come into existence under the 1948 Act As & 31 is one of the foregoing provisions referred to in section 88, it win not apply to lands held on lease from a local authority. In effect, therfore, legislature, which had conferred by the 1939 Act, the status of a protected tenant on certain persons, took away that status by enacting section 88 in the 1948 Act so far as lessees from a local authority were concerned. As far as section 89(2)(b) is concerned, that part of it which says that any repeal effected thereby shall not affect or be deemed to affect any right etc., will not help the appellant because sections 3, 3A and 4 of the 1939 Act were not repealed by the 1948 Act. Nor will the clause "nothing in this Act, shall affect or be deemed to affect" apply, if there is an express provision in the 1948 Act which takes away the interest of a protected tenant acquired before its commencement, because of the qualifying words, "save as expressly provided in this Act", in the section. Section 88, of the 1948 Act is such an express provision which takes out leases from a local authority from the purview of sections 1 of 87 of the 1948 Act, including section 31 which is the only provision in the 1948 Act which recognised protected tenants. It follows that there can be no protected tenants of lands held on lease from a local authority under the 1948 Act. It is true that section 88 does not in so many words say that the interest of a protected tenant acquired under the 1939 Act is being taken away so far as lands held on lease from a local authority are concerned; but in effect, section 88(1)(a) must be held to say that there will be no protection under the 1948 Act for protected tenants under the 1939 Act, so far as lands held on lease from a local authority are concerned. The intention from the express words of section 88(1) (a) is also the same. It may very well be that the legislature thought that the status of a protected tenant should not be given to lessees of lands from a local authority, in the interest of the general public, and therefore, took away that status which was conferred by the 1939 Act. by the express enactment of section 88(1)(a). [622 F G; 623 E G; 624 F G; 625 B F; 616 C] Further the appellant could not claim the benefit of section 4A, which takes the place of section 31 after the amendment of 1956, and claim that he is a protected tenant, because, section 4A also does not apply to a case of lands held on lease from a local authority. [627 D E] Sakharam vs Manikchand, ; , disapproved. Mohanlal Chunilal Kothari vs Tribhovan Haribhal Tamboli, ; , explained. (ii) Section 88B will not protect the appellant, for his lease had already been determined before the section came into force on 1st April 1956 [627 C D]

Appeal No. 890 of 1964. Appeal by special leave from the order dated February 19, 1963 of the Foreign Exchange Regulation Appellate Board, New Delhi, in Appeal No. 52 of 1959. A. V. Viswanatha Sastri and J. P. Goyal, for the appellant. Bishan Narain, R. N. Sachthey and B. R. G. K. Achar, for the respondents. 652 The Judgment of the Court was delivered by Subba Rao, J. This appeal by special leave raises the short question whether the appellant contravened the provisions of subss. (1) and (3) of section 4 of the Foreign Exchange Regulation Act, 1947 (VII of 1947), hereinafter called the Act. During the years 1951 to 1956 the appellant, Ram Rattan Gupta, visited the Far Eastern countries after obtaining the necessary foreign exchange from the Government of India. During that period the appellant opened current accounts with the Chartered Bank of India, Australia and China, at Singapur, Hong Kong, Osaka and Tokyo, without the general or the special permission of the Reserve Bank of India. In the different branches of the said Bank he deposited the unspent part of the foreign exchange given to him. The balance of the said deposits made at the various branches of the Bank was pound 40 (sterling). The appellant received payments from those accounts even after he returned to India. The Director, Enforcement Directorate, Foreign Exchange Regulation Act, took proceedings against the appellant under section 19(2) of the Act and, after making the necessary enquiries, found him guilty of contravening the provisions of sub sections (1) and (3) of section 4 of the Act and imposed on him a penalty of Rs. 2,500/ under section 23 (1) (a) of the Act. On appeal, the Foreign Exchange Regulation Appellate Board agreed with the view expressed by the Director of Enforcement that the appellant contravened the said provisions of the Act and dismissed the appeal. The appellant has preferred the present appeal, by special leave, against the judgment of the said Board. Mr. A. V. Viswanatha Sastri, learned counsel for the appellant, contended that the total of the amounts kept by the appellant in the branches of the said Bank was a negligible balance of the free quota of foreign exchange given to him, that there was no relationship of creditor and debtor between the appellant and the Bank in regard to the said amounts, that the free quota of foreign exchange was given to him without any condition imposed thereon, and that on the said facts there was no scope to invoke either sub section (1) or sub section (3) of section 4 of the Act. We will read the relevant provisions of the Act in order to appreciate the said contentions. Section 4. Restrictions on dealing in foreign exchange (1) Except with the previous general or special permission of the Reserve Bank , no person other than an authorised dealer shall in India and no 653 person resident in India other than an authorised dealer shall outside India, buy or borrow from, or sell or lend to, or exchange with, any person not being an authorised dealer, any foreign exchange. (2). . . . . (3) Where any foreign exchange is acquired by any person other than an authorised dealer for any particular purpose, or where any person has been permitted conditionally to acquire foreign exchange, the said person shall not use the foreign exchange so acquired otherwise than for that purpose or, as the case may be, fail to comply with any condition to which the permission granted to him is subject, and where any foreign exchange so acquired cannot be so used or, as the case may be, the conditions cannot be complied with, the said person shall without delay sell the foreign exchange to an authorised dealer. Section 4(1) of the Act was amended in the year 1964, but we are concerned only with the said sub section as it stood before the amendment. To attract section 4(1), a resident in India other than an authorised dealer shall have lent to any person, not being an authorised dealer, any foreign exchange. It is not disputed that the said Bank was not an "authorised dealer" within the meaning of the said sub section. If so, the only question is whether the appellant, in depositing the said amounts in the current account ', of the various branches of the said Bank, lent the said amounts to the Bank. What is the meaning of the expression "lend" ? It means in the ordinary parlance to deliver to another a thing for use on condition that the thing lent shall be returned with or without compensation for the use made of it by the person to whom it was lent. The subject matter of lending may also be money. Though a loan contracted creates a debt, there may be a debt created without contracting a loan; in other words, the concept of debt is more comprehensive than that of loan. It is settled law 'that tie relationship between a banker and a customer qua moneys deposited in the bank is that of debtor and creditor. This Court in Shanti Prasad fain vs Director of Enforcement(1) restated the principle in the following words: (1) ; , 324. 6 54 .lm15 "Now the law is well settled that when moneys are deposited in a Bank, the relationship that is constituted between the banker lad the customer is one of debtor and creditor and not trustee and beneficiary. The banker is entitled to use the monies without being called upon to account for such user, his only liability being to return the amount in accordance with the terms agreed upon between him and the customer. " But this Court qualified that general statement with the remark that "there might be special arrangement under which a Banker might be constituted a trustee, but apart from such an arrangement, his position qua Banker is that of a debtor, and not trustee". It follows that ordinarily a deposit of an amount in the current account of a bank creates a debt; but it need not necessarily involve a contract of loan. Whether a deposit amounts to a loan depends upon the terms of the contract whereunder the deposit is made. In the context of section 4(1) of the Act, can it be said that the depositor in the present case lent money to the Bank ? When a person deposits free currency in the current account of a bank in order to draw it whenever necessary for the _purpose for which it was given, it is not possible to hold that he enter% into a contract of loan with the bank within the meaning of section 4(1) of the Act. He only deposits the money for the said purpose. Should we hold that such a transaction is a loan, many an honest man who deposits foreign exchange in a bank in a foreign country where he is staying for a short time to draw it for his requirements will be committing an offence. That could not have been the intention of the Legislature. If such a deposit is not a loan, it follows that the appellant cannot be held to have contravened the provisions of section 4(1) of the Act. The next question is whether the appellant was guilty of contravening the provisions of sub section (3) of section 4 of the Act. Under the relevant part of that sub section, where any foreign exchange was acquired by a person for any particular purpose and where the foreign exchange so acquired cannot be used, the said person shall without delay sell the foreign exchange to an authorised dealer. Admittedly the foreign exchange was acquired by the appellant for the purpose of meeting his expenditure during his tour of the Far East countries; but he had not used the entire foreign exchange for the said purpose. If so, under the express provisions of sub section (3) of section 4 of the Act, he should have without delay sold the same to an authorised dealer. Instead he kept the 655 said amount in the current account of the various branches of the Bank for a number of years. The tribunals were, therefore, right in holding that the appellant had contravened the said provision. No other point arises for consideration in this appeal. As we find the appellant guilty of an offence only under sub section (3) of section 4 of the Act, we think the ends of justice will be met if a fine of Rs. 1,000 only is imposed on him. We, therefore, reduce the fine of Rs. 2,500/ imposed on the appellant to Rs. 1,000/ . In the result, the order of the Foreign Exchange Regulation Appellate Board is modified accordingly. The parties will bear their own costs. Order modified.

IN-Abs

The appellant visited Far Eastern countries during the years 1951 to 1956 after obtaining from the Government of India the necessary foreign exchange for the purpose of meeting his expenditure during his tour. He deposited the unspent part of the foreign exchange in different branches of the Chartered Bank in those countries. The Director, Enforcement Directorate, Foreign Exchange Regulation Act, took proceedings under section 19(2) of the Act and found him guilty of contravening section 4(1) and (3). The order was confirmed on appeal by the Foreign Exchange Regulation Appellate Board. In the appeal to this Court. HELD : (i) The appellant could not be held to have contravened the provisions of section 4(1). [654 F] To attract section 4(1), the appellant should have lent foreign exchange to a person who was not an authorised dealer. The Bank, no doubt, was not an authorised dealer, but, when a person deposits free currency in the current account of a bank in order to draw it whenever necessary for the purpose for which it was given, it is not possible to hold that he enters into a contract of loan with the bank, within the meaning of section 4((1). Ordinarily a deposit of an amount in the current account of a bank creates a debt, but it need not necessarily involve a contract of loan. [653 E; 654 C. D E] Shanti Prasad Jain vs Director of Enforcement, , followed. (ii) The tribunals were right in holding that the appellant had contravened section 4(3). [655 A] Under this sub section, the appellant should have sold the unspent foreign exchange to an authorised dealer without delay. Since he had kept the amount in the current account of various branches of the Bank for a number of years, he was guilty of contravening the provision. [654 H; 655 A]

XXIX of 1950. Application under article 32 of the Constitution of India for a writ of certiorari and prohibition. The facts are stated in the judgment. N.C. Chatterjee (B. Banerji, with him) for the petition er. M.C. Setalvad, Attorney General for India, (section M. Sikri, with him) for the respondent. May 26. The judgment of Kania C.J., Patanjali Sastri, Mehr Chand Mahajan, Mukherjea and Das JJ. was deliv ered by Patanjali Sastri J. Fazl Ali J. delivered a separate dissenting judgment, 607 PATANJALI SASTRI J. This is an application under arti cle 32 of the Constitution praying for the issue of writs of certiorari and prohibition to the respondent, the Chief Commissioner of Delhi, with a view to examine the legality of and quash the order made by him in regard to an English weekly of Delhi called the Organizer of which the first applicant is the printer and publisher, and the second is the editor. On 2nd March, 1950, the respondent, in exercise of powers conferred on him by section 7 (1) (c) of the East Punjab Public Safety Act, 1949, which has been extended to the Delhi Province and is hereinafter referred to as the impugned Act, issued the following order: "Whereas the Chief Commissioner, Delhi, is satisfied that Organizer, an English weekly of Delhi, has been pub lishing highly objectionable matter constituting a threat to public law and order and that action as is hereinafter mentioned is necessary for the purpose of preventing or combating activities prejudicial to the public safety or the maintenance of public order. Now there more in exercise of the powers conferred by section 7 (1)(c) of the East Punjab Public Safety Act, 1949, as extended to the Delhi Province, I, Shankar Prasad, Chief Commissioner, Delhi, do by this order require you Shri Brij Bhushan, Printer and Publisher and Shri K.R. Halkani, Editor of the aforesaid paper to submit for scrutiny, in duplicate, before publication, till further orders, all communal matter and news and views about Pakistan including photographs and cartoons other than those derived from official sources or supplied by the news agencies, viz., Press Trust of India, United Press of India and United Press of America to the Provincial Press Officer, or in his absence, to Superintend ent of Press Branch at his office at 5, Alipur Road, Civil Lines, Delhi, between the hours 10 a.m. and 5 p.m. on work ing days. " The only point argued before us relates to the consti tutional validity of section 7 (1) (c) of the impugned Act which, as appears from its preamble, was passed "to provide special measures to ensure public safety 608 and maintenance of public order. " Section 7 (1) (c) under which the aforesaid order purports to have been made reads (so far as material here) as follows : "The Provincial Government or any authority authorised by it in this behalf if satisfied that such action is neces sary for the purpose of preventing or combating any activity prejudicial to the public safety or the maintenance of public order may, by order in writing addressed to a print er, publisher or editor require that any matter relating to a particular subject or class of subjects shall before publication be submitted for scrutiny." The petitioners claim that this provision infringes the fundamental right to the freedom of speech and expression conferred upon them by article 19 (1) (a) of the Constitu tion inasmuch as it authorises the imposition of a restric tion on the publication of the journal which is not justi fied under clause (2) of that article. There can be little doubt that the imposition of precen sorship on a journal is a restriction on the liberty of the press which is an essential part of the right to freedom of speech and expression declared by article 19 (1)(a). As pointed out by Blackstone in his Commentaries "the liberty of the press consists in laying no previous restraint upon publications, and not in freedom from censure for criminal matter when published. Every freeman has an undoubted right to lay what sentiments he pleases before the public; to forbid this, is to destroy the freedom of the press(1). The only question therefore is whether section 7 (1)(c) which authorises the imposition of such a restriction falls within the reservation of clause (2) of article 19. As this question turns on considerations which are essentially the same as those on which our decision in Petition No. XVI of 1950(2) was based, our judgment in that case concludes the present case also. Accordingly, for the reasons indicated in that judgment, we allow this petition and hereby quash the impugned order of the Chief Commission er, Delhi, dated the 2nd March, 1950. (1) Blackstone 's Commentaries, Vol. IV, pp. 151, 152. (2) Romesh Thappar vs The State of Madras, supra p. 594. 609 FAZL ALI J. The question raised in this case relates to the validity of 'section 7 (1) (c) of the East Punjab Public Safety Act, 1949 (as extended to the Province of Delhi), which runs as follows : "The Provincial Government or any authority authorised by it in this behalf if satisfied that such action is neces sary for the purpose of preventing or combating any activity prejudicial to the public safety or the maintenance of public order, may, by order in writing addressed to a print er, publisher or editor * * * * (c) require that any matter relating to a particular subject or class of subjects shall before publication be submitted for scrutiny;" It should be noted that the provisions of sub clause (c) arc not in general terms but are confined to a "particular subject or class of subjects," and that having regard to the context in which these words are used, they must be connect ed with "public safety or the maintenance of public order. " The petitioners, on whose behalf this provision is assailed, are respectively the printer (and publisher) and editor of an English weekly of Delhi called Organizer, and they pray for the issue of writs of certiorari and prohibi tion to the Chief Commissioner, Delhi, with a view ' 'to examine and review the legality" of and "restrain the operation" of and "quash" the order made by him on the 2nd March, 1950, under the impugned section, directing them "to submit for scrutiny, in duplicate, before publication, till further orders, all communal matter and news and views about Pakistan including photographs and cartoons other than those derived from official sources or supplied by the news agencies. " The order in question recites among other things that the Chief Commissioner is satisfied that the Organizer has been publishing highly objectionable matter constituting a threat to public law and order and that action to which reference has been made is necessary for the purpose of preventing or combating activities 610 prejudicial to the public safety or the maintenance of public order. It is contended on behalf of the petitioners that notwithstanding these recitals the order complained against is liable to be quashed, because it amounts to an infringement of the right of freedom of speech and expres sion guaranteed by article 19 (1) (a) of the Constitution. Articles 19 (1) (a) and (2), which are to be read together, run as follows : 19, (1) All citizens shall have the right (a) to freedom of speech and expression; * * * * (2) Nothing in sub clause (a) of clause (1) shall affect the operation of any existing law in so far as it relates to, or prevent the State from making any law relating to, libel, slander, defamation, contempt of Court or any matter which offends against decency or morality or which under mines the security of, or tends to overthrow, the State. " It is contended that section 7 (1)(c) of the Act, under which the impugned order has been made, cannot be saved by clause (2) of article 19 of the Constitution, because it does not relate to any matter which undermines the security of, or tends to overthrow, the State. Thus the main ground of attack is that the impugned law is an infringement of a fundamental right and is not saved by the so called saving clause to which reference has been made. There can be no doubt that to impose pre censorship on a journal, such as has been ordered by the Chief Commissioner in this case, is a restriction on the liberty of the press which is included in the right to freedom of speech and expression guaranteed by article 19 (1) (a) of the Constitu tion, and the only question which we have therefore to decide is whether clause (2) of article 19 stands in the way of the petitioners. The East Punjab Public Safety Act, 1949, of which sec tion 7 is a part, was passed by the Provincial Legislature in exercise of the power conferred upon it by section 100 of the Government of India Act, 1935, is 611 read with Entry 1 of List II of the Seventh Schedule to that Act, which includes among other matters "public order." This expression in the general sense may be construed to have reference to the maintenance of what is generally known as law and order in the Province, and this is confirmed by the words which follow it in Entry 1 of List II and which have been put within brackets, viz., "but not including the use of naval, military or air forces or any other armed forces of the Union in aid of the civil power. " It is clear that anything which affects public tranquillity within the State or the Province will also affect public order and the State Legislature is therefore competent to frame laws on matters relating to public tranquillity and public order. It was not disputed that under the Government of India Act, 1935 (under, which the impugned Act was passed) it was the responsibility of each Province to deal with all internal disorders whatever their magnitude may be and to preserve public tranquillity and order within the Province. At this stage, it will be convenient to consider the meaning of another expression "public safety" which is used throughout the impugned Act and which is also chosen by its framers for its title. This expression, though it has been variously used in different contexts (see the Indian Penal Code, Ch. XIV), has now acquired a well recognized meaning in relation to an Act like the impugned Act, as a result of a long course of legislative practice, and may be taken to denote safety or security of the State. In this sense, it was used in the Defence of the Realm (Consolidation) Act, 1914, as well as the Defence of India Act. and this is how it was judicially interpreted in Rex vs Governor of Wormwood Scrubbs Prison(1). The headnote of this case runs as follows "By section 1 of the Defence of the Realm (Consolidation) Act, 1914, power was given to His Majesty in Council 'during the continuance of the present war to issue regula tions . for securing the public safety and the de fence of the realm ' : (1) 612 Held, that the regulations thereby authorized were not limited to regulations for the protection of the country against foreign enemies, but included regulations designed for the prevention of internal disorder and rebellion " Thus 'public order ' and 'public safety ' are allied matters, but, in order to appreciate how they stand in relation to each other, it seems best to direct our atten tion to the opposite concepts which we may, for convenience of reference, respectively label as 'public disorder ' and 'public unsafety '. If 'public safety ' is, as we have seen, equivalent to 'security of the State ', what I have designat ed as public unsafety may be regarded as equivalent to 'insecurity of the State '. When we approach the matter in this way, we find that while 'public disorder ' iS wide enough to cover a small riot or an affray and other cases where peace is disturbed by, or affects, a small group of persons, 'public unsafety ' (or insecurity of the State), will usually be connected with serious internal disorders and such disturbances of public tranquillity as jeopardize the security of the State. In order to understand the scope of the Act, it will be necessary to note that in the Act "maintenance of public order" always occurs in juxtaposition with "public safety", and the Act itself is called "The East Punjab Public Safety Act. " The prominence thus given to 'public safety ' strongly suggests that the Act was intended to deal with serious cases of public disorder which affect public safety or the security of the State, or cases in which, owing to some kind of emergency or a grave situation having arisen, even public disorders of comparatively small dimensions may have far reaching effects on the security of the State. It is to be noted that the Act purports to provide "special measures to ensure public safety and maintenance of public order. " The words "special measures" are rather important, because they show that the Act was not intended for ordinary cases or ordinary situations. The ordinary cases are provided for by the Penal Code and other existing laws, and 613 with these the Act which purports to be of a temporary Act is not apparently concerned. It is concerned with special measures which would presumably be required for special cases or special situations. Once this important fact is grasped and the Act is viewed in the proper perspective, much of the confusion which has been created in the course of the arguments will disappear. The line of argument advanced on behalf of the petitioners is that since the Act has been passed in exercise of the power granted by the expression "public order," used in the Government of India Act, which is a general term of wide import, and since it purports to provide for the maintenance of public order, its provisions are intended or are liable to be used for all cases of breaches of public order, be they small or insig nificant breaches or those of a grave or serious nature. This is, in my opinion, approaching the case from a wrong angle. The Act is a piece of special legislation providing for special measures and the central idea dominating it is public safety and maintenance of public order in a situation requiring special measures. It was argued that "public safety" and "maintenance of public order" are used in the Act disjunctively and they are separated by the word "or" and not "and," and therefore we cannot rule out the possibility of the Act providing for ordinary as well as serious cases of disturbance of public order and tranquillity. This, as I have already indicated, is a somewhat narrow and technical approach to the question. In construing the Act, we must try to get at its aim and purpose, and before the Act is declared to be invalid, we must see whether it is capable of being so construed as to bear a reasonable meaning consistent with its validity. We therefore cannot ignore the fact that preservation of public safety is the dominant purpose of the Act and that it is a special Act providing for special measures and therefore it should not be confused with an Act which is applicable to ordinary situations and to any and every trivial case of breach of public order, 614 In my opinion, the word "or" is used here not so much to separate two wholly different concepts as to show that they are closely allied concepts and can be used almost inter changeably in the context. I think that "public order" may well be paraphrased in the context as public tranquillity and the words "public safety" and "public order" may be read as equivalent to "security of the State" and "public tran quillity. " I will now advert once more to clause (2) of article 19 and state what I consider to be the reason for inserting in it the words "matter which undermines the security of, or tends to overthrow, the State. " It is well recognized in all systems of law that the right to freedom of speech and expression or freedom of the press means that any person may write or say what he pleases so long as he does not infringe the law relating to libel or slander or to blasphemous, obscene or seditious words or writings: (see Halsbury 's Laws of England, 2nd Edition, Vol. II, page 391). This is prac tically what has been said in clause (2) of article 19, with this difference only that instead of using the words "law relating to sedition," the framers of the Constitution have used the words mentioned above. It is interesting to note that sedition was mentioned in the original draft of the Constitution, but subsequently that word was dropped and the words which I have quoted were inserted. I think it is not difficult to discover the reason for this change and I shall briefly state in my own words what I consider it to be. The latest pronouncement by the highest Indian tribunal as to the law of sedition is to be found in Niharendu Dutt Majumdar vs The King(1) which has been quoted again and again and in which Gwyer C.J. laid down that public disor der, or the reasonable anticipation or likelihood of public disorder, is the gist of the offence of sedition and "the acts or words complained of must either incite to disorder or (1) 615 must be such as to satisfy reasonable men that is their intention or tendency. " For this view, the learned Chief Justice relied on certain observations of Fitzgerald J. in R.v. Sullivan (1), and he also added that he was content to adopt "the words of that learned Judge which are to be found in every book dealing with this branch of the criminal law. " There is no doubt that what Gwyer C.J. has stated in that case represents the view of a number of Judges and authors and was also the view of Sir James Stephen in regard to whom Cave J. in his charge to the jury in a case relating to the law of sedition JR. vs Burns(2) said : "The law upon the question of what is seditious and what is not is to be found stated very clearly in a book by Stephen J. who has undoubtedly a greater knowledge of crimi nal law than any other Judge who sits upon the Bench, and what he has said upon the subject of sedition was submitted to the other Judges, who sometime back were engaged with him in drafting a criminal code, and upon their report the Commissioners say that his statement of law appears to them to be stated accurately as it exists at present. " The decision of Gwyer C.J. held the field for several years until the Privy Council, dealing with a case under the Defence of India Rules, expressed the view in King Emper or vs Sadhashiv Narayan Bhalerao(3) that the test laid down by the learned Chief Justice was not applicable in India where the offence under section 124A of the Indian Penal Code should be construed with reference to the words used in that section. They also added : "The word 'sedition ' does not occur either in section 124A or in the Rule; it is only found as a marginal note to section 124A, and is not an operative part of the section, but merely provides the name by which the crime defined in the section will be known. (1) [1868] 11 Cox c.c. 44. (2) [1886] 16 cox 855. (8) 74 I.A. 616 There can be no justification for restricting the contents of the section by the marginal note. In England there is no statutory definition of sedition; its meaning and content have been laid down in many decisions, some of which are referred to by the Chief Justice, but these decisions are not relevant when you have a statutory definition of that which is termed sedition as we have in the present case. Their Lordships are unable to find anything in the language of either section 124A or the Rule which could suggest that 'the acts or words complained of must either incite to disorder or must be such as to satisfy reasonable men that this is their intention or tendency. " The framers of the Constitution must have therefore found themselves face to face with the dilemma as to whether the word "sedition" should be used in article 19 (2) and if it was to be used in what sense it was to be used. On the one hand, they must have had before their mind the very widely accepted view supported by numerous authorities that sedition was essentially an offence against public tranquil lity and was connected in some way or other with public disorder; and, on the other hand, there was the pronounce ment of the Judicial Committee that sedition as defined in the Indian Penal Code did not necessarily imply any inten tion or tendency to incite disorder. In these circumstances, it is not surprising that they decided not to use the word "sedition" in clause (2) but used the more general words which cover sedition and everything else which makes sedi tion such a serious offence. That sedition does undermine the security of the State is a matter which cannot admit of much doubt. That it undermines the security of the State usually through the medium of public disorder is also a matter on which eminent Judges and jurists are agreed. Therefore it is difficult to hold that public disorder or disturbance of public tranquillity are not matters which undermine the security of the State. 617 It will not be out of place to quote here the following passage from Stephen 's Criminal Law of England (Vol. II, pp. 242 and 243) : "It often happens, however, that the public peace is disturbed by offences which without tending to the subver sion of the existing political constitution practically subvert the authority of the Government over a greater or less local area for a longer or shorter time. The Bristol riots in 1832 and the Gordon riots in 1780 are instances of this kind. No definite line can be drawn between insur rections of this sort, ordinary riots, and unlawful assem blies. The difference between a meeting stormy enough to cause well founded fear of a breach of the peace, and a civil war the result of which may determine the course of a nation 's history for centuries, is a difference of degree. Unlawful assemblies, riots, insurrections, rebellions, levying of war, are offences which run into each other, and are not capable of being marked off by perfectly definite boundaries, All of them have in common one feature, namely, that the normal tranquillity of a civilised society is in each of the cases mentioned disturbed either by actual force or at least by the show and threat of it. Another class of offences against public tranquillity are those in which no actual force is either employed or displayed, but in which steps are taken tending to cause it. These are the formation of secret societies, seditious conspiracies, libels or words spoken. Under these two heads all offences against the internal public tranquillity of the State may be arranged. " This passage brings out two matters with remarkable clarity. It shows firstly that sedition is essentially an offence against public tranquillity and secondly that broadly speaking there are two classes of offences against public tranquillity: (a) those accompanied by violence including disorders which 618 affect tranquillity of a considerable number of persons or an extensive local area, and (b) those not accompanied by violence but tending to cause it, such as seditious utter ances, seditious conspiracies, etc. Both these classes of offences are such as will undermine the security of the State or tend to overthrow it if left unchecked, and, as I have tried to point out, there is a good deal of authorita tive opinion in favour of the view that the gravity ascribed to sedition is due to the fact that it tends to seriously affect the tranquillity and security of the State. In principle, then, it would not have been logical to refer to sedition in clause (2) of article 19 and omit matters which are no less grave and which have equal potentiality for undermining the security of the State. It appears that the framers of the Constitution preferred to adopt the logical course and have used the more general and basic words which are apt to cover sedition as well as other matters which are as detrimental to the security of the State as sedition. If the Act is to be viewed as I have suggested, it is difficult to hold that section 7 (1) (c) falls outside the ambit of article 19 (2). That clause clearly states that nothing in clause (1) (a) shall affect the operation of any existing law relating to any matter which undermines the security of, or tends to overthrow, the State. I have tried to show that public disorders and disturbance of public tranquillity do undermine the security of the State and if the Act is a law aimed at preventing such disorders, it fulfils the requirement of the Constitution. It is needless to add that the word "State" has been defined in article 12 of the Constitution to include "the Government and Parlia ment of India and the Government and Legislature of each of the States and all local or other authorities within the territory of India or under the control of the Government of India. " I find that section 20 of the impugned Act provides that the Provincial Government may by notification 619 declare that the whole or any part of the Province as may be specified in the notification is a dangerously disturbed area. This provision has some bearing on the aim and object of the Act, and we cannot overlook it when considering its scope. It may be incidentally mentioned that we have been informed that, under this section, Delhi Province has been notified to be a "dangerously disturbed area. " It must be recognized that freedom of speech and expres sion is one of the most valuable rights guaranteed to a citizen by the Constitution and should be jealously guard ed by the Courts. It must also be recognised that free political discussion is essential for the proper functioning of a democratic government, and the tendency of modern jurists is to deprecate censorship though they all agree that "liberty of the press" is not to be confused with its "licentiousness. " But the Constitution itself has pre scribed certain limits for the exercise of the freedom of speech and expression and this Court is only called upon to see whether a particular case comes within those limits. In my opinion, the law which is impugned is fully saved by article 19 (2) and if it cannot be successfully assailed it is not possible to grant the remedy which the petitioners are seeking here. As has been stated already, the order which is impugned in this case recites that the weekly Organizer has been publishing highly objectionable matter constituting a threat to public law and order" and that the action which it is proposed to take against the petitioners "is necessary for the purpose of preventing or combating activities prejudi cial to public safety or the maintenance of public order. " These facts are supported by an affidavit sworn by the Home Secretary to the Chief Commissioner, who also states among other things that the order in question was passed by the Chief Commissioner in consultation with the Central Press Advisory Committee, which is an independent body elected by the All India Newspaper Editors ' Conference and is composed of 620 representatives of some of the leading papers such as The Hindustan Times, Statesman, etc. In my opinion, there can be no doubt that the Chief Commissioner has purported to act in this case within the sphere within which he is permitted to act under the law, and it is beyond the power of this Court to grant the reliefs claimed by the petitioners. In these circumstances, I would dismiss the petitioners ' application. Petition allowed. Agent for the petitioners: Ganpat Rai.

IN-Abs

Section 7 (1) (c) of the East Punjab Public Safety Act, 1949, as extended to the Province of Delhi provided that "the Provincial Government or any authority authorised by it in this behalf, if satisfied that such action is necessary for preventing or combating any activity prejudicial to the public safety or the maintenance of public order may, by order in writing addressed to a a printer, publisher or editor require that any matter relating to a 606 particular subject or class of subjects shall before publi cation be submitted for scrutiny. " Held per KANIA C. J., PATANJALI SASTRI, MEHR CHAND MAHAJAN, MUKHERJEA and DAS JJ. (FAZL ALI J. dissenting) that inasmuch as section 7 (1) (c) authorised the imposition of restrictions on the fundamental right of freedom of speech and expression guaranteed by article 19 (1.) (a) of the Consti tution for the purpose of preventing activities prejudicial to public safety and maintenance of public order, it was not a law relating to "a matter which undermines the security of or tends to overthrow, the State" within the meaning of the saving provisions contained in cl. (9.) of article 19 and was therefore unconstitutional and void. Romesh Thappar vs The State ([1950] S.C.R. 594) followed. Per FAZL ALI J. The expression "public safety" has, as a result of a long course of legislative practice acquired a well recognised meaning and may be taken to denote safety or security of the State; and, though the expression "public order" is wide enough to cover small disturbances of the peace which do not jeopardise the security of the State yet, prominence given in the Act to public safety, the fact that the Act is a piece of special legislation providing for special measures and the aim and scope of the Act in gener al, show that preservation of public safety is the dominant purpose of the Act, and "public order" may well be para phrased in the context as "public tranquillity". Public disorders which disturb the public tranquillity do undermine the security of the State and as section 7 (1) (c) of the im pugned Act is aimed at preventing such disorders it is difficult to hold that it falls outside the ambit of article 19 (2) of the Constitution. Held by the Full Court. The imposition of pre censor ship on a journal is a restriction on the liberty of the press which is an essential part of the right to freedom of speech and expression declared by article 19 (1)(a). Black stone 's Commentaries referred to.