5. From the above statement of facts, it is clear that the assessee, after been incorporated, was engaged in setting up the plant. During the accounting year relevant to the assessment year concerned herein, it was still at the stage of construction. It had borrowed certain funds for setting up the plant. A part of the funds which was not immediately required was kept in deposit upon which some interest was earned. On the amounts borrowed by it, it was paying interest at a much larger figure. It, therefore, sought to deduct the interest earned by it from out of the interest paid by it and capitalise the balance interest paid. The Income-tax Officer, however, did not agree with this method. He treated the interest earned in a sum of Rs. 15,092 as "income from other sources" and held that no amount is deductible therefrom as none was expended wholly and exclusively for earning the said interest amount. In short, he treated the said amount as income of the said year refusing to allow it to be deducted from the interest paid by the assessee during the relevant assessment year. On appeal, the Commissioner (Appeals) affirmed the order of the Income-tax Officer. On further appeal, however, the Tribunal took a different view. Relying upon the notes prepared by the Institute of Chartered Accountants of India on "A study on expenditure during construction period", the Tribunal held that the proper method to be adopted in such cases is not to treat the said interest amount of Rs. 15,092 as income from other sources, but to treat the same, as also the interest paid by the assessee on the loans obtained by it, as one single account. This is what the Tribunal said :


Commissioner Of Income-Tax vs Nagarjuna Steels Ltd. on 18 November, 1987

"It is, therefore, clear that on the facts of the present case, receipts and payments of interest have to be considered as in a single account. Therefore, the receipts of interest would go to reduce the payment of interest. As we have already pointed out, interest payments were to the extent of Rs. 7,94,389 and interest receipts were to the extent of Rs. 15,092. Thus the amount of interest to be considered for capitalisation purposes would, on the facts of this case, be only the net figure, i.e., Rs. 7,79,297 (Rs. 7,94,389 less Rs. 15,092), because this is the net interest outgoing...."
 6. Questioning the correctness of the said finding, the Revenue asked for and obtained reference of the above two questions.
 7. Sri. M. Suryanarayana Murthy, learned standing counsel for Revenue, contended that the Tribunal was in treating the receipts and payments of interest as a single account. He submitted that the interest received on deposits is income from other sources, chargeable under section 56 of the Act, and that it cannot also be said that the interest paid by the assessee was an expenditure incurred wholly and exclusively for earning this interest amount. For that reason, there is no question of setting off these two amounts against one another, he argued.


8. On the facts found in this case, we are of the opinion that the reasoning adopted by the Tribunal is the correct one and is a realistic assessment of the situation. The company was incorporated for setting up a plant and to manufacture certain products and no deal in them. During the relevant accounting year, it was in the course of setting up the plant. For that purpose, it had borrowed certain amounts upon which it was paying interest. All the amount borrowed was not needed at once. A portion of the said amount was kept in deposit, until needed. Those deposits earned some interest. Would it be realistic to say that that is income from source, or would it be more appropriate to adopt the approach indicated by the Institute of Chartered Accountants of India in their "A Study on Expenditure during construction period"; relied upon by the Tribunal ? The following portions of the said study are relevant for the present purpose :
 "Pars 8 to 8.3 :
 8. Income during the construction or pre-production period :
 8.1 : It is possible that a new project may earn some income from miscellaneous sources during its construction or pre-production period. Such income may be earned by way of share transfer fees or by way of interest from the temporary investment of surplus funds prior to their utilisation for capital for capital or other expenditure.


8.2 : Where a particular item of miscellaneous income can be directly related to a particular item of expenditure, it is suggested that it should be set of against the expenditure, and the net amount of the expenditure should be treated in the appropriate manner depending upon its nature, in accordance with the various principles suggested above. For example, income from share transfer fees may be set off against the various corporate expenses incurred during the construction or pre-production period and income, if any, from lending transport vehicles to outsiders may be set off against the expenditure incurred in operating and maintaining those vehicles. Similarly, interest income earned during the construction period may be off-set against interest expenses incurred during this period...".


9. In our opinion, the course indicated by the institute of Chartered Accountants of India is the proper one to be adopted in such circumstances. Indeed, a somewhat similar case had arisen before us in R.C. No. 134 of 1982, deposited of on April 2, 1987 (CIT v. Andhra Farm Chemicals Corporation ). There, a subsidiary company had borrowed certain funds from its parent company. The subsidiary company, the assessee was in its formative period. With a view not to keep the borrowed money idle, it deposited a part of the same with the holding company, which was not mature only by December 31, 1974. Meanwhile, the assessee required some amount and, accordingly, it borrowed a small amount from the parent company on which it was made to pay interest. The interest earned by the assessee-company on deposits made by it was Rs. 34,865 and the interest paid by it on the loan taken from the parent company was Rs. 13,464. Accordingly, the assessee returned an income of Rs. 21,401 representing the difference between both the figures. An identical contention was urged by the Revenue that the interest earned is "income from other sources" and since the interest paid by the assessee was not an expenditure incurred for earning the said interest amount, the said amount cannot be set off under section 57 of the Act. We noted the finding of the Tribunal recorded in that case, viz., that though for the purpose of accountancy, there appeared to be two independent transactions, i.e., one of deposit by the assessee with the parent company, and the other the transaction of borrowing of the money by the assessee from the parent company, they, in truth and reality, constituted one single transaction. On the basis of the said finding, we upheld the assessee's contention that the income received by the assessee in that case is only Rs.


the assessee's contention that the income received by the assessee in that case is only Rs. 21,401, and nothing more. We observed that having regard to the finding of the Tribunal, section 57(iii) has no application, nor can the said interest income be treated as "income from other sources." Of course, we did not think it necessary to go into the concept of "real income" which concept too was employed by the Tribunal in that case to sustain its finding.


10. We are of the opinion that though the particular situation of a subsidiary company and parent company does not obtain in this case, the same principle must be applied.


11. Learned standing counsel for the Revenue relied upon a few decisons which we may refer now. In CIT v. New Central Jute Mills Co. Ltd. , the assessee-company was setting up a heavy chemical plant, and during the accounting year relevant to the assessment year 1958-59, the plant was under erection. Earlier in 1955, the assessee had obtained from the Government of Uttar Pradesh a loan of Rs. 145 crores for the purpose of setting up the said plant. The amounts received towards loan were kept in deposit with a bank till their transfer or utilisation for the stipulated purpose. During the relevant assessment year, the assessee earned a sum of Rs. 1,75,471 as interest on such deposits, while during the same period it paid to the Government U.P. a sum of Rs. 9,54,588 as interest. The assessee, since it was an existing company and already engaged in another business, claimed the difference between the interest earned and interest paid, i.e., Rs. 7,79,117, as revenue expenditure, which was disallowed by the Income-tax Officer on the ground that the expenditure had nothing to do with the existing business of the assessee, but related to a separate unit altogether which was still under erection. The Appellate Commissioner affirmed the said view. On further appeal, the Tribunal held that the amount paid by way of interest should be allowed as a deduction as against interest earned from the bank in terms of the loan; that as the assessee had to keep the money in deposit with the bank segregated its other business assets, the interest earned from the deposits would be "income from other sources", and that by adopting a different method of assessment, the Income-tax Officer could not defeat the assessee's claim. It held that the interest paid by the assessee towards loan to the Government should be set off against the interest earned by the assessee on its


towards loan to the Government should be set off against the interest earned by the assessee on its deposits. This view was questioned by the Revenue before the Calcutta High Court. The High Court held that though the assessee had succeeded in establishing that there was some connection or nexus between the interest paid to the Government and the interest earned from the bank, it was not established that it was one of the terms of the agreement of loan that the amount borrowed shall be kept in a deposit account which would earn interest in the interim period. Accordingly, it held that the interest so earned had to be treated as "income from other sources", and since the interest paid by the assessee cannot be said to be an expenditure incurred solely and wholly for the purpose of earning the said interest, it cannot be set off against the interest earned. It held further that the interest paid to the Government had to be capitalised and added to the cost of the plant which was being set up, and that the interest amount has to be taxed as income from other sources. In our opinion, the high Court has taken too narrow a view of the situation. Just because it was not proved that the loan agreement stipulated that the amounts borrowed should be kept in deposit earning interest, treating the said interest as an independent income may not be a proper course. After all, the assessee is not expected to keep the amounts in its own till. It kept them in a bank. Whether the amounts are kept in an account which earns interest or in an account which does not earn interest should not make any difference to the principle, because it was only an interim agreement. Instead of keeping the amounts with itself, the assessee deposited the same with a bank to be drawn and utilized as and when necessary.


12. The next decision cited is of the Bombay High Court in CIT v. United Wire Ropes Ltd. [1980] 121 ITR 762. Here too, the facts were similar; it was founded as a fact that the interest paid on foreign exchange loan and the interest earned on back deposits were not inter-connected or inter-dependent. Accordingly, it was held that under section 57(iii), the interest paid cannot be set off against the interest received. In our opinion, the finding that there was no connection or nexus between the transactions is the distinguishing factor.
 13. Learned standing counsel for the Revenue then relied upon the decision of the Madras High Court in Addl. CIT v. Madras Fertilisers Ltd. [1980] 122 ITR 139. The facts of this case too are again somewhat similar. But there too, a finding was recorded that there was no direct connection between the interest paid and the interest received. This finding again, in our opinion, is a distinguishing factor.


14. On the other hand, learned counsel for the assessee relied upon a decision of the Delhi High Court in Snam Progetti S.P.A. v Addl. CIT [1981] 132 ITR 70. In this case, Snam Progetti, an Italian company carrying on business as engineers and contractors in the filed of petroleum and petro-chemical plant, was engaged in India having huge contracts, each running into millions of dollars, which necessitated the assessee having large liquid funds. Th excess business funds were placed in short-term deposits with the bank and interest income was earned thereon. For the assessment year 1970-71, the assessee incurred a net business loss of Rs. 122 lakhs, but in the next assessment year 1971-72, it earned a profits of Rs. 30 lakhs and interest income of about Rs. 5 lakhs. The assessee sought to carry forward the business loss incurred in the assessment year 1970-71 and set it off against the interest income as well earned in the succeeding assessment year. This was rejected by the Department, whereupon the matter was taken to the High Court by way of a writ petition. The court held that, in the circumstance of the case, even the interest earned on short-term deposits should be deemed as "business income" and not as "income from other sources." It observed that the assessee had not come from Italy to make bank deposits in India but had come to carry on business here and that the said short-term deposits were made in that connection. It, therefore, held that the interest earned is really business income and the losses of the previous assessment year carried forward can be set off against the said interest income as well. In our opinion, the approch adopted by the Delhi High Court in the facts of the case before it can also be adopted in the facts of the case before us. In this case too, the object


can also be adopted in the facts of the case before us. In this case too, the object of the assessee was not to earn interest on deposits. The object was to do business. It was in the course of setting up a plant and since all the borrowed money was not needed at once, it put certain moneys in deposits which earned interest. In our opinion, the said interest earned on deposits should be set against the interest paid by the assessee on the loans obtained by it and the balance of the interest amount capitalised.


15. For the above reason, we answer both the questions in the affirmative, i.e., in favour of the assessee and against the Revenue. There shall be no order as to costs.
 16. R.C. No. 8 of 1985 - The question referred in this case is :
 "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was correct in directing that the interest payable to M/s. Andhra Pradesh Industrial Development Corporation is wholly and exclusively incurred for the purpose for earning the interest from short term deposits within the meaning of section 57(iii) ?"
 17. The facts of this case are similar to the facts in R.C. No. 315 of 182. Though the question referred is squarely based upon section 57(iii), the finding of the Tribunal is that during the relevant assessment years, the assessee was engaged in setting up its plant and unit and that part of the amount borrowed by it from Andhra Pradesh Industrial Development Corporation was kept in short-term deposits with banks, whereon it earned some interest. The Tribunal disagreed with the departmental authorities that the said interest income should be treated as "income from other sources." It was of the opinion that the payment of interest of the loans obtained by the assessee and earing of interest on short-term deposits made by it out of the amounts borrowed must be treated as a single transaction. on the above finding, we are of the opinion that the question referred does not really arise, because the interest income earned cannot be treated as income from other sources. As held by us in R.C. No. 315 of 1982, the said interest income has to be set off against the interest paid by the assessee during the relevant assessment years and the balance of interest capitalised.


18. Accordingly, we decline to answer the question referred while affirming the correctness of the decision of the Tribunal. No costs.
 19. R.C. No. 12 of 1985. - The assessee in this case is the A.P. Forest Development Corporation Hyderabad, and the question referred is :
 "Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is justified in holding that interest received on short-term deposits is not assessable under the head 'other source' but would have to be set off against the payment of interest ?"
 20. The facts of this case are again practically similar to the facts in R.C. No. 315 of 1982. For the same reasons as are given hereinbefore, the question referred is answered in the following terms : the interest received by the assessee on short-term deposits is not assessable under the head "other source", but would have to be set off against the interest paid by it, and the balance interest capitalised. No costs.
 21. R.C. No. 79 of 1985. - The question referred in this case is :
 "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is justified in holding that the bank interest received on the deposits during the stage of construction of the factory should be treated as capital receipt and this would go to reduce the actual cost of capital assets ?"


22. Though the question is framed differently, the facts found by the Tribunal are practically the same as the facts in R.C. No. 315 of 1982. Accordingly, for the reasons given in our judgment in R.C. No. 315 of 1982, we hold that the proper course to be adopted in such cases is to set off the interest earned against the interest paid by the assessee and capitalize the balance interest paid.
 23. Accordingly, while we do not wish to express any opinion on the question whether the said interest amount received represents a capital receipt or not, we are of the opinion that it cannot be taxed as income from other sources, and that the proper course to be adopted is the one indicated by us hereinbefore. Accordingly, we re-frame the question in the following terms :
 "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is justified in holding that the bank interest received during the stage of construction of the factory cannot be treated as income from other sources and should go towards reducting the actual cost of capital assets ?"
 24. and answer the question in the affirmative. No costs.


Venkat N.R. Akkineni Occ: ... vs Counsel For The on 12 April, 2013

HON'BLE SRI JUSTICE K.G.SHANKAR
C.M.S.A.Nos.2 of 2009 and batch

dated:12-4-2013

Venkat N.R. Akkineni occ: Managing Director, M/s. Heart Entertainment
Limited,C/o.Annapurna Studios,Road No.2, Jubilee Hills, Hyderabad-500 033; and
another ... Appellants

Appellate Tribunal for Foreign Exchange, Ministry of Law Justice & Company
Affairs, Janpath (Indian Oil) Bhavan, New Delhi 110 001; and 3 others..
Respondents

Counsel for the Appellants: Sri S.Ashok Anand Kumar

Counsel for Respondents 2 &3: Sri P.S.P.Suresh Kumar

<Gist:

>Head Note:

?Cases referred:
1. 2007 (4) ALD 35
2. AIR 1961 SC 1633(1)
3. 1969 (3) SCC 644
4. AIR 1969 SC 460
5. [1984] 146 ITR 341
6. 1969 (2) SCC 627
7. (2006) 5 SCC 361

C.M.S.A.Nos.2 and 3 of 2009


C.M.S.A.Nos.2 and 3 of 2009

Common Judgment:
The two second appeals are directed against the orders of the Appellate Tribunal
for Foreign Exchange, New Delhi (the Appellate Tribunal, for short), in Appeal
Nos.125 of 2006 and 124 of 2006.  A common order was passed by the Appellate
Tribunal on 22-10-2008 in the two appeals.  The appellants herein assailed the
orders of the Appellate Tribunal.  C.M.S.A.No.2 of 2009 is by the Managing
Director of M/s. Heart Entertainment Limited, Hyderabad.  C.M.S.A.No.3 of 2009
is by the Company itself viz., M/s. Heart Entertainment Limited, Hyderabad.  As
the appeals arise common questions, both the appeals are disposed of through
this common judgment.


2. M/s. Heart Entertainment Limited, Hyderabad (the Company, for short),
obtained the approval of the Reserve Bank of India (RBI, for short) for
establishing
a foreign concern in the United States of America
(the USA, for short) in the field of animation software.  The Company invested
US $ 1,75,000 through two instalments in August, 1999.  The Company however did
not follow Regulation 15(iii) of Foreign Exchange Management (Transfer or Issue
of any Foreign Security) Regulations, 2000 (the Regulations, 2000, for short)
vide Notification No.FEMA 19/RB-2000, dated 03-5-2000, as it failed to submit
Annual Performance Report (APR, for short).  The Company also failed to furnish
the information called for under Section 37 of the Foreign Exchange Management
Act, 1999 (FEMA, for short) read with Section 131(1A) of the Income Tax Act,
1961, by failing to furnish information and details such as copies of the
Audited Annual Accounts, APRs, copies of the Share Certificates and other
documents in evidence of investment in foreign equity together with the details
of dividend and royalty.


3. The Company responded to the Notice dated
27-02-2003 through reply dated 30-6-2004 that the Company obtained approval from
the RBI on 02-02-1999 for investment of US $ 1,75,000 in Overseas Joint Venture
in the USA, that the Company held 35% of the equity stock in M/s. Startoons
Incorporation (Inc.,), that the Company has executed works worth US $ 2,27,430
and that the Company received Share Certificate from M/s. Startoons
International LLC (Limited Liability Company), USA, for US $ 1,75,000.  The
Company further claimed that no dividend could be declared as the Company went
into losses on account of slump in animation industry and that the Company had
to close the operations to avoid further losses.  It also claimed that the APRs
could not be furnished to the RBI and that the Company did not provide the
requisite details which was because the accounts of LLC were not compulsorily
auditable under the United States Local Laws.
The Company claimed that it submitted APRs for the years 2000 to 2003 to the RBI
and that the audited financial statements, Directors' Report and Certificate of
Incorporation of the Joint Venture could not be furnished owing to circumstances
beyond the control of the Company.
4. Considering that the Company contravened the provisions of Section 6(3) of
FEMA read with Regulation 15(iii) of the Regulations, 2000 [Foreign Exchange
Management (Transfer or Issue of any Foreign Security) Regulations, 2000 through
Notification No.456(E) (FEMA 19/2000-RB, dated 03-5-2000) of the RBI] and
rendered themselves liable to be proceeded against under


rendered themselves liable to be proceeded against under
Section 13(1) of FEMA, 1999, Show Cause Notice dated 18-02-2005 was issued to
the Company.  Show Cause Notice was also issued to the Managing Director in
terms of Section 42(1) of FEMA holding that the Managing Director was
responsible for the non-compliance of the Rules and Regulations.
5. The Company issued a reply to the Show Cause Notice reiterating their stand
that it obtained approval of the RBI for direct investment of US $ 1,75,000 in
Overseas Joint Venture in the USA with 35% of the equity stock and that as the
Rules and Regulations in the USA did not obligate the Company to undergo audit,
the accounts could not be audited by an Accountant in the USA.  It claimed that
the non-submission of APRs and audited accounts were beyond their control and
that
they were unintentional and without any mala fides.


6. The dispute came up before the Deputy Director, Directorate of Enforcement
(FEMA), Government of India, Bangalore.  Through orders dated 29-9-2005, the
Deputy Director imposed a penalty of Rs.30,00,000/- upon the Company and
Rs.20,00,000/- upon the Managing Director of the Company.  Aggrieved by the
same, the Company preferred Appeal No.124 of 2006 before the Appellate Tribunal
whereas the Managing Director preferred Appeal No.125 of 2006.  After
considering the respective claims, the Appellate Tribunal dismissed the appeals.
Hence, the present civil miscellaneous second appeals.
7. The point for consideration is whether the Company and the Managing Director
are liable for imposition of penalty, and if so at what rate

8. Sri S.Ashok Anand Kumar, learned counsel for the appellants, contended that
there was no violation, much less intentional violation on the part of the
Company and the Managing Director, so much so, neither of them is liable for
prosecution and imposition of penalty.
9. Sri P.S.P.Suresh Kumar, learned counsel representing the Enforcement
Directorate (respondents 2 and 3 herein), on the other hand, submitted that the
appellants did not submit the APRs within the statutory period and never
submitted the audited accounts and that the appellants consequently are liable
to pay penalty under Section 13 of the FEMA, 1999.


MAINTAINABILITY OF C.M.S.As:
        10. The first question that arises for consideration is whether the
appeals are maintainable and if so,
on what basis
        11. The Foreign Exchange Management Act, 1999 (FEMA, for short) was
enacted to replace the Foreign Exchange Regulation Act, 1973 (FERA, for short).
The present civil miscellaneous second appeals are laid under Section 35 of
FEMA.  The relevant portion of Section 35, FEMA reads:
"35. Appeal to High Court
Any person aggrieved by any decision or order of the Appellate Tribunal may file
an appeal to the High Court within sixty days from the date of communication of
the decision or order of the Appellate Tribunal to him on any question of law
arising out of such order:
...............................................................
..............................................................." FEMA thus envisages an appeal from the decision or order of the Appellate Tribunal on any question of law arising out of such an order.

12. The learned counsel for the respondents 2 and 3 contended that there is no substantial question of law involved in these appeals and that these appeals therefore are not maintainable.

13. The learned counsel for the appellants, on the other hand, drew a distinction between Section 100 C.P.C and Section 35, FEMA and submitted that under Section 100 C.P.C., a second appeal would lie on a substantial question of law in the case, whereas under Section 35, FEMA, a second appeal would lie if a question of law arises from such decision or order.


14. The first point to be noticed is that an appeal under Section 35, FEMA, lies if there is a question of law which need not be a substantial question of law. Secondly, question of law need not be relating to the case; it is sufficient if it arises from the decision of the Appellate Tribunal.

15. In Enforcement Directorate, Government of India, Hyd. v. Ilyas Moosa1, a learned single Judge of this Court observed that a civil miscellaneous second appeal would lie on any question of law arising out of an order of the Appellate Tribunal in view of Section 35, FEMA.

16. The learned counsel also pointed out that there is no embargo under Section 35, FEMA that the High Court should formulate substantial question of law and then answer the same as in the case of a second appeal.

17. In a five-Judge Bench judgment of the Supreme Court in Commissioner of Income-tax, Bombay v. Scindia Steam Navigation Co. Ltd.,2 a question arose as to the maintainability of an appeal under Section 66(1) of the Income-tax Act, 1922. The majority considered a four-fold circumstance. The Supreme Court held that when a question is raised before the Appellate Tribunal and is answered by the Appellate Tribunal and a question is raised before the Appellate Tribunal but is not answered by the Appellate Tribunal, such question shall be considered to be points arising out of the order of the Appellate Tribunal. While the Supreme Court further observed that if a question is not raised before the Appellate Tribunal but is answered by the Appellate Tribunal, such a question shall be treated as a question arising out of the order of the Appellate Tribunal; the Supreme Court further held that if a question is neither raised nor answered by the Appellate Tribunal, it would not be considered to be a question arising from the order.


18. The learned counsel for the appellants contended that the issue relating to the violation of the Regulations is indeed considered by the Primary Authority as well as the Appellate Tribunal and that the question relating to the violation of the Regulations by the appellants consequently is a question arising from the order of the Appellate Tribunal.


19. In an appeal arising under the Income Tax Act, 1922, in C.I.T., W.B.III v. K.S.RAMPURIA3, the Supreme Court pointed out:


"4. It is well established that the High Court is not a Court of Appeal in a reference under Section 66 of the Act and it is not open to the High Court in such a reference to embark upon a reappraisal of the evidence and to arrive at findings of fact contrary to those of the Appellate Tribunal. It is the duty of the High Court to confine itself to the facts as found by the Appellate Tribunal and answer the question of law in the setting and context of those facts. It is true that the finding of fact will be defective in law if there is no evidence to support it or if the finding is unreasonable or perverse. But in the hearing of a reference under Section 66 of the Act it is not open to the assessee to challenge such a finding of fact unless he has applied for a reference of the specific question under Section 66(1). In India Cements Ltd. v. Commissioner of Income-tax (60 KTR 52), it was pointed out by this Court that in a reference the High Court must accept the findings of facts reached by the Appellate Tribunal and it is for the party who applied for a reference to challenge those findings of fact, first, by an application under Section 66(1). If the party concerned has failed to file an application under Section 66(1) expressly raising the question about the validity of the findings of fact, he is not entitled to urge before the High Court that the finding was vitiated for any reason. The same view has been expressed by this Court in a later case in Commissioner of Income- tax v. Sri Meenakshi Mills Ltd. (63 ITR 609). We are therefore of the opinion that the High Court was in error in reappraising the evidence before the Appellate Tribunal and in interfering with its finding that the Income-tax Officer had no reason to believe that there was an omission on the part of the assessee to disclose


Officer had no reason to believe that there was an omission on the part of the assessee to disclose fully and truly all the material facts necessary for the assessment."


It was thus held that the High Court should confine itself to the facts as recorded by the Appellate Tribunal and answer the question of law in the setting and context of those facts.


20. In Oriental Investment Co. (P) Ltd., v. Commissioner of Income-tax, Bombay4, in an appeal arising under Sections 66(1) and 66(2) of the Income-tax Act, 1922, the Supreme Court elaborately considered the limits under Section 66 of the Income-tax Act, 1922; in the process of which, the Supreme Court also considered the meaning of question of law. The Supreme Court held that the conclusions of fact arrived at by the Tribunal or the Appellate Tribunal can be challenged on the ground that they are not supported by legal evidence or on the ground that the conclusions are perverse and that the High Court cannot otherwise go into the conclusions of fact arrived at by the Tribunal while exercising its powers under Section 66 of the Income-tax Act, 1922. Admittedly, Section 66 of the Income-tax Act, 1922, is para materia Section 35, FEMA, insofar as it relates to the jurisdiction of the High Court.

21. In J.K.BARUAH v. COMMISSIONER OF INCOME-TAX, ASSAM5, a Division Bench of the Gauhati High Court held:
"If the Tribunal ignores or excludes admissible and relevant evidence and takes into consideration material irrelevant to the inquiry or considers material which is irrelevant to the inquiry, then this court can treat the same as a question of law and deal with the order of the Tribunal accordingly. Similarly, if it appears that the Tribunal has acted without any evidence or upon a view of the facts which could not be reasonably entertained, the question becomes a question of law which is examinable by the High Court."

The Division Bench further observed that a question of law not raised before the Tribunal and not dealt with by the Tribunal in its order cannot be said to have arisen from such an order.


22. The substratum of all these decisions is that if a question is raised by the Appellate Tribunal or answered by the Appellate Tribunal, whether raised or otherwise, it would constitute a question of law for the consideration of the High Court. Further, any perverse conclusion would also constitute a question of law.

23. Sri S.Ashok Anand Kumar, learned counsel for the appellants, pointed out that the Tribunal and the Appellate Tribunal held that the appellants contravened Regulation 15(iii) of Foreign Exchange Management (Transfer or Issue of any Foreign Security) Regulations, 2004 and that when the order of the Appellate Tribunal is challenged, it is tantamount to a question of law, so much so, the appeal is maintainable. Evidently, the Primary Authority held and the Appellate Tribunal confirmed that the appellants violated the terms and conditions of Regulation 15(iii) read with Section 6(3), FEMA. Consequently, the appellants are primarily raising a question of law. As a question of law arises for consideration, these civil miscellaneous second appeals obviously are maintainable.


FULFILLMENT OF THE CONDITIONS BY THE APPELLANTS:
 24. The RBI informed the 2nd respondent that the appellants violated Regulation 15(iii) issued under Section 37, FEMA read with Section 131(1A) of the Income Tax Act, 1922. When the appellants were put to notice through a Show Cause Notice, the Managing Director issued a reply denying that the appellants violated the conditions of sanction of foreign exchange, viz., the non- submission of APRs and Financial Statements, Directors' Report and Certificate of Incorporation for Joint Venture. Holding that the explanation offered was not acceptable, penalty was imposed by the Primary Authority and was confirmed by the Appellate Tribunal. Consequently, the question of law that arises for consideration is whether the appellants violated the terms of Regulation 15(iii) of the Regulations, 2000, under FEMA. Inter alia, the learned counsel for the appellants contended that there was no violation of the Regulations by the appellants and that in fact, Regulation 15(iii) under FEMA is not a statutory Regulation, so much so, the violation of the same cannot attract penal consequences.
 25. Section 47 of the FEMA empowers the RBI to make Regulations under the FEMA. The Regulations in question were made in exercise of the powers under Section 47 of the FEMA as well as under Section 6(3)(a) of the FEMA. Consequently, these Regulations have statutory force. The contention of the learned counsel for the appellants that the Regulations, 2000 are not statutory Regulations and are directory but not mandatory, therefore, cannot be accepted. The consequent contention of the appellants that the violation of Regulation 15(iii) of the Regulations, 2000 does not attract penal consequences also cannot be sustained.


26. In the Show Cause Notice dated 18-02-2005 issued by the Deputy Director of Enforcement, it was alleged that the approval of the RBI for setting up a foreign concern in the USA involving equity investment of US $ 1,75,000 was subject to the conditions that the Company shall submit certified true copies of audited balance-sheet as well as profit and loss account together with the report of the Directors on the working of the Overseas Foreign Concern during the year and a Certificate of Incorporation of the Joint Venture.

The Show Cause Notice further envisages that the Company, which has acquired foreign security, shall submit to the RBI, APR each year in respect of each Joint Venture outside India within 30 days from the date of expiry of the statutory period as prescribed by the respective Laws.

27. It is the contention of the learned counsel for the appellants that no period is prescribed by the USA as the host country for the finalisation of the audited accounts and that the condition that the Company shall submit APR within 30 days, therefore, has become inapplicable. However, Clause (6) of the Sanction Letter issued by the RBI on 02-02-1999 contemplated that the APRs shall be submitted within 6 months from the date of the closing of the relevant accounting period of the host country in the event no statutory period is provided by the foreign country. Consequently, in the event the USA as the host country did not provide for any period, the 30 days' period as envisaged in the Sanction Letter stands enlarged to 6 months before the expiry of which, the APRs and other details like audited accounts should be submitted to the RBI.


28. In response to the Show Cause Notice, the Company issued a reply on 10-3-2005. It was stated by the Company:
"5. HEL could not submit the Annual performance reports to RBI as the JV Company did not provide us the details in time. The Directors/Managers of the JV Company informed us that, as the company being an LLC it is not bound by the local regulations/statutes to get their annual accounts audited by an Accountant. We expressed our inability to submit the audited accounts with RBI, Hyderabad. But the officers concerned were not appreciating the facts of the local regulations and insisting for the audited accounts. We explained them that getting the accounts audited by the Accountant in US would be costly and the JV partners were not inclined to spend that kind of money as the operations were not encouraging. HEL is helpess in this issue as we were unable to impress upon the JV Company to get the accounts audited. The copy of the APR's filed with RBI, Hyderabad up to 31st March 2003 were enclosed."
 The explanation further claimed in para 9:
"The local regulations for LLC's (Limited Liability Company) in US exempts the company from the conduct of regular meetings, annual general meetings, auditing of accounts etc. (The write downloaded from the Website is enclosed duly highlighted the relevant para)."


29. The learned counsel for the appellants contended that in the light of detailed explanation, the appellants cannot be considered to have violated Regulation 15(iii) of the Regulations, 2000 and that the appellants are not liable for levy of any penalty. It is contended by the appellants that it must be shown by the respondents 2 and 3 that the appellants contravened the provisions of the Regulations, 2000 and that there should be an adjudication of the contravention. Section 16, FEMA, deals with the adjudication by the Primary Authority while Section 28, FEMA, provides for the procedure and powers of the Appellate Tribunal. The main case of the appellants is that the host country did not provide for compulsory audit of the accounts of the Limited Companies and that it consequently became impossible for the appellants to submit duly audited accounts. It is the contention of the learned counsel for the appellants that the subsidiary Company in the host country was not willing to submit its accounts for auditing where there is no statutory compulsion for a Limited Company to get its accounts audited; because the subsidiary Company considered it expensive to get its accounts audited.


30. The learned counsel for the appellants, inter alia, contended that the order by the Primary Authority is not supported by reasoning and that the order more or less is imposition of penalty accepting the contentions of the charge. The learned counsel for the appellants contended that the order of the Primary Authority suffers from non-application of the mind. The order was subsequently confirmed by the Special Director as the Appellate Authority. The order of the Primary Authority as well as the Appellate Authority have reasonably explained the circumstances in which the contention of the appellants herein could not be accepted. I regret to disagree with the claim of the learned counsel for the appellants that the orders of the Primary Authority and the Appellate Authority are laconic and deserve to be set aside. On the other hand, both the Authorities have expressed sufficient reasons for rejecting the contentions of the appellants herein. That apart, the learned counsel for the respondents 2 and 3 contended that when the RBI prescribed a condition, the condition is liable to be complied with and that if the appellants failed to establish that it complied with the conditions, the violation as alleged by the Enforcement Directorate has been made out. In fact, the conditions as provided by the Sanction Letter as well as Regulation 15(iii) of the Regulations, 2000, are identical obligating the appellants to comply with the conditions. It therefore is not open for the appellants to turn round now and claim that the conditions cannot be enforced.


31. One of the contentions raised by the learned counsel for the appellants is that the appellants shall fulfill their obligations on the happening of an event and that the appellants cannot be blamed for not fulfilling their obligations since the expected event did not occur. Clause (6) of the Sanction Letter obligated the Company to submit audited balance-sheet as well as the profit and loss account together with the Directors' Report on the working of the Overseas Foreign Concern during the year and also APRs. The only contingency is that the concerned documents ought to be submitted within 30 days after the expiry of the statutory period for the finalisation of the audited annual accounts as applicable in the host country and in the absence of such a period for the host country, within 6 months from the date of the closure of the relevant accounting period of the foreign concern. As there is no provision of compulsory auditing of the accounts of the foreign concern, the appellants should have submitted the documents within 6 months from the date of the closure of the accounting period for the host country. It is not open for the appellants to now claim that the 30 days time as mentioned has become irrelevant, that such a contingent event did not take place, that the condition has not been fulfilled and that there is no obligation on the part of the appellants to submit the documents envisaged by Clause (6) of the Sanction Letter. It is not as though the appellants were not aware about their obligation.

The appellants in fact submitted APRs from 2000 to 2003 belatedly on 25-8-2004. It is not open for the appellants to approbate and reprobate fulfilling one of the conditions of the sanction and failing to comply with the other conditions adamantly taking the stand that the conditions are not applicable.


32. The learned counsel for the appellants, inter alia, submitted that the appellants are minority stakeholders and that the question of mismanagement of the Company by the appellants would not arise.

As rightly submitted by him, mismanagement of the Company is not the claim by the Enforcement Directorate. Their only case is that the Company failed to discharge its obligations and thus exposed itself to penal consequences. In summation, it may be pointed out that the appellants were sanctioned foreign exchange on certain conditions to be fulfilled in future, the failure of which would attract penal consequences. It is evident from the very contentions of the appellants that the appellants did not fulfill those conditions. In the reply to the Show Cause Notice, the appellants failed to explain the circumstances in which they did not fulfill the terms and conditions provided by Clause (6) of the Sanction Letter. Thus, the appellants themselves agree that the terms and conditions stipulated by the Sanction Letter have not been fulfilled by the appellants. The Primary Authority and the Appellate Authority therefore were perfectly justified in holding that the appellants violated the terms and conditions of the allotment and consequently violated Regulation 15(iii) of the Regulations, 2000.

PENALTY:
 33. The Primary Authority imposed penalty of Rs.30,00,000/- against the Company and Rs.20,00,000/- against the Managing Director under Section 42 read with Section 13 of the FEMA.


Section 13(1) of the FEMA reads:
"13. Penalties (1) If any person contravenes any provision of this Act, or contravenes any rule, regulation, notification, direction or order issued in exercise of the powers under this Act, or contravenes any condition subject to which an authorisation is issued by the Reserve Bank, he shall, upon adjudication, be liable to a penalty up to thrice the sum involved in such contravention where such amount is quantifiable, or up to two lakh rupees where the amount is not quantifiable, and where such contravention is a continuing one, further penalty which may extend to five thousand rupees for every day after the first day during which the contravention continues.

 (2) .......................................

 Explanation.-For the purposes of this sub-section, "property" in respect of which contravention has taken place, shall include-
(a) deposits in a bank, where the said property is converted into such deposits;
(b) Indian currency, where the said property is converted into that currency; and
(c) Any other property which has resulted out of the conversion of that property."


34. The contravention of the provisions of the FEMA, the Rules or the Regulations attracts penalty which may extend up to thrice the sum involved in the contravention if the amount can be quantified and up to Rs.2,00,000/- if the amount covered by the contravention cannot be quantified and a further penalty up to an extent of Rs.5,000/- for each day's contravention. Regarding the penalty, as an alternative relief, the learned counsel for the appellants contended that the contravention in this case is not quantifiable and that the appellants consequently can be penalised to a maximum extent of Rs.2,00,000/-.
35. In HINDUSTAN STEEL LTD. v. STATE OF ORISSA6, penalty was sought to be imposed under the provisions of Orissa Sales Tax Act, 1947. The Supreme Court observed:


"8. Under the Act penalty may be imposed for failure to register as a dealer-Section 9(1) read with Section 25(1)(a) of the Act. But the liability to pay penalty does not arise merely upon proof of default in registering as a dealer. An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding, and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute. Those in charge of the affairs of the Company in failing to register the Company as a dealer acted in the honest and genuine belief that the Company was not a dealer. Granting that they erred, no case for imposing penalty was made out."


36. The Supreme Court thus observed that the imposition of the penalty was not automatic and that the penalty is imposed only when a party who failed to register as a dealer was acting deliberately in defiance of law or was guilty of dishonest conduct or was acting in conscious disregard of its obligations.

37. In CHAIRMAN, SEBI v. SHRIRAM MUTUAL FUND7, regarding penalty for contravening provisions of Securities and Exchange Board of India Act, 1992, the Supreme Court observed that the quantum of penalty is discretionary for the authority. The decision of HINDUSTAN STEEL LTD. (6 supra) was indeed considered by this decision but the Court held that to constitute the contravention of the provision obligating the party to penal consequences need not be coupled with mens ria. Obligation envisaged by Regulation 15(iii) of the Regulations, 2000, as well as Clause (6) of the Sanction Letter are mandatory. The failure to comply with them certainly attracts penal consequences under Section 13 of the FEMA. The question consequently is as to the quantum of penalty leviable against the two appellants.


38. The Primary Authority imposed penalty of Rs.30,00,000/- against the Company and Rs.20,00,000/- against the Managing Director of the Company. I may assume for the purpose of quantifying the penalty that the contravention cannot be quantified. The penalty in such a circumstance is not more than Rs.2,00,000/-. The rider however is that the contravener is liable to penalty up to an extent of Rs.5,000/- for each day's contravention. While the Sanction Letter was issued on 02-02-1999, the Company would appear to have utilised the sanction in 1999 itself. Right from the beginning of 2000, the non-filing of the statements and returns envisaged by Clause (6) of the Sanction Letter is a violation attracting penalty of not more than Rs.5,000/- per each day. Even if the penalty is worked out at Rs.2,00,000/- and penalty at the rate of Rs.5,000/- per day is added to the same, it would be much more for the past over 12 years. The Appellate Tribunal confirmed the order on 30-3-2006. I consider that imposition of penalty at Rs.2,00,000/- and working out additional penalty at Rs.5,000/- per day for over 5 years from 2000 onwards is far less than Rs.30,00,000/-. The Primary Authority as well as the Appellate Authority would appear to be in fact sympathetic with the case of the appellants in imposing penalty of Rs.30,00,000/- against the Company and Rs.20,00,000/- against the Managing Director of the Company. The penalty imposed is quite reasonable and does not warrant interference. The penalty as imposed by the Primary Authority and confirmed by the Appellate Authority deserves to be confirmed.


penalty as imposed by the Primary Authority and confirmed by the Appellate Authority deserves to be confirmed. CONCLUSION:


39. For various reasons mentioned, the appeals are found to be devoid of merits and are accordingly dismissed. There shall be no order as to costs.


__________________ K.G.SHANKAR, J.
12th April, 2013.

The learned counsel for the appellants orally sought the permission of the Court to move the Supreme Court under Article 132 of the Constitution of India. I do not find any substantial question of law that is involved in the case. Hence, the oral request for permission to appeal to the Supreme Court is rejected. _________________ K.G.SHANKAR, J.
12-04-2013


N. Veerabrahmam vs State Of Andhra Pradesh ... on 12 March, 1959

JUDGMENT Chandra Reddy, C.J.
 1. The subject-matter of both the petitions is the order of the Government of Andhra Pradesh passed under Section 99-A of the Criminal Procedure Code in G. O. Ms. No. 501 Home (General-C) dated 23nd March, 1958.

2. The petitioner is the author of a book called 'Bible Bandaram', which means the Treasure of the Bible'. He claims to have dealt with the Bible from a scientific and rationalistic point of view. Being of opinion that it contains matter, which falls within the purview of Section 99-A, Criminal Procedure Code, the State Government declared that all copies of the aforesaid book, wherever found, should be forfeited to the Government. Pursuant to this, the books are said to have been confiscated by the officers concerned.

These two petitions are filed in this Court challenging the validity of that order. Crl. M. P. No. 888 of 1958 is preferred under Section 99-B Criminal Procedure Code, while the Writ Petition raises the question of the constitutional validity of section 99-A.

3. The main theme of the argument of the counsel for the petitioner in support of both the petitions is that Section 99-A of the Criminal Procedure Code offends Article 19 (1) (a) of the Constitution, which guarantees to the citizens freedom of expression. The stress of the argument of the learned counsel for the petitioner is that any law, which takes away or even curtails any of the freedoms enshrined in Article 19 is void and should, therefore, be struck down.


4. It is contended that the power conferred by that section could be used by the executive in such a way as to interfere with the right of freedom of expression of a citizen and thus destroy the protection afforded under Article 19. The crucial point for consideration is whether there is any repugnancy between Article 19 of the Constitution and Section 99-A Criminal Procedure Code.

5. We will presently show that the impugned section does not in any way violate Article 19 (1) (a). The right now claimed is created by Article 19 and is not independent of it and is subject to the limitation imposed by it and as such is not an unrestricted or unqualified right. It is useful to extract here the relevant provisions of Article 19.

6. Article 19 (1) in so far as it is relevant runs as follows : -

"19 (1)   All citizens shall have the right

(a)     to freedom   of     speech     and  expression
  xx   xx                          xx

(f)    to acquire,     hold     and     dispose of property,"


(f)    to acquire,     hold     and     dispose of property,"

  Article   19 (2) says :--
 "Nothing in Sub-clause (a) of Clause (1) shall affect the operation of any existing law or prevent the State from making any law, in so far as such law imposes reasonable restrictions on the exercise of the right conferred by the said sub-clause in the interests of the security of the State, friendly relations with foreign states, public order, decency or morality or in relation to contempt of Court, defamation or incitement to an offence.'' Article 19 (5) says: --
"(5) Nothing in Sub-clauses (d), (e) and (f) of the said clause shall affect the operation of any existing law in so far as it imposes, or prevent the State from making any law imposing, reasonable restrictions on the exercise of any of the rights conferred by the said sub-clauses either in the interests of the general public or for the protection of the interests of any scheduled tribe."
7. It is seen that the rights guaranteed under Clause 1 are subject to certain restrictions of a reasonable kind. The restrictions on the rights contemplated should be within the limits set by Clause 2. Therefore, the point for decision is whether the offending section is saved by Sub-article (2). This, in its turn, depends upon the terms of Section 99-A of the Criminal Procedure Code. We will have therefore to read that section, here. It runs thus ; -
"(1) Where

(a) any newspaper, or book as defined in the Press and Registration of Books Act, 1867 (25 of 1867) or


(b) any document Wherever printed, appears to the State Government to contain any seditious matter or any matter which promotes or is intended to promote feelings of enmity or hatred between different classes of the citizens of India or which is deliberately and maliciously intended to outrage the religious feelings of any such class by insulting the religion or the religious beliefs of that class, that is to say, any matter the publication of which is punishable under Section 124-A or Section 153-A or Section 295-A of the Indian Penal Code (45 of 1860) the State Government may by notification in the Official Gazette, stating the grounds of its opinion, declare every copy of the issue of the newspaper containing such matter and every copy of such book or other document to be forfeited to Government and thereupon any police officer may seize the same wherever found in India and any Magistrate may by warrant authorise any police officer not below the rank of Sub-Inspector to enter upon and search for the same in any premises where any copy of such issue or any such book or other document may be or may be reasonably suspected to be."
8. It is seen that this section does not take away the right to write and publish books. People are at liberty to write books without offending deliberately the religious sentiments of the other citizens who are as much entitled to certain freedoms as the petitioner himself. Section 99-A does not place a total prohibition on the exercise of the fundamental right guaranteed to a citizen. It only empowers the Executive to take action in the interest of public order etc., in the eventualities mentioned therein.


Surely, no citizen could claim a right to insult the religion or religious beliefs of another section of the population. The right which one citizen claims should be consistent with the rights of the other citizens. If people are permitted to indulge in activities calculated to wound the religious susceptibilities of the other religious denominations in the State, that would inevitably lead to the disruption of public order.

If there is no law authorising the executive to take necessary action to prevent or combat activities prejudicial to the maintenance of public order, there will be disorder in society and bitter feelings and even hatred between various sections of society which is not conducive to the maintenance of order. Any law aimed at preventing such a mischief is reasonable and is not intended to abridge any of the rights conferred under Article 19. The impugned provision is conceived in the interests of public order, decency or morality etc. That being so, the restriction placed by this statutory provision on the freedom of expression is a reasonable one and as such it falls within the reservation under Clause (2) of the Article. Consequently, it is not open to any objection based on the Constitution.

9. Sri Chowdhury invited our attention to some of the rulings of the Supreme Court, which dealt with the scope and ambit of this Article of the Constitution None of these rulings Viz: Re-mesh Thappar v. State of Madras, , Chintaman Rao v. State of Madhya Pradesh, and Brij Bhushan v. State of Delhi, is in point. They do not bear on any treatise which insults the religion or religious feelings and in regard to which Section 99-A had been involved.


10. Further, Article 19 (2) was amended after these rulings were rendered by the Supreme Court so as to nullify the effect thereof. Therefore, these decisions cannot render much assistance to the petitioner. Article 19 (2) before the amendment read as follows : --
 "Nothing in Sub-clause (a) of Clause (1) shall affect the operation of any existing law so far as it relates to, or prevents the State from making any law relating to, libel, stander, defamation, contempt of court or any matter which offends against decency or morality or which undermines the security of or tends to overthrow the State."
As a result of the amendment, the scone of Article 19 (2) was very much enlarged. The amended article is couched in wide language so as to include restrictions to cover all eventualities enumerated in the amended Article. The expression 'in the interests of is of wide connotation. So, any law penalising activities which have a tendency to cause public disorder is within (the scope of) authorised limits. The impugned section therefore, comes within the range of clause 2 or that Article.


11. A similar contention was repelled by the Supreme Court in Ramjilal Modi v. State of Uttar Pradesh, . There, the question posed was whether Section 295-A of the Indian Penal Code was obnoxious to Article 19 of the Constitution. The answer was in the negative. Their Lordships have observed that Article 1972) only punishes an aggravated form of insult to religion when it is perpetrated with the deliberate and malicious intention of outraging the religious feelings of that class. In the course of the judgment, the learned Chief Justice observed : --
 "It cannot be predicated that freedom of religion can have no bearing whatever on the maintenance of public order or that a law creating an offence relating to religion cannot under any circumstances be said to have been enacted in the interests of public order."
This pronouncement of the Supreme Court applies equally to Section 99-A Criminal Procedure Code since it is only a matter that would fall either within the ambit of Section 295-A or Section 124-A and Section 153-A of the Indian Penal Code that would enable the Government to take action under Section 99-A.


12. Another ruling of the Supreme Court which is of assistance in this enquiry is Virendra v. State of Punjab, . In that case, Section 2 of the Punjab Special Powers (Press) Act, which is analogous to the offending section was declared valid on the ground that it imposed reasonably restrictions on the exercise of the rights conferred by Articles 19 (1) (a) and 19 (1) (g) in the interests of public order and of the general public and was therefore, protected by Article 19 (2) of the Constitution. Section 2(1) (a) of that Act runs as follows : -
"2 (1) The State Government or any authority so authorised in this behalf if satisfied that such action is necessary for the purpose of preventing or combating any activity prejudicial to the maintenance of communal harmony affecting or likely to affect public order, may, by order in writing addressed to a printer, publisher, or editor : --
(a) prohibit the printing or publication in any document or any class of documents of any matter relating to a particular subject or class of subjects for a specified period or in a particular issue or issues of a newspaper or periodical :
Provided that no such order shall remain in force for more than two months from the making thereof :
Provided further that the person against whom the order has been made may within 10 days of the passing of this order make a representation to the State Government which may on consideration thereof modify, confirm or rescind the order."
 Their Lordships however declared Section 3 invalid since there was no time limit for the operation of the order made under that section nor any provision made for any representation being made to the State Government notwithstanding the fact that the powers under Section 3 were subject to the same condition as to the satisfaction of the State Government or its delegates as mentioned in Section 2 (1) (a). The principle underlying that judgment governs the instant case.


13. In considering whether Section 99-A imposes a reasonable restriction, it has to be remembered that Section 99-D contains a provision for judicial corrective. That is a safeguard which is absent in Section 3 of the Punjab Special Powers (Press) Act. Further, in deciding whether a particular restriction is reasonable or not, the Court should take into account the character of the right alleged to have been violated and the underlying purpose of the restriction imposed, "the extent and urgency of the evil sought to be remedied thereby, the disproportion of the Imposition and the prevailing condition at the time" etc. Vide : State of Madras v. V.G. Row, . We feel that the restriction imposed by Section 99-A is not disproportionate to the evil sought to be remedied. For these reasons, we hold that Section 99-A is not hit at by Article 19 of the Constitution and its validity cannot be impeached.

14. It was next faintly argued that this legislation also interferes, with the right to acquire, hold and dispose of property within the ambit of Article 19 and as such infringes Clause (f) of that Article. We cannot accede to this contention. Section 99-A does not seem to have any impact on Clause (f). Assuming that it has any such effect, it is protected by Clause (5) of that Article, as such an enactment is necessary in the interests of the general public. By that as it may, the law in dispute is protected by Clause (2), as it is concerned with the freedom mentioned in Clause (a). Therefore, no further, question arises.


15. The validity of this provision is attacked on another ground also. It is urged that the right of application contained in Section 99-B of the Criminal Procedure Code is an illusory one in that it does not contemplate the issue of a notice of forfeiture to the person concerned, while a time limit is fixed for the filing of an application. The order for: felting the books generally does not come to the knowledge of the persons affected. The publicity in the Official Gazette does not amount to proper notice as the value of such notification is very little.

This defect renders the encroachment upon the light conferred by Clause (a) of Article 19 (1) unreasonable and takes it out of the operation of the saving clause, argues the Counsel for the petitioner. Reliance for this proposition is placed upon . We are not very much impressed by this argument either.

16. The decision in (supra), has not laid down any proposition that the notification of an order in an Official Gazette is not proper publication and does not amount to notice. All that their Lordships remarked was: --
 "Publication in the official gazette whose publicity value is by no means great, may not reach the members of the association declared unlawful, and if the time fixed expired before they know of such declaration, their right of making a representation, which is the only opportunity of presenting their case, would be lost."
Their Lordships have not stated as an invariable rule that the notification in the Official Gazette does not constitute notice to the persons concerned. These remark's have to be understood in the context they were made, viz. whether an association which was sought to be declared unlawful on the ground that it would interfere with the maintenance of public order, should not be given sufficient opportunity to make a representation to the Government within the time prescribed by that order in regard to the existence of the grounds on which the Government proposed to take action.


That decision, therefore, does not establish the proposition of the Counsel for the petitioner. Under Section 99-A, the forfeiture has to be notified in the Official Gazette. That, in our opinion, is sufficient publication. The normal mode of notifying any order of Government is publication of it in the official gazette and no personal service is generally contemplated. Therefore, Section 99-A is not open to attack on that ground.

17. Further, before the order is put into effect, the order should be communicated to the person concerned, be it the author, the printer or the publisher and that would enable him to move the High Court under Section 99-B. It is contended that the Government could deprive a party of the right of application by postponing the actual forfeiture of the book. We do not think that there will be any justification for attributing evil designs or mala fides to the Government.

It cannot be assumed that Government will throw obstacles in the way of the exercise of the right of application derived from the sub-section. The remedy provided by Sub-section D (sic) is a very effective one and gives an opportunity to have the legality of the order tested in the High Court. So Section 99-A cannot be challenged even on that account.


18. It was alternatively contended that the order in dispute does not comply with the terms of Section 99-A. It is said that it is vitiated by the failure of the State Government to state the grounds of its opinion. It is true that the order has not set out the grounds for the opinion of the State Government that the book contains matter which is punishable under Section 295-A Indian Penal Code. It is also indisputable that the section requires the Government to mention the facts in support of its opinion and that a mere statement that the book contains matters constituting an offence under any of the provisions of the Penal Code recited therein does not fulfil the requirement of that section, which is a mandatory one.

But the defect in the order cannot be a ground for this Court to quash that order. Under Section 99-D, this Court has to consider whether the newspaper or book or other document ordered to be forfeited contains such of the matters as are referred to in Section 99-A. If the Special Bench is not satisfied that there is no such material, the order of forfeiture would be set aside. If on the other hand, there is enough material to justify the action of the Government, this Court will not interfere with it.

Therefore, all that this Court is called upon to do by Section 99-D is to see whether there is any justification for the Government to pass the order forfeiting the books. It is pertinent to note that under Section 99-A the grounds of the order given in their factual aspects are tested in the enquiry by the Special Bench of the High Court. So the existence of grounds which would justify the order is amenable to determination by the High Court.


Therefore, the argument that the non-observance of the rule in regard to the subject-matter of the grounds vitiates the whole order does not commend itself to us. There would have been substance in the argument if the satisfaction of the Government is final and is not open to question in a judicial proceeding. That is not the position under Section 99-A. The Special Bench has to be convinced about the existence of the grounds forming the basis of the order. It is not permissible for the Special Bench to consider a matter other than that specified in Section 99-D such as the one now raised for the petitioner. There is authority for this position in Harnam Das v. State of Uttar Pradesh (S) AIR 1957 All 538 (SB), which followed a judgment of the same Court in Baijnath v. Emperor, AIR 1925 All 195 (SB). This contention is, therefore, negatived.

19. Another point raised is that the book contains only a dissertation on the unscientific, un-historical and unrationalistic nature of the Bible and that if any of the passages therein have the effect of insulting the religion or religious beliefs of Christians, that docs not attract the applicability of Section 99-A unless it is found that the petitioner had deliberately and maliciously done it. The petitioner had no intention at all to insult in any way the Christian religion, his only object in writing the book being to examine the Bible and its literature from a rationalistic point of view. The book in question was a dispassionate and scientific study of the Bible and the author as a rationalist had applied reason to the investigation of phenomena, proceeded the argument.


20. We do not think that we can accept this proposition. It is true that each and every insult to the religion or religious feelings of a sect which arc unintentional would not bring the matter with in the ambit of Section 99-A. Sometimes it may be offered unwittingly or carelessly and without any deliberate or malicious intention. It is only insults to religion or religious beliefs that are deliberately and maliciously made that would bring into play Section 99-A Criminal Procedure Code. But the intention of the author has to be gathered primarily from the language used. If the words employed are of such a nature as would lead any reasonable man to think that they are grossly offensive and provocative and are intended to be regarded as such, the consequences indicated in that section ensue.
21. Judged in that light, the ideas expressed in the book and the language used manifest a malicious intention to outrage the religious feelings of the Christian community by insulting their religion and their religious beliefs. The very tide of the book is disparaging and contemptuous in its tone and insinuation. The expression "Bandaram" is used in popular parlance in a satirical sense. Coming to the body of the books, the petitioner has used abusive and insulting language in regard to the religious personalities and the tenets of the Christian faith. The tenor and the tone of the publication is consistent only with a deliberate and malicious intention to offer insults to that religion.

22. The effect of some of the passages therein as set out in the counter-affidavit fully supports this conclusion : --
"(a) That the Bible contains vivid descriptions of tribal warfare, sacrifices, drink, blood-shed which show that this book was produced by the uncivilised who were determined and engaged to destroy the more civilised races.


"(b) That the Old Testament is neither the word of God Jehovah nor the New Testament the word of Jesus. This is amply proved by the incongruities, excesses, improbabilities and anachronisms, vulgarities that are manifest in every page of the Bible.


(c) That the Old Testament came into existence in the 4th and 5th century B. C. A critical reading of the Old Testament indicates that it is God Jehovah who is a cruel and selfish tyrant while Satan is a most excellent noble and normal person. The five books of the Old Testament are mere forgeries and cannot be said to have been written by Moses at the word of Jehovah. The prophecies contained in the Old Testament are mere poetic imaginations. The story of Jesus Christ built upon the shaky foundations of the Old Testament is a mere myth. The gospels of Saints Mathew, Mark, Luke, and John in the New Testament are subsequent fabrications. The material discrepancies contained in these gospels regarding the birth, life teachings, death and resurrection of Jesus amply prove their spurious nature. A person by name Jesus was reported to have been born out of an adulterous intercourse between his mother Mary and a Greek soldier in the Roman Army. The conception of the Holy Ghost was a later creation by interested followers to purify the sinful birth of Jesus. The virginity of Mary and her subsequent apotheosis were absurd and unwarranted. The story of resurrection is also untrue and improbable. Christianity is therefore a false and fabulous religion. Its early propagation is steeped in bloodshed and it is of little credit to the teachings of Christ. The Bible justifies such barbarities. The Christian Moral Code as thought in the Bible is contrary to human nature and natural evolution. The growth of fascism in European countries is entirely due to the previous propagation and belief in the stupid and extraordinary teachings of the Christian religion."


23. These passages clearly show that the petitioner is vilifying in grossest terms the principles and tenets of Christianity. There are other passages in the book which though not so objectionable as the above are calculated to produce the same effect. It is clear that he bad not spared even the founder of that religion Jesus Christ and he had described him as the off-spring of an adulterous intercourse. The Christian religious beliefs were depicted in grossly offensive and provocative terms.


In these circumstances, the claim of the petitioner that it was a dispassionate study of religion could not carry conviction. On a reading of the offending passages, the reasonable conclusion that could be reached is that the book was published with the deliberate and malicious intention of outraging the religious feelings of Christians.

24. It was next urged that no significance need be attached to the passages, a gist of which was given above and that the book should be read as a whole and the general effect which it would have on the mind of the people gathered. In support of this argument, reliance is placed on the judgment of the Supreme Court in State of Bihar v. Shailabala Devi, . That ruling does not support the wide proposition that even if there were a number of objectionable passages in provocative terms against the founder of a religion and other religious teachers, they should be ignored and the State Government should remain inactive.

In that case, the document that was sought to be forfeited was said to contain matter which had a tendency to incite people to over-throw the Government. Their Lordships thought that the document did not deserve much consideration, that it was some kind of patchwork with no consistency or cohesion between the different parts, that some portions of it were unmeaning and non-sensical and that in other parts it talked of revolution in the abstract and there was no appeal to anybody in particular or for any known or specific cause.

It was remarked that the document was written in high-flown Bengali language and contained a good deal of demagogic clap-trap with some pretence to poetic flourish. Therefore, that case does not furnish any analogy here.


25. Another contention pressed upon us was that the thoughts expressed by the petitioner were not born of a desire to insult arty particular religion and that in fact he said such things in regard to other religions also. It is also said that as a free thinker he was justified in giving expression to his views and propagating them by means of a publication like this. It was further argued that similar ideas were expressed by several eminent writers in several other countries, to which no exception was taken and there was no reason why a book of his embodying similar concepts should be confiscated. We do not think that weight could be given to this argument.

26. Free thinking does not involve freedom to make scurrilous attacks on the religion and religious beliefs of other sects with impunity. It is not free-thinking to abuse and insult other religions. Further, the method find the manner of discourse on a particular topic also matters very much. All the citizens of India are guaranteed freedom of religion and freedom of conscience by our Constitution and each one has a right to pursue his own way of attaining salvation, unhampered and without interference from others.

It is the duty of the State to create such a climate as would enable every one of its citizens to exercise freedom of religion and conscience. Section 99-A of the Criminal Procedure Code and Section 295-A of the Indian Penal Code are only legislative recognition of the power of the State to take action for the purpose of affording such protection to all its citizens. If the deduction that any citizen could intentionally wound the religious beliefs of others in the name of free-thinking were legitimate, no affront however deliberate and malicious it might be would be governed by Section 99-A of the Criminal Procedure Code and Section 295-A of the Indian Penal Code with, the result that they become otiose.


27. As regards the justification pleaded viz: that there are writings of a similar description in other countries, we think that it is wholly outside the scope of this enquiry to consider the nature of those publications. All those writings have not been placed before us and we do not know whether those ideas were couched in a language similar to the one before us and what effect they would have on the mind of the readers. We are also not aware whether provisions akin to Section 99-A Criminal Procedure Code and Section 295-A of the Indian Penal Code exist in the statute books of those countries.

So, assuming that there are writings, which are of the same character as the one in this case and no action was taken in regard to them, that would not absolve the author of a document or a book from liability if it attracts the applicability of section 99-A, Criminal Procedure Code. We have to judge the writings in the setting of that section the conditions existing in this country, the light in which such treatises will be viewed by the people of this country who read them and the kind of people whose religious beliefs are attacked by the book.
In fact, it is disclosed in the counter-affidavit that representations were received from Indian Christian Associations that the book offered insults to the Christian religion and religious beliefs. If the conditions envisaged in that section are fulfilled, the author will become liable to be proceeded against.

28. It is also no defence to a charge under either of the two sections to say that the author had incidentally attacked other religious beliefs also For these reasons, we negative these contentions. We are satisfied that the writing is of such a nature as to come within the purview of Section 99-A Criminal Procedure Code.


29. There remains the point whether the forfeiture should be confined to one part or to both the parts of the book in question. What was maintained on behalf of the petitioner in this behalf was that in the second part of "Bible Bandaram", he merely picked up passages from different parts of the Bible itself and placed them in juxtaposition, so that the contradictions may be easily noticed by the readers, and, therefore, there is no ground for applying the section to this part also.

It was contended that the two parts constitute two books because they are bound in two volumes and that part of it which does not contain matter of the nature contemplated by that section, should he excluded from the purview of the order confiscating the books. We do not think we can accept these theories. First of all, it should be noted that the second part is a vituperative commentary on the Bible. Some of the teachings and tenets of Christianity are described as "Sriranga Neethulu," which conveys the idea that the teachings are ludicrous ones.

Further, in order to gather the effect a book, is likely to produce on the mind of the reading public, it should be read as a whole. It cannot be postulated that the operation of Section 99-A, Criminal Procedure Code should necessarily he confined to isolated parts of the book, which come within the mischief of that Section. All that the section emphasises is that the book should contain matter which is deliberately and maliciously intended to outrage the religion or religious beliefs etc. It does not prescribe that each and every part of the book should in itself be of the nature indicated in that section. It is difficult to accede to the theory that only such parts of the book as would offer insults that should be extracted from the writing and forfeited.


30. Taking up the next proposition, viz., that each part should be regarded as a separate hook we think it is equally untenable. Section 99-A talks of a book as defined in the Press and Registration of Books. Act (Act XXV of 1867), which defines a "book" as including every volume, part or division of a volume and pamphlet, in any language, and every sheet of music, map, chart or plan separately printed or lithographed. It is seen that the definition takes in every volume or division of a volume. Therefore, a book can be in more than one volume and each volume does not constitute a separate book.

That apart, one of the meanings of the word 'book' as given in the Oxford English Dictionary, Vol. I is a literary composition such as would occupy one or more volumes without regard to the material form or forms in which it actually exists. This clearly indicates that the expression 'book' is of wide import and covers every part and every volume of it. The fact that each part is bound in a different volume does not take it out of the meaning of the word 'book'. The question is posed whether all the volumes of Halsbury's Laws of England or Encyclopaedia Britannica constitute each a book.

This is easily answered because they deal with different topics and different subjects. In considering whether a particular volume is a book or not, the main test is whether the treatise deals with one subject and it does not depend upon whether a book is bound in one volume or in two volumes. Often a book is bound in two volumes if the size of it makes it convenient to have it so. If the number of pages of a book makes it unwieldly to have it as one volume, the publishers may think of having it bound in more than one volume so that they could be easily handled by the readers.


Not unfrequently a book, which was published in the form of one volume at one stage, may be bound in two volumes at a later stage. Take the instance of the Civil Procedure Code by Mulla. The earlier editions consisted of only one volume but the latest edition consists of two volumes. Thus it depends upon the convenience and whims and fancies of the publisher whether a particular book is to be in one volume or in two volumes. So the question whether a particular part or volume constitutes a separate book does not turn upon how they are bound. Regard must be had to the contents of the book.

If each volume deals with a distinct subject, it forms a book by itself. The condition is not satisfied in the instant case. Both the parts together discuss the Bible and expose its hollowness and pretension and point out the alleged incongruities, contradictions and the immoral nature of the doctrines contained therein. The first part anticipates the contents of the second part.

31. The petitioner did not treat them as two separate and independent books in his petition. Through out the petition, he proceeds on the assumption that the two parts make one book. In paragraph 7 of the affidavit of the petitioner it is alleged that there was no demonstration against the publication of his work and again he talks of the book 'Bible Bandaram' in the same paragraph.

In the next paragraph he also refers to the two parts as one book in several places. Thus, the petitioner himself did not treat them as two books. In our opinion, the two books together constitute one book and the second part also falls within the mischief of Section 99-A of Criminal Procedure Code.


32. In this connection, the judgment of the Allahabad High Court in AIR 1925 All 195, relied on for the petitioner does nut furnish any guidance in this enquiry. There, the applicant published a Hindi reader for use in schools. It was composed of six separate readers numbered 1 to 6 and was designed for the instruction of boys of 8 to 13 or 14 years of age. The local Government issued a notification under Section 99-A declaring all copies of volumes 3, 4 and 5 forfeited inasmuch as they contained seditious matter.

Their Lordships remarked that it was necessary that they should consider each of the readers separately but this does not help the petitioner for the reason that the present position is not analogous to that envisaged in that decision. It should be noted that in the case under examination, each of the readers was meant for boys of a different class and they were separate text books. As appears from the statement of facts, each was a different reader meant as a separate text book.

Thus the case cited does not come to the rescue of the petitioner. The case on hand has to be decided with reference to the contents and nature of the two parts. We are satisfied that the two parts together answer the definition of 'Book' in the relevant enactment and together fall within the operation of Section 99-A. Consequently we think that the State Government was right in passing the order now assailed before us and we do not find any grounds for interfering with it.

32a. W. P. No. 842 of 1958 is dismissed with costs and Criminal M. P. No. 888 of 1938 is dismissed. Advocate's fee is fixed Rs. 200/-.

 Bhimasankaram, J.
33. I regret my inability to concur in the order proposed by my Lord.


34. The Criminal Miscellaneous Petition is an application made under Section 99-B of the Code of Criminal Procedure, whereby the applicant seeks to have set aside an order made by the State Government under Section 99-A of that Code on 22-3-1958 and published in the Andhra Pradesh Gazette dated 10-4-1958 whereby all copies, wherever found, of the Telugu book entitled "Bible Bandaram" written by the petitioner and published by Kavirajasramam, Nagandla, Guntur District and all other documents containing copies, re-prints, translations of, or extracts from the said book arc forfeited to the Government.

35. We have set as a special Bench of three Judges to hear the application as required by Section 99-C of the Code. Along with this application, the applicant has filed a writ petition under Article 226 of the Constitution impugning the constitutional validity of Section 99-A.

36. It will be convenient to set out even at the outset the sections of the Code to which reference will have to be made in this opinion:
"99-A (1) Where:
(a) any newspaper, or book as defined in the Press and Registration of Books Act, 1867; or


(b) any document, Wherever printed, appears to the State Government to contain any seditious matter or any matter which promotes or is intended "to promote feelings of enmity or hatred between different classes of citizens of India or which is deliberately and maliciously intended to outrage the religious feelings of any such class by insulting the religion or the religious beliefs of that class, that is to say, any matter the publication of which is punishable under Section 124-A or Section 153-A or Section 295-A of the Indian Penal Code, the State Government may, by notification in the Official Gazette, staling the grounds of its opinion, declare every copy of the issue of the newspaper containing such matter, and every copy of such book or other document to be forfeited to Government and thereupon any police officer may seize the same wherever found in India and any Magistrate may by warrant authorize any police officer not below the rank of Sub-Inspector to enter upon and search for the same in any premises where any copy of such issue or any such book or other document may be or may be reasonably suspected to be.

(2) In Sub-section (1) "Document" includes also any painting, drawing or photograph, or other visible representation.

99-B. Any person having any interest in any newspaper, book or other document, in respect of which an order of forfeiture has been made under Section 99-A, may, within two months from the date of such order, apply to the High Court to set aside such order on the ground that the issue of the newspaper, or the book or other document, in respect of which the order was made, did not contain any seditious or other matter of such a nature as is referred to in Sub-section (i) of Section 99-A.


XX XX XX XX 99-D. (1) On receipt of the application, the Special Bench shall, if it is not satisfied that the issue of the newspaper, or the book or other document, in respect of which the application has been made, contained seditious' or other matter of such a nature as is referred to in Sub-section (i) of Section 99-A, set aside the order of forfeiture.

(2) Where there is a difference of opinion among the Judges forming the Special Bench the decision shall be in accordance with the opinion of the majority of those Judges.

99-E. On the hearing of any such application with reference to any newspaper, any copy of such newspaper, may be given in evidence in aid of the proof of the nature or tendency of the words, signs or visible representations contained in such news paper, in respect of which the order of forfeiture was made.

 xx xx xx xx 99-G. No order passed or action taken under Section 99-A shall be called in question in any Court otherwise than in accordance with the provisions of Section 99-B."
It is also necessary to read Section 295-A of the Indian Penal Code as in the present case the Government notification states that the publication in question is within the mischief of that section:
"295-A. Whoever, with deliberate and malicious intention of outraging the religious feelings of any class of citizens of India, by words, either spoken or written, or by visible representations, insults of attempts to insult the religion or the religious beliefs of that class shall be punished with imprisonment of either description for a term which may be extended to two years, or with fine, or with both".


The definition of a book in the Press and Registration of Books Act, 1867, referred to in Section 99-A of the Code of Criminal Procedure is as follows:
 " "Book" includes every volume, part or division of a volume, and pamphlet, in any language, and every sheet of music, map, chart or plan separately printed or lithographed."
Before considering the arguments, two obvious but important facts must be noted: One, that the State Government has in its notification not stated the grounds of its opinion as required by the Statute; two, that the notification does not expressly refer to the two volumes of the book which is declared forfeited.

37. In support of his application under the Code and his writ petition, the applicant has filed an affidavit; therein, he has attempted to show 'Inter alia' that in writing the book he is not guilty of the "deliberate and malicious intention of outraging the religious feelings of any class of citizens of India". The Government has now tried to make up for the breach of its statutory duty by summarising in the counter-affidavit filed on its behalf in these proceedings the effect of three or four passages from Volume I of the book to justify its stand that the book is within the mischief of Section 99-A of the Code.

No endeavour has however been made by the Government even at the time of the hearing of these matters to translate into English which is still the official language of this court -- the whole of the book or at least the offending passages therein in their entirety and to place such a translation before us. Indeed, the court has not been furnished even with three copies of the original, one for each of the Judges constituting the Special Bench.


What is more remarkable is that although it is contended for the State that the notification covers both volumes (or parts) of the book no copy of the second volume was available oven to the 3rd Government Pleader, who was not aware until one was produced by the petitioner's advocate that there was more than a single volume of the book. It is needless to add that no reference has been made in the counter-affidavit to the contents of the second volume.

38. As both the writ petition and the application under Section 99-B have been heard together, the arguments raised in both may be dealt with together.

39. The applicant has contended broadly in the first place that Section 99-A infringes the right to freedom of expression, the right to hold and dispose of property and also the right to practise any profession or carry on any occupation or business. He has argued that in clothing the Government with such a power, the legislature is not protected by Clauses 2, 5 or 6 of Article 19 of the Constitution.

He has next contended that in so far as the order passed by the State Government does not state the grounds of its opinion, it should be struck down 'in limine,' without reference to the merits, as such a statement of the grounds of its opinion is a precondition to the exercise of its power. He has then urged that he is a seeker after religious and philosophical truth, that he has no animus against any religion in particular, that he is opposed to all religions, that therefore he cannot, if the passages referred to in the Government's counter-affidavit are read in the context of the whole book, be charged with any intention to outrage the religious feelings of Christians, still less of a deliberate and malicious intention of that kind.


He has drawn our attention to the fact that one of the passages complained of is an extract from the well-known book of Ernst Haeckel "The Riddle of the Universe." find that the other passages are entirely innocuous. He has further argued that even assuming that Section 99-A is not obnoxious to the Constitution and even if it is established that the passages in question are objectionable as being of the nature mentioned in Section 295-A, I. P. C., still the Government's power to forfeit the book is limited to the volume containing the offensive passages and does not extend to so dealing with the second volume.

40. The learned 3rd Government Pleader has, on the other hand, argued that Section 99-A is not open to any Constitutional objection; that the passages clearly evince an intention of the nature mentioned in Section 295-A Indian Penal Code, that the order of the Government is not liable to be quashed merely because it does not contain a statement of the grounds of the opinion of the Government; and that as the power of the Government to forfeit a book extends to all the volumes which make up the book, the word 'book' in the notification in the present case must be held to include both the volumes. He has in addition contended that the burden is on the applicant to establish his innocence of the guilty intention,

41. I shall first deal with the last submission of the 3rd Government Pleader first. He submits that it is for the applicant in an application under Section 99-B to convince this Court that the order of forfeiture is unsustainable. In support of his proposition, the learned Pleader relies on a decision of the Allahabad High Court in (S) AIR 1957 All 538.


Dealing with a similar application impugning an order of forfeiture under Section 99-A which toe did not contain the grounds of the opinion of the Government, the learned Judges observed as follows:
 "When an application is made under Section 99-B to have an order of forfeiture set aside on the ground that the matter published does not fall within the mischief of Section 153-A or 295-A of the Indian Penal Code it is for the applicant to convince the Court that for the reasons he gives the order is a wrong order."
Then again, towards the end of their opinion, they said:
 "The applicant has entirely failed to show that the books did not contain matters which promoted feelings of enmity and haired between different classes, or which did not insult or attempt to insult the religion or religious beliefs of the Sikhs."
 With great respect to the learned Judges, I must confess my inability to appreciate their point of view.

42. It falls to be observed in the first place that in order that a newspaper etc., may be attracted by Section 99-A the matter which is published must be punishable under Section 295-A (or the other Sections mentioned) of the Indian Penal Code; that is to say, when a conclusion is reached under Section 99-B by the Court, the Court is finding that a crime has been committed and the person responsible for the publication is liable to the punishment under Section 295-A, Indian Penal Code.

This would clearly in my opinion point to the necessity of the Government establishing the satisfaction of the Court that the book forfeited contains objectionable matter of the nature mentioned in Section 99-A.